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The Times is good today in looking at how some prognosticators are racing to outdo each other predicting how far the market will fall. Itâs kind of amazing to see experts quoted in a major paper saying the Dow could fall to 2,000. Itâs stunning, actually, and thatâs not even mentioning the guy who predicts a 90 percent tumble.
The Times is quick to say that trying to predict stock-market movements is largely a foolâs errand and is amusing in busting the chops of those guys who wrote âDow 36,000â a few months before the tech bubble burst.
Still, while the reputation of its authors may have taken a hit, âDow 36,000â has not seemed to hurt their careers. Mr. Hassett, who did not respond to a reporterâs inquiry, works at the American Enterprise Institute, a conservative research group in Washington, and serves as the senior economic adviser to the presidential campaign of Senator John McCain.
According to his spokesman, Mr. Glassman prefers not to comment on the financial markets now that he has started in his new position: under secretary of state for public diplomacy in the Bush administration.
I think thatâs called failing upward.
Speaking of prognosticators, Nouriel Roubini, who will be remembered as the Prophet of the Panic of â08, says itâs only going to get worse, with governments likely to have to shut markets down for a spell. Heâs not called Dr. Doom for nothing.
“We’ve reached a situation of sheer panic,” Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. “There will be massive dumping of assets” and “hundreds of hedge funds are going to go bust,” he said.
N. Gregory Mankiw in the Times yesterday asked whether weâve learned enough over the last 80 years to prevent another Great Depression. The ex-Bush economic adviser is not too optimistic either.
Whatâs next? Perhaps the most troubling study of the 1930s economy was written in 1988 by the economists Kathryn Dominguez, Ray Fair and Matthew Shapiro; it was called âForecasting the Depression: Harvard Versus YaleââŚ
The three researchers show that the leading economists at the time, at competing forecasting services run by Harvard and Yale, were caught completely by surprise by the severity and length of the Great Depression. Whatâs worse, despite many advances in the tools of economic analysis, modern economists armed with the data from the time would not have forecast much better. In other words, even if another Depression were around the corner, you shouldnât expect much advance warning from the economics profession.
Let me be clear: Like Mr. Blanchard at the I.M.F., I am not predicting another Great Depression. We have indeed learned a lot over the last 80 years. But you should take that economic forecast, like all others, with more than a single grain of salt.
Arthur âthe Curveâ Laffer gets column inches from his favorite patron, the WSJ editorial page, and calls Bush (and Congress, to be equanimous, of course) Herbert Hoover! Of course, heâs got a book to sell, but whatâs really laughable is to see him beef about budget deficits.
Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.
Thatâs right— itâs Mr. Voodoo Economics himself, griping about deficits that his theories had perhaps the biggest role in creating. Nice.
The NYTâs Gretchen Morgenson let loose on the BS being shoveled out by the perps in the crisis, including Alan Greenspan, SEC Chairman Christopher Cox, and the ratings agencies.
The press is talking more and more about the potential bankruptcy of the Big Three. Today itâs the Journal and yesterday it was the Times. Iâve beefed about after-the-fact-ism in the press, so a tip of the hat to it for an uncharacteristic boldness in spelling out the likely scenarios before they happen.
Bloomberg is decent in looking at the outlandish bonuses on Wall Street, $20 billion of which have yet to be paid.
Goldman Sachs Group Inc. and Morgan Stanley, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.
Huh?
“I’m just flabbergasted that the financial community has failed to show any sense of leadership on this issue and doesn’t seem to understand how angry people are at them,” said Nell Minow, editor of Corporate Library, a Portland, Maine-based corporate-governance research firm. “They are just a bonus away from having the villagers come after them with torches.”
New York-based Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns Cos. awarded their employees a cumulative $145 billion in bonuses from 2003 through 2007, according to estimates based on company reports. That’s more than the annual gross domestic product of the Philippines. Last year the firms paid out a record $39 billion.
The Washington Post is a little bit late with its online headline today: âMiddle East Financial Hubs Still Faring Wellâ
Here’s the WSJ on page one: âFinancial Storm Hits Gulfâ.
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