Gone Forecasting: Fishing for Economic Answers

Saturday, August 30, 2008 | 03:00 PM

CNBC's Steve Liesman on "Unique insights on the credit crisis and the future of the banking system from a stream in Maine..."

I have a few words in this, along with my pal Scott Frew, and colleagues David Mordechai (Swiss Re) and David Kotok (Cumberland).

click for video


via CNBC

Gone Forecasting: Fly Fishing With Economic Pros 

Other SQUAWK BOX Leen's Lodge related reports

John Silvia Chief Economist Wachovia 

Paul McCulley Portfolio Manager/managing director PIMCO   

Jobs Preview Stuart Hoffman Chief Economist PNC Financial Services Group   

David Kotok Chairman & Chief Investment Officer Cumberland Advisors


Saturday, August 30, 2008 | 03:00 PM | Permalink | Comments (10) | TrackBack (0)
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What will be the catalyst to a U.S. recovery?

Barry, you mention a couple of quarters of more pain, but I think you may be referring to stock prices and since stock prices generally foretell a recovery a couple of quarters out, I think you believe that the macro economy may be weak for a good year or so. At least that is my takeaway from your soundbite?

Personally, I think that you are very optimistic and I think that pain in the market and in the economy may linger for several years. I look at several factors:

First, global growth has only started to sputter and may slow dramatically. In fact, even if the global growth story remains somewhat intact and global consumers save less and consume more, it is possible that the United States economy may not be a huge beneficiary because, beyond airplanes and some other high tech items, we simply do not make a lot that can't be made elsewhere for less (yeah, I know, I sound like Peter Schiff).

Second, the American consumer is getting crushed. Without getting redundant as most on this blog know the story, it is simply impossible to get much contribution here when debt to income is at historically high levels and prices on basics such as food and fuel are rising so rapidly.

Third, the credit crisis will probably go on for years, not quarters. This is a big deal and a lot of players, from pension funds to community banks got seriously burned and either can't or won't lend on easy terms for years. How long did the S&L credit hangover last? Years as I recall.

Fourth, government cutbacks, especially in state and local government, are just beginning to take hold. Unfortunately, local government feasted on easy credit both in borrowing and in temporary increased housing rleated revenues and that is going to go in reverse in a major way over the next couple of years.

Finally, I look back at the last two cycles and I see the incredible "internet" / tech productivity gains of the late nineties and the housing/credit related boom of the last 5 years and I wonder what will power the next expansion? I am hard pressed to answer, but I suspect that energy (in all its forms) will be a growth area, but of course that depends on high energy prices and that sort of kicks the consumer in the teeth..so on a macro level this is self-cancelling.

I think that consumers, banks, and government are all going in to a period of balance sheet repair and when I look at the excesses in all those areas, I just don't think it all gets solved in a few quarters.

Posted by: Rich Shinnick | Aug 30, 2008 4:38:27 PM

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