Morgan Stanley Asia Chair Warns We Are In Early Stages Of Downturn
Stephen Roach, Morgan Stanley Asia’s chairman, appeared on Bloomberg Television this morning. From their New York studio:
ROACH: I think we’re still on a near-recession trajectory. The second quarter was clearly stronger than most of us, including myself, expected.
BLOOMBERG: Do you buy that GDP report? The only reason I bring it up— a lot of folks over the weekend said that report was misleading.
ROACH: Well, look, the numbers are the numbers. There were a lot of rebates paid to consumers. And, once again, savings-short over-indebted consumers went out and bought another DVD player or flat-screen TV they didn’t need. But there’s going to be payback in the second half of this year. And I think consumption weakness in the U.S. is going to be the big macro story for America and the rest of the world in the second half of this year.
Roach, who while serving as Morgan Stanley’s chief economist back in 2004 warned the United States had no better than a 10 percent chance of avoiding an economic Armageddon, added:
There’s more to this macro event than just the credit market contagion itself. Maybe two-thirds of that is behind us. But the impacts on the real side of the U.S. economy and the real side of the global economy are in the very early stages. So the overall macro adjustment scenario, I think, is still in the fairly early stages…
We’re in the early stages of the downturn of the U.S. and global business cycle. And investors, especially in equities, have to be wary of being too optimistic on the earnings implications of what could be a long, and drawn out, multi-year adjustment, for the American consumer.
You can watch the 6 minute 40 second interview here.
Source:
Stephen Roach Interview
Bloomberg, September 2, 2008
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