What's the worst-case scenario for stocks?
Economist Nouriel Roubini thinks 2013 will be a lousy year, even if the fiscal cliff gets taken care of. But things could actually get worse. Here's how.
He's hardly been optimistic since the financial crisis. He thinks 2013 will be trying for the global economy. Europe will be struggling with recession. China's economy is still soft, and he thinks U.S. economic growth will be modest at best.
But a perfect storm of four issues could make 2013 truly awful, Roubini said on an interview on Turkish television. Here they are:
The U.S. fiscal cliff issue doesn't get resolved. That means tax rates go up and government spending gets cut. The result, many economists believe, Roubini among them, will be another recession. We should note that President Obama and House and Senate leaders met Friday and swore they'd get the problem fixed. That was enough to turn a bad day for stocks into a winner.
The European recession gets nasty. This would occur if Greece runs out of cash (a real possibility) and leaves the euro currency in a messy way. Read that as this: Greece basically defaults on its debt and plunges global credit markets into chaos.
China's economy tanks. It's possible. Real estate in many Chinese markets has been overbuilt, and construction spending has slowed. The Shanghai Composite Index, the benchmark Chinese stock index, is down 34% since April 2011 and 67% since peaking in November 2007. Hong Kong's Hang Seng Index, however, suggests things aren't that bad. The index is up 15% this year.
War erupts in the Middle East. This assumes Israel and Iran somehow go to war, not a huge possibility by itself. But the rising tensions between Israel and Syria and Israel and Egypt over what Israeli forces might do in the Gaza Strip could cause major disruptions in crude oil markets, with crude oil pushing toward $200 a barrel with serious effects on the global economy.
So far, however, oil markets aren't in a panic mode.
Crude oil (-CL) for January delivery in New York settled up $1.05 to $86.92 a barrel Friday and was up 1% on the week. Brent crude, the better indicator to watch in this case, was up 97 cents to $108.98 a barrel and is down slightly for the week.
Wholesale gasoline futures for December delivery ended the day up 1.39 cents to $2.7101 a gallon.
AAA's national average retail price of gasoline was $3.43 a gallon Friday, down slightly from Thursday and down 9.4% this quarter.
More from Top Stocks
- Nonunionized Wal-Mart still facing strikes
- Sears shares plunge after depressing earnings report
- Major shift in consumer sentiment looms
Are YOU kidding me?
WHAT IS WORSE THAN OBAMA IN THE WHAT HOUSE?
I will tell you what is worst:
it is all those who voted for this arrogant, inexperienced, liar and divider in chief....that's what.
IT IS SCARY when you CAN'T TELL SOMEONE WHO DON'T KNOW....AS....THE Democ.....RATS.
Read the book "Atlas Shrugged" - it really sums this all up in one HUGE novel.
My life has now been determined by specific ethnic groups that voted based on color - and an age bracket that has net worth in negative figures and no jobs.
Worse yet, no motivation to change it that actually required getting off the couch.
So yeah...the worst thing would be Russia and China making a play in the Middle East...and us being incapable politically and militarily of doing anything about it...
When Iran closes the Strait of Hormuz...well, that's going to be an interesting day to be sure...
It's already started....
Worst case senario, Obama re-elected, continues his war on business and the middle class, Ben continues his printing to infinity and beyond. For thoise democrats too stupid to do the math 40 billion is about $480/family/month. He could just send each family a check, but instead he is letting Obama continue to reward his special interest groups...
Buy guns/ammo, Specie (Au, Ag, Pl), and stocks, and stash some money overseas where Obama cannot get at it. It would be wise to invest in diversified Foreign stocks. Investing in Obama's America is like asking a Jew to invest in Hitler's Germany...
"What's the worst-case scenario for stocks?"
I don’t believe for one second that anyone knows the answer to this question. I’m certain they won’t guarantee their opinion for a fixed price.
But, I do think we might all eventually find out the answer for ourselves the hard way. I guarantee it.
The worst case scenerio for stocks? They all fall to 0. It will not happen. There are cascading effects if the Fed limitlessly prints money to purchase its' own debt.
I do not see any reason to think that stocks will take off, but they won't drop to 0. I would start loading up on Medical stocks.
Maybe we could get the Feds to talk to Texas about how they can run their Government within its budget. They might learn a thing or two. But, D.C. can't find its own a** with both hands.
Copyright © 2014 Microsoft. All rights reserved.
Traders might want to bite on BABA, but long-term investors have reasons to wait.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.