Yes, you read well… and if we’re lucky “deep recession” is a mild terminology. The worse case scenario is the “D” word - like depression.

Whie this is true that we do not have to become paranoid every time somebody is ‘crying wolf’, this time we’d take it very seriously because the fundamentals say so.

Let’s take a look at them:

04/04/08 - Reuters: U.S. government bonds are the most overvalued assets in the world and it is tough to justify them as an investment given the level of inflation expectations, the manager of the world’s biggest bond fund said on Friday…

04/11/08 - NYTimes: Mr. Soros has always been a controversial figure. But he is becoming more so with a new, dire forecast for the world economy. Last week he rushed out a book, his 10th, warning that the financial pain has only just begun. “I consider this the biggest financial crisis of my lifetime,” Mr. Soros said during an interview Monday in his office overlooking Central Park. A “superbubble” that has been swelling for a quarter of a century is finally bursting, he said.

04/09/08 - Businessweek.com: Forecasting the stock market is a fool’s game—but there are grounds to believe there’s another drop in the market yet to come. The reason: a broad decline in consumer spending, which so far has been masked by a quirk in the government’s statistics. Combine that with a rapidly unraveling job market, high energy prices, and the continuing credit crunch, and you have the recipe for a drop in consumer stocks. A big decline there could take the rest of the market down with it..

04/08/08 - Reuters: The Group of Seven warned Friday the global economic outlook was weakening and said banks should adopt steps to ‘fully and promptly’ reveal their risk exposure due to the current financial market turmoil within 100 days.

On the top of that, today, the US banks Citigroup and Merrill Lynch revealed fresh $15bn loss… how many more Titanics out there?

It doesn’t bode well, does it? You are free to believe what you wish but to us the prospects of a 25 year depression, is absolutely meaningful.

Speaking at the Reuters Hedge Fund & Private Equity Summit in London, Hugh Hendry, Chief Investment Officer of Eclectica Asset Management, said financial stocks were set to fall further after the credit crisis burst a 16 year bubble in their prices last year…. When a bubble is created in a sector’s stocks, which sees their weighting dominate the index, it typically takes a generation, or around quarter of the century for them to recover to their pre-bubble levels, he said… (Reuters - 04/09/08)

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