Morgan Stanley Economist Stephen Roach a long time bear has become more sanguine on the global economy. The phrase long time bear doesn't belie the truly dire forecasts he has made over the last few years.
That he is turning more bullish is probably not market moving. He is still concerned about the same things in the US he has been worried about all this time. The change, which didn't really sound like much of a change, stems from a new world wide acknowledgement of the problems Roach has worried about.
If I have it right, and I may not, it seems like that now that the world, as in the G-7, is now worried about the US deficits that somehow things have improved. This entire episode was a little confusing.
This article helped a little. Roach says that the acknowledgement means that other countries may get involved with trying to solve these deficits which he views as progress.
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6 comments:
Talk about another contrarian indicator. The biggest bear on Wall Street just got bullish? Oh boy!
I was wondering the same thing. funny. thanks for the link
Yeah don't you hit the Sell button when the bears capitulate?
To be fair here, Roach didn't say "time to buy". He said "the global imbalances might be resolved eventually". Change of stance, yes. Uncharacteristically hopeful, yes. Suggestion to buy? Maybe not. Resolving imbalances could be bad for the markets in the short run and could take a while. Remember, he's a macro guy. Things that he considers to be rounding error could bankrupt you.
Sestina has the right take. Check out the full commentary by Roach here
http://www.morganstanley.com/GEFdata/digests/20060501-mon.html
One possible 'take away quote'
"Don’t get me wrong -- I am still very concerned about the mounting pressures of unprecedented global imbalances. America’s massive current account deficit -- hitting an annualized $900 billion in late 2005 -- puts an extraordinary financing burden on the world. Moreover, with the three largest surplus nations -- Japan, Germany, and China -- all hard at work in stimulating internal demand, America is likely to have less surplus foreign saving at its disposal. With the perils of a US current account adjustment mounting, global authorities had seemed asleep at the switch. That is no longer the case. I am pleased that they have risen to the occasion -- not just by devoting a special annex of the recent G-7 communiqué to global imbalances, but also by empowering the IMF to expand its purview to multilateral surveillance and consultations. That finally puts teeth into the global rebalancing campaign (see my 28 April dispatch, “Rebalancing Legitimized!”). While that doesn’t eliminate the possibility of a disruptive US current account adjustment, it does mean that an unbalanced world is now taking its collective responsibility more seriously."
Paul
OK so alot of people are bearish but what is the catalyst to reverse a 3 year bull market? Earnings has been good so far with 70% of the S&P beating. Any thoughts?
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