wpe50.jpg (1913 bytes)     TigerSoft News Service    11/1/2008      www.tigersoft.com     More information later today.
                                                                            Updated 11/11/2008
               NYU Professor Nouriel Roubini 
                "Dr. Doom" or Economic Cassandra

                                               On 11/11/2008 Roubini Warned the Stock Market
                                                     Will Like Fall Another 25%-30%.

           This Man Predicted The Collapse in 2006                                      wpe12A.jpg (56142 bytes)                                                      

by William Schmidt, Ph.D.  Author of TigerSoft
wpe4F.jpg (33251 bytes)  

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            NYU Professor Nouriel Roubini 
                "Dr. Doom" or Economic Cassandra

by William Schmidt, Ph.D. 

                                                   See Riubni's daily comments  RGE Monitor.

This is clearly the worst financial crisis that the US and other advanced economies
                   have experienced since the Great Depression... Six months from now, everything we've done to
                   backstop the banks is going to be undone by a collapse in aggregate demand. It's going to imply
                   credit losses, nonperforming loans, delinquencies, mortgage defaults, foreclosures and defaults
                   by corporations
"   A second stimulus package of $400 billionis needed immediately.. "That's
going to be the only way we're going to make sure that this recession will be shorter and more
."   (This is from his  testimony Congress on October 31st. )  He predicted a sharp drop in
                   private sector jobs and spending amounting to $450 in 2009 from the weak 2008 numbers. 
                   A new fiscal stimulus between $300 billion and $400 billion must not wait until the new
                   Congress.   The bailout of the banks is not enough by a mile.

                                        "This fiscal stimulus should be voted on and spent as soon as possible as
                                           delay will make the economic contraction even more severe. A stimulus package
                                            legislated only February or March of next year when the new Congress comes
                                            back will be too late as the contraction of private aggregate demand will be
                                            extremely sharp in the next few months. Such policy action should be legislated
                                            right away—in a "lame duck" session right after the election—to ensure that
                                            the actual spending is undertaken rapidly in the next few months.
http://www.usnews.com/blogs/the-home-front/2008/10/30/nouriel-roubini-to-congress-pass-stimulus-asap.html )

                                                    A Perfectly Terrible Prediction in 2006

  Previously an obscure economist, his words are to be taken seriously, since he was one
                  of the few that foresaw what has come to pass.  He laid out a bearish scenario to the International
                  Monetary Fund in the fall of 2006 that has proved remarkably prescient.  His words were ominous
                  while most economists and network "talking heads" offered reassuring but very false hope.
                  