Showing posts with label Nouriel Roubini. Show all posts
Showing posts with label Nouriel Roubini. Show all posts

Saturday 24 July 2010

Nouriel Roubini 2009 - Stock Market Calls




Back Peddling Bears
There is a reason bears such as Nouriel Roubini, David Rosenberg, and now Doug Kass are offering a more tame outlook. The data doesn’t support an all-out economic collapse.

For the record, we are not bulls. We see a lot of major problems in the global economy. However, we see a much more mixed picture than the apocalyptic bears who seem to have blinders on when it comes to anything disproving their case.

A recovery starts slowly. First companies cut costs. Then they spend. Then they hire. Then the economy heals. Seems like the first two phases are taking root.

Do you think the economy is about to fall off the cliff? Do you think we are amidst a textbook recovery? Is it more complicated than that? Let us know in the comments below …

Monday 24 May 2010

Nouriel Roubini said the bubble would burst and it did. So what next?

Nouriel Roubini said the bubble would burst and it did. So what next?
The dismal science? Don't believe a word of it. If Nouriel Roubini's New Year's Eve invitations were anything to go by, economics is far from the dour affair it once was.


By Jonathan Sibun
Published: 5:51PM BST 23 May 2010



Holed up in the Caribbean island of St Bart's, Roubini was forced to choose between two parties. The first hosted by Chelsea owner Roman Abramovich, the second by Colonel Gaddafi's son Hannibal.
While dancing the night away with a Russian oligarch or the son of a Libyan dictator might not be everyone's glass of Cristal, the invitations show just how far the New York university professor has come in the celebrity stakes.
Just three years earlier, Roubini had been the object of derision in the economics community as he prophesied a US housing market crash, financial crisis and partial collapse of the banking sector. Today, as an adviser to governments and central bankers and much feted in the media, he's well aware of the power of being right.
"In my line of business your reputation is based on being right," he says. "The publicity is just noise. Certainly with a global crisis, the dismal scientists are having some prominence, even if most of the economics profession actually failed to predict it."
The 51-year-old, widely known as Dr Doom, is in town to publicise his new book Crisis Economics, a crash course in the financial crisis and what can be done to avoid another.
The book does little to suggest he is uncomfortable with his nickname. Where Roubini is concerned, the great recession has some way to run.
"The crisis is not over; we are just at the next stage. This is where we move from a private to a public debt problem," he says, his speech the mongrel drawl of a man who was born in Turkey to Iranian parents, raised in Israel and Italy and lives in New York. "We socialised part of the private losses by bailing out financial institutions and providing fiscal stimulus to avoid the great recession from turning into a depression. But rising public debt is never a free lunch, eventually you have to pay for it."
As eurozone leaders panic and markets continue to dive, Roubini believes Greece will prove to be just the first of a series of countries standing on the brink.
"We have to start to worry about the solvency of governments. What is happening today in Greece is the tip of the iceberg of rising sovereign debt problems in the eurozone, in the UK, in Japan and in the US. This... is going to be the next issue in the global financial crisis."
It already is. And Roubini claims to have foreseen it as far back as 2006.
"I was writing about the PIGS [Portugal, Italy, Greece and Spain] six to nine months before everyone else, I was worried about the future of the monetary union back in 2006," he says. "At the World Economic Forum I outraged a policy official by suggesting the monetary union might break up."
Roubini has sandwiched a visit to the The Daily Telegraph's offices between a private meeting with Bank of England Governor Mervyn King – "I regularly meet with policy makers. I don't know if it's even worth mentioning" – and a talk at the London School of Economics. I ask him if I can see his LSE speech.
"I haven't written one. I never prepare a speech, I don't even have notes. I usually just speak out of my own thoughts; stream of consciousness."
It's a manner he adopts when we meet. Looking over my shoulder, declining eye contact, he moves seamlessly between what he describes as the economist's usual suspects – "the US, eurozone, Japan, China, emerging markets, inflation, deflation, markets" – as he must when teaching his 400 students in New York.
The prognosis for all the suspects save China and the emerging markets is grim, little wonder given the backdrop of a 3.8pc drop in the FTSE last week and panic among investors spooked by German chancellor Angela Merkel's short-selling ban. The ban has been dismissed as fiddling while Rome, or rather the eurozone, burns.
Roubini believes Greece's problems will see the country forced to restructure its debt and raises the longer term prospect of a breakdown of the union with the potential exits of Greece, Spain and Portugal.
