The 'Real' Economy Is Dying:
Q4 'Going to Be a Bloodbath,' Whalen Says
By Aaron Task
October 06, 2009 -- -- Stocks rallied to start the week thanks to a better-than-expected ISM services sector report and a Goldman Sachs upgrade of big banks, including Wells Fargo, Comerica and Capital One.
But all is not right in either the economy or the banking sector, according to Christopher Whalen, managing director at Institutional Risk Analytics. In fact, Whalen says most observers are drawing the wrong economic conclusions from the stock market's robust rally.
"Why is liquidity going into the financial sector? It's because the real economy is dying [and] everyone is fleeing into the stocks and bonds because they're liquid at the moment," Whalen says. "That's not a good sign."
The banking sector's assets shrunk by about $300 billion per quarter in the first half of 2009, a sign of banks hoarding cash in anticipation of additional future losses, according to Whalen. "The real economy is shrinking because of a lack of credit." Continued here