Roubini Predicts Worst U.S. Recession in 40 Years, Market Rally `Sputter'

[marmar]

from Bloomberg:



Roubini Sees Worst Recession in 40 Years, Rally's End (Update1)

By Eric Martin and Rhonda Schaffler

Oct. 14 (Bloomberg) -- Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, causing the rally in the stock market to ``sputter.''

``There are significant downside risks still to the market and the economy,'' Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. ``We're going to be surprised by the severity of the recession and the severity of the financial losses.''

The economist said the recession will last 18 to 24 months, driving unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs.

``This will be the first round of recapitalization of the banks,'' Roubini said. ``The government has to decide to intervene much more directly in the provision of credit and the management of these companies.''

U.S. stocks staged the biggest rally in seven decades yesterday on the government plan to buy stakes in banks and a Federal Reserve-led push to flood the global financial system with dollars. The Standard & Poor's 500 Index rose 12 percent. It gained as much as 4.1 percent and fell as much as 1.1 percent today.

`Really Tanking'

``The stock market is going to stop rallying soon enough when they see the economy is really tanking right now,'' Roubini added. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0AZ3ECSkvwc&refer=home

[benld74]

1. But, But, But,

All of our leaders have said the economy is strong, all of the CEO's have been pulling in millions in salaries, all of the hedge fund managers have been pulling in millions in salaries,,, OHHHHH I get it now!

[dixiegrrrrl]

2. I need the market to hold on for 10 more days..just 10

I should get my last 401-k account cashed out by Friday.
It is in a Lehman bank, one which apparently was not affected by the Lehman crash, says my broker.

Just a few more days till check comes, pls pls pls pls....

Join me in thinking happy thoughts, anyone??

[marmar]

3. Sending happy thoughts and stability your way.....Did you already request it.....

.... and you're just waiting on them to get everything taken care of?

[dixiegrrrrl]

4. Yes, Marmar....

The interesting part is it was in a 3 year cd, safe enough in normal times.
And I thought I was trapped until maturity because of the penalties for early cd withdrawal.
But, broker said we could sell the cd, good price, because it was at 4.5% interest rate.
So she did, sales money went into bank sweep account, and i immediately got the redemption forms, she sent them in today, says it usually takes a couple days, no more than 48 hours by law.

Gee, the bank is going to follow the law, at this stage of the game?
Hope so.

I will worry about taxes next year.It won't be much.
safety is paramount now.