April 8th, 2009
09:42 AM GMT
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LONDON, England - Alcoa, the largest U.S. aluminum producer, has kicked off the first quarter earnings season with a loss of nearly $500 million.

Markets haven't taken the news well. Alcoa is a nasty reminder that the sting of the recession continues to bite. There will be plenty of other reminders.

The U.S. earnings decline has now lingered for six straight quarters and it's not over yet. The expectation is that profits for companies in the S&P 500 will decline for three more quarters including the current one, according to Bloomberg data.

Marc Faber, a well-known analyst, predicted this week that the S&P could go back down to 750 - a fall of some 10 percent from its recent high - before rebounding in the summer.

Even though markets are supposed to anticipate recovery, there are still plenty of reasons to be cautious. Nouriel Roubini, who predicted the economic crisis we are now in, remains bearish, and expects the U.S. economy will continue to contract this year.

And Mike Mayo, the banks analyst, is predicting that loan losses at U.S. banks may exceed Great Depression levels.

Mayo, isn't a household name. But anyone who follows Wall Street closely knows his name well. He's the guy who correctly took a bearish stance on banks in 1999, when others remained bullish.

He thinks mortgage-related losses are only about half way to their peak. While credit card and consumer losses are about a third of the way from their worst levels.

George Soros expressed skepticism this week about whether the market rally had legs, pointing to problems in the real economy.

Soros says recently announced changes to fair value accounting rules will keep problem banks in business, and that in turn will only delay any economic recovery.

Confidence of course, plays an important role in any rebound. It was only a matter of time before the reminders of the depth of this downturn hit investors once again.

Alcoa is the first of those fresh reminders - it won't be the last.

Meanwhile, the problems of the banks persist, and as long as that continues, any real recovery will have to wait.

Do you think the recent rally in the market was a bear market trap?

When do you see the economy rebounding?

How much longer do you think it take to work through problems in the banking sector?



soundoff (35 Responses)
  1. Paul

    Macroeconomics is 90% psychology.

    Economists can tell you tomorrow why what they said yesterday didn't happen today. They're not very good at seeing the future, because it's so hard to get a good reading on consumers' and business leaders' minds.

    The bottom will be behind us only once consumer and business confidence have shown significant upward movement.

    Only then will people start buying again and lift the economy. That could be months or years away.

    April 8, 2009 at 10:46 am |
  2. K.Srinivasan

    You will get some clues by first week of July; after second quarter results. By the time small business would have taken great beating. Small business are always orphans, unlike Banks, Insurance,Auto comanys and sub prime Houses. Recovery or fall of economy is with small business.

    April 8, 2009 at 11:04 am |
  3. Aoki

    It all depends on the government following through on its banks bailout plan. So far, it has only been announced, but toxic assets are still in their balance sheets.

    April 8, 2009 at 11:46 am |
  4. Paul

    Aoki,

    The soaking up of toxic assets was to keep banks from failing and to encourage them to lend more.

    I don't think people stopped buying cars and houses because of the banks' toxic assets. They stopped because they either lost their job or were afraid they would soon. Or worse: they think prices will be lower in a few weeks or months: deflation.

    Unfortunately, the crisis has gone far beyond the banks and hit at the very root of the economy now: confidence – both at the consumer level and with corporate decision makers.

    April 8, 2009 at 12:13 pm |
  5. Ahmed Musallam

    I agree with Paul. The bottom will be behind us only once job created and demand from consumers grow

    Ahmed

    April 8, 2009 at 12:33 pm |
  6. Philip Regan

    Why do you assume that things will ever go back to the way they were ?

    The US cannot prosper with maxed out credit cards property or stock bubbles.

    The priciples of Adma Smith's' famous essay 'The Wealth of Nations' still is valid'today.

    To ensure prosperity you must be able to innovate and manufacture – all else is mere delusion.