Could it survive such a blow? "Well you could think of a world where there is a eurozone with only a core of really strong economies around Germany," he says. "But the process that would lead to one or more countries leaving the union would be so disruptive that the euro as a major reserve currency would be severely damaged."
Like many economists, Roubini does not talk in absolute predictions. It is all about what could happen in worse case scenarios.
But he argues they are only becoming more likely under current political leadership, the UK's new Conservative-Liberal coalition included. "I am worried about the hung parliament. Whenever you have divided, weak or multi-party governments, budget deficits tend to be higher. It is harder to make the necessary sacrifices."
He dismisses the £6bn of cuts announced by the coalition as "small compared to what is needed", but rejects the idea that the UK is worse off than many of its peers.
"In the US there is a lack of bipartisanship between Democrats and Republicans, in Germany Merkel has just lost the majority in her legislature, in Japan you have a weak and ineffective government, in Greece you have riots and strikes," he says. "The point is that a lot of sacrifices will have to be made in these countries but many of the governments are weak or divided. It is that political strain that markets are worried about. The view is: you can announce anything, we'll see whether you're going to implement it."
This, he explains, is the ultimate challenge facing governments.
"If you're pushing through austerity while there is growth that's one thing, but if you're pushing it through while the recession is deepening, politically that is harder to sell. And the eurozone doesn't just need fiscal consolidation but also structural reform to increase productivity and restore competitiveness," he says.
Germany is the blueprint, Roubini points out, but "it took a decade for them to see the benefits of structural reform and corporate restructuring".
"If Spain and Portugal start today, you'll see the short-term cost without the long-term benefit and they might run out of political time," he says. "That's why I worry about several eurozone members having to restructure their debt, or deciding that the benefits of staying in the monetary union are less than the cost of it."
The prognosis for the UK is, at least, a little less alarming. An independent currency gives it a few more levers to pull – quantitative easing means default is unlikely to be an issue. But that comes with its own challenges.
"Eventually inflation will go up and that erodes the real value of public debt," Roubini says. "In that scenario the value of the pound will fall sharply. It could even become disorderly and that could damage the economy, the financial markets and also the role of the pound as a reserve currency."
Yet another challenge for Government then. Whether the coalition can live up to it remains to be seen. And whether it thinks it has to.
Roubini is adamant that the great recession is not over. But a temporary economic pick-up, which would convince governments that reform is unnecessary, could bring its own problems.
"People asked me why I saw there was a bubble and my question was why others didn't. During the bubble everybody was benefiting and losing a sense of reality," he says. "And now, since there is the beginning of economic recovery – however bumpy that might be – in some sense people are already starting to forget what happened two years ago. Banks are going back to business as usual and bonuses are back to levels that are outrageous by any standards. There is actually a backlash against even moderate reforms that governments are trying to pass."
Reform, Roubini insists, is necessary, recovery or not. "We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don't address the issues, you risk having a double-dip recession and one which is at least as severe as the first one."
Roubini has built his reputation on such forecasts. So, given the real reputation builder was forecasting the crisis, has he been one of the few to enjoy the troubled times of the past few years?
"We are witnessing the worst global economic crisis in the last 60 to 70 years and for an economist that offers an opportunity," he says. "So it has been interesting, but the damage financially and economically has been so severe and so many people have suffered. Anybody involved has to bear that in mind."

Thursday 20 May 2010

Global stockmarkets slumped overnight

Global stockmarkets slumped overnight, as the surprise German strike against speculative trading panicked nervous investors instead of reassuring them.

Top economist Nouriel Roubini, who was one of the few experts to predict the global financial crisis, warned that the debt drama set off by Greece was likely only the tip of the iceberg.

A fresh crisis could occur "not just in the eurozone but in the UK, US, or Japan," Roubini said in a speech at the London School of Economics.

"The next stage of the crisis could be a sovereign debt crisis that could lead to a double-dip recession."

In Asian trade on Wednesday, Tokyo lost 0.5 per cent with Hong Kong down 1.8 per cent while Sydney fell to its lowest level in nine months, giving up 1.9 per cent.

