The World Has Not Ended Yet According to Joseph Stiglitz

Economics / Recession 2008 - 2010 Sep 22, 2009 - 06:22 AM GMT

The now famous economic guru of our time Joseph Stiglitz has proclaimed the world economy has not crashed. BUTTTTTTTTTTTTTTTT… Stiglitz has repeatedly stated that the US has failed to fix the underlying problems in the banking system. Stiglitz has stated the concept of banks ” Too big to fail” have only gotten bigger.

Ironically other economists have claimed the global recession has ended. I have a simple question. Granted the world economy has not fallen off a cliff ( yet)…granted some things have stabilized to some degree…what has really improved or changed? In order for a true bottom to be in place things have to get better! I am not trying to be a pessimist but rather a realist. Currently the stock market is vastly over bought ( but this can continue for a long time). This inhibits a proper risk reward stance. More so the central banks have inflated the economies of the world however the real economy or Main Street seems exceedingly weak.

My question is what happens when the so called stimulus money runs out… is there a second or third stimulus? What about inflation from all of this printing of money? What also I do not understand from all those economists is how they can state things are getting better when foreclosures are increasing? The ripple effects throughout the economy are so clear when there are foreclosures. Let me understand something, people lose their house and their equity (if they have any in the house) and now they go out and spend more money? They go to buy new cars in which they can not afford ( the US govt clunker program) or they run a credit card in which they have no intention of repaying?

Sure the economy is getting better. Sure the banks are making money. That is why every week we have at least 2 banks get taken over by the FDIC and defaults on debts in corporate bonds ( as well as 415 banks on the FDIC watch list). OH, why is it that I remember that another wave of ALT -A and option ARMs are resetting and so many economists forget this point? How many foreclosures will this now lead to?

I know everyone wants to be positive but what I find absolutely shocking is that the percentage of investment advisors that are bullish now surpasses the stock market peak in 2007. Remember the statement, the public is always wrong? What potentially is happening now is similar to what happened in the 1930s after the Oct 1929 crash. The market rallied as it has now. Statement after statement came out is the crisis is over and this was so wrong. The stock market fell almost 90%, there were wholesale defaults and failures.

Again.. I am not trying to plant fear. The fact is the risks are high. Even doing nothing and staying in cash has risks that many of us have never seen. Suggestion..Simply… diversify…have a plan… make yourself available for all opportunities. Do not predict..react…Realize what are your goals. Realize the returns you are looking for. Be realistic..

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.