A Bears Questions

David A. Rosenberg, a Merrill Lynch economist, is out with a report today that concludes that home prices need to fall another 20 percent or more to get into reasonable territory relative to rental prices.

And he asks an interesting set of questions on a day when a combination of good IBM profits (largely from overseas) and faith in the Fed has lifted share prices:

“Finally, the question must be asked: if the first 7 percent downleg [Citigroup Model Assumption is 7% for 2008 and 2009] in home prices could manage to trigger …

1. Almost $100 billion in write-downs in the banking sector;
2. A 65 percent year-over-year surge in foreclosures;
3. The highest residential real estate loan delinquency rate in 20 years; and,
4. A 20 percent plunge in S&P financials …

… then what, pray tell, will the next 20-30 percent have in store?