Two major Wall Street firms have finally thrown in the towel and are now calling for a recession. Wall Street is usually late to call downturns, so this probably means that 1) the recession is already over, or 2) this recession is going to be a doozy (the more likely explanation, in our opinion).
The pessimism of Jan Hatzius at Goldman prompted Ben Stein to call him a lightweight, conflicted shill who was just “selling fear” to help Goldman’s proprietary trading desk. We therefore look forward to Stein’s explanation for the pessimism of Merrill Lynch economist David Rosenberg:
“The US consumer is on the precipice of experiencing its first recessionary phase since 1991 – the last time we had the combination of high, punishing energy prices; weakening employment conditions; real estate deflation and tightening credit conditions…
We reiterate that real estate deflations are unique and have never ended well for the consumer, the credit market or the economy. We can identify only five periods post WWII when the real value of housing assets turned negative on a year-on-year basis. All of these time periods inevitably included a consumer downturn. Maybe it will be different this time, but we fail to see why.”
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