Monday, April 30, 2007

Alan Abelson in the Current Issue of Barrons Sounds an Ominous Prediction for the Economy

I love to read Alan Abelson in Barrons each week. He's a good writer and always has some witty observations to challenge his readers. Whether you agree with everything he says or not, I can't help but add his prognostications into my thinking about the markets and where they may be heading.

And so it is, Abelson sounds an ominious warning in his weekly column of the current issue of Barrons:

"That pretty much the rest of the global economy has been humming along at a brisker pace than we have has given rise to the notion that the world is no longer dependent on us...that Europe and Asia can thrive quite nicely if we---the U.S. economy---hits the skids. But we don't buy it for a second. And we suspect it'll become painfully evident why we don't, as the months go by.

"We think the economy will slide into recession, as the drag from housing and the burden of unprecendented consumer debt make themselves increasingly felt. We think the dollar will continue down the slippery slope, complicating Mr. Bernake's life and inducing slumpfation.

"We think this overleveraged, overheated, overhyped market will blow itself out and touch off a chain reaction that'll rock global bourses. And all this will happen, if not tomorrow, then soon enough, we're afraid."


I tend to agree with Alan's assessment of future markets. I think the housing bubble which is far from completely burst, coupled with decades of profligate consumer overspending, is a train wreck waiting to happen and probably not that far off in the future.

Time will tell. But it certainly admonishes caution in all money transactions today.

1 comment:

pm said...

Read your column on Abelson and will not be so bold as to challenge him , caution is certainly a recommended policy when dealing with money. On the other hand go to our friend Kudlow and read that the conditions in place, low interest rates, strong corporate earnings point to a continuing strong economy. I think the housing trouble in the shaky credit risk market is overblown.

There is already some movement to find refinancing help there. The fact that a couple of the operators in this market are going belly up is good news. They should not be promoting debt to people who would be crushed by the slightest set backs. The rest of the housing market will weather this blip and regain traction.

There may be some overevalution in real estate but remember our populations grows & grows and the folks need a roof over their heads.

We have had a great run due to
the Bush tax cuts,he has fumbled some stuff but not the economic policy. The tax cuts are bringing in record revenues. You should do a column on that. The rest of the media keep hammering him, I still find Katrina popping up but no mention of the tax revenue flowing in from the tax cuts.

One point made in the Kudlow blog by a panelist, the capital gains revenue is from a voluntary tax. If it were not 15% lots of people would sit on gains and a no tax would occur.( less business activity)

The real danger to our economy is the Democrats who if they had their way would repeal the cuts out of straight demogogery not economic insight.

So don't run out and do something reckless, listen to the cautionary advise but take a look at what has happened with the low interest rates and tax cuts and do your darndest to get the message out so that a few more people realize what has happened and don't fall for the Democratic message of the tax cuts benefiting only the wealthy and should be repealed.
Disasterous economic nonsense.