- U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.
- “The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”
- The global equity rebound in March that sent the Standard & Poor’s 500 Index to its best monthly advance in 17 years is a “bear-market rally” and U.S. Treasury yields will “remain relatively low” as investors flock to the safest assets, Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said.
- Roubini’s outlook contrasts with predictions this week from Templeton Asset Management Ltd.’s Mark Mobius and Traxis Partners LLC’s Barton Biggs, who said that equities are poised to rally as government efforts to revive the economy and banking system begin to work. Investors are “way too optimistic” about the prospects for a recovery in the economy and earnings, Roubini said. (I so agree with this point as the market has already turned from "not terribly valued" on my guess of 2009 estimates to "extremely expensive" in the past 3 weeks) Mobius, who helps oversee about $20 billion of emerging- market assets as executive chairman at San Mateo, California- based Templeton, said March 23 the next “bull-market” rally has begun. Biggs, the former chief global strategist for Morgan Stanley who now runs New York-based hedge fund Traxis Partners, predicted the same day the S&P 500 may jump between 30 percent and 50 percent.
- Roubini, who predicts loan and securities losses in the U.S. will reach $3.6 trillion, said the stress tests will reveal that some banks need to be taken over and have their good and bad assets separated before being sold to the private sector. He didn’t name which companies he thought would need to be rescued. (it would be a farce if none of the banks failed, but farce is us nowadays in the country)
- With “deflationary forces” lingering for as long as three years, Roubini said U.S. government bond yields will remain low and American house prices will fall as much as 20 percent in the next 18 months. (I agree that deflation will be the problem as the "output gap" is enormous, unemployment ramps in the coming quarters, and housing prices still have a long way to go: as I've been saying 90% of housing issues thus far have been BAD mortgages - we still have the next, more traditional recessionary, leg to go--> housing crisis from job losses) While the dollar will initially benefit as investors seek a safe haven in the U.S., the currency will ultimately drop as the nation’s trade deficit shrinks, he said.
- Roubini dismissed China’s call for the creation of a new international reserve currency as a “pie in the sky idea” that’s unlikely to gain traction any time soon. (I agree here too; think Euro creation and multiply complexity by 100) “This was a political call and in a nut shell - it ain’t going to happen any time soon,” Roubini said.
[Mar 3, 2009: Nouriel Roubini Lollapalooza]
[Feb 6: What Would Roubini Do?]
[Jan 28: Roubini & Soros on Bad Bank]
[Dec 25: Nouriel Roubini Wishes You a Merry Christmas]
[Sep 30: Roubini on the Bailout - Thumbs Down]
[Sep 15: Nouriel Roubini with a Series of Videos on Yahoo Tech Ticker]
[Aug 20: Nouriel Roubini: "Told you So"]
[Mar 13: Scary Stat of the Day: Roubini Calling for $1 Trillion - $3 Trillion in Losses]
7 comments:
Mark,
Sorry to post an off topic comment, but have you heard any rumours through your channels on the reasoning for the recent surge in solars?
My best efforts have only found the typical talk about oversold positions, short squeezes, and possible China-specific incentives. This reminds me of the high speed lemming train that got the sector so hot this time last year.
Your TSL is up 55% on the day as I write this.
-Jerry
Roubini will never tell you to get back in the market near a bottom. He will stay negative way too long.
Good timing - was just writing a post on it..
TSL is evil :)
NEW YORK (Dow Jones)--Shares of solar companies soared Thursday following a media report that the Chinese government is open to supporting the local development of solar energy in China. Asian technology newspaper DigiTimes said in an article Thursday that China hasn't yet designed a program or set a schedule for solar energy subsidies as costs of solar power generation are still too high. DigiTimes attributed the comments made at a Taiwan-China photovoltaic industry convention to officials from the Chinese Department of Renewable Energy. "This is consistent with what we have always heard and thought," Cowen & Co. analyst Robert Stone told Dow Jones Newswires, adding the news is still positive and is boosting shares. "The Chinese market could potentially be very large because China uses a lot of energy and demand grows with the economy." Gabelli & Co. analyst John Segrich said that while China has discussed renewable energy in the past, it usually focused on wind power. He added that the fact China is talking about solar power at all is a positive factor for the industry. "China has the potential to be a significant market," Segrich said. "It has gotten everyone excited." China-based solar companies traded up the most Thursday, as Cowen's Stone said China-based companies stand to benefit most from any Chinese subsidies. Suntech Power Holdings Co. Ltd. (STP) soared 39% to $10.87, and Yingli Green Energy Holding Co. Ltd. (YGE) rose 40% to $5.79. LDK Solar Co. Ltd. (LDK) jumped 33% to $7.81, and Trina Solar Ltd. (TSL) soared 30% to $11.20. China Sunergy Co. Ltd. (CSUN) climbed 30% to $3.24, and JA Solar Holdings Co. Ltd. (JASO) gained 20% to $3.18. SolarFun Power Holdings Co. (SOLF) jumped 20% to $4.30 a day after it reported it swung to a fourth-quarter loss on inventory write-downs and falling prices. Shares ended Wednesday down 8.9%. "Chinese companies are also trading higher than other companies because up to now, they were trading at a discount to U.S. and international names," Stone said. "The valuation gap is closing somewhat today." Stone added that if the Chinese government began providing subsidies for photovoltaic products, it would benefit the solar market overall, though Chinese companies would be the biggest beneficiaries.
China needs water as much as solar and will pay for both. Mobius and Biggs are educational but are hawking their products, heck Japan issues taunted by Mobius reached a nadir during that lost decade I suspect.
Most of the chartists I follow see the S & P at 870 by April 2nd and the sell off just as the M2M discussions commence.
I like Mobius and had a hunk of his Emerging Market Fund way too long. He does talk a good talk though. (Actually reminds me of a more refined 'Daddy Warbucks' from the 'Little Orphan Annie' comics. He lives in his plane something like 250 days a year as he visits the places countries he is interested in. Odd life..) but as keithpiccirillo said, he's selling his book of business.
Agree on water big time.
Agree on Mobious look lol.
Alas, Matthews Fund had its day in the sun also.
I recall seeing him at least twice on Bloomberg, there's that whole aura of a comic book figure he resembles. I do like to watch Bloomberg on weekends, especially MarketWeek.
Calm civil analysis.
As to the banks, I have gobs of XLF and hope to discard these shares like a freshly extinguished match. JPM holdings are vast and are derivative exposure laden, WFC is 2nd holding within this ETF.
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