Analyst tips Aussie recession

Chief market strategist at Morgan Stanley, Gerard Minack, is predicting that Australia will be dragged into recession by a slowing world economy, the effects of the credit crisis and the Reserve Bank's cash rate increases. Mr Minack says that the market is coming to the end of its fifth bull run since the beginning of the last century and that bear markets usually last two or three years while producing falls of around 50 per cent. The market is not overvalued according to Minack, but based on profit figures back the 1970's, earnings are around 44 per cent over the long term trend. “You've got to argue that earnings do revert to their mean. On almost every measure we've got for earnings, be it profit share of GDP, return on assets or margins, it looks unsustainable,” he said.

Source: The Australian

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