Financial experts "miserably bearish"

This report by Jim McTague from Barron's, reproduced on the Cumberland Advisors site, gives an indication of how the money experts were feeling this month, on their annual fishing trip in Maine:

[David] Kotok's diagnosis of the cause of the gloom that permeated the crowd was this: Most of them see more economic downside than upside; we don't have functioning credit markets; banks and big Wall Street credit intermediaries are either dead, wounded or on life-support; housing is a wreck; and the auto industry "is done."

Once the economy stabilizes, it will take many years to fully recover, he said, because no strong growth engines are evident. "That's why people are so gloomy! They see no upside!" He personally is investing client money in agricultural plays because, he says, the long-term price of food is trending up. He likes bio-companies whose products are geared to an aging population. And he likes Asia as an investment destination...and he doesn't like much else.

I conducted in-depth interviews with a dozen of the participants. They all perceive the economy in the early stages of a multiyear recession that will be the most painful downturn since the 1970s. The housing market, which experts once predicted would recover in 2008, may not recover even in 2009. Credit woes on Wall Street will begin to inflict real pain on Main Street.

We're already seeing the impact on housing, though the worst may not have happened yet; and I think stocks and bonds are still in something of a fool's paradise. I'm sticking with my guess that in retrospect, we will see that the upturn began in the Spring of 2010.

Planning for the dollar drop

The bear view continues to spread. Greg Peel at Australian financial news site FN Arena today rehashes the article by Mr Venkatesh I covered yesterday.

The IHT article from March 28 last year was significant in that the Asian Development Bank was then urging countries to appreciate their currencies in concert when the dollar falls, so as to minimise the additional disruptive effect of national economic rivalry in the region. I guess that contingency plans are indeed being formulated.

The point of my own coverage is not to add to the gloom-and-doom, but so that readers may make their own plans to survive and thrive in the coming changes. Some will do well. What is your strategy?

To sum up... from India

A chartered accountant from India today summarises the general bear case about USA trade deficits and the future of the dollar. Mr Venkatesh apportions some blame to Asian countries, for choosing to keep their currencies weak in order to sustain their trading advantage.

The article is well worth reading in full, in particular the comments on oil and the threat of trading crude in Euros rather than dollars. It is also worrying that...

On March 28, 2006, the Asian Development Bank is reported to have issued a memo, advising members to be ready for a collapse of the US dollar. [see the International Herald Tribune report here.]

Since end March 2006, the US Federal Reserve has stopped publishing the quantum of broad money [...] This is the worst possible signal that the US Federal Reserve could have sent to the world.

[The rise in commodity prices] has led to inflation across the globe. No wonder countries are forced to increase their interest rates to fight inflation. This has triggered an interest rate hike across continents and the US is finding it extremely difficult to sustain its current borrowing programme: it hardly has any elbow room to manoeuvre.

The author says that the US can neither raise interest rates much further, because of the cost of servicing debt, nor lower them, because that may deny it fresh supplies of credit.

Either we are witnessing a global meltdown of the US dollar, or a controlled US dollar devaluation (read, revaluation of other currencies). If it is a global meltdown the global economy is doomed, if is an orderly devaluation, it is damned.