US Economy Mired in ‘Form of Depression’: Rosenberg
By Daniel at 24 November, 2009, 12:10 pm
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http://www.cnbc.com/id/34125178
The US economy is mired in an economic crisis that shows only scant signs of abating, economist David Rosenberg told CNBC.
“We’re in a form of Depression,” Rosenberg, chief economist and strategist for Gluskin Sheff, said in an interview. “Depressions…typically happen after a prolonged period of credit excess morphs into a collapse and you get asset deflation. We had asset deflation and we had a contraction in private-sector credit.”
Investors should be careful, he said, as the Standard & Poor’s 500 is probably overvalued from its current levels. The broad market index has gained about 60 percent off its March lows and has recently broken some key resistance levels.
Yet Rosenberg said an S&P at about 875 is more reflective of fair value considering earnings this year and the prospects of the road ahead. That would represent about a 20 percent drop.
Valuing the current market is tricky considering the amount of trouble left in the economy, Rosenberg said.
“This is a different animal than the garden-variety of recession that we’re used to forecasting in the post-World War II era,” he said. “The Fed started reducing rates in 2007 and here we are debating when did the recession end.”
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