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.
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Last year the federal government received 6.7 trillion from tax revenue. It still needed to borrow 1 trillion. That accounts for 17% more then revenue received. As long as congress allows this administration to continue no budget and borrowing policy ;the market, dollar and economy will be doomed. We all can agree that spending 17% more every year then is taken in is unsustainable. The interest alone will bankrupt us. You can ignore the problem and believe the government will take care of you forever, but there is a date on the wall where the money train will run out of fuel. Whether you agree with me or not at this point, all Americans will feel the pinch and see why fiscal discipline should have been implemented. This will also be a very interesting day in America. The world will see if The Social Contract that America has with its government is still strong or will there be anarchy like we see in Grease.
Pretty sure I put an opinion on here about Roubini...Looks like it's gone...?
Guess you have to be careful what you say about somepeople's heroes.?
Anyone could guess what he is guessing, right now..Doesn't take a rocket scientist.
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.
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.
We talk about Roubini on other blogs. The ones that don't have mindless Southerners clogging the top positions with foolishness and dribble. Anyone get the feeling that Mylanta is a big seller in the South because it also looks like it says: Atlanta, on the label? Kids... if you want to feel better about things... turn Limbaugh off and get a life.
His bolded points are spot-on. No one believes a fiscal resolution will occur without force. Europe is toast. It hasn't had economy in years. Greece would do better if it walked away. Didn't China take on GOP characteristics? How on Earth can it recover when a very small segment of the population got all the earnings and toys? IF we had Romney, we would be neck and neck toward that Train Wreck! War in the Middle East is inevitable. Israel wants it. This time, let's send our older GOP in first and keep our kids back here to help restore what older GOP ruined.
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...
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The idea of US crude being a shelter from turmoil abroad may not be as far fetched as it seems.
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