2009-01-23 04:57:27
Nouriel Roubini Predicts a 20% Decline For Global Equities in 2009
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If you don't know who Nouriel Roubini is - you should.
Roubini made a name for himself by correctly predicting the housing bust and deep recession that we currently find ourselves in.
Nouriel Roubini is a professor of economics at the Stern School of Business at New York University. He has been given the nickname "Dr. Doom" due to his incredibly pessimistic views on the future of the global economy.
That being said - his pessimistic views have largely come true, leading some to call him a "prophet" and "sage". His views are respected and he has appeared before Congress and the World Economic Forum.
To give you an idea of how accurate his predictions were, I give you one of his quotes taken from September 2006. This quote was taken from his speech to the International Monetary Fund:
"In the coming years, the United States will likely face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession."
He said that he saw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt."
WOW. If that doesn't sum up the past few years, then I don't know what does.
Roubini has become an adviser to a number of central bank governors and finance ministers.
In a nutshell - Roubini has been wildly accurate with his predictions, so we certainly need to listen to what he has to say about the situation going forward.
Roubini now says that global equities will fall "20 percent" from current levels due to a slowdown in China's economy.
He says that despite recent data to the contrary, China is in a recession and this will have dire consequences for economies and markets throughout the world.
So where would that leave the S&P 500, Nasdaq and DJIA if Roubini's prediction comes true?
DJIA is currently at 8,122.50
Nasdaq is currently at 1,465.49
S&P 500 is currently at 827.50
If all three averages receive a 20% haircut over the next year, then:
DJIA would be at 6,498
Nasdaq would be at 1,172.39
S&P 500 would be at 662
What do you think? Will Roubini continue to be right?
Or will the markets put in a bottom this year and start to recover?
Filed under: The Economic Meltdown
17 COMMENTS - What Say You?
Comment by Scott on February 03, 2009 @ 11:47 pm
2/3/09-I believe this prediction to be very plausible. Many folks still believe that the DOW7900 and S&P800 are the bottoms, but at this time there continue to be increasing storm clouds on the horizon, specifically the auto makers next and a major collapse from them impacting all the supply chain. Also, the stimulus package in draft at this time does not appear to provide the kind of immediate help we need. I've tried hard to stay positive, but it's really not looking good from where I sit. Our part of the country had been relatively immune from some of the job displacement/sales contraction, but that is now starting to change as well
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Comment by James MacInnis on February 04, 2009 @ 11:36 pm
I concur with Mr.Roubini not only because of his accurate forecasts in the past but because the early warnings are there and we ignore them at our own peril.
Mr. Roubini does not owe anyone an apology if he has the reputation for being a doomsdayer. The credit crises,the toxic poisons that have infiltrated the international financial system,are result of deregulation on the part of greedy bankers and Wall Street hucksteers.
These foreshocks presage as they allways have,some great crisis in the world's history.
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Comment by C T Rice on February 06, 2009 @ 5:23 am
The Old Rule of Thumb. You can't buy a home for more than 1.5 X your annual income. This rule was broken many times over in the past few years. Yes the handwriting was on the wall.
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Comment by Vincent Donato on February 08, 2009 @ 4:19 pm
How do I invest in the continued downturn?
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Comment by jeff mackie on February 11, 2009 @ 8:34 am
I think 6400 for the DOW is a pretty accurate number for 12/09. However, I'm looking for a 15% bounce upward until March or April.
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Comment by Emre on February 25, 2009 @ 9:54 pm
Roubini is not the only one that generally predicted the current events, there are many, however those people are under the radar since its not thier profession.
In my opinion a DOW 6500 is reasonable within this quarter.
However if the news is more negative than anticipated during the summer and early fall of 2009, we could see a DOW that is below 5500, and even much lower by 2010.
According to Dr. Schiller, if you take the historical PE ratio over 200 years instead of after the great depression, you get a PE ratio that requires to be at about 40% lower than it is today given the DOW at 7200, before it becomes a reasonable price.
At this moment stocks are probably fairly priced if you can hold for 40 years.
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Comment by Ed on February 28, 2009 @ 1:00 pm
Unfortunately the most significant aspect overlooked by most is the fall from grace of our nation. The lending crisis was opportune given our longing for mammon at the expense of God and His purpose. We have become the richest nation in the history of the world and instead of being thankful to our creator we have turned from Him and ignored the words written on our money some fifty five years ago "in God we trust."
