December 21, 2009

It's safe to say that that Nouriel Roubini screwed the pooch something royally in 2009. And that's why you should never listen to a perma-anything

Nothing lasts forever.

What goes down must come up.

What goes up must come down.

And if you listened to Nouriel Roubini in 2009, you were as screwed as those who listened to Lawrence Yun in 2008, or Greg Swann in 2007.

Here's Roubini, being spectacularly wrong a year ago. Guess he didn't read Manias, Panics and Crashes either.

For those of you who did, please feel free to chime in with your 2010 predictions here. And make sure you put Roubini in the "never to be listened to again" file.

8 really, really scary predictions

"For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough.

"I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too."

- Nouriel Roubini, December 2009


Anonymous said...

It is hard to be the Hero all of the time, sometimes Heroes do get it wrong.

It is only human.

Best (and worst) of the Decade: Financial heroes and villains


2. Nouriel Roubini: "Dr. Doom" economist who predicted the housing bubble in 2005.

Anonymous said...

No one is perfect Including you Keith!

Mike Hunt said...

Dr Doom sold out a long time ago.

But he might be correct in 2010 as the sugar high wears off. Time will tell, as always.


long beach, ca said...

something told me to check out your blog saturday and there you were.

Serinator said...

Merideth whitney gives me a hard on.She tells the truth while all wall street clowns spew more bullshit about a bull market.

jackblack said...

The patient needs another shot of adrenaline Keith, but the syringe is empty and the pharmacy in China is closed. Have you forgotten about the option-ARMs? The TBTF banks haven't, and we are about to see a replay of Q4 '08 real soon. Roubini wasn't wrong, he like many others just underestimated the degree of corruption, deception and fraud the law enforcement agencies would tolerate as they played extend and pretend. But 2+2 still equals four, and the underlying mathematical reality can't be fudged even by Obama.

Afterthought said...

2010 poll idea:

What will interest rates be at this time next year?

We love you Kieth, the fact that you are getting back into the fight is itself an economic trend indicator!

Anonymous said...

Roubini has made his bucks and his RGE is doing extremely well.He can afford to take it easy. I think his call on Gold will be spot on in 2010.


Devestment said...

invest in medical.

the gov. is going to push it through and use it to pump dollars into the economy.

pretty obvious

satan said...

Get rid of dollars, they are worthless.

Buy houses and commercial real estate, they will never be lower.

Quit your job and start that small business you always wanted. Your boss is a looser.

Have sex with that cute gal or guy at work before you leave, I’ll help you keep it a secret from your spouse.

Move to the country, the city is too busy.

Donate to a nice Jewish charity.

Buy gold, it's going to $55,000 oz.

Eat out more often.

Start a "light weight" drug or booze habit.

Use credit cards to pay for everything.

Anonymous said...

WOW...first you say "Look out for the housing bubble" pat yourself on the back while smugly muttering to 'we told you so'.

Roubini was right before. He could be right again. Do you really believe that now that the Dow is back over 10,000 that everything is fine? Here is a tip for you: Extend your horizon out further than a year.

Foreclosures aren't done yet. Cash for Clunkers is done and the second round of $8K tax credits won't be nearly as popular as the first. When (not IF) interest rates rise, double-digit unemployment becomes the norm...then you can go back and re-read Roubini's stuff.

Mark in San Diego said...

Interesting that I tuned Roubini out about April of this year. . .I still get his email newsletter, but never read it. . .I was a huge Roubine fan. . .I just had a gut feeling that "never fight the Fed" was the new name of the game. . .I did well this year, buying stocks like DOW at $10 (now $26). . .bought all the household names that were selling at dirt cheap prices. . .either I would go down with the ship, or make a bundle. . .figured if everyone else was eating cat food, it wouldn't be that bad. . .

As for 2010??? My guess is we may have seen the "sugar high" of the Fed, and we may just stay flat (if lucky) for the year. . .still too many problems out there. . .I'm buying nice dividend stocks, like Kraft, etc.

Angry Leprechaun said...

To start off I hate Palin. But let us have a vote on people who are actually involved in decision making on whether or not they are stupid or just acting stupid. Let us start with Obama?
Keith, he does have the worst approval rating of any President at the end of the first year. Meanwhile he is nothing but a cheerleader for Pelosi and Reid. If I had to choose between Roubini and Obama I would go with Roubini. He was at least able to call the fact we were in a recession, and Obama and Co could not see they were getting slapped with it.
Damn it! You just made me defend Roubini.

Randy said...

