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In a speech entitled "Fasten your Seat Belts, It's Going to Be a Bumpy Year" Standard & Poor's chief economist David Wyss dared to utter the dreaded "r" word at the DealFlow Media Inc.'s Distressed Debt Conference 2008 in New York.
"We think we're in a recession," he began. "There will be negative [economic] growth in the first half that will be a mild, short recession, but we are worried that it could get worse." Wyss went onto say that "housing is the only major weakness [in the U.S. economy], but a slowdown in the rest of the world won't help. ... Recession is at least an 11 point favorite in this game. We're looking for a 14% to 18% decline in housing prices. ... There's going to be a lot of cheap houses out there." "We're only halfway through the process," he continued. "[Housing] starts and sales will probably bottom out around midyear; vultures are already starting to come into some markets, and it's especially inviting for foreign money. We're not at the bottom yet, and [housing] will still be a drag on the economy at least until the end of the year." On the stock market, Wyss commented, "We thought financial markets would handle [the housing downturn] better than they have." "The stock market is down 17% from the peak, and in the average recession the market goes down 36%; it looks like its only going to be a 20% correction this time." He went on to predict that "we expect to see a rally in the market later this year, but not until the market thinks the recession is over. There is a risk that this turns into a double dip, where people spend there rebates and we see a recovery in the second half, only to drop right back into a recession early next year." The American consumer is "going to start slowing down. They can't live beyond their means forever. The savings rate has been at zero for two years, [and] unfortunately Americans tend not to save for a rainy day until they get wet." "Sixty percent of the 2001 rebate was spent within 90 days, although much of it went to pay down credit cards. But within a couple of months, [consumers] had run the credit card balance back up," he continued. - George White See earlier posts from the conference CategoriesComments Deal Video
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It's really gonna be a bumpy year for everyone specially with the crisis going on. Despite this, we all need to stand strong to cope up with this crisis.