- Roubini Sees Global Gloom After Davos Vindication
- Obama pushes economic plan; cloud over health pick
- Violent clashes in Russia as angry protesters call for Putin to resign over economy
News Hour Part II Warren Brussee, "The Great Depression of Debt,
Survival Techniques for Every Investor"
- Despite layoffs, federal work force is growing
- Macy’s (M) Workers May Face More Large Layoffs
- WSJ Video, GDP 3.8% Skewed by Inventory
- General Mills says more people eating at home
Jan. 30 (Bloomberg) — At the World Economic Forum two years ago, Nouriel Roubini warned that record profits and bonuses were obscuring a "hard landing" to come. "I really disagree," countered Jacob Frenkel, the American International Group Inc. vice chairman and former Israeli central banker.
No more. "Roubini was intellectually courageous, and he called the shots correctly," says Frenkel, whose AIG survives only on the basis of more than $100 billion of government loans. "He gained credibility, and he deserves it."
Even as he wins plaudits for his prescience, Roubini, 50, says worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says.
"The consensus is catching up with me, but it’s still behind," Roubini said in an interview in Davos. "I don’t know what some people are smoking."
As long ago as February 2007, Roubini was writing on his blog that "the party will soon be over," and warning of "painful consequences for the U.S. and the global economy." By last February, his tone had become apocalyptic, raising the specter of a "catastrophic" meltdown that central banks would fail to prevent, triggering the bankruptcy of large banks with mortgage holdings and a "sharp drop" in equities.
The next month, Bear Stearns Cos. failed, to be taken over by JPMorgan Chase & Co. in a government-backed deal. Then, in September, Lehman Brothers Holdings Inc. went bankrupt, prompting banks to hoard cash and depriving businesses and households of access to capital. The U.S. took over AIG, Fannie Mae and Freddie Mac, and the Standard & Poor’s 500 Index suffered its worst year since 1937.
"I was intellectually vindicated," Roubini says. "But I was vindicated by having an economic disaster which has political and social consequences."
Roubini’s predecessors in the role of economic nay-sayer include some well-known names: Joseph Granville, publisher of the Granville Market Letter, who forecast the stock-market declines of 1976 and 2000; Henry Kaufman, who as a managing director at Salomon Brothers projected rising interest rates that led to a U.S. recession in the early 1980s; Marc Faber, publisher of the Gloom, Boom & Doom Report, who predicted the 1987 stock crash; and Yale University’s Robert Shiller, a former colleague of Roubini’s, who forecast the end of the dot-com bubble in his 2000 book "Irrational Exuberance" and said in a second edition in 2005 that the U.S. housing market had undergone the biggest speculative boom in U.S. history.
Granville, 85, says the key to being an outlier is not to doubt your analysis.
"I don’t have anything to do with emotion," says Granville, who’s based in Kansas City. "Keep your head, follow the numbers and ignore the rest."
Roubini was born in Istanbul, the son of an importer- exporter of carpets, and spent his childhood in Israel, Iran and Italy. It was while living in Milan from 1962 to 1982, he says, that he became attracted to economics: "Economics had the tools to understand the world, and not just understand it but also change it for the better."
Roubini, who’s now working on a book about the crisis, says he takes no particular pleasure in his role as Dr. Doom or the attention it brings him.
"I’m not a permanent bear," he says. "I’ll be the first to call a recovery, but I just don’t see it yet, and it’s getting uglier."
WASHINGTON (Reuters) – U.S. President Barack Obama sought to rally support for his emerging economic rescue package on Saturday, as he stood by his latest cabinet nominee to run into tax problems that could impede confirmation.
Obama, in his second weekly radio address since taking office, pledged to help lower Americans’ mortgage costs under a new plan to be unveiled soon to help revive the financial system and "get credit flowing again."
But even as he moved to confront the economic crisis, Obama was facing a new political distraction — the disclosure that Tom Daschle, picked to spearhead U.S. health care reform, failed to pay more than $128,000 in taxes.
It was the latest glitch in Obama’s effort to complete his cabinet and focus on top priorities, including a mid-February target for Congress to pass an economic stimulus bill with more than $800 billion in tax cuts and spending.
Treasury Secretary Timothy Geithner’s nomination was held up earlier by criticism over late payment of $34,000 in taxes.
Russia was rocked today by some of its strongest protests yet as thousands rallied across the vast country to attack the Kremlin’s response to the global economic crisis.
The marches, complete with Soviet-style red flags and banners, pose a challenge to a government which has faced little threat from the fragmented opposition and politically apathetic population during the boom years fueled by oil.
Pro-government thugs beat up some of the protesters.
WASHINGTON (AP) – Companies are cutting jobs by the tens of thousands. State and local governments are penny-pinching, too. So what about Uncle Sam? Tough times for him as well?
In fact the number of federal workers is on the rise.
That might seem strange to the 11 million people in the U.S. who are out of work – and the millions more who fear they soon will be. Shouldn’t Washington pare down too?
But it is unlikely that President Barack Obama will put any of the nearly 2 million federal civil servants out in the street in the middle of the worst economic downturn since the Great Depression. His proposed $800-plus billion economic aid plan, which includes heavy spending on public works, is expected to increase the ranks of federal workers, although mostly at the state and local level.
That measure is working its way through Congress just as Microsoft Corp. (MSFT), Pfizer, Caterpillar, Home Depot and scores of other companies are shedding workers, and governors are asking or ordering state workers to accept furloughs, salary reductions, truncated workweeks or reduced benefits.
"Federal belt-tightening would worsen the problem right now," said Kevin Hassett, director of economic policy studies at the American Enterprise Institute, a conservative think tank. "Most economists agree that the federal government is a built-in stabilizer," said Hassett, a former adviser to GOP presidential campaigns.
Simply letting federal workers go is "penny-wise and pound foolish," said Max Stier, president of the Partnership for Public Service, a nonprofit group that works to revitalize the government and its work force. "We had a situation where we had a single person monitoring toys coming in from abroad. End result: You get lead-tainted toys coming in to the country," Stier said. "We need people looking out for the public good."
Paul Light, professor of public service at New York University, also thinks more, not fewer, federal workers on needed on the front lines. He said other steps could be taken to trim costs. The Obama administration has suggested reducing the number of managers at the middle levels, he said.
"That would be a good thing," Light said. "What he hasn’t suggested is that we reduce political appointees at the senior level. I just think you could do some things to say to the public, ‘Look, the federal government is going to make its share of sacrifice and it’s more than just having energy-efficient buildings.’"
Macy’s (M) is up against the same hard rock as other large retailers who cater to the middle class, Sears (SHLD) and Nordstrom (JWN). Sales are being crippled by the recession and there are simply too many stores in too many malls and on too many street corners.
Macy’s (M) may layoff as many as a thousand people next week.
According to The New York Post, "The giant department-store chain is expected to announce next week that it’s consolidating its regional operating divisions, sources said, and could lay off hundreds, and possibly thousands, of workers."
Even that may not be enough. Macy’s has 853 stores and 182,000 employees.The company’s same-store sales were down 4% in December and revenue fell 4.7% from the same month a year ago, hitting $4.4 billion. In Macy’s last reported quarter, it only made $68 million in operating income on $5.5 billion in revenue.
Cutting one or two thousand people will not solve the retailer’s troubles in an environment which is this vicious.
DAVOS, Switzerland (Reuters) – General Mills Inc and other food makers are benefiting from a sharp rise in home cooking in the United States and to a lesser extent in Western Europe, the head of the U.S. company said on Saturday.
"We are seeing some very interesting changes in consumer behavior as we plunge deeper into the recession," Chairman and Chief Executive Ken Powell told a panel at the annual meeting of the World Economic Forum.
Two or three years ago, around half of the $1 trillion spent by Americans each year on food went into the tills of restaurants and fast-food outlets.
But the fashion for eating away from home — a strongly growing feature of the U.S. marketplace for the past 35 years — has now been thrown into reverse.
"What we see now, over the last year and a half, is a very, very significant change in the direction of that trend," Powell said.