Roubini warns ‘Too Much, Too Soon, Too Fast’
The world renowned New York University Professor Nouriel Roubini, who accurately predicted the 2007 financial crisis, has sounded another timely warning “Markets have gone up too much, too soon, too fast.”
At the annual meeting of the International Monetary Fund in Istanbul last week, Roubini said “I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U- shaped. That might be in the fourth quarter or the first quarter of next year.” He fears that surplus economies like China and Japan will not boost consumption enough to make up for the downturn in American consumer spending.
According to an article in Bloomberg today ‘The global equity rally has added about $20.1 trillion to the value of stocks worldwide since this year’s low on March 9. Governments have poured about $2 trillion of stimulus into the global economy while central banks have cut interest rates to close to zero in efforts to revive growth’.
Should we be listening to him this time?
On the other hand Steve Leuthold, one of the most successful investors in the world, has called for the S&P 500 to jump as high as 1350.
You buy the ticket, you take the ride.
v
He is an economist, as I am. Economists say, “on the one hand…” and they counter it by saying, “and on the other hand…”.
Some claim economics is a science. I cannot see how you can show how economies outside the classroom adhere to scientific rules. Economics is illustrative, not prescriptive.
That said Mr. Roubini’s track record speaks for itself. The area that he addresses, asset price inflation, is one to which bankers and politicians are blind – unless they can claim some advantage. They simply do not account for the downside risk of asset price inflation – or another area Roubini addresses: the acceleration and trajectory of asset price inflation – the stock market rising 45 % in a few months.