    Phil Regan
    Edinburgh
    Scotland

    April 8, 2009 at 1:24 pm |
  7. shan saeed

    Economy can start to see recovery by Q-1, 2010.....The moderate recession will be officially over by Q-4, 2009.....However growth will remain sluggish in 2010.....So we might see some hustle and bustle in the economy next year.....The global economy will show more resilience to confront future challenges so that financial system does not stall for any reasons. New financial stability procedures would provide buttress to the existing economic system to make it more robust going forward.

    With kind regards,

    Shan Saeed
    Uni. of Chicago
    Booth School of Business
    MBA 2009 Graduated

    April 8, 2009 at 6:02 pm |
  8. pooja

    this crisis of global economic downturn surfaced bcoz of our selfish nature of always wantng for more ,any amount of stimulus packages to bail out banks or other industries provided by our governments wud be futile if we dont change the psychologyof people not to indulge in quickfixes,wether its homeloans carloans or creditcard debt.This economic crisis wud occur again if corrective measures are not taken in right direction at right time .Economy should be rebounding by year end or next year beginning by when president Obama rescue packages are there in the market.

    April 8, 2009 at 6:24 pm |
  9. Lauro Silva - Brazil

    To see the economy rebounding is pretty much impossible to be predicted. First, because one doesn´t know how far the global economy has gone by dint of mismanagement, greed and speculation. Second,a severe economic global adjustment imposed by the crisis has to be faced yet,and its bad effects have to be dealt with, regardless how bitter the pill is to be swallowed. As yet, not any government across the world has made a serious adjustment in earnest. They keep spending more than they can afford and living a fantasy world relied on an enormous mountain of bailouts,postponing this way as much as they can the required adjustments. If you spend more and more beyond your means, changing your car, your house, traveling around, taking bank loans, use of your credit-card, no doubt your world will collapse whether you like or not. The aftermath of it has to be faced and you will respond by struggling and adapting yourself to the new condition,losing what has to be lost and starting up again. If at this stage you get a bailout to keep you living your fantasy world, and on top of that, a fair bailout to be paid off, you simply will be in a mess without a way out. ´´Sie sind kaputt gegangen- literally you´re destroyed´´, only remaining your suicide in case your extravagance has gone too far. If you escape the suicide, how long will your rebound take? Even you will not be able to answer it. The common people know exactly what is going on and what they are currently doing to face the mess and are also just waiting how the governments will be getting along to escape the mess they got into,starting up to offer jobs and avoiding inflation by dint of stimuli and bailouts. Don´t forget the bankers, investors,wall street, CEOs,AIGs prefer the fantasy world to get them more and more wealthier.

    April 8, 2009 at 7:50 pm |
  10. ray

    when this started i thought that it would take about four years to work itself out.
    but with this massive injection of government money, i think it could take another two or three years to claw this money back.
    so a rebound in the economy?. about another four years.

    April 8, 2009 at 8:04 pm |
  11. Dr. Virginia Lubell

    We are unsettled because we have not yet defined the word 'competition'.

    'Competition' when used for employees means reduced wages, little or no health or retirement 'entitlements' AND an ability to reduce the workforce as a way to maintain profits for shareholders. Once again in history, business is not taking responsibility for the workforce that permits the business to exist.

    'Competition' when used for employers means paying big salaries on a belief that good people will leave if they don't receive huge salaries. Taking responsibility could mean a 'tender' system for top jobs ... the ability to provide a better service for less money.

    'Competition' has been thrown out the window since the late 1980s when mergers were permitted that has led to the growth of mega-corporations so that now there are a mere handful of seed, media, pharmaceutical, telecommunication, supermarket companies that have many subsidiaries. Responsibility would mean, allowing partnerships between businesses and breaking apart these mega-corps.

    'Competition' has come to mean permitting our commons to be sold off to overseas mega-corporations so that 'water' can be owned by one private business. Responsibility would mean that our commons always remain as such.

    'Competition' has been implemented by the IMF to permit private corporations to take over services usually distributed by a Government to its citizenry such as: education, health, retirement benefits. Responsibility would maintain certain services as a reflection of the shared 'savings' by citizens in the form of taxation and rates and entitled to by all within that country.

