More Bad News

Nouriel Roubini is one of those who was most notoriously correct in calling the downturn ("If you can keep your head when all about you are losing theirs..."). He has now released his outlook out for 2009 and he ain't happy:

It is clear that 2008 was a dismal year for the economy and financial markets year and it is now official that the current U.S. recession started already in December 2007. So, how far are we into this recession that has already lasted longer than the previous two (the 1990-91 and 2001 recessions lasted 8 months each)? We forecast that the U.S. economy is only half way through a recession that will be the longest and most severe in the post war period. U.S. GDP will continue to contract throughout all of 2009 for a cumulative output loss of 5% and a recession that will thus last about two years. Our forecast is much worse than the current consensus forecast expecting a growth recovery in the second half of 2009; we also predict significantly weak growth recovery – well below potential - in 2010

Taking Equity: But Wait, Folks, There's More

I, like so many of my betters and wisers,have been saying for months that if the taxpayers are going to bail out the banks, the taxpayers ought to get equity (see, e.g., link). I'm still not sure why equity was not part of the first Paulson plan:I suppose it is some confused notion that bailing out debt is not socialism while taking equity is. Still, the idea of a $700 billion wet kiss to the richest and best protected has turned out to be a hard sell--it takes a lot of explaining that Paulson et al apparently never thought necessary.

But wait, folks, turns out that we can take equity--and could do so all along (link). Two thoughts:

• Well, hey!

• Doesn't anybody know how to play this game?

Boring who-the-hell-cares policy note: No, I don't want the government in the business of running banks. But if they (we) are going to take the risk, we ought to get to share in the upside. Preferred is okay with me. Or warrants. And it some not too distant day when the birds all sing again, sell 'em all at an obscene profit.

Tech note: the original of the linked piece is, of course, from Hyperbull Nouriel Roubini who is now saying he wasn't pessimistic enough. I link Kedrosky because it seems you have to register for Roubini to get full access. OTOH, registering is not that hard, and they are giving away a ton of free stuff at the moment, so give it a look-see.