Roger Nightingale of Roger Nightingale & Associates says with the new year looming, a recession in the new year is inevitable. “It’s not inconceivable that that recession turns into a long-term depression.”
While global macro news hasn’t buoyed markets so far, he is optimistic that they will go up. He, however, continues to hold a bearish view on the economy
The ECB have a long track record of making favourable statements which aren’t justified. We have had about 25 meetings or so in the last several months and trying to resolve the European economic problems. None has been at all successful. In fact after each meeting there have been optimistic statements and none of them have come to be justified.
The reality is that the economic situation around the world as a whole is deteriorating rapidly. We are heading for a serious recession in 2012. It’s not inconceivable that that recession turns into a long-term depression. We ought to be extremely worried about the economic situation because the federal bankers have no capacity to ease the situation. Interest rates are already in most countries at very low levels.
They have already got money policy at extremely accommodative levels and so there is very little capacity for the central banks to help. What's more, the central banks are no longer trusted by the people or the industrialists. They say things and it’s quite clear that the statements they make don’t have credibility.
I would be very worried about the economy, but I do actually think the markets will do well. The liquidity that’s in the system is very substantial. It’s looking for a home and its bidding up security prices in the process. So, I am the bear on the economy and bull on the markets.
It depends of course if the Euro stays in existence. There is a rising possibility that the Euro disintegrates and come by the end of March next year it no longer exists. It’s certainly possible that a number of countries, Greece most obviously, Portugal, Italy and so on leave the Euro.
If some weak members of the Euro were to leave then the remaining countries in the Euro would look stronger. It’s possible that the Euro as a whole would strengthen. The Euro even more dominated by Germany would rise. But I suspect that actually that’s not going to happen in the time that we are talking about. It will take much longer than that. In consequence I would expect the euro as a currency to decline over the next three months.
