Really, It Should Get Better

In an interview with Bloomberg’s Tom Keene, Nouriel Roubini again predicted U.S. growth would be lower the last half of 2010 than it has been the first half. He now expects GDP growth to be less than 1% in the 3rd quarter. He suggested that what had been sustaining growth the first half of the year were “tailwinds,” which were now turning into “headwinds.” He suggested that fiscal stimulus is now becoming a drag on the economy and there is no longer the census benefit. The inventory effect has run its course and the base effect is now putting pressure on growth. Furthermore, a number of tax policies have already run their course. They “stole demand from the future.”

Nouriel Roubini said there are many reasons he has concluded that there is now a 40% probability for a double-dip recession.

[Editor’s comment: Roubini repeated the same arguments given in the Bloomberg interview summarized in And Again with Emphasis, so we did not repeat them here. Rather, we summarized the further comments he made.]

Reported by Maria Bartiromo of CNBC, Nouriel Roubini tweeted today that he placed the probability of a double-dip recession above 40%, noting too, that capital expenditures were “now faltering.”

In a Bloomberg telephone interview, Jim Rogers said, “If the U.S. and Europe continue to slow down, that’s going to affect everyone.” Suggesting further that, “We never got out of the first recession.”

“China and other global economies should increase interest rates to contain a surge in inflation,” said Jim Rogers. He said rates were “too low worldwide.” Elaborating further he said, “If the world economy gets better, that’s good for commodities demand. If the world economy does not get better, stocks are going to lose a lot as governments will print more money.

Marc Faber said there is now a bubble in the U.S. treasuries market. He said he saw little up-side potential for treasuries, unless possibly for the short-term. Even there, he has great concerns. When he looks ten years ahead, he is sure he does not want his money in U.S. treasuries.

Marc Faber recommended that investors stay clear of 10- and 30-year treasuries. He said he thought inflation would eventually begin to accelerate. Already, he said we are seeing some advance indicators that will happen. He pointed out that whenever you see food prices going up, like grains now, you find inflation increasing in the future.

Marc Faber suggested he was “not too keen on Chinese companies.” He said he would rather play China through other means like a play on commodities, or through companies doing business with China, or currencies that would benefit from Chinese growth. In China, even the whole world, you have some sectors of the economy with deflationary pressures. For example, he said, wages in Europe and the U.S. are simply not going to go up much because wages are so much less in Asia.

Carl Icahn is suing the Tropicana Las Vegas casino-hotel in an attempt to be paid royalties for the use of the Tropicana  name. No longer connected to the famous casino-hotel, Icahn said the new ownership group is attempting to use the name and other trademarks for free. 

Regulatory filings show that Carl Icahn has become more invested in energy companies. He has increased his position in Chesapeake Energy Corp. (CHK) from 2.1 million shares to 12.7 million, or 2% of outstanding shares. Furthermore he now owns 2 million shares of Anadarko Petroleum Corp. (APC), less than half a percent and 2.4 million shares of NRG Energy Inc. (NRG), or 1%.

[Editor’s comment: This article reports several other companies in which Icahn has boosted his position. If the reader is interested in the specifics, please follow the link.]

In a discussion on whether or not to abolish the post office, Steve Forbes suggested if you don’t want to abolish it, privatize it or allow competition. He noted other countries have done so. The Netherlands and Germany have privatized their systems. Britain, Sweden, and others have eliminated the monopoly. In doing this, competition caused the service to improve. He thinks we should do it here.

Steve Forbes suggested that the U.S. has gone through “three profound periods of pessimism during the past century.” These include the Great Depression of the 1930’s, the great inflation of the 1970’s, and the economic crisis today.  He suggested that once major policy changes were made in the Great Depression and the great inflation, the “economy bounced back vigorously.” Today, he identified the “economic culprit” as the weak dollar policy, begun under President Bush and taken to new heights under President Obama.

Discussing the expected 9% increase in health care costs for employers following the new health care legislation, Steve Forbes explained that hiring would follow “basic arithmetic.” CEOs will hire less if the costs of employment go up. Furthermore, if they don’t know what the rules are, they will also hold back until they get more clarity.