    The Japanese recovery package announced yesterday focuses on the temporary, casual worker who receive no support by 'business' so that now the Government must go back to taking over care or else leaving people to fend for themselves. Without care, there can be civil unrest.

    There has been an urge for China to provide a 'safety net' so that people can then go out and spend instead of save. At the same time these 'safety' nets are being privatized or removed from Government. This too can lead to civil unrest.

    Business and Government should not be in competition with each other. Employers and employees should not be in competition with each other. Our commons should not be in competition with private profit.

    Until this one word is sorted out and we all work together responsibly for a healthy world then we will remain unsettled.

    April 8, 2009 at 9:01 pm |
  12. Nam(South Korea,Busan)

    I think George Soros age is gone.

    He is doing....a fear mongering......like the Bush's WMD.

    But obama's age is coming........like the Global New Deal.

    April 9, 2009 at 2:43 am |
  13. dave in des moines

    Many companies and declining cities should reinvent themselves. Deep discount retail stores have diversified by selling groceries as part of their inventory. Many companies should also diversify. First we need to find ideas for companies to diversify into. We should create monetary contests to do so.
    We learned to fly with such contests. Perhaps college students could participate with the winners receiving full ride scholarships. Usually out of 200 ideas, there may be 2 that may transform this great nation. We need to encourage many ideas from people before we discover true winner(s).
    In conclusion, diversify, diversify, diversify – of what you make and sell. Could RV plants be diversified to make Mobile Health RVs or Mobile farmers markets RVs. Could high tech defense plants make high tech health care equipment for those Mobile health RVs. These RVs could visit rural or inner city parts of this great nation where health care is at an extreme shortage…
    Are there any other ideas out there that may make economic sense?

    April 9, 2009 at 1:25 pm |
  14. thomas bennett

    middle class Tax Cuts = Socialism.....upper income Tax Cuts="trickle down" benefit to the economy...onlty problem is the Trickle never gets down

    April 9, 2009 at 3:22 pm |
  15. jorgen petersson

    the financial situation is at this time very tricky--it will have to takeVERY CAREFUL RISK ASESMENT--it do not help totrough good money after bad--the worlds cashburn have to bee reduced in order to get a nice ballence of less a lot less deficit for all countryes concerned--regards Jorgen Petersson--CEO--J.P.FinancialService-cph. Denmark

    April 9, 2009 at 3:24 pm |
  16. Scott

    Why, exactly, are we SO focused on when the economy will come back? It's stagnant. Get over it. Anticipation of trends is one of the reasons we're in this situation in the first place.

    Once we quit trying to make the cutting edge of financials by trying to make the quickest dollar, we will begin to edge out. Until fundamentals are our priority, we are doomed. Bailing out financial disasters nets us a bigger disaster later down the road. By allowing poor business models to continue, you doom those who practice good business and the cycle of financial corruption continues unimpeded.

    Get rid of greed, however, and I doubt anything like this will happen again. (Good luck with that)

    April 9, 2009 at 5:37 pm |
  17. Manuel Vilhena

    Hello Mr. Benjamin,

    I really like your articles. I listened very carefully your comments last week in the Quest Means Business program one day before the G20 summit.

    I believe that something was achieved in that summit. As far as I understand FMI will have more money, protectionism will be avoided and tax heavens are now unwelcome.

    I believe that President Obama, PM Brown and some other leaders are being cooperative and really working on bringing recovery as soon as possible.

    Is that good for the long term economy? I really do not know, but at least is action.

    In what concerns the five weeks growth in the stocks, which is a fact, I believe that is not a bad sign.

