http://seekingalpha.com/article/193122-forecasting-a-double-dip-roubini-s-being-optimistic

Roubini´s global consulting think tank, RGE Monitor, puts the risk of a double dip recession at 20% just now, while arguing that a slow protracted U shaped recovery is more probable at 60%.

I disagree and think the situation is worse than that.

Reasons Roubini cites for the 20% "double dip" scenario are the following:

1. Poor US economic data
2. Europe’s debt crisis
3. Europe facing a double dip recession as well.

The bad economic data Roubini cites are very poor and dropping consumer confidence, tanking new home sales, existing home sales sliding, construction activity falling and new jobless claims stubbornly staying above 400,000. Roubini notes that while the Q4 GDP figure was revised upward to 5.9%, most of that figure, 3.9 percentage points of it, was due to inventories.

Since the end of February, the macroeconomic data for the US “have been almost uniformly poor, if not outright awful," Roubini contends.

I think Roubini is being too optimistic.

I place the probability of a double dip recession at 40% because of the further problems Roubini did not focus on which are developing in the financial sector as evidenced by declining M2, M3, the monetary multiplier, commercial paper outstanding, CDOs being sold, and the drop in GDP or down turn predicted by the new Predictive Financial Index recently developed by Goldman Sachs, Deutsche Bank, Columbia University, New York University and Princeton.

Too, the banking system is also known to be carrying a substantial “shadow inventory” of homes not on the market for sale. Rail traffic is stalled and where there is progress, it is too feeble. Our banks remain badly leveraged and loaded with bad debt. They survive only because of the abandoned mark to market rule.

China is a developing concern as well as Europe because it may need to combat inflation, some of its macro economic data are now being questioned and housing and investment bubbles seem to be deveoping in some areas.

I also believe we are too weighted down by our continuing large trade deficit, rising oil prices, and our serious maldistribution of income. The likelihood of the Fed erring in its exit strategy compounds my concern. Pressure to cut pork and reduce the deficit also weigh in, as does the fading impact of our stimulus program and those likely to lose their jobs in state government and elsewhere when it expires.

Indeed, my 40% figure for a "double dip" may be too optimistic.

Disclosure: No positions