Pros Say: Fed Moves Can Kill Recession (UPDATED)
President-elect Barack Obama nominated Gov. Bill Richardson (D-NM) for commerce secretary Wednesday, the same day that United Auto Workers President Ron Gettelfinger announced the UAW would make huge concessions to help the Big 3 automakers nail government bailout funds. CNBC heard from experts who said the drop in gasoline prices bodes well for the first quarter — and Ben Bernanke just may stave off a severe recession.
Q4 is Gonna Be Brutal; Q1 May Be Better
U.S. GDP could decline 4.5 percent during the fourth quarter, according to David Resler of Nomura Securities Intl. Two factors: the amount of discounting that retailers will be forced to do to; and the huge drop in gasoline prices. Without the big gasoline run-up during the summer, a recession might have been avoided, he says.
We ARE in a Severe Recession — But Fed Can Save Us
Columbia professor and former Fed governor Frederic Mishkin said that the biggest surprise as financials led the economy into recession was the trouble at AIG . "It was completely unanticipated that this insurance company...didn't really know what the hell it was doing." He said what will help is aggressive monetary policy, a la moves by the Federal Reserve, ECB and other central banks.
Coffee, Cocoa & Sugar: Sweet and In The Black
During a recession, people buy coffee in bulk and look for sweet treats, explained CPM Group director Mark Hansen. Supplies are coming down, because producers have been finding it tough to get funding. Dark chocolate, which contains more cocoa, is growing in popularity. And he said there's price inflation ahead, with supplies of these commodities crimped by the current credit crunch.
Buy Stocks Because...Recovery's Coming
The challenge to stock market investors is that they're buying into a leading indicator, said James Moffett of Scout Investment Advisors. That said, he believes this is a good time to be buying stocks. RDM Financial Group's Michael Sheldon suggested the foundations are being laid for a recovery over the next six to 12 months.
(What to buy? See Picks & Pans Page and CNBC Stock Blog.)
Straightening Out TARP Soothed the Market
Peter Canelo of Argus Institutional Partners said the TARP program got off to a terrible start when the government seemed to switch gears on toxic securities after all, but the Feds got the message when the market melted down. The latest version of the plan seems to please more people.
Gold Still Glitters (Though It's 22% Dimmer)
The precious metal is still a safe haven, asserted Nuwave Investment's Stuart Flerlage — even if it's down 22.12% from its high on March 18. It's just not in lockstep with the markets; if you want to see volatility, look at oil's 70% plunge in the last couple of months. But it's unclear what role hedge funds have played in gold prices' swings, he said. (Track commodities prices here)
Theme of Every Financial Cycle: Overreaction
Jim Grant of Grant's Interest Rate Observer said value has become irrelevant, and that creates an opportunity for value-seeking investors. Some of the best opportunities now involve credit: e.g, convertible bonds are "completely orphaned" now. The things now perceived as being the safest — cash and Treasurys — could soon be much riskier.
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