Interesting analysis via David Rosenberg of Merrill Lynch:
"There have been five phases to this current down-cycle – the first four are still in full swing, but it is the fifth that will very likely emerge as the most difficult stage of this economic downturn and bear market:
• The first wave was the end of the housing cycle when starts peaked and began to roll over in the first quarter of 2006.
• The second wave was the end of the home price bubble when the Case-Shiller index began to deflate in the first quarter of 2007.
• The third wave was the end of the credit cycle when the interbank market froze in August 2007.
• The fourth wave was the employment cycle, which peaked when payrolls did in December 2007, prompting the Fed to reluctantly embark on an aggressive policy easing course.
• The fifth wave will be the end of the consumer cycle and the beginning of what may well prove to be the most significant recession since the mid-1970s, and while delayed by the tax rebates, this phase seems to have commenced in June when U of M consumer sentiment collapsed to its lowest level in 28 years."
Rosenberg has been consistent in terms of warning about an economic slowdown over the past year, and dates the likely start of the recession to January 2008. Going forward, he is more concerned with Deflation than Inflation . . .
Five phases to the current down-cycle
David Rosenberg North American Economist
Merrill Lynch, 07 July 2008
Serious words from Robert Rubin:
"Former U.S. Treasury Secretary Robert Rubin said that the world economy still faces "extended difficulties” from the fallout of the U.S. subprime mortgage crisis and rising energy and food costs.
"It’s possible that it could get better during the course of this year, but it’s far more likely that we will have extended difficulties for quite some time yet if you consider what is happening with housing prices, the price of oil and so much else,” Rubin said today in an interview in Rome.
Record oil and food prices are fueling inflation and choking growth at a time when the fallout from the U.S. subprime mortgage market meltdown has already taken a toll on the global expansion. The Organization for Economic on June 4 cuts the growth forecast for its 30 members to 1.8 percent for this year, the slowest since 2002."
click for video
Rubin Says Economy Facing `Extended Difficulties’
Alessandra Migliaccio and Flavia Rotondi
Bloomberg, July 1 2008