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Smart People Say We’re Still Kinda Screwed

“The odds are we flatten out,” said former Fed Chairman Alan Greenspan, talking today about the stock market in 2010. He didn’t mean it in a good way.

Despite the name of this site, we don’t want the recession to go forever. It would nice to feel some prosperity and stability again. But we are big on reality. And despite the rally in the stock market that has taken place over the last three months, and some good (ish) news about the economy, there are plenty of signs that we are not out of the woods yet. There are also smart people who are less than positive that a recovery is taking place—or if it is, whether it will last.

Some of the good news: Yesterday, a much-watched measure of the real estate market, the Case/Shiller index, showed that home prices were up a tiny bit in July, the third month of increase in a row. The Conference Board said last week that the recession was bottoming out; its index of economic indicators was up .6 percent in August. “These numbers are consistent with the view that, after a very severe downturn, a recovery is very near,” said Conference Board’s economist, Ken Goldstein.

Some of the lots of bad: The U.S. economy is shrinking—yes, at a slower pace, but we’re making less stuff. Consumer confidence is down. And in contrast to that slightly positive housing report, sales of existing homes were down in August, and while sales of new homes were up a tick, prices were down. Demand for mortgages was down last week, even though rates are low. And this is despite the fact that the $8,000 tax credit for first-time homebuyers is still in place, which raises the question of what happens when it eventually goes away. The FDIC, which insures bank deposits, says it expects $100 billion worth of bank failures over the next few years, rather than the $70 million it had projected. (For some perspective, there have been 95 bank failures since the credit crisis started.) Yikes.

If that isn’t enough, some very bright people are pessimistic. Nouriel Roubini, a.k.a., Dr. Doom, says the risk of a double-dip recession, in which things get better and then worse again, is big. Meredith Whitney, one of the people who predicted the downturn, thinks home prices could still drop another 25 percent because unemployment is headed to 13 percent. (Right now it’s at 9.7 percent.) If more people lose their jobs — and the ones who area already unemployed are running out of money — they won’t be able to buy jack.

Then there’s Julian Robertson. The highly respected chairman and founder of the hedge fund Tiger Management thinks the worst of the recession is over—at least temporarily—but that we have some “real rough sledding” ahead. The video is definitely worth a watch.

Tags: economy, real estate, recovery, The Unemployed Life, Wall Street