AFP

http://www.smh.com.au/business/markets/angelas-ashes-desperate-merkel-fuels-slump-in-global-markets-20100520-vfl2.html

Wednesday 6 May 2009

Economist cautions on equities market

Economist cautions on equities market
Wed May 6, 2009 6:47am

SINGAPORE (Reuters) - Rallying global stock markets will likely reverse trend later this year when weak earnings and economic news surprise investors, Nouriel Roubini, a well-known economist who predicted the credit crisis, said on Wednesday.

"This is still a bear market rally," Roubini told a financial seminar. Roubini is chairman of independent economic research firm RGE Monitor and professor of economics at the Stern School of Business at New York University.

He gave three reasons why investors ought to be cautious about the rally that has seen the Dow Jones Industrial Average .DJI rise 27 percent in two months and taken Asian stocks 42 percent higher over the same period.

Roubini expects macroeconomic news to be worse than expected, lower than expected earnings, and more bad news from the banking sector or an emerging market crisis.

"We will discover soon enough there are a lot of financial shocks.

"While financial markets are mending, we are going to see negative surprises in the next few quarters," he said.

"Markets are getting ahead of themselves."

(Reporting by Vidya Ranganathan and Kevin Lim; Editing by Tomasz Janowski)

http://uk.reuters.com/article/businessNews/idUKTRE54514W20090506?feedType=nl&feedName=ukdailyinvestor

Thursday 5 March 2009

Even 'Dr. Doom' Is Scared: Economy Much Worse Than Roubini Predicted

Even 'Dr. Doom' Is Scared: Economy Much Worse Than Roubini Predicted

Posted Mar 02, 2009 01:35pm EST
by Aaron Task in Newsmakers, Recession

Fed Chairman Bernanke raised eyebrows (and, briefly, the market) last week when said there's a "reasonable prospect" the economy will bottom this year and be in recovery in 2010.
But Berkshire Hathaway's Warren Buffett disagrees: The economy "will be in shambles throughout 2009 and...probably well beyond," the Oracle of Omaha declared this weekend.
In sum, Buffett and much of the rest of humanity are just now coming around to Nouriel Robuini's way of thinking, the economist known as "Dr. Doom" is upping the ante on his longstanding bearish views.

A year ago Roubini was forecasting an 18-month recession with a U-shaped recovery; now, he's now expecting the downturn to last at least 24 months and possibly 36-months. He also sees rising risks of a Japanese-style L-shaped stagnation, i.e. a prolonged period with little or no economic growth.

"I was one of most bearish people [but] the economy has surprised the bears on the downside," says Roubini of NYU's Stern School and RGE Monitor. "What's happening in the world now is scary."

Indeed, while the U.S. economy contracted 6.2% in the fourth-quarter, Roubini's main concern is economic activity in much of the rest of the world is in much worse shape. And while he is often critical of U.S. policymakers - including over the stimulus package, Fed policy and bank bailouts - Roubini says "the rest of the world is way behind the curve," in terms of doing the "right things" to confront the worst economic crisis since the 1930s.

http://finance.yahoo.com/tech-ticker/article/197164/Even-'Dr.-Doom'-Is-Scared-Economy-Much-Worse-Than-Roubini-Predicted?tickers=%5Edji,%5Egspc,QQQQ,DIA,SPY

Tuesday 17 February 2009

Nouriel Roubini trusts Timothy Geithner to get it right on US banks


Nouriel Roubini trusts Timothy Geithner to get it right on US banks
Nouriel Roubini can see that the 'N' word might be a little difficult for Western governments to swallow right now. But for him, it's the right – indeed, the only – route to follow.

By James Quinn, Wall Street Correspondent
Last Updated: 2:34PM GMT 16 Feb 2009

Nouriel Roubini predicted the current financial crisis and now argues that many US banks should be nationalised
The "N" word, of course, is nationalisation: nationalisation of failing banks which are continuing to wreak havoc on the world's economies.

"Many US banks are insolvent, even the major ones," argues Roubini, professor of economics and international business at NYU Stern, New York University's business school, without naming names. "Call it nationalisation, or if you don't like the dirty N-word, use 'receivership' or whatever is palatable."

Call it what you want, says Roubini, but without nationalisation of some of the major banks in both the US and the UK, the banking crisis will get worse and the current recession deepen.

