Monday, January 5, 2009

Newsweek jumps on the Roubini bandwagon

A little late? Dr. "Doom" is featured in Newsweek magazine, just as the stock market starts to turn upwards. It used to be Businessweek that would give you the "cover" indicators giving the all clear signal.

Now we have a stimulus plan from Obama that includes tax cuts. Maybe the bears will finally figure out that the 6.66% rise in the NASDAQ last week wasn't a bearish omen!

With the economy in a tailspin and the layoff tally climbing, this is a tough time to be a second-year M.B.A. student who's about to hit the job market. It may be especially tough for the students who gathered in a second-floor classroom at New York University in early December to listen to a lecture on the global economy by their professor, Nouriel Roubini. To start the class, Roubini clicked an overhead screen to show the day's economic news. "The numbers are awful," he said, referring to the latest unemployment estimates. He clicked to another piece of data. "That's as bad as you can get," he said grimly. For the next 90 minutes, Roubini—clad in a black suit, with tousled dark hair, fingering his reading glasses as he paced the front of the classroom—discussed his 15-point plan for rebuilding the global financial system. The M.B.A.s followed closely and challenged some of his points. Nothing he said should have made them optimistic, but that's hardly a surprise: there's a reason Roubini's nickname is Dr. Doom.

Roubini, who began making dire predictions about a U.S. economic collapse back when Americans were still busy flipping condos and doing cash-out refis, has become the oracle of the financial crisis. As early as mid-2006, on his well-read blog and in speeches, he explained why the bursting housing bubble would drive an unusually severe recession. He predicted mortgage defaults would cause financial institutions to fail, and that soaring oil prices, combined with falling home prices, would cause debt-ridden consumers to dramatically cut spending. At the time, most economists were predicting a "soft landing," and even those forecasting a housing downturn didn't foresee its deep impact on the financial system. Today Roubini scoffs at their optimism. "[My view] was so obvious, I don't know how anyone could argue otherwise," he says

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