December 2004 ‘Susan researched it’ said:

‘Its safe to say that HP screwed the pooch something royally in 2004 and that’s why you should never listen to perma-anything’

As of today the average /median house is still not affordable to the average /median person.

Remember the fundamentals of P/E?

We will get there; and Mr. Roubinas prediction may still come true.

It is possible that switching support for propping up house prices from easy lenders to the goberment will in the end make things worse and not better.

What bothers me is, how can it be that the biggest bubble of all times by far, a several %100 quick and wild ascent of house prices (the largest asset for most people).

Ended up with a ‘soft landing’. ?????

Sure trillions were lost and we experienced chaos in the financial industry for a very short while.

But if the natural law of gravity says ‘what goes up must come down’ - it will;
even tough it has been delayed by gamblers and tax dollars.

Andrew from Russia said...

I tried to put my prediction for 2010 into three words, and here it is:

Clunkers for Cash

keith said...

Remember the 'green shoots' poll I did in March 2009, when 96% of readers of this blog said no.

Well, we know how that turned out.

Always be ready to pivot. Read conflicting viewpoints. Go against the herd. Group-think is a terrible thing.

And read Manias, Panics and Crashes again and again.

Charles said...

I've always felt he and Schiff push there own agendas to a certain degree...

However I think their right on the fundamentals just a little off on the psychology. This is a suckers rally that will play its self out by 2011 at the latest.

Of course the smart money will belong gone by then. But yeah in the mean time Schiff and Roubni followers missed out on a hell of a run.

edd browne said...

Big winner went long.
Tepper's hedge-fund racked up
about $7 billion profit so far this year.
Maybe not next year.
[also: TinyURL = special spyware risk]

Banana Republicrat said...

--Massive State & Local Tax Revenue Shortfalls ("no one could have guessed it would be this bad!")

--The Prime Mortgage Crisis

--The Ginnie Mae Bailout

--The $8K Tax Credit Extended Another 6 Months

Pompous S Monson said...

Last I checked, the PE for the S&P was somewhere around 145, that's over 10 times its historical average!

On 10/20/07 you wrote a blog entry called, "It's the P/E stupid. It'll always be the P/E stupid."

The earnings for stocks simply don't justify their high prices just like rents for Phoenix and Miami dotcondos did not justify their million dollar price tag.

Dr. Huxtable said...

You can have the right call but the wrong timing. Timing is relative.

It seemed inevitable that Lehman would go under yet the stock traded up from $30/share to $65/share over the 2 months preceding it's final descent.

You could have sold short at $30/share during that final bull run and looked like a fool once it rose to $65/share. But two months after that, had you ridden out your bet, you would have been right and wealthy.

Anonymous said...

Stocks may have improved, but it's a mirage, and has nothing to do with an improving economy.

Investments in stocks can logically only come from two sources, savings or debt. Since it sure as hell isn't coming from savings, that only leaves debt.
People are borrowing at low interest and putting the money into stockscreating yet another bubble.
This goes well as long as stocks go up, when they go down 'poof'.

Bukko_in_Australia said...

In defense of Roubini, I say that no one could have forseen the huge bailouts and economic unreality that has been unleashed over the past year. I think his predictions were based on what SHOULD have happened in a rational world, one which follows the rules of what had normally been considered financial reality.

It's like saying "In a universe where the laws of gravity and thermodynamics apply, you will fall to the ground and go "splat" when you jump out that 88th-floor window." But in the Pretendiverse of make-believe money, the maggots at the top can do the equivalent of magically growing rocket boosters on their backs and flying to the moon. When the U.S. Fed creates $23.4 trillion (or whatever figure you choose to believe) in new money, loan guarantees, etc. out of thin air, that's like growing an imaginary rocket booster.

Other financial systems have done similar scam-magic like the U.S. Fed to keep the balls in the air. It didn't work for Iceland and Ireland, but perhaps the message is "If you're too small to save, you're fucked. If you're too big to fail, do whatever you want. We'll let you get away with it."

Can they keep it up forever? Will the majority of people and governments around the world keep playing the game and accepting this "money from thin air" as real? Who knows? Perhaps Newton's Laws do not apply to finance, because money is an artificial concept not bound by physical reality.

Reality still applies to the average schmoes who have lost their jobs, and there are lots of them. It might not apply immediately to people who have stopped paying on their home loans (where's "Nick" the scammer?) but have not been kicked out because of the "shadow inventory" problem, but they're living with a sword over their heads, ready to drop at any minute the first buyer wants their property. There are many people who are "dead men walking." Many countries in that position too.