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Comment by Albert on March 22, 2009 @ 11:50 am
Is the "bounce prediction" based on the financial services paradigm of the housing/asset bubble predating the crises?
The crises will endure because the housing valuations and easy credit fueled consumer spending was the main driver of the economy. Unless business spending in the US picks up the slack there is no driver in the US economy.
I doubted the retiring 'baby boom' generation is going to lead the charge.
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Comment by Renee on March 25, 2009 @ 1:23 pm
The fact that he was labeled a doomsayer as opposed to the truth teller, means that most people just didn't want to face reality. I've followed him since 2006, and he made sense to me back then as he does today. I consider myself a logical person, not a pessimist. I saw cold hard facts backing up his deductions. It takes a delusional nation to dig ourselves in this big a mess. Time to wake up.
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Comment by Alexander Gervais on May 04, 2009 @ 8:21 pm
Still think the end of the world is coming? Today, the S&P 500 closed at 907.
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Comment by udo hoernke on July 05, 2009 @ 6:41 pm
Get out of the market now!
The DOW will hit 3500 before it settles down to a very slow recovery.
If you are over 30 you'll not see a new high for the dow or the S&P in your life time.
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Comment by stanley perry on September 07, 2009 @ 3:40 pm
I think Nouriel was right on the money in 2006 regarding the housing bubble and the collapse of our financial markets, however i think we are seeing a brand new ballgame. The intervention of higher spending by most nations to
to stimulate the economy is apparently
working as seen the numbers from wall street and around the world. As far as the U.S.markets go it would be better if the obstructionist republican in congress wasn"t standing in the way of
progress
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Comment by stanley perry on September 07, 2009 @ 3:46 pm
Mr roubini is right on the money regarding the housing bubble and the meltdown of our financial markets of 2008. However i think we are seeing recovery signs all over the world as a result of stimulus packages put in place by most nations. optimism prevails, without it the whole economy collapses
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Comment by Mike Haselmire on November 18, 2009 @ 12:38 pm
As a follower of Robert Prechter (Elliott Wave Theory) I too believe the U.S. markets are on the brink of a massive implosion. Elliott Wave Theory now shows that we have reached the very top of the "bear market rally" which began on March 10, 2009. If Prechter's predictions do indeed occur, we will see a Dow decline that will be greater than the 1929 crash, and unemployment (U6) will reach 25%. (currently at 17.5%)U3, now at 10.2 could reac 15%. Hang on to your hats and move to cash NOW.
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Comment by dick on December 28, 2009 @ 8:11 pm
I TOO CONCUR THAT TIMES WILL GET WORSE. REASONS BEING. NO COUNTRY HAS SPENT IT'S WAY OUT OF A RECESSION. WITH HOUSING DEFAULTS,CREDIT CARD DEBT, EMPLOYMENT AT 10% OR WORSE, GOVERNMENT DEBT,INTEREST RATES WILL CLIMB & CLIMB. JOBES WILL CONTINUE TO BE OUTSOURCED.I FAIL TO SEE A RECOVERY SOON.IF A RECOVERY IN EMPLOYMENT IS TO COME IT WILL BE PART TIME HELP BECAUSE OF HEALTH INSURANCE. I HOPE IAM WRONG.
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Comment by Mark Hemstreet on February 12, 2010 @ 10:07 am
The "One - Year Mortgage Holiday" 9 Point Stimulus Plan as fully detailed at
www.saveoureconomy.com is the silver bullet solution to solve the current housing, credit, banking, financial crises, that will immediately jump start our economy, create millions of new Jobs, stimulate growth and generate long term economic prosperity through out America! The Mortgage Holiday Plan is the bold, ingenious ultimate "Trickle Up" stimulus plan that will help all home owners, renters and small/medium businesses that will actually work to stabilize the housing market and get America's economic wheel of commerce rolling again, which will also help balance the Federal budget and help start reducing the National Debt, which will strengthen the American dollar.
We urge you to contact all of your elected Representatives as well as the White House to tell them to support the "One - Year Mortgage Holiday" 9 Point Stimulus Plan, that is supported by a majority of American's across the country.
Thank-you,
Mark S. Hemstreet
Owner/President Shilo Inns
11600 SW Shilo Lane
Portland, Oregon
503.641.6565
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Comment by CAM on February 13, 2011 @ 12:16 pm
All the comments do not show in reality the origin of the problem, nor do they meassure their impact and do not have a control plan to overcome the crisis.
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