For the first time in 25 years, the GS European chief economist is making a dowgrade just 1 month after the previous revision. This underscores the severity of it, in my opinion. Doing such a thing is a hard prestige hit. Europe is going dooown, if anyone thought otherwise.
GS is revising Eurozone GDP growth for 2009 from -0,3% to -1,3%.
The biggest recession in postwar history.
This is equivalent to what Sweden went through in the early nineties, in what is regarded as the worst banking crisis in European history. (Although I guess it has faded somewhat compared to what we are witnessing in the global banking industry this time around.)Well, we havent seen the Baltic "subprime" collapse unfold yet. Scandinavian banks will surely get a chance to break their previous record. I reckon theyve got good chances of achieving this. Will be a strong sense of dejavu for the Swedish Riksbank, but with a new twist, bailing out the banks AND the Baltics!
Enjoy the ride of this bear rally while it lasts and make money on it, but dont buy into the story that we have bottomed. It might last one more hour, day, week or month, but, not months or a year. I want to see a solution to the Emerging market story first. A downgrading of Europe is NOT going to help.
I have bought calls on US banks, looking for US equities and banks to outperform other markets in the short term.
As always, good luck!
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