Stephen Roach of Morgan Stanley, who pretty much called it at last year’s Davos, when consensus was for no recession in the “real” economy and decoupling of emerging markets, is gloomy again. Speaking with him this morning after he did an interview with Reuters on Davos Today, Roach said that there was a real threat of protectionism as politicians come under pressure from rising unemployment. The U.S. and China relationship will be key, he said.
On U.S. real estate – a continuing issue for banks and the economy:
“The interplay between the property and financial sectors has been ground zero of this crisis.
The problem was the banks played the property bubble just like consumers did and so we are all in this together.”
Not a big fan of equities, it seems:-
“Equities have pretty much discounted a dire outlook for 2009. The problem with equities as an asset class is that they are pretty much based on optimistic earning expectations for 2010 and 2011. We will challenge those expectations this year. I’d be pretty cautious before committing new funds to the equity market in this climate.
So what is Blackstone Group chairman Stephen Schwarzman’s prescription for solving the banking crisis?