Roubini and some of the economic blogs I follow have been getting heat from commenters because the predicted crash did not come. All I can say is that I respected their reality-based predictions. They did not anticipate un-reality. You MIGHT have, Keith, but since you do not elucidate on the deeper reasoning behind your predictions like "MOABO" all we can see is a guy who throws a lot of pithy one-liner blogposts out there. If you make 10 guesses, chances are a few will be right.

That said, I lost respect for Roubini when he started palling around with the White House economic team (intentional Palin "palling around with terrorists" ironic reference there). It seems like he signed up as an Obama cheerleader then. Do they put some kind of hypnotic mind-control Kool-aid in the Oval Office water? I had hope for Obammy initially, but he turned into a Pod Person too. Perhaps he always was...

P.S. Sorry to be nit-picky, but you spelled Roubini's name wrong in the header. If it was anything but a head, I'd say let it ride.

Mad As H*** said...

What Roubina predicted was accurate assuming the government didn't inject the country with massive doses of monetary "crack".

High on crack a junkie can be severely injured and still run a marathon.

The problem comes when you run out of crack or overdose --- terrible withdraw or death.

Anonymous said...

If one avoided the stock market and instead went into gold and silver for the year, you didn't do badly for 2009. If you stuck with cash, your return wasn't good but with price deflation in many areas (housing, fuel, food) you didn't do well but it was better than poking your eye out with a sharp stick - numbers work in both directions to the positive and to the negative so if your costs went down for the year by 10% and you made 2% on interest, you netted 12%by accumulating cash. See my point? As far as the run up in foreign stock markets (and other items of investment), that looks to be an offshoring of inflation to me - from the U.S. and to the rest of the world - Merry Christmas gift from the Fed. The dollar is our currency but it is the rest of the world's problem. Keith, I'm waiting for a thread on Dubai. I'm surprised you haven't put anything up yet on the same.

Devestment, please come back if you are out there.

Smug Bastard

Anonymous said...

sorry Devestment, I didn't scroll up far enough to find you - there you are. I agree. With demographics being what they are and the political environment. Along the same line of thought - do you think that we are going to see a heavy duty return of manufacturing within the U.S. all things considered?

That may sound strange to some to say but it seems logical to me all things considered where the U.S. is in the world at this point.

Smug Bastard

vanilla ice said...

In my humble opinion the last 18 months have been a giant shot of morphine to the economy provided by the US government. It keeps the economy looking good nominally, but is not a solution in the long run. It masks the underlying debt situation.

The situation is that much of our country's institutions are insolvent. But this was masked by the probably the greatest transfer of wealth in the past 30 years.

Anonymous said...

Don't celebrate the return of good times just yet. We're only halfway back from the nadir of the stock market crash. This could all be one long dead cat bounce. Roubini may still prove right in principle, just wrong about the timing.

Anonymous said...

The Powers kicked the can down the road . Nothing makes sense anymore
because it all about hyping up a market .

Devestment said...

"Group-think is a terrible thing."

Group think is the driving force in the economy.

Fundamentally, consumers drive the economy with supply and demand. When consumers are discouraged as a group, the economy is slow.

Out in public and on blogs such as this one, I only hear negative comments and complaints. This supports my theory that spending will continue to be restricted while the masses fear for their jobs.

When the complaining stops we will be at hope, this will happen some time in the next administration.

The positive evidence in the bubble gold market and the propping up of certain stocks is outside the common person’s scope of benefit and control. It is a game that separates investors from wealth while those who do have control profit. The product is speculation which has no attraction or intrinsic benefit. To find the next boom, look to the itinerary of those who create the money and make the rules. Wisely place your bet in the interests that will profit from government regulated mandatory health care.

Anonymous said...

still being ripped off by low interest rates on deposits in bailed out banks...still being ripped off as a bank stock shareholder and low low dividends and values....still see credit cards with 28 percent rates...???????????????

Anonymous said...


Anonymous said...

Of course the smart money will belong gone by then. But yeah in the mean time Schiff and Roubni followers missed out on a hell of a run.

Been following Schiff. Gave him monday in October '08 and May '09. As of today, my account is up 108%. (Yes, it doubled and then went up some more.) And, I'm scheduled to get some pretty serious dividends going forward.

Also, because of Schiff, I have a pretty huge gold pile (in another account) that I started accumulating in the 600's. That's worked out obviously.

I'm not bragging here. I'm thankful as hell and want to give credit where it is due. I don't manage the account. My broker pretty much guides all my moves. I just tell him to pull the trigger.

