Cracking Denial
Extract from Stephen Roach
"This is obviously an extremely painful period for equity investors. Oversold is an understatement in describing current market conditions. Yet experience has taught a generation of investors that such sell-offs should be treated as classic dip-buying opportunities. Such a chance may well be at hand. I’ll leave that to the strategists. But there’s one key premise in all this that continues to eat away at the economist in me: The current state of affairs is still diagnosed as the market’s problem, not as an economic problem. That’s where I continue to take issue. Until denial cracks on this pivotal presumption, I continue to fear that any trading rallies will be short-lived and that financial market conditions will remain exceedingly treacherous"
"Yet a still US-centric world is hardly immune to America’s travails. Our economists around the world remain convinced that the US is still the only meaningful domestic demand story in the global economy. If that’s correct -- and I fully endorse such a conclusion -- then a relapse on the US demand front could spell serious trouble for the rest of the world"
