WORLD TOUR WITH DOCTOR DOOM

  Legendary economist Nouriel Roubini gets paid to travel around the world predicting doom.

Roubini acknowledges the global recovery, but he warns of a double dip in the developed world AND of overheating in emerging markets.

" Today there is a global economic recovery, but my view is still two-speed.  Emerging markets, China, India, Asia, even Latin America are doing well.  I think the recovery in the advanced economy is making us apart.  There is still balance sheet repair in both the private and public sector.  You see this especially in the periphery of the euro zone and Japan, the U.K. is almost double-dipping.  Even in the U.S., the recovery is still weak.  The banks are doing better of course--they're being built out, they're being recapitalized at least in the United States in the case of the euro zone, but we still have significant problems in Ireland, Spain, and so on."  

Roubini named Russia as a country at risk of overheating.

Some “emerging markets are overheating” and as inflation is accelerating, “they are behind the curve in terms of policy tightening,” Roubini said at a conference in Moscow today. “In China, Russia and many other emerging-market economies that are emphasizing growth over fighting inflation, if inflation gets out of hand, they have to tighten more in the middle or later part of this year.”

BONUS: Nassim Taleb says Russia is relatively robust.

“When I look at the future, I feel comforted by a country like Russia,” (it has) “resilience” (after going through) “several crises over the past hundred years,” whereas the U.S. “can’t sustain shocks,”

 

Roubini recently warned of a debt crisis in Arizona and other states.

“I would say that the condition of state and local governments are extremely serious... There’s a fundamental fiscal problem.  Think of it: Greece is only 3% of the Euro zone GDP, while California alone is one seventh of the U.S. GDP.  And the trouble is not just in California.  It’s California, Arizona, Nevada, Florida, Illinois, New York, and a good chunk of U.S. states.”

• Major Asian indices were mixed in overnight trading, with the Nikkei up 0.41%. European markets are also mixed, and U.S. futures are lower.

• The NFIB small business index is released at 7:30 AM ET. It is expected to show an increase in confidence. 

• China hiked its key interest rates again this morning, moving the one year lending rate to 6.06% from 5.81%. The deposit rate increased as well, to 3.0%. 

• Brazilian inflation data came in pretty in line with expectations, with year-over-year inflation for January at 5.99%. Chile's inflation also came in hot as well, at 2.7% year-over-year. 

• Eurozone leaders still look likely to go through with their plan for an expansion of the region's bailout fund, even though they failed to come to any consensus at this weekend's meeting. It now looks like a " grand bargain" is being planned for next month's meeting. 

• Toyota has increased its outlook for its current fiscal year, saying it will make 40% more than it originally expected. The company now expects to have a net profit of $5.95 billion for its fiscal year ending in March.

• Xstrata, the mining firm, notched 2010 profits of $6.61 billion, more than a four times increase over its 2009 profits of $1.53 billion. The surge in profit was based on increasing global demand, particularly from China.

• ArcelorMittal reported a Q4 loss of $780 million, down from a $1.1 billion profit the year prior. The loss is the result of weak demand.

• UBS reported weaker than expected Q4 profits, at $1.35 billion. The firm blamed one time charges associated with its debt portfolio for the loss.

• German industrial output came in weaker than expected, falling 1.5% from November to December. Weather was partially blamed for the larger than expected fall. 

• Bonus: Katy Perry says she used to wish she looked like Kate Moss.

BUY ON DIPS, SELL ON RUMOURS

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  The recovery itself has not been abnormally weak (GDP has risen 3.7% from trough), but it has been abnormally weak compared with the decline in GDP growth that preceded it (4.1%)

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  In general, capex growth explains around 60% of GDP growth variance—and capital spending indicators are consistent with 10%+ capex growth.

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  The US labour market recovery is gaining momentum

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  Lending conditions are improving

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  Our weekly lead indicator of US growth is still accelerating

The economy is in the midst of a thirty year super-cycle that will see Asia boom to become the dominant economic force in the world, according to Standard Chartered.

The world has been through this before: once from 1870 until 1913, and again from the end of World War II until 1973.

The first super-cycle was the result of rampant growth in the U.S. and global utilization of the tools of the industrial revolution. The second was brought on by the rebuilding of Europe, growth of a global middle class, and emergence of Asian exporting powers.

This time, the cycle is all about the emerging consumer class in Asia. China's consumer will move ahead of the U.S. by 2018. Chinese growth will average 6.9% over the next two decades, India 9.3%.

There will be slowdowns, largely driven by the slowing west, but Standard Chartered feel this emerging market story is about to drive another massive period of growth in recent human history.