    Best wishes,

    Manuel,
    Coventry, UK

    April 9, 2009 at 9:31 pm |
  18. David Martin

    Disguised by the G20 summit, America cancelled mark to market accounting, meaning that banks can now declare that their 'assets' are worth just about whatever they feel like.
    No confidence can be restored when every effort is being made to hide banks insolvency, with the collusion of politicians and regulators.
    Meanwhile, Geithner continues the Paulson policy of transferring losses from bondholders to taxpayers.
    As Simon Johnson, ex-chief economist of the IMF ably lays out here:
    http://www.theatlantic.com/doc/200905/imf-advice
    there has been total regulatory and political capture of the system by the banking elite, led by Goldman Sachs, and they are busy looting whatever they can before collapse, presumably with a view to retreating to armed enclaves.
    There can be no recovery, as measures so far taken are not designed to create one, but simply to protect the elite.
    In any case, a real recovery would need the huge amount of debt to be paid down, as happened in the 30's.
    Instead of this it is being increased by taxpayer commitments, on the principle that a debt problem is cured by taking on more debt.
    The IMF quantitative easing is for the purpose of encouraging the bankrupt to hold still whilst their resources are captured by international capitalists.
    With good policies which were not directed to swindling the remaining capital of the middle classes, you might get a recovery after 10 years.
    With the current oligarchic death-lock on finance and the political system, recovery can no more be expected than in any other hopelessly corrupt Third World crony capitalist despotic state.

    April 9, 2009 at 10:12 pm |
  19. Linda Lawrence

    The economy will not rebound until we start manufacturing the items that we need over here.

    It is like a economy e-co system. The manufacturing makes jobs and pays taxes, the people buying the items then have to work to make money to buy and pay taxes.

    It goes around and around. Taking the manufacturing and other jobs out of the country rips off a part of the circle an it will not function.

    Who was the stupid person who even thought this would work. Must have been in a doped up state or they could not reason????????

    April 10, 2009 at 5:02 pm |
  20. Brian in Pennsyl-tucky

    In the past, with my 20,000 hours of CAD and my ABET-accredited BS in Mechanical Engineering, I would go into an interview and practically start doing take-offs and have blueprints marked up even before the interview closed. There is just too many people flooding the market. Am I wrong to feel this is unfair? I didn't vote for Bush, take out a subprime loan, push for bankrupting 'wars' that fail to qualify as such under prior conventions other than simply imperialism where insecure NASCAR fans/goons walk down foreign streets (without working visas) pointing guns at unarmed poor people to make sure they 'like' them, even though the only avenue available to those Muslims for putting food in their families' mouths is to work for the Taliban. ...as ironically, the only employment available to those NASCAR fans is to work for the U.S. military...hmmm. I'm not some middle America, dancing with the stars couch diabetic who's so fat they need a scooter chair just to get to the ice cream aisle in their Wal-mart. I bust my ass and keep up on advancements in my field, learn a second language, relocate halfway around the world to work in Japan and take the intiative to start my own company. But here I am again. Back in the land of the apes who cling to their guns and god and are all programmed by their 'elders' to fixate on stupid petty crap like the fact that I just spelled god without a capital 'g'...back where they don't have enough problems so they get hung up on trivialities like gay people getting married. Who cares??? Back when I was a kid, it was about industry and hard work and keeping America strong...and the music on the radio was good. Because Americans cared about doing their work and didn't focus on the 'tone' they got at the drive-thru window when they asked for no ketchup. People asked me why I learned Japanese...because I wanted to speak to critical-thinking humans again...a people who are intelligent enough to know that universal healthcare is the wise choice and to not be fooled by health insurance conglomerates and pharmaceutical powerbrokers who try to conjure up those dark and eery junior-high, assembly projector images of the ruskies and diving under tables to escape certain nuclear death by using words such as 'socialism' to keep America dumbed down and passive... ...a people who simply ban guns and hey, guess what!, there's no apocalyptic anarchy of bad guys mowing down unarmed innocents in the streets...nor are there any school/mall/workplace shootings to speak of. If somebody wants to die, they either jump in front of the train or out their office window, but nobody dies with them. ...Anyways, I guess I have to wait now for the economy to recover from the hole the rednecks and deregulating Bush voters put us in.

