The financial crisis has made the world less focused on the U.S., which will have to face up to the fact that it is not as significant as before, Carlyle Group co-founder David Rubenstein told a large audience at the World Business Forum in New York:

“After World War II we were 48 percent of the world’s GDP; now we are about 20 percent of the world’s GDP… We have to get used to the fact that the dollar is relatively cheap and … that the dollar is probably not going to be the reserve currency that it’s been for so many years.”

Rubenstein said the center of the financial world won’t just be New York, but spread between here, London, Shanghai, Dubai, Sao Paulo and a few other cities.

Rubenstein concentrated particularly on the U.S. economy’s problems, listing issues such as the deficit, inflation, taxes and employment. He said that the U.S. is about two years into the recession and probably has a “month or two to go.”

He listed the areas he thinks are attractive investment opportunities: distressed investing, companies getting support from the U.S. government, energy (both carbon and alternative),  healthcare and emerging markets such as China, India and Brazil.

Among the final tidbits of advice that the private equity chief shot at the audience was to avoid excessive leverage:

“What we learned out of this most recent recession is if you borrow a lot of money it comes home to roost, so I’d avoid leverage–even normal leverage can be very dangerous at times when the economy goes down.”

As they headed into 2009, chief executives at top U.S. manufacturers were licking their chops at the thought of the M&A bargains they would find in the midst of the worst recession since the Great Depression. The takeover feast they hoped for has not materialized, but the chief financial officer of 3M Co said on Wednesday he believes that may start to change.

“I honestly had anticipated that the M&A market was going to be a better market during this recessionary period. It really hasn’t panned out that way,” Patrick Campbell, CFO of the St. Paul, Minnesota-based company told an investor conference in New York. “A lot of companies were either holding their breath waiting for the recovery to happen or they were looking back to where their stock price was before. And honestly that’s the price they wanted and we weren’t ready to pay a price that was based on a previous peak.”

Deal flow may start to pick up when the economy begins to turn and companies find themselves needing money quickly to respond to returning demand, Campbell said.
“Maybe it’s yet to come,” he said. “As volume comes back for many suppliers, many companies, this may actually be the stress point for them relative to their financing needs, as they need to fund working capital requirements and so forth … This could actually be the point where maybe we start to see some companies that maybe become a little more distressed in the recovery phrase. We’ve got our eyes wide open on that.”

For all the designer drinks and gourmet foods - from raw oysters to sushi, and the sea of men in expensive suits and bejeweled women in elegant gowns, the setting seemed fit only for celebration.

But dressed as they were to the nines, investors attending "A Night with the Bears" at Toronto's upscale Elgin Theatre, were eager to hear the worst, on the edges of plush seats amid predictions of market doom from some of the continent's savviest
financial minds.

"I only wish we'd sold tickets," said a smiling Eric Sprott, arguably Canada's best known hedge fund manager and chairman at Sprott Asset Management Inc, as he looked out at the 1,500 or so crowd.

In a media room below stage, journalists were held equally rapt by the star speakers after being treated to a hand-operated elevator ride.

Once there, rows of chairs slowly filled as smartly-dressed servers roamed the dimly-lit space
offering drinks to journalists briefed quickly.

The message?

When an economic recovery takes place -- and it won't take place any time soon -- it's going to be a weak and shallow recovery.

"Still negative growth, still the worst recession we've had in the last 60 years, still the worst financial crisis since the Great Depression, still even many of the largest banks are going to be found insolvent," said Nouriel Roubini, a professor of economics at the New York University's Stern School of Business, who rose to celebrity status after sounding early warning signs about housing bubbles and the credit crisis.

Later, experts on stage predicted bank failures and harsher times unless back-to-basics medicine is applied to cure a U.S. economic "pneumonia" that spread to the rest of the world late last year.
"There's a buyer's strike and the market is not coming back," said Meredith Whitney, a Wall Street veteran of more than 15 years and one of it's most bearish bank analysts. The groan from Torontonians was audible.

Canada's financial system, for many years criticized for being heavily conservative, is now credited for being among the world's soundest and most resilient to the global crisis.

Canadian banks are routinely ranked as the world's most solid, having remained profitable despite a crisis that pushed many U.S. and European institutions to the brink of insolvency.
Whitney predicted U.S. banks will need to start raising capital by selling hard assets, and advised investors to "stay tuned" for opportunities.

Roubini, introduced to the audience by his nickname "Dr. Doom", appeared a tad irritated by the moniker, but not enough to change his tune.

"I don't think I'm too bearish," he told reporters. "I am more a realist rather than a pessimist."

"I'll be the first one to call for the bottom of this economic contraction, recovery of the market when I see a sustained economic and, therefore, financial recovery. I don't define myself as a permabear."

He says he can't be too bearish because he thinks all the massive stimulus measures and rate cuts around the globe will eventually kick in to avert an "L-shaped" near-depression like the one Japan experienced.

He described the U.S. recession as three times as long and five times as deep as the last, and warned a recent stocks rally was just a precursor to another fall.

"For the first time in more than 60 years we have a global, synchronized recession."

(Additional reporting by Jennifer Kwan)

This economy is a killer. Just ask New Yorkers on Craigslist. 

You may not have heard of the Killers, a music group from Las Vegas that’s been variously called the next U2 and the best Mormon rock band of all time. They are playing tonight at the Hammerstein Ballroom in New York City.

Tickets, at $45, sold out in a few minutes when they went on sale in late September, and have been reselling for 10 times that amount on the secondary market.  That’s where Craigslist, and a former hedge fund associate, come in.

A Reuters reporter was not willing to pay the $350 asking price per ticket to see the show, and emailed the seller, pointing out a recession is under way.  The former hedge fund associate emailed back: “I’m not a scalper. I’m a ticket arbitrageur.”  So we called him up.

“I really like this band. I can play some of their songs,” he said. “New York is an expensive place and I don’t have a paycheck coming in today.” He did not want to be identified since he is looking for work.

The Ivy League-educated 25-year-old, a Killers fan, bought tickets to Friday’s show a few days before his Park Avenue hedge fund laid him off, along with several others. The fund paid out unused sick days and vacation time, but no severance. He’s received inquiries about tickets from across New York’s financial industry, but mostly from its higher strata.

“Only VPs are still able to still afford luxury,” he said. ”The belt’s already been tightened. It used to be the associates and the analysts were the most visible, making money in this economy, because we walked around with new Hermes ties and bought all the hot clothes. Now that’s clearly over.”

The Killers are not much older than he is, but they also seem to know something about hard times.

“Dreams aren’t what they used to be, some things slide by so carelessly,” Brandon Flowers sings on their single “Smile Like You Mean It.”

Expect to hear that song tonight at Hammerstein — if you can afford a ticket.

(Photo of Brandon Flowers in concert from Reuters)