Roubini Claims Dow 7000 on Horizon, 2 year recession

Citigroup has about a trillion dollars of improperly markets illiquid, toxic assets they are holding off their balance sheets. Its the main reason why C was not on a buying spree, until the Wachovia deal came out which it seems they will now only get parts of. Fact is, they are in no position to buy because they cant. However, they are too big to fail.

sorry, meant "improperly marked illiquid toxic assets".

oh, the guy has been right for two years. Extrapolate!

"Extrapolate"

Extrapolation is a logical error. "Past performance...."

"the technical insolvency of Citigroup in the early '90s -- when the housing market was down a comparatively measly 5% -- as a sign that major financial institutions are increasingly vulnerable."

That's not what brought Citibank down in the 90's. It was sovereign debt.

Someone, somewhere should realize that mark-to-market accounting works only for securities held for trading with a real market price. Unlike shares of stock, which are fungible, every asset-backed security is unique. There can be no single market for all of them. Moreover, if the intention is to hold them till maturity, then there is no need to continuously mark them to the market price.

For instance, if I have a treasury bond that I paid $99 for, and interest rates go up so today it's only worth $98, I did not lose $1 UNLESS I sell it. If that $99 yields me 1%, it continues to yield me 1% until I sell it, and doesn't suddenly start yielding me 2% because the bond is only worth $98. Likewise, if my house is on the market for $100,000 and no one buys it for month, it is not suddenly worth $0.

That's what's wrong with mark-to-market accounting for assets held as investments, not for trading. That was the rule for all of time, until recently.

Want to watch the insolvency issues go away?

"Eventually, a government takeover of the biggest bank in the United States is a possibility"

Yup. And the sun might wobble off to one side and explode. Everything is a possibility, provided we do nothing to correct the problems. I believe you are seeing a natural correction of housing to income levels correcting a boom, and an irrational fear in the stock market unrelated to corporate income causing it to have some very low multiples, indeed.

roubini is the man ... has been right on everything .... I personally am hoping for only a 2 year recession, that is not so bad.

A stopped watch is right twice a day...

My take is this... if there weren't many folks thinking it could go lower, it would already be higher. If there was no chance we'd hit 8k, then we wouldn't currently be at 9k...

Bottoms don't feel like bottoms, they generally feel like the end of the world...

Yes, but he has been right more than twice a day ...

Check out what else he called....

Not to mention, a lot of folks called the credit crisis a couple years back. The only real question was the depth. This guy happened to have the most gloom in it. In days of panic, that guy looks right.

There are always a million guys saying dow at 50% of where it is now...

he was pretty specific and called the collapse of investment banks almost in order ... also he is specifically not calling for the great depression, just saying a very ugly couple of years ...

Read his "12 steps" - it's about as specific as it can get. Him and Schiff have been very accurate.

Toss Marc Faber in and you have the "three wise men".

Toss in Shiller and you have 4 wise men...

I agree MMAfia, Schiff has been a part of my investment strategy for quite some time.

Don't know about anyone else, but I own a small business, work for small businesses, and have friends who work in small businesses, and they're all booming. To me that's the real economy.

"Don't know about anyone else, but I own a small business, work for small businesses, and have friends who work in small businesses, and they're all booming. To me that's the real economy."

Unfortunately, that's not the stock market. By the way, you haven't posted any negative articles lately. Haven't seen any in the media? I can help you look.

i never agree with steve but have to say that i have no real complaints with the economy. it's not fun to watch the domestic numbers right now but it does seem the carnage is necessary. as usual, it seems the lower middle class/lower class will be wiped out while oupper middle to the wealthy just take a few flesh wounds.

"Unfortunately, that's not the stock market."

I didn't say it was.

Note, though, this recent pattern in the stock market: the US markets are falling more than the developing markets. This is not a usual pattern. It seems to indicate what many are saying - that there is money waiting to come into the market, just nobody want's to be first.

The stock market is overtaken with fear right now. Everyone knows this. We are not at the end of the world.

"By the way, you haven't posted any negative articles lately. Haven't seen any in the media? I can help you look."

I've done a ton of that, BGaria.

want's = wants

So what was the point of saying that small businesses are booming? I work for a small business too, and it's in finance, and my income this year will be higher than ever before, and I will never ever get laid off. What does that mean? That I should be bullish on the stock market or RE market or the economy or on consumer spending? Or that I should be telling everybody that things are great and that there is nothing to worry about?

the point, i think, is that there is no need to panic and the media is distorting the extend of the crisis. even during the depression far more people worked than not. this has to unwind and it will be ugly, no need to make the traffic jam more ugly by rubber necking.

My you are annoying, BGaria. My comment was on the "real economy," and it refers to the initial post. Please read.

"My you are annoying, BGaria."

Just wanted to make sure you know how much I value your opinion of me and how important it is that you like me...

Steve, we know things are in a strange place when you are posting some of the most reassuring material!

Thank you.

Good point will, I'm actually starting to like steve now . . .

I've said it before - this is NOT 1937. Things are NOT this bad. I lost money - cool. I'm cool with it. Fortunately, I have no leverage, am invested solely in 2x China bull with money I don't need. Otherwise, I can pay for my lifestyle on my income. It doesn't feel good not to have as much money as I used to, but it will come back in the medium-term. As the market was crashing I was worried - I'm not worried anymore about what happens. Let's say we have massive deflation - which is where we're headed if this doesn't stop soon. The world will end. Then the sun will come up the next day, and Manhattan real estate is going to be really, really cheap. :0

And for those who laughed at my complaint to CNBC, watch tonight's Fast Money - the tone has changed, I've barely heard the word "fear." They're focusing on putting everything in perspective - which is fair, regardless of how bad it is - rather than on fear of a depression. I haven't heard the word "depression" even once.

I imagine that this will continue.

You're welcome.