Whalen, Whitney, Roubini: "Real" Economy Is Dying: Q4 "Going to Be Bloodbath"

Discussion in 'Economics' started by ByLoSellHi, Oct 5, 2009.

  1. http://finance.yahoo.com/tech-ticke...MS,GS,HCBK&sec=topStories&pos=9&asset=&ccode=

    The "Real" Economy Is Dying: Q4 "Going to Be a Bloodbath," Whalen Says
    Posted Oct 05, 2009 01:49pm EDT
    by Aaron Task in Investing, Recession, Banking

    Stocks rallied to start the week thanks to a better-than-expected ISM services sector report and a Goldman Sachs upgrade of big banks, including Wells Fargo, Comerica and Capital One.

    But all is not right in either the economy or the banking sector, according to Christopher Whalen, managing director at Institutional Risk Analytics. In fact, Whalen says most observers are drawing the wrong economic conclusions from the stock market's robust rally.

    "Why is liquidity going into the financial sector? It's because the real economy is dying [and] everyone is fleeing into the stocks and bonds because they're liquid at the moment," Whalen says. "That's not a good sign."

    The banking sector's assets shrunk by about $300 billion per quarter in the first half of 2009, a sign of banks hoarding cash in anticipation of additional future losses, according to Whalen. "The real economy is shrinking because of a lack of credit."

    The shrinkage will continue into 2010, Whalen predicts, suggesting the banking sector hasn't yet seen the peak in loan losses. Institutional Risk Analytics forecasts the FDIC will ultimately need $300 billion to $400 billion to recoup losses to its bank insurance fund. (In other words, the $45 billion the FDIC sought to raise last week by asking banks to prepay fees is just a drop in the bucket.)

    "Investors should think about this because the fourth quarter in the banking industry is going to be a bloodbath," says Whalen, who believes smaller and regional banks like Hudson City Bancorp may come into favor vs. larger peers, which have dramatically outperformed since the March lows.

    "When you see the markets rallying when the real economy is shrinking that tells you this [recovery] is not going to be very enduring," Whalen says.

    In this regard, Whalen finds himself in philosophical agreement with Nouriel Roubini, George Soros and Meredith Whitney, among other "prophets of the apocalypse" who've once again been raising red flags in recent days.
  2. I like Whalen, but like Daal, he was short at the bottom and instead of just admitting he was wrong, he keeps on being bearish. Eventually he may be proved right, but at a great cost.
  3. Daal


    Actually I neutral at the bottom(bought SPY at 730). Went net short through garbage stock puts at 820. Couldn't see that crisis of confidence being solved out of nowhere for no reason, all the government programs had failed to lift people up to that point. I was wrong(the goverment policies helped with a long lag) but being studborn and following my view has helped many times, look at all the dips from ZQ from late 08 to today, I was a 'buy more' moron in all of them and cashed. Matter of fact I'm just waiting for a new dip to buy more in the greatest bull market since the crisis began
  4. "Economic bloodbath" or not, market may hold up or even advance on the expectation of even greater money pump.
  5. Bull drops bullshits.:D
  6. Nothing of that sort will happen

    The govt. and GS have an agreement. Govt. gives GS preferential treatment, GS props up the market with their computers and news media.

    Welcome to the evolution of capitalistic "democracy". He who pays the piper, calls the tunes.