When will this horror show come to an end?

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This post offers Wachovia‘s 2009 economic outlook for the US, under editorship of highly rated John Silvia. The report recognizes the extreme challenges that will confront investors and businesses in the year ahead and is aptly titled “When will this horror show come to an end?” A brief excerpt follows below.

“The 2008 economic story could have been written and directed by a Hollywood horror master. Watching the developments in financial markets this year was like squinting through closed fingers during the iconic shower scene in Alfred Hitchcock’s 1960 thriller, ‘Psycho’. You could almost hear the soundtrack of screeching violins during televised financial news, and this time it was your assets that were going down the drain.

“… further declines in consumer spending, business fixed investment spending and residential construction translate into continued contraction in real economic activity. By the time the economy hits bottom in the middle of 2009, real GDP will probably have contracted nearly three percent, the worst downturn since 1981-82. Underlying our forecast is the assumption that policymakers will take the necessary steps to prevent the global financial system from locking up again. Should that assumption prove overly optimistic, global economic growth would end up even weaker than our already bleak outlook projects.

“After the year we just finished, you might feel like covering your eyes rather than looking at what might be lurking ahead. In this outlook, we explore how the unprecedented financial developments of the past year will unfold over the next 12 months. The villains in this horror flick are the credit crunch, poor public policy decisions and diminishing foreign trade. At the risk of spoiling the ending to this movie, the good news is that we are going through some of the scariest parts right now; by the end of 2009, economic growth should return.”

Click the links for the full report or the slideshow (used for the Wachovia conference call).

 

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6 comments to When will this horror show come to an end?

  • Norm

    The declining price per barrel of oil seems to be a yet unrealized negative for the global economic situation. Conditions in oil producing countries will gradually deteriorate. I’m basing my assumption on the prediction that the dollar will remain strong and the global economy weak. There just doesn’t seem to be enough bad news lately.

  • Bernard

    As member of the community which put us in this mess, Wachodia amazes me in using such a title “When will this horror show come to an end?”

    Better use “When will this mess we initiated will come to an end”.

  • Michael M.

    The opening description that Mr. Silvia is a “highly rated analyst” makes me wonder why he is highly rated. I enjoy reading analysts’ descriptions of our situation, they nearly always show impressive verbal intelligence; but it is hard not remember that apparently nearly everyone failed to forsee the devastation of the last year. So when I see an analyst or expert cited at length now, I always wonder what their past prediction success has actually been.

    This strikes me as a general problem: we are not told the past records of “experts” when their new opinions appear. I now assume a “highly regarded analyst” could be someone who makes cogent analyses, whether or not they turn out to be predictive, without further information.

  • john s

    found the anaylsis of credit, housing & autos useful. If Obama & the Democratic partys’ plan is just to spent money & add more restrictions on business we are in for a rough economic ride. I agree with Mr. Robert Lucas that the incentives to enter business must be increased if we are all to prosper. I have just been to Western Europe, which is heavily socialized, and their economic problems are much worse. The goverment cannot tax anymore because the people have to have something left of their income in order to survive and they are maxed out on the debt they can incurr. Will the Euro make it through this recession? Milton Freidman didn’t think it would survive a recession.

  • we are in transition to the upside, the top of that transiton was yesterday, now we must drop likely to a new low….transiton is like crwon molding the higher the walls the bigger the moulding. So with this move. See our charts

    http://www.exceptional-bear-market-letter.com/2.html

    Eduardo Mirahyes

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