Soros: "Acute Phase" of Financial Crisis Past, Real Economy Consequences Just Beginning

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While George Soros today said that he believed the worst consequences to the financial system are past, he was far from bullish about the economy. The veteran investor believes that the real world impact is only beginning to be felt.

Given that the last housing recession of the late 1980s-early 1990s took 15 quarters to reach bottom, Soros’s forecast is consistent with historical patterns.

From Bloomberg:

Billionaire investor George Soros said the “acute phase” of the financial crisis is “largely behind us” even as the U.S. economy is only now starting to feel the effect.

The damage done to the global financial system “has to affect, in my opinion, the real economy,” Soros, 77, said in a question-and-answer session in Washington today. “The effect of that is only beginning to be felt. There is a certain time lag.”

Just as housing prices “overshot on the upside,” they will overshoot on the way down, Soros said. The U.S. is in the “very beginning of an uptrend” in foreclosures, he said at an event hosted by the Council on Foreign Relations…

Sovereign wealth funds have been a “positive factor” in stabilizing U.S. financial companies, Soros said. Certain “standards” need to be set for the funds because they could come under political influence, he said….

U.S. stocks are in “a bear-market rally,” Soros said. The Dow Jones Industrial Average has risen 10 percent since March 10…

Soros earned an estimated $2.9 billion last year, ranking second after John Paulson, founder of New York-based Paulson & Co., according to Institutional Investor’s Alpha Magazine.

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  1. S

    Consumer credit grew 7% annualized in Mar. Previous months revised up. Unless we think the fed is going to fail, then we no strike that the investment banks are out of ICU. However to the point of the complex systems post, the quarantine came way to late – say about a decade or so. Therefore, I’d take his all clear in the same light as Fuld, Mack, etc. PR noise. begs the question of what exactly si the Fed’s endgame or as Krugman asks what is the equilibrium? Imagine what the US would look like if the market clearing equilibium were allowed to run its course.

  2. Anonymous

    Real info for real cash flow:

    As of Thursday (March 31, 2008) Vanguard’s Treasury Money Market fund was yielding 2.35%. But other funds that had invested heavily in the repo market or had high expenses have seen their yields drop precipitously. On Monday, the yield on certain share classes of First American Treasury Obligations was 0.05%; for certain share classes of Federated Treasury Obligations, the yield was 0.12%.

    As of 04/28/2008 Yield = 2.24% (C — AVERAGE ANNUALIZED INCOME DIVIDEND OVER PAST 7 DAYS)

    As of May 7, 2008 Yield is @ 2.11%

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