At a dinner in Davos, Nouriel Roubini said the U.S. government is insolvent. He went on to say that most of the U.S. banking indurstry is insolvent and that the four largest banks will be nationalized eventually. He says we can either do it now or wait for the problems to grow and be dealt with down the road when things are far worse. If this is to occur (which I think is highly probable) it could very well result in a final capitulation moment. He went to say that the global economy would experience -1% growth this year and that the idea of a second half recovery is “delusional”.
I’ve been very bearish for 18 months and I still am, but I think Mr. Roubini is beginning to stretch his 15 minutes a bit too far. With the Dow down nearly 50% and much of the global economy down far more I think we’re getting closer and closer to the time when Roubini’s economic mindset will catch up with his inability to predict market movements.