CNBC – Roubini on the Market Fall
CNBC — Investors need to be risk averse and say in cash, economist Nouriel Roubini told CNBC Thursday after riots broke out in Greece following the passage of an austerity program.
“The markets are going to be bumpy and very volatile,” Roubini, roubini.com chairman and a NYU professor, said by phone. “Investors need to hedge themselves against risk and stay more in cash in the event of a sharp market correction.”
“The rise in sovereign risk in advanced countries is the next step in this whole process,” Roubini went on to say. “Public debt is going to increase in most economies.”
Roubini also said that the markets are going to remain uneasy for some time and that there is a weak recovery in the US and the employment picture is still very weak, despite some job creation.
Roubini said that effects of such a Greek scenario won’t immediately impact the United States, but predicted that a rough road is ahead in the second half of 2010 due to other factors.
Just last week, Roubini told CNBC that Europe’s current bailout plan for Greece “is not going to work because Greece is nearly insolvent.”
“A restructuring of its debt is going to be necessary,” said Roubini on April 28th.
A collapse of the Greek economy could have domino effect among other weak eurozone countries—including Portugal, Spain, Italy and Ireland, he said.
“Suppose you have a disorderly collapse of Greece, two things will happen,” he added. “Financial institutions holding Greek debt—mostly European—will have massive losses. Secondly, a contagion from Greece to Portugal to Spain to Italy to Ireland will have a domino effect.”
Eventually, debt increases and risk aversion is going to drive down asset prices globally. Roubini said last week.
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5 Responses to “CNBC – Roubini on the Market Fall”
The EU Pozi game is up. The world has come to realize that another chunk of pseudo-demand has evaporated! Ad GDP evaporation will follow.Just like subprime in the US, the purchasing power for the PIIGS and other lesser countries who consume more than they produce, was possible by making up the difference with borrowed money. In theory, the US economy will recover and its citizens will produce REAL incomes linked to real GDP, tax its citizens and pay its debts but even that may be brought into question.But one thing is for sure: Greece, Spain, Portugal ad other lesser countries within and without the EU are dead zombies. They will never make enough money to pay their debts and have a money leftover from a positive GDP to help its citizens.There are two issues. The economic calamity. A big chunk of the EU GDP was a mirage. Even in Germany, as a good chunk of its GDP was exports to EU countries which were just acquiring euro debt. Just as it was the case with the Chinese and the US. So the world economy will suffer greatly because the demand generated with borrowed money has evaporated and this includes people in the US as well as people in Greece, Spain, Portugal, Ireland etc. So to whom are the Asian countries and Germany sell all their GDP generating junk?The other issue is the renewed financial crisis that will ensue as banks take another HUGE hit… Another trillion [Euro this time] black-hole.it looks very ugly.
OR,Its been a long time since my prediction for S&P 700 I made to you way back when, however I guess we are headed there now. I still do not see any basis for your theory that the US economy would recover and its citizens pay back their debts from real GDP. Producing what? The US economy is a shell where much of its GDP is generated via a Ponzi scheme as you describe in Europe. I developed the model below to describe what I see going on:http://willanystand.blogspot.com/2009/11/when-owing-money-means-nothing-and.htmlUnfortunately Roubini continues to call for more easing and free money as the way out of the crisis. He wants ECB Q E, IMF involvement, and I am sure he will be calling for currency swap lines etc very soon. He simply can see no other solution that someone, somewhere, pumping more money into the system to somehow keep it afloat.We sit at the edge of momentious times, my friend. We are, unfortunately, back at that edge againex VRWC
Dear Mr. Roubini,At this moment, not long before a major economic disaster, I am actually felling sad to read you talking about investors’ concern toward markets’ volatility, and hedging against risk.Why not concerning the employees, workers, producers, the people in general, the society, the working conditions, and the general public, professor? Are you not aware that “investors”, and their “investments and hedging”, are the major cause of world economic problems today?Or, are you having a conflict of interest between intellect and greed, as what happen to most people, Mr. Roubini? If that is the case, I am very sad.
I try hard to be optimistic on the US but U R rite: “Producing what?”Perhaps our parasitic financial sector, via nuclear financial innovation products designed to screw the rest of the world to our benefit, will save the day:-)
Now you’re talking sense…