US large-cap stocks are bargains of a lifetime

By Bill Miller Chief investment officer at Legg Mason Capital Management

The common view seems to be that the weak stock market reflects a weakening economy.

But we think the converse is more likely: the weak stock market is causing the economy to weaken. It is not a surprise that the recent US consumer confidence numbers were so poor; with the stock market having fallen so sharply since late April, they could hardly be otherwise.

…..read the original article HERE

….read the analysis HERE

No defence left against double-dip recession, says Nouriel Roubini

“The US has run out of bullets,” said Nouriel Roubini, professor at New York University, and one of a caste of luminaries with grim forecasts at the annual Ambrosetti conference on Lake Como.
“More quantitative easing (bond purchases) by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5pc yet credit spreads are widening again. Monetary policy can boost liquidity but it can’t deal with solvency problems,” he told Europe’s policy elite.

Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5pc to zero, a budget deficit of 10pc of GDP, and $3 trillion to shore up the financial system.
The anaemic pace compares with rates of 4pc-6pc at this stage of recovery in normal post-war recoveries.

“We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009,” he said, describing a self-feeding process as the real economy and the credit system hurt each other.

“There is a 40pc chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it,” he added.
Hans-Werner Sinn, head of Germany’s IFO Institute, said the US would have to purge its debt excesses the hard way.

…..read more Nouriel Roubini HERE

It’s Not Time to Abandon Stocks

(ed Note: Late addition via Barron’s)

IT’S BEEN A LOST DECADE FOR STOCKS; as of late last week, the S&P 500 had a 10-year annual loss of 1.29%. That’s led investors to head for the exits–to bond funds, in particular. But are they following a wise course?

For a discussion about equities, their future and related issues, including the impending expiration of the dividend tax cut that was enacted in 2003, we turned to Duncan Richardson, executive vice president and chief equity investment officer at Eaton Vance.

A graduate of the U.S. Naval Academy who spent time as an officer aboard a nuclear submarine, Richardson, 52, later earned an MBA at Harvard. In 1987, he joined Eaton Vance, a Boston money manager that now oversees $173 billion in assets. Richardson, who has been an equity analyst, fund manager and chief investment officer, spoke with Barron’s by phone last week from his Beantown office.

…..read more HERE