    April 10, 2009 at 9:16 pm |
  21. Per Holmlund

    The real problem

    You have probably heard the story: The Emperor's New Clothes. Tomorrow it will be: Obama’s new money. Suddenly a Chinese will say: But he has no Money! But now breathe with the stomach and enjoy the recovery cycle. Try to collect as much as possible before the next break. And pray that it will be above 1150, S&P 500.

    (I hope that the story want become real: The Yankee: What kind of nese are you, Chinese or Japanese? The Chinese: And what kind of kee are you, Yankee or monkey. Have we seen the end of Monkey business: Greenspan, Madoff… )

    The top 2000 surplus, the top 2007 deficits and the next top?

    And the S&P 500 in a technical sell, objective 400, that will be there as long the market stays below 1150.

    Per Holmlund March 3rd, 2009 2140 GMT
    Yesterday goodbye tomorrow a good buy

    A sell out and then, hopefully, the traditionally “dividend rally” end March to May. And then a recovery cycle from where ever the market hit bottom after the dividend rally. One recovery cycle that probably want lift the market to new all time highs. So forget buy and hold and try buy and sell. Don’t look for big bulls, hunt rabbits.

    April 10, 2009 at 10:00 pm |
  22. John Frey

    Dr. Virginia Lubell you have a good head on your shoulders. Gobalization is the main cause of this reccesion. It is called dumping by large corparations.

    We should show these countries how to improve their quality of live by showing how to build/make to make that happen. No one should have to live like that. However all the firms do is pay them enough wages to make live a little better while firing the people back home so they can make outragious wages. That is why our forefathers had custom taxes. Show them how to improve their quality of life but do not make them your slaves to make yourself rich.

    Make a government bank to bail out people. Here the gov. gives the banks .5 -0% interest and they still refuse to pass it on. Why not give the people 2%interest and haep them get on their feet? Cuz Bro how can we pay ourseleves our outragious wages? Do not take over the banks, lost cause and would be thowing good money away, make a bank, create more jobs, and get the people back on their feet. Then you will build CONFIDENCE!!!

    April 11, 2009 at 8:30 am |
  23. K.Srinivasan

    Even after full economical recovery, the living standard of the middle class will be never again the same.It go down by 40%.I afraid social unrest will surface soon.

    April 12, 2009 at 6:26 am |
  24. Dell

    2014

    April 12, 2009 at 12:49 pm |
  25. Sam

    I really love to hear the optimists and the economists talking everything up, however I think they are going to be very foolish when tha markets continue their downward trend. the first sign of an upturn will be when you see the first BLUE MOON, until then everyone is just guessing and hoping that it will be soon, but I would suggest that it may take some 3 or 4 years yet.
    I think that I am entitled to a guess as well as anyone else. It's like snakes and ladders and will remain so for some time. Lets hope the ladders remain in place!!!!!!!

    April 12, 2009 at 4:13 pm |
  26. Joey (Manila)

    This year can be writen off if we are dreaming of a rebound. Saftly the second half of 2010 will give clear signals.
    For this year there will be some moments of light & hope but until jobs continue to be lost & there is so much insecurity in the air, things won't change much.
    We must remember that this is not just one of those economic/financial crisis that was to be expected.
    Because spending habits have been seriosly affected & things will never be the same.
    America can no longer continue leaving in a world of leaveing beyound their means.
    The Financial sector will be under a microscope.
    Capitalissim is not & will never be absolute freedom.

    April 14, 2009 at 8:31 am |
  27. vale

    I see the recession ending when I don't have to borrow money to pay bills. It's not anytime soon.

    April 14, 2009 at 8:34 pm |
  28. Whitelyon from Providence Rhode Island

    Jack,remember that Rome was not built in a day and the day eyes blinded is not the day it decays,I mean it will long be to see progress in economical growth,if Americans can be patient and nurse some hope,I think it will be alright sooner rather than later.

