Market rebound tests the faith of Dr. Doom’s disciples
Academic Nouriel Roubini has a mixed track record
Whitney Kisling 30 August 2009
Listening to market gurus in making investment decisions - even those with an impeccable record of sound judgment - may not always help in these uncertain times. Not even someone like, say, Nouriel Roubini.
Making money on the thinking of Dr. Doom is not what it used to be. The New York University professor, who in 2006 foretold the worst financial unravelling since the Depression, has yet to say the economy is worth investing in again.
“There is a big risk of a double-dip recession,” he wrote in a newspaper column last week.
Anyone attempting to apply Mr. Roubini’s wisdom to stocks may be forgiven for missing the biggest rally since the 1930s, as the Standard & Poor’s 500 Index climbed over 50 per cent and the Hang Seng Index over 60 per cent in six months.
While Mr. Roubini said in March the advance was a “dead-cat bounce”, that it may “fizzle” in May and warned in July that the economy was “not out of the woods”, the MSCI World Index was making its biggest gains since it began in 1970.
“We’re looking at a bull cycle in phase one,” Laszlo Birinyi said. Mr. Birinyi was the top-ranked Dow Jones Industrial Average forecaster for most of the 1990s on PBS’s Wall Street Week with Louis Rukeyser.
“No one wants to come out and say: ‘This is a bull market.’ Everyone’s just dancing around the term,” he said.
The S&P 500 added 14 per cent since Birinyi Associates, which manages US$350 million, said on May 20 that a bull market had begun. Mr. Roubini, who forecast in October last year that the US was in a recession that would last 24 months, said on March 9 that the index might fall back to 600. It has crossed 1,000 since.
About US$4 trillion has been restored to US equity markets since March, following signs of an improving economy.
Mr. Roubini’s July 2006 warning about the financial crisis protected investors from losses in the S&P 500’s worst annual tumble in seven decades. He also correctly warned investors to avoid stocks following the steepest advances last year.
But he may have missed this year’s bull market because he is not focused on stocks, Mr. Birinyi said.
Mr. Roubini has “done a very good job on the economy”, Mr. Birinyi said. “Our approach is to try to understand the market and not try to do much more than that.”
Mr. Birinyi, 65, who spent a decade on the trading desk at Salomon Brothers before founding Birinyi Associates in 1989, said on May 20 that the S&P 500 may reach 1,700 by 2011, shifting from his April 13 call that the market had risen too much “by almost every measure”.
In October 2007, he told investors to avoid bank stocks, saying bad loans and lower revenue from underwriting would damp earnings. The S&P 500 Financials Index then plunged 82 per cent through to March 6 of this year.
“Both of them just have a pretty deep understanding of the history of economic and business cycles,” said Eric Teal, chief investment officer at First Citizens Bank. “Roubini has an academic background, whereas Birinyi has been managing money and working in capital markets.”
Roubini was a member of Yale University’s faculty until joining NYU in 1995. He started his consulting firm, Roubini Global Economics, in 2004. The firm’s 1,300 institutional clients include asset managers and hedge funds, as well as investment banks and universities. Mr. Roubini does not invest any money on behalf of customers.
“There’s a lot more weight behind pundits who put their money where their mouth is,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. “Where I get up and pay attention is when I see someone who’s been bearish go bullish.”
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Market rebound tests the faith of Dr. Doom’s disciples
Academic Nouriel Roubini has a mixed track record
Whitney Kisling
30 August 2009
Listening to market gurus in making investment decisions - even those with an impeccable record of sound judgment - may not always help in these uncertain times. Not even someone like, say, Nouriel Roubini.
Making money on the thinking of Dr. Doom is not what it used to be. The New York University professor, who in 2006 foretold the worst financial unravelling since the Depression, has yet to say the economy is worth investing in again.
“There is a big risk of a double-dip recession,” he wrote in a newspaper column last week.
Anyone attempting to apply Mr. Roubini’s wisdom to stocks may be forgiven for missing the biggest rally since the 1930s, as the Standard & Poor’s 500 Index climbed over 50 per cent and the Hang Seng Index over 60 per cent in six months.
While Mr. Roubini said in March the advance was a “dead-cat bounce”, that it may “fizzle” in May and warned in July that the economy was “not out of the woods”, the MSCI World Index was making its biggest gains since it began in 1970.
“We’re looking at a bull cycle in phase one,” Laszlo Birinyi said. Mr. Birinyi was the top-ranked Dow Jones Industrial Average forecaster for most of the 1990s on PBS’s Wall Street Week with Louis Rukeyser.
“No one wants to come out and say: ‘This is a bull market.’ Everyone’s just dancing around the term,” he said.
The S&P 500 added 14 per cent since Birinyi Associates, which manages US$350 million, said on May 20 that a bull market had begun. Mr. Roubini, who forecast in October last year that the US was in a recession that would last 24 months, said on March 9 that the index might fall back to 600. It has crossed 1,000 since.
About US$4 trillion has been restored to US equity markets since March, following signs of an improving economy.
Mr. Roubini’s July 2006 warning about the financial crisis protected investors from losses in the S&P 500’s worst annual tumble in seven decades. He also correctly warned investors to avoid stocks following the steepest advances last year.
But he may have missed this year’s bull market because he is not focused on stocks, Mr. Birinyi said.
Mr. Roubini has “done a very good job on the economy”, Mr. Birinyi said. “Our approach is to try to understand the market and not try to do much more than that.”
Mr. Birinyi, 65, who spent a decade on the trading desk at Salomon Brothers before founding Birinyi Associates in 1989, said on May 20 that the S&P 500 may reach 1,700 by 2011, shifting from his April 13 call that the market had risen too much “by almost every measure”.
In October 2007, he told investors to avoid bank stocks, saying bad loans and lower revenue from underwriting would damp earnings. The S&P 500 Financials Index then plunged 82 per cent through to March 6 of this year.
“Both of them just have a pretty deep understanding of the history of economic and business cycles,” said Eric Teal, chief investment officer at First Citizens Bank. “Roubini has an academic background, whereas Birinyi has been managing money and working in capital markets.”
Roubini was a member of Yale University’s faculty until joining NYU in 1995. He started his consulting firm, Roubini Global Economics, in 2004. The firm’s 1,300 institutional clients include asset managers and hedge funds, as well as investment banks and universities. Mr. Roubini does not invest any money on behalf of customers.
“There’s a lot more weight behind pundits who put their money where their mouth is,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. “Where I get up and pay attention is when I see someone who’s been bearish go bullish.”
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