Friday, January 18, 2008

Larry Pesavento Predicts Worst Bear Market in 10-15 Years!

I still listen to Tom O'Brien just about everyday. He has been WAY ahead of all of this financial pain, predicting the subprime bank loses, state investment fund failures (Florida), and laughing at all of the sovereign wealth funds that have come in to provide a stay of execution for the banks. (Tom believes that these funds will lose their money.)

For a few weeks now, Tom has been harping on the next shoe to drop in the financial markets, which he predicts will be credit default swaps. This market is absolutely huge and is so complicated that most people do not fully understand or grasp the true danger it presents. Today there was a post on the The Big Picture that also points out this danger. It is a quick and understandable explanation that should be read by all.

Back to Tom O'Brien for a moment. He is pleading for buy-and-hold people to do something to protect themselves. Just the other day he was interviewing Larry Pesavento, a well-respected currency trader, who also had some very disturbing things to say.

Here are some highlights.

"We are predicting a major bear market in stocks, the worst in 10-15 years."
(yes even worse than 2000-2002)

"We feel that subprime is just the tip of the iceberg."

You can listen to the entire interview here.
Tom O'Brien Interviews Larry Pesavento

UPDATE: Barry Ritholtz makes a good point in the comments and it got me thinking. Since there has only been one undisputed bear market in the last 10-15 (and it was a doozie), I'm sure Larry Pesavento must be talking about the worst bear market since the 70's, because he clearly states in the interview that this bear will be worse than 2000-2002.

Larry is a bit of an old timer and he must be forgetting that this is 2008. The mid-70's were 30 years ago. I must admit that I do the same thing every once and a while.


Barry Ritholtz said...

Worse than 2000-02? Worse than down 78%?

Paul Stiles said...

Yes, a very good point. Pesavento doesn't define exactly how the bear market will be worse. Most of his methodology is based on time instead of price so he is probably looking for a longer bear market (> 2 years). I don't know.

O'Brien interviews Pesavento every Monday, Wednesday, and Friday. I could contact Tom and ask him to ask Larry.

This could be my excuse to finally call into a radio show and say, "first time caller, long time listener".