    April 14, 2009 at 9:52 pm |
  29. Clark

    Well, Pres Obama says he sees glimmers of hope for the economy ...

    but the news says .... unemployment rate will more than likely incrase to 10%

    Pres Obama says he sees glimmers of hope for the economy ....

    but the news says that bankruptcy rate is increasing significantly

    Pres Obama says he sees glimmers of hope for the economy ....

    but home forclosures are continuing ..... the stock market keeps getting bad news, and he says that the bad economy is fueling right wing radicals ....

    he may be building his economic policies on a rock and not on sand but that doesn't mean the rock isn't on top of a tectonic fault line .....

    American's can be lead by the nose for awhile by the spin (lies) from the media and the politicians .... but the truth always sinks in sooner or later .... and history will repudiate what we are currently being spoon fed about Pres Obama and his policies.

    April 15, 2009 at 2:24 am |
  30. dan in Tucson

    The banks can predict all they want, but until America gets back to work, pays taxes, and stops accumulating debt we will not get back on our feet.

    April 15, 2009 at 3:41 pm |
  31. I can't even remember

    I think the economy is fine. the real problem is the fact that everyone [100millionpeople] are all trying to find an easy job so they can be lazy and make a bunch of money, because the truth is there are plenty of jobs for people, they are just jobs no one wants to do and they don't pay well so we struggle and die. Everyone just wants to sit behind a computer or report the news. Then God usually finds a way to get them off their asses[floods, tornadoes, war, wipeing peoples asses for them, disease, earthquakes, armageddon, and flooding the media with positive news, until something slipps right past their eyes and it's called an accident and no one is to blame but themselves. So that is the truth and it will probably be erased so no one knows. Please start printing the ugly truth before it gets any more ugly than it already is. Thank you!

    April 17, 2009 at 2:00 am |
  32. R.Bala

    Hi,

    Even economy rebound and the world will face the typical crisis again in 2 to 3 years. Currently world leaders are trying to patch up the problem instead of fixing the root cause by injecting billions as stimulus packages. World trade is not managed ethically well so that will happen againg as you can notice the share markets, traders just wanted to push the markets only up irrespective actual happenings.

    These people are called as investors that invest today and try push up bear market and sell the shares same day or next day as called ivestors.

    If we look at the crisis, started from inflation due to greed, as like OPEC is doing same now. They wanted to sell oil at $85DOLLARS, The same OPEC kept mum when oil sold at $147 and earned money. Now oil price driven by stock index, when they traders pushed up bully market then oil will go up as well and commodities etc.

    Even world leaders to confront their political fron in their respective countries, they have keep this game going. Stock index rise is enough to say economy revived ! I believe this crisis happened world wide due to greed and irresponsibility which is addressed. So that 2012 will face the same crisis again before next US election !

    April 18, 2009 at 8:25 pm |
  33. hoho10

    if there is to be recovery, it needs to start with the housing markets, We still see the housing market taking a beating and for another year or 2, it will be same. Tthe stock market is not an indication of how well the economy is doing or how poorly it is, it is more of a reflection of investor sentiment short of alternative investments. The fact is that we are in a depression and no one is willing to admit it, expect they keep saying we have seen the bottom and "road to recovery" and all these hype terms government and media use to influence our mind.

    I have learned that we can not trust these numbers, once we see the job market and housing markets recover, then we can say the depression is over, but not till then.

    April 20, 2009 at 8:22 am |
  34. sandy

    hi todd,

    I wrote to you in 2006 once, that time the way you see economic direction nobody was caring but you need to tell. Even i faced all that the way you faced from people but you have to live with it. Because at that time i was exporting to US but people were not buying garments at that time indication started. American loves 2 things- garments and Cars both were going down in demand. Fictitious figures of sub prime making fool of everybody.
    This time US is in deep trouble because govt is not helping or motivating to work. Instead they are distributing money for being idle. And Europe is doing the same. Involve them in community service create their faith again. And then you can see your rebound.....................American dream!!!!!!!!!

    June 4, 2010 at 7:11 pm |
  35. `Canister Set

    the stimulus package is really good for kickstarting the economy'~:

    August 20, 2010 at 1:29 am |

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