The Lost Decade, American Style?

Housing prices fell as much as 18% in November 2008 when compared to the year-earlier period. Consumer confidence registered a 40-year low. Influential NYU economics professor Nouriel Roubini says unemployment will hit 9% and that the best we can hope for is 1% GDP growth in 2010. 
Throw in the massive amount of layoffs announced Monday, and you might think there would be a substantial sell-off going on. But stocks are actually staging a bit of a rally just above important support levels. 
Even steel stocks like Nucor (NYSE:NU) and U.S. Steel (NYSE:X), which are bearing the brunt of the global recession, are showing some strength today. 
As brutal as October’s decline was, it did what was needed – it priced in a potentially record-setting recession.  
*****For the first time, I’ve heard an economist acknowledge that there is the potential for America to end up with its own version of Japan’s Lost Decade. 
When Japan’s asset bubble burst in the early 1990s, Japan’s banks were loaded with non-performing loans. Instead of working to get these loans off the books, Japan simply kept re-capitalizing its banks. The banks survived as "zombie" banks, unable to lend. Sounds familiar, doesn’t it? 
I’ve discussed this potential situation before in Daily Profit. But in the mainstream financial media, most feel that America is too dynamic to end up like 1990s Japan. 
Well, in addition to his pessimistic projection of 2010 GDP growth, Mr. Roubini is coming around to the "Lost Decade" argument. He’s advocating that the U.S government nationalize troubled banks, fix the balance sheets and then sell them off to private investors. 
I’m sure Americans won’t like this idea any more than the bailouts. But it’s probably a far more efficient way to deal with the problem. Current bailouts are just a band-aid and aren’t going to cure the problem. Plus, we’d all have the pleasure of watching these ego-maniacal CEOs finally get put out on the street. 
*****Now, I have a couple administrative items to attend to. First, I’m going to include something extra with Wednesday’s Daily Profit. I contacted a friend who runs an options trading service. His name is Bryan Bottarelli, and he’s been having a lot of success trading options during this difficult market. I asked Bryan to sit down for an interview so we could get a look behind the scenes, as it were. Bryan consented, and I’ll be sending you a copy of that interview tomorrow. I think you’ll enjoy it. 
*****Also, the trading strategists for TradeMaster Daily Stock Alerts, Benson George and Jason Cimpl, are doing another video conference on February 4, 2009. And this time, they need your help… 
If you sat in on the last one, you know they were right on with their forecasts. And they even revealed some of their top stock picks that turned some nice gains in the days following the conference. 
This time around, they’ll be sharing their insights on investments in gold and biotech. Plus, they want to open up the forum for some viewer questions. That’s where you come in. 
If you’ve got any investment questions, now’s your chance to ask these two top-notch analysts. Here’s a link where you can sign up for the video conference and enter your question. Please feel free to ask more than one. 
And again, the TradeMaster video conference will be held Wednesday, February 4, 2009 at 6 P.M. eastern with on-demand service for viewers in other time zones. And of course, it’s completely free.

To top