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The latest moves by governments and central banks to stabilize the world's financial system didn't light a fire under the U.S. stock market on Tuesday, but it did get observers focusing on the next issue: Wow, is the U.S. economy ever in trouble.

Paul Kedrosky, who writes the Infectious Greed blog, made a list of dire predictions - plus a few opportunities - for the next stage in the business cycle. The way he sees it:

S&P 500 earnings forecasts are about to plunge faster than at any time in recent history, which presumably includes the sharp revisions that followed the technology bust at the start of the decade. This could lead to a revaluation of the markets. "After all, at S&P 1010 we are trading at 19-times trailing earnings, and 18-times forward [earnings] neither of which are inexpensive, historically speaking," he said.

The U.S. economy is already in a recession, which will last well into the fourth quarter of 2009.

U.S. unemployment, currently sitting at 6.1 per cent, could rise as high as 9 per cent.

The housing market will fall another 10 to 15 per cent in the United States, and Canada is just at the start of a major decline.

Commodity prices will be under pressure but will "reverse savagely" as developed economies emerge from their recessions. "We have newly resynchronized the global economies, which will have immense consequences," Mr. Kedrosky said.


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