Video Interview: Roubini – More pain, but not Armageddon

By Prieur du Plessis, on July 24th, 2008 posted in: Investment, Markets, Money

Nouriel Roubini, professor at New York University and chairman of RGE Monitor, is renowned for his bearish stance on the US economy and stock markets. Henry Blodget and Aaron Task have just conducted a three-part video interview on behalf of Yahoo Finance with Roubini on a variety of topical issues.

In Part 1 Roubini argues that the bear market is only half over, but that it is not Armageddon. He sees a “severe recession” that will last 12 to 18 months, but does not foresee the US sliding into a prolonged Japan-like economic malaise. Similarly, while a further 20% decline for the major US averages is not pretty, it will not be as bad as the bursting of the tech bubble or the Great Depression.

Click here or on the image below for Part 1 of the interview.

In Part 2 Roubini states that more than $1 trillion will be needed to solve the housing crisis.

“We have to find a solution where government intervention prevents a disorderly outcome” in the housing market that leads to a “systemic banking crisis,” Roubini says. The housing bill, which earmarks $300 billion to backstop mortgages after lenders agree to lower mortgage payments, is “a step in the right direction” but “doesn’t do enough,” he says, predicting the government will need to spend more than $1 trillion in total.

Roubini believes US house prices will ultimately fall by 30% from their peak – versus 18% to date according to the S&P Case-Shiller Index – “before bottoming out at some point in 2010”.

Click here for Part 2 of the interview.

In Part 3 Roubini says the US broker/dealer business model was “inherently unstable” and the four remaining major firms will not be independent in a few years. With US financial giants like JPMorgan (JPM), Citigroup (C) and Bank of America (BAC) dealing with internal issues, the most likely buyers are international financial firms or sovereign wealth funds, Roubini says.

Click here for Part 3 of the interview.

Source: Yahoo News, July 22, 2008.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)

Six Reasons Roubini is Wrong about the Recession (Wealth Daily, 10/15/11)

Roubini: Euro Contagion is Now Viral; Eurozone Breakup (Shocked Investor, 11/23/11)

Roubini: The Plane Is In Stall, Europe May Implode; Countries May Leave, Governments May Fall (Shocked Investor, 11/9/11)

Read more on Nouriel Roubini at Wikinvest

Frank Wordick

July 25, 2008 at 3:55 am

I could be wrong, but I think Roubini is out of his head believing the US government is going to spend $1 trillion to bail out the housing market. It is already massively in debt. It will do something, but will expect others to share the burden and it will also expect to recoup part of its contribution over time. In respect of major brokers and investment banks being sold to foreign governments en masse, guess again! Remember what happened when a certain pro-American foreign government tried to buy a Western US Port Authority? And remember what happened when Sovereign Wealth Funds bought into certain US financials last year? Think they will make the same mistake again? Government regulation, government regulation , government regulation…