Tags: carlyle | david rubenstein | recession | investors | trump

Carlyle's David Rubenstein: 'We'll Have a Recession Sometime Soon'

Carlyle's David Rubenstein: 'We'll Have a Recession Sometime Soon'
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By    |   Monday, 29 January 2018 10:29 AM

Billionaire private equity chief David Rubenstein, cofounder of The Carlyle Group, warns savvy investors not to believe everything they read and hear about the seemingly endless bull-run stock market.

Rubenstein recently told Yahoo Finance that he thinks the “party could continue” thanks to the Trump tax cuts, but at some point soon, there will be a recession.

“We’ve had economic growth uninterrupted since June of 2009 when the recession ended,” he said.

“So now, you know, we’re going to be 9 1/2, 10 years. So maybe there’s a new economic norm and maybe people can go 10, 15 years without a recession,” Rubenstein said.

“But there’s no history of going 100 years or 25 years without a recession. So I suspect we’ll have a recession sometime soon. But it could be pushed out now by two or three years. I think the tax cut probably will push it out for another year or so,” Rubenstein said.

Meanwhile, the U.S. economy grew at a solid rate of 2.6 percent in the final three months of last year, helped by the fastest consumer spending since the spring of 2016 and a big rebound in home construction.

The fourth quarter advance in the gross domestic product, the country’s total output of goods and services, followed gains of just above 3 percent in the second and third quarters, the Commerce Department reported Friday. The latest slowdown reflected a worsening trade deficit and less growth in inventory restocking by companies.

For all of 2017, the economy grew 2.3 percent. That is a significant improvement from a 1.5 percent gain in 2016 but little changed from the modest 2.2 percent average growth rate turned in since the Great Recession ended.

Economists are looking for even better growth this year, propelled by the $1.5 trillion tax cut that President Donald Trump pushed through Congress in December. The Trump administration contends that its economic program of tax cuts, deregulation and tougher enforcement of trade laws will lift economic growth to sustained rates of 3 percent or better in coming years. In the 8 1/2 years of the current recovery, the growth rate has averaged 2.2 percent, the weakest expansion since the end of World War II.

Trump has said his tax plan will serve as “rocket fuel” for the economy by prompting Americans to spend more and businesses to step up investment.

Economists, however, believe the growth spurt will be short-lived. They are forecasting GDP this year will be boosted by around 0.4 percentage points by the tax cuts and roughly 0.2 percentage points in 2019. Beyond that, many analysts believe rising interest rates will drag growth back down to around 2.2 percent.

“I want to point out that my projections of GDP growth are invariably wrong. So I would say that 3% growth is a challenging number to reach for an economy that’s roughly $20 trillion,” Rubenstein said.

“Obviously, I, as an American citizen, as an investor, would be thrilled if it happened, and I hope it does. But we don’t know how to project 10 years into the future, it’s very difficult. The budgets of the United States are 10-year projections now. And really, projecting more than one or two years in advance is difficult. So if they can do 3%, I think it’s great, and the tax cut will help them get there, but I just don’t know if it’s possible to get there for 10 years in a row.”

For his part, Trump has taken to Twitter to tout the economy. 

"Our economy is better than it has been in many decades. Businesses are coming back to America like never before. Chrysler, as an example, is leaving Mexico and coming back to the USA. Unemployment is nearing record lows. We are on the right track!" he tweeted Sunday.

Other economic gurus are much more optimistic about the economy's future.

Larry Kudlow, the Reagan administration economist who also advised the Trump campaign, praised President Trump for his speech and other remarks this week in Davos, Switzerland.

The president brought his “America First” message to the annual World Economic Forum meeting, while also showing a willingness to co-operate with other countries. Davos has the reputation for bringing together the business and political elite to promote a globalist agenda that’s contrary to Trump’s campaign message of protecting U.S. workers from the ravages of unfair trade.

“It was very wise to go into the lion’s den,” Kudlow said on cable channel CNBC. “I liked his tone, which was cooperative, and I liked his substance, which was: ‘America’s open for business’.”

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Billionaire private equity chief David Rubenstein, cofounder of The Carlyle Group, warns savvy investors not to believe everything they read and hear about the seemingly endless bull-run stock market.
carlyle, david rubenstein, recession, investors, trump
Monday, 29 January 2018 10:29 AM
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