Sure, you could have put all your money into EuroPac stuff at the wrong time and be down a bit, but you would have to have been really unlucky.

Bukko_in_Australia said...

You asked for predictions? I can't be bothered to write up a list of my own, but I like this set from a personal blog that's part economic philosophizing, part about how one middle-class woman is trying to get pregnant.

What’s Dead (Short Answer: All Of It)

Just so you have a short list of what’s at stake if Washington DC doesn’t change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can’t believe, and they’re showing it as an imminent event – like perhaps today imminent.)

* All pension funds, private and public, are done. If you are receiving one, you won’t be. If you think you will in the future, you won’t be. PBGC will fail as well. Pension funds will be forced to start eating their "seed corn" within the next 12 months and once that begins there is no way to recover.

* All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can’t earn anything off investments, and if you have a claim in process at the time it happens, it won’t get paid. The probability of you getting "boned" on any transaction with an insurance company is extremely high – I rate this risk in excess of 90%.

* The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they’re doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.

(Part 2 follows...)

Bukko_in_Australia said...

* Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to….

* Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.

* Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what’s left of it, or an IRA, consider it locked up in Treasuries; it’s not yours any more. Count on this happening – it is essentially a certainty.

* Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to….

* The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.

* Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won’t be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go "feral"; witness New Orleans after Katrina for how fast, and how bad, it can get.

The good news is that this process will clear The Bezzle out of the system. The bad news is that you won’t have a job, pension, annuity, Social Security, Medicare, Medicaid and, quite possibly, your life.

It really is that bleak folks, and it all goes back to Washington DC being unwilling to lock up the crooks, putting the market in the role it has always played – that of truth-finder, no matter how destructive that process is.

So let's see if this woman is more accurate than Roubini...

Anonymous said...

He was right in 08, very wrong in 09' He is no different then any other economic forecaster - they all get it wrong as much as they get it right.

In the end, thinking for your self is the only advice to follow.

JAWS said...

I read Manias, Panics and Crashes a couple years ago but it's a good idea to go through it again. With a little bit of knowledge, it's easier to sit back and watch the show unfold. And, it's real obvious who's an idiot and who isn't. Most everyone is an idiot.

I'm still going to get out there and buy investment property but not for a very long time. There is still a lot of devestation to come. Out government has shot their wad. Good luck to them when they need another stimulus package of some sort. It's just getting stupider and stupider.


Bukko, "that woman" you quote is a plagiarist. She's ripping off Karl Denninger's work over at his Market Ticker blog. Denninger is a hard deflationist, and his logic is based on mathematics. Normally I'd agree with most of what he predicts, but after watching Paulson, Geithner, Bernanke, and Obama ignore the normal laws of the universe, it might be time to kick mathematics to da curb as well.

Here is their new rule for the "little people": What's their's is their's, and what's your's is negotiable.

Bukko_in_Australia said...

Well fark! On her blog, the cunt made no mention of it being Deninger's predictions. I don't read him -- there's only so many hours in a day for teh Internets tubez, and at my well-paid government job in Canada, I have to actually work hard, instead of farting around on the computer like I did in Australia -- so I don't have to cross-check. I wouldn't have posted it if I knew the bitch was ripping somebody off.

I never thought I'd say this about a woman I was displeased with, but I hope she DOESN'T get knocked up (since she goes on in excruciating detail about how she's trying so hard to get preggers.) Way to make sex seem tedious, lady!

Anonymous said...

I think *Keith* doesn't actually know. Which is why he's simultaneously claiming absolute confidence in the 12 step chart (clever!) and embracing the current people, but decrying them all the same for the spending, etc.

Keith is having a victory lap (deserved!) and doesn't know how to follow it up.

Anonymous said...

Bukko_in_Australia said...

Well fark! On her blog, the cunt made no mention of it being Denninger's predictions..."

Heh. I always run a snippet through Google when someone doesn't want me to know where they read something originally.

Maybe they're just stupid and lazy instead of transparently dishonest.

Anonymous said...

What the hell is wrong with you Keith? How can you say Roubini telling people to be in cash last year is like Swan telling people to buy real estate in Phoenix in 2007. WTF are you talking about? Roubini made 2% in 2009, Swan lost 70% in 2007.

Anonymous said...

Cudos Keith, you called this one. I'm dining on crow right now.

GT Charlie

Anonymous said...

Dr. Huxtable,

not as wealthy as someone who instead bought at $30 and sold at $65...