"If the problem of banks is one of liquidity, you can do anything you like, which seems to me what the US Treasury wants to do," he says, with reference to US Treasury Secretary Tim Geithner's slightly-fumbled banking bail-out plan launched last week to much disregard from Wall Street.

"But if the banks are insolvent, none of these will work," says Roubini of Geithner's three-part plan which includes stress-testing major banks to see if they need more public capital.

"To see which banks are insolvent, a stress test is a step to making these tough decisions," he says, tough decisions which are so politically charged that they need to be "done right" due to the number of stakeholders involved who face being wiped out if nationalisation were to occur.

"Triage the banks that are solvent but illiquid, and those that are beyond redemption need to be nationalised. But it's urgent to do it sooner rather than later. Let's not wait another 12 months."

Roubini, one of the world's foremost experts on the current banking crisis, argues that until now, the US government, like many of its European counterparts, has been busy "trying to provide manna to everyone" without actually working out who needs what.

So why, given that Geithner appears to know some of what is needed, does Roubini think he didn't go the whole hog last Tuesday?

"The benevolent view of what they've done is realise the problem, but maybe not go as far as they might like to. A month into the [Obama] administration, saying "we're going to take over most of the US banks" because they're insolvent - that might lead to being accused of being Bolshevik," he surmises.

The second reason Geithner may have held back, Roubini adds, is that perhaps he and the rest of Obama's economic team – including senior adviser Larry Summers and chairman of the White House Council of Economic Advisers Christina Romer – were banking on the economy recovering somewhat later in the year, which might lead to less stress being placed on bank assets. "A sense of cautiousness, perhaps?" he says.

Based on Roubini's forecast for the US economy, such caution is perhaps a little unwise.

He estimates that a "broad recession" – will continue well into next year, with some form of recovery into 2011.
But even that is not certain, he argues, saying there is a "risk" that the current recession does not create a U-shaped curve as the majority do, but that the US ends up like Japan of the 1990's with "nasty L-shape stagnation."

"In a banking crisis, some banks are so under-capitalised that they might as well just take them over," he argues, pointing out that often it is better from a capitalist-friendly perspective to take them over, clean them up in public ownership, and sell them off again, than it is to leave them flailing for help on the open market.

Roubini, who turns 50 in March, makes his comments with a degree of inside knowledge. Although he is no way connected to the Obama administration – and is an independent economist whose only commercial tie is as chairman of economic analysis firm RGE Monitor – he did work with Geithner at the tail-end of the Clinton administration.

When Geithner was promoted to under-secretary for international affairs, Roubini became his adviser, working together for just under a year.

"I trust him," he says, despite acknowledging that he may not quite have got his ducks in a row yet. "He's someone I know well and I have great respect for him."

Why then did Geithner get it so wrong, with his ill-timed and ill-structured banking bail-out which was in many ways smothered by the ongoing debate on the now-passed $787bn fiscal stimulus package?

"You cannot blame him," says Roubini, pointing out that he's facing the "worst economic crisis since the Great Depression" and also that he is just one of a number of high-level economic advisers working under Obama. Although he does concede that his old boss could have waited for a few weeks to "get it right."

Getting it right, in Roubini's eyes of course, means nationalisation, which will invariably involve Geithner returning to the US Congress for additional funds on top of the existing $700bn bail-out fund. "Sooner rather than later, they'll need more money," estimating that $1 trillion to $1.25 trillion of extra money needs to be injected in to the US financial system to revive it, having previously warned that credit losses from US institutions will total $3.6 trillion by the time the crisis is over.

"If you do it fast, you will get private money. But if you take time, and mix good apples with bad apples, then private investors won't want to get involved," he warns.

Aware that going back to the US Congress for an extra $1 trillion of taxpayer's money will be a hard sell for Geithner, Roubini stresses that sum would not necessarily be the final cost. "That's not necessarily the total loss for the taxpayer, as the net costs are less than the headline number due to interest payments and the hope that most of the capital will be repaid."

"They'll get to that point, it's just a matter of when," shrugs Roubini, who, nationalisation or not, will no doubt be watching the actions of his former boss with keen interest.


http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4639504/Nouriel-Roubini-trusts-Timothy-Geithner-to-get-it-right-on-US-banks.html