This is, um, promising…. NOT!
Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish.
But you should hear what he’s saying in private.
Roach met select groups of fund managers [in Boston] last week, including a group at Fidelity.
His prediction: America has no better than a 10 percent chance of avoiding economic ‘armageddon.’
Press were not allowed into the meetings. But the Herald has obtained a copy of Roach’s presentation. A stunned source who was at one meeting said, ‘it struck me how extreme he was – much more, it seemed to me, than in public.’
Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ‘we’ll muddle through for a while and delay the eventual armageddon.’
The chance we’ll get through OK: one in 10. Maybe.
In a nutshell, Roach’s argument is that America’s record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.
The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.
Less a case of ‘Armageddon,” maybe, than of a ‘Perfect Storm.’