IMF: SLOWDOWN BIGGER THAN EXPECTED

as predicted in my post of october 12, the imf revises its 2009 global outlook downwards, almost by a full percentage point, to 2.2% growth for the world, with a contraction of -0.7% in the u.s. and -0.5% in europe. business confidence indicators are plunging, and the new imf report speaks of "rapidly weakening prospects". what is remarkable is that the revision follows so soon after the initial forecast, and that it is so significant.

at the same time, even the imf seems to think that quick policy interventions are the answer to the crisis, and on its website it urges "countries to stimulate their economies in the face of a bigger-than-expected slowdown in the global economy".

apparently no one is bothering to look at the long term average of p/e ratios, discussed in my post of october 28. any government policies that will lead to a premature recovery of the stock markets will only result into an even bigger crash down the road. the last thing the world needs now, is another stimulus package that will once more inflate asset prices far beyond their true values.

profits are falling all over the place, and asset prices therefore must be allowed to follow suit. pretty much like going to the dentist - it is going to hurt, but what's the alternative?