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The last time I spoke to Financial Armageddon's Michael Panzner for Going Concern, it was about how to prepare for the worst (while not necessarily hoping for the best) in September of last year. This time around, it's the beginning of the year so even though I'm late, it's time to discuss the 2010 outlook.
Panzner can also be found writing at When Giants Fall and Huffington Post and if you don't know his bio, it's here.
First of all, before we could get to anything I had to have him explain his strong dollar policy again:
"There are a number of reasons why I expect a technical rally in the dollar even though my long-term view remains quite negative," he said, "The fact is that even if the fundamental outlook is poor, prices can still rise in the short run if too many people — speculators and investors — are short or if other factors temporarily gain in importance."
This explains why he seemed spooked by recent market behaviors, like everything from March 2009 on. You know, when things started getting wonky. Panzner is a classy bastard so he's not about to make conspiratorial statements about the behavior of markets but let's just say his feeling is that they're performing less rationally these days. No shit. Might be all that fishy stuff going on but who am I to speculate?
He points to massive speculation and gigantic stockpiling in commodities, specifically oil. Gee, wonder who is behind that. He recognizes that China is at least attempting to clamp down on speculation.
He also admits to having underestimated how people will behave with free money. I find that statement incredible; didn't we see the houses, big screens, and Hummers? It was obvious at the time and it feels obvious now. "Last time they speculated like there was no tomorrow, they were worried tomorrow would never come," he says. Again, this from the man who brought us Financial Armageddon.
Interestingly, Panzner says if he could do the book over, he would have better predicted the contagious nature of the financial crisis. It scared the shit out of me when I read it for the first time in 2008. It didn't seem sluggish at all the way he'd imagined it. In fact, I've been waiting for the bottom to drop out for months now after seeing how he painted it.
As far as threats go, he pretty much agrees with most of what I identify as the largest (the Fed's dumb behavior, sociopolitical pressures, blahblahblah) and adds a few. He's with most of us who feel CRE still has to drop, which places additional pressure on smaller banks. There are also the usual suspects; conflicts in the Middle East putting pressure on energy markets and municipal debt problems. Birmingham, Alabama is not an isolated incident, in other words.
I know Caleb gets pissed when I write too much so I think we're good on the economic outlook for now, lest he come flame me as Guest. Whatever. Back with Part 2 on Monday: What comes after?