Having spent a great deal of my youth in places where the waves break, I have seen my fair share of hurricanes.
And I can tell you from experience that there is nothing quite like what happens when the eye of one passes over. It is surreal.
The winds die down, the sun comes out, and for a moment at least it is all over. And if you didn’t know what was on the other side of the calm you would think that you were home free.
That to me is what the markets feel like these days. The front half of the storm has passed and for the moment at least it has been safe enough to go outside.
So here we sit, in the eye of the proverbial storm with the winds starting to picking up again and the unknown clearly on its way.
That’s the unsettling part about these markets and what makes them so tough to gage.
Maybe that’s why there is such a gigantic disconnect between the assorted pumpers on CNBC and the regular folks just trying to make ends meet.
Because the truth is, according to the latest release of the Reuters/University of Michigan index of consumer sentiment, regular folks are less optimistic about their own finances than at any time in the past 60 years.
So while Cramer and his friends may be convinced that it is all over, consumers seem to know otherwise.
It is also a view shared by economist Nouriel Roubini. He now sees a double-dip recession beginning to take shape.
From Bloomberg by Shamim Adam entitled: Roubini Sees Increasing Risk of Double-Dip Recession
“Nouriel Roubini, the New York University professor who predicted the financial crisis, said the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.
The global economy will bottom out in the second half of 2009, Roubini wrote in a Financial Times commentary today. The recession in the U.S., the U.K., and some European countries will not be “formally over” before the end of the year, while the recovery has started in nations such as China, France, Germany, Australia and Japan, he said.
Governments around the world have pledged about $2 trillion in stimulus measures amid the worst worldwide recession since the Great Depression. Federal Reserve Chairman Ben S. Bernanke and other global policy makers have cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.
“There are risks associated with exit strategies from the massive monetary and fiscal easing,” Roubini wrote. “Policy makers are damned if they do and damned if they don’t.”
Government and central bank officials may undermine the recovery and tip their economies back into “stagdeflation” if they raise taxes, cut spending and mop up excess liquidity in their systems to reduce fiscal deficits, Roubini says. He defines “stagdeflation” as recession and deflation.
Those who maintain large budget deficits will be punished by bond market vigilantes, as inflationary expectations and yields on long-term government bonds rise and borrowing costs climb sharply, he wrote. That will in turn lead to stagflation, Roubini said.”
The good news is someday it really will be over for good…until then enjoy the eye of this one.
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