Tags: Peter Boockvar | Falling | Asset Prices | Recession

Peter Boockvar: Falling Asset Prices Could Cause Recession

Peter Boockvar: Falling Asset Prices Could Cause Recession

By    |   Tuesday, 01 September 2015 07:31 AM

Tumbling asset prices have the nation in the fast lane to another recession, warns Peter Boockvar, chief market analyst for the Lindsey Group.

"Before the late '90s, a recession would then cause a bear market, but the last two recessions were caused by declines in asset prices. I'm afraid this is going to be the same thing the third time," the Lindsey Group's chief market analyst told CNBC.

The last two recessions occurred between December 2007 and June 2009 following the subprime mortgage and financial crises, and in 2001 following the dotcom bubble, CNBC reported.

The United States is stuck in a cycle in which economic disruptions occur once inflated asset prices revert to a mean, Boockvar said. He blamed former Federal Reserve Chair Alan Greenspan for creating an "asset-dependent economy."

"If you're a CEO, a CFO, and you see the market down, well, that may give you pause. If you're a consumer at the upper end, well, your portfolio just took a hit. That's going to make you reassess what kind of spending you want to do," he said.

Other respected financial voices are warning of more volatility.

“I think the market is unstable and vulnerable to news flows. It could be volatile,” said the optimist, David Kotok, chairman of Cumberland Advisors, which oversees $2.5 billion in Sarasota, Fla.

Nobel laureate economist Robert Shiller wrote in The New York Times that a return of his cyclically-adjusted P-E ratio, which take into account 10 years of earnings, to its historical norm, would put the S&P 500 at 1,300. The ratio now stands at 25.1.

Jason Trennert, chief investment strategist at Strategas Research Partners, doesn't think we're out of the woods yet either.

"The volatility is not over for two reasons," he told CNBC. "One, we don't know what the Fed's going to do. Two, I think the China devaluation was a game changer. Until those two things are resolved, I think it's going to be hard for the market to make a big bounce from here."

As for the Fed, until this week many economists expected it to begin raising interest rates next month. But now some officials at the central bank say that might not be such a hot idea, given the stock market's volatility.

As for China, its decision to devalue the yuan two weeks ago (the currency has dropped 2.6 percent against the dollar) shows incompetence on the part of China's government, Trennert said.


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Tumbling asset prices have the nation in the fast lane to another recession, warns Peter Boockvar, chief market analyst for the Lindsey Group.
Peter Boockvar, Falling, Asset Prices, Recession
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2015-31-01
Tuesday, 01 September 2015 07:31 AM
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