Scary Outlook from Former IMF Economist: Report
While the stock markets opened up significantly lower on continued concern over financials, a downbeat housing starts result, and a larger-than-expected jump in wholesale inflation, words from former IMF chief economist Kenneth Rogoff suggested that more was yet to come. Rogoff, currently an economics professor at Harvard, suggested to conference goers in Singapore that "the worst is yet to come" in the financial crisis, according to a report filed Tuesday morning by Reuters. He went so far as to suggest that the upheaval in the credit and related financial markets was only at "the halfway point." His remarks might have had some conference goers believing that they were listening to famed perma-bear Nouriel Roubini, whose near-apocalyptic views of market direction have proven in recent months to be frightenly correct. "We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," Rogoff said, according to the Reuters report. He also said that neither Fannie Mae (FNM) nor Freddie Mac (FRE) would continue to "exist in their present form." The dour outlook compounded data released Tuesday that found single family housing starts hitting a 17-year low during July; the Labor Department also said its Producer Price Index rose by 1.2 percent in July -- more than double the expected rate. Prices have n ow risen in the past 12 months at the fastest pace in 27 years, putting increasing pressure on the Federal Reserve to hike interest rates. The Dow Jones Industrial Average was at 11,364.83, off 114.56 or 1 percent, when this story was published. Disclosure: The author was long FRE when story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.