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Nouriel Roubini's Three Reasons Why Stocks Are Bound to Fall

Posted Jun 19, 2009 10:00am EDT by Tech Ticker in Investing, Newsmakers, Recession, Banking

Believe it or not, Nouriel Roubini -- professor at NYU's Stern School and Chairman of RGE Monitor -- has some good news: Aggressive government intervention prevented a great depression.

The bad news: Roubini says the stock market rally is long in the tooth. (They don’t call him Dr. Doom for nothing.)

He points to three factors that will lead to a correction in the near future:

1. Volatility and Uncertainty Will Increase.  Note: the CBOE Volatility Index is currently down more than 50% since the October panic.

2. Corporate Earnings Will Disappoint.  He says the market is pricing in a robust ‘V’ shape recovery. However, when earnings miss expectations, buyers will turn into sellers, as was the case this week with FedEx. (Research In Motion shares were down early Friday after the firm’s guidance failed to live up to expectations.)

3. The Global Financial System Still Faces Serious Problems.  Roubini thinks unemployment will rise to 11%, bank losses will increase across the globe, and the recession in Europe will get worse.

The silver lining: Roubini isn’t convinced the market will retest the lows.

136 Comments

marx
marx - Friday June 19, 2009 10:08AM EDT

Roubinis ties to the world bank,imf and privately owned Fed Res make him an untrusted source for information.He is a tool to instill fear into our minds so that we support lending more powers to the FED. Instead of listening to this mouthpiece we need to Email our congress and tell them to support auditing the fed with HR 1207 and S 604. http://www.ronpaul.com/on-the-issues/audit-the-federal-reserve-hr-1207/

Ron
Ron - Friday June 19, 2009 10:13AM EDT

Trying to recall the last time this guy was on target...been a while. Or if anyone really cares anymore. Over the past 12 months his predictions have been pretty erratic and unoriginal. I think it's time to let this guy fade away and quit listening to him. Either way, his 3 reasons for stocks to fail is not very innovative or original. I think just about anyone could have come up with them. Thank you Dr. Obvious. Now please disappear and go back to teaching your dooming economics.

Poch At Home
Poch At Home - Friday June 19, 2009 10:13AM EDT

Lucky to have these guys share expertise.

Jeroly
Jeroly - Friday June 19, 2009 10:16AM EDT

there is a difference between saying that the economy will get better and saying that the stock market will continue to go up.

FootballJunkie
FootballJunkie - Friday June 19, 2009 10:16AM EDT

Anyone else think this guy is a media whore? If he reports the market is turning and the future is bright, Yahoo would no longer be plastering his name all over their home financial page.

Cas
Cas - Friday June 19, 2009 10:19AM EDT

Where’s the money? Since for every seller there is a buyer, where are the sellers that made all the money? www.PTLdomains.com

Yahoo! Finance User
Yahoo! Finance User - Friday June 19, 2009 10:19AM EDT

I predict this guy will keeping changing his predictions to keep getting interviewed. A fella's gotta eat, and this guy ain't no ditch digger.

jjp
jjp - Friday June 19, 2009 10:20AM EDT

he's not a tool to instill fear just simply a TOOL!!!!!!!!!!

Yahoo! Finance User
Yahoo! Finance User - Friday June 19, 2009 10:21AM EDT

Thanks for having Roubini. Few talking heads can actually pull together so much relevant information and then quickly rattle it off in a coherent narrative. There are more insights in one minute of Roubini's talking than five minutes of many others. No B.S. No umm's, ahh's, and other pauses. Maximum aural and brain punch.

- Friday June 19, 2009 10:26AM EDT

I think Nouriel Roubini is correct to be cautious with the recovery of the economy. But it's very likely that part of the recovery of the the stocks market is caused by the idea that will not see other crash like 1929.

Yahoo! Finance User
Yahoo! Finance User - Friday June 19, 2009 10:29AM EDT

I support Nouriel's view and projections. Reasons: #1 The anouncement of unemployment rolls declining for the first time since January does not Identify how many applicants fell off due to expiration of their qualification. New claims are down, however expect hese to climb back to higher levels once the construction season ends in northern states. #2 Home sale are up, what is not being said are the amount of short sales occuring throughout the nation where banks and credit unions will have to write off losses for the balance of the loan amounts. #3 New home starts are up, in a market where supply is higher than demand this can only continue to drive prices downward causing further erosion of real estate values. The Bull will ultimately become the Bear

Gerald
Gerald - Friday June 19, 2009 10:30AM EDT

Brace yourself, Marx! The ether of the past 5 months will eventually wear thin. If profits were realistically expected, it WOULD have a chance. However, less working, less spending, less profits, ...not a pretty trend. And no, Obamanation is not working, nor will socialism bring us prosperity, tho this generation mistakenly thinks so. You see, socialism breeds complacency, while a democracy based on Judeo-Christian principals, and free enterprise, and capitalism, will bring prosperity, as has been proven around the world. As our economic picture changes with socialistic policies, the masses will denegrate over another generation, and wake up as subjects of the King. Where oh where are the entrepeneurs of days past? Yes, yes, i know i am a conservative that believes we must be responsible in government and that we all need to walk with Jesus, and laugh, love, & live like Him! I wish you both!

Yahoo! Finance User
Yahoo! Finance User - Friday June 19, 2009 10:30AM EDT

I love the persistent bearish view of this guy. Go Dr. Doom, you Rock!!!

Yahoo! Finance User
Yahoo! Finance User - Friday June 19, 2009 10:32AM EDT

He is right expect a drop this is just a retrace in a bear market fall.

william
william - Friday June 19, 2009 10:33AM EDT

listening to Roubini is almost worst than root canal surgery... neither is an appealing experience... i am amused at the number of academics who have "all of a sudden" become experts on everything to do with economy, stock markets, money markets... while I respect Roubini's intelligence and give him credit for luckily forecasting the collapse of the US real estate market... he is no authority on what the future holds and he should stop spreading fear couched in all sorts of "ifs and or buts..." he is sounding more like a politician than true market/economic commentator/analysts... having said my peace i think now i am going to visit my dentist for a root canal....

hell_boy08
hell_boy08 - Friday June 19, 2009 10:35AM EDT

Roubini probably might have missed the rally and wants to get in. So he wants everyone to sell their stock so he can get it too.

JAYANTILAL
JAYANTILAL - Friday June 19, 2009 10:36AM EDT

WE ALL ARE GOING TO LIVE ON SOMEBODY ELSES MONEY (CHINA). CHINA IS STUCK WITH US LIKE BAD MARRAGE TILL THEY FIND ANOTHER MARKET AS OURS OR BIGGER.AS FAR AS THE MARKET I WOULD INVEST IN CHINA BRAZIL AND INDIA. HAVE A WONDERFUL DAY UNLESS SOMETHING ELSE IS PLANNED

Rob
Rob - Friday June 19, 2009 10:36AM EDT

Actually, his predictions for the past 12 months haven't been bad. He said Dow would test 8000 when nobody else did, then when it got bad last fall he said it would test 7000. Pretty accurate. Last time the stock market was around this point, six months back, he said it wouldn't last and it didn't. His points my be unoriginal, but they clearly are not universally accepted or the Dow wouldn't be where it is. Let's see in three months whether he was right or not, i.e. whether the stock market gives back most but not all of its gains since March and whether the economy has stopped falling but isn't bouncing either.

Yahoo! Finance User
Yahoo! Finance User - Friday June 19, 2009 10:38AM EDT

Tech Ticket = Short the market since March! These are the same crooks telling their readers to hide out in bomb shelters in March only to see the market rebound some 30%!!!! You have got to be kidding me! who would still listen to these two, Roubini is a doom and gloom dangerous individual! Its one thing to be bearish its quite another thing to try and scare people, if consumers and investors fear the worst is yet to come, then it will! Yahoo and Tech ticker crook are scum of the earth!

MGA_1
MGA_1 - Friday June 19, 2009 10:38AM EDT

Umm.. he's pretty accurate, but I think overly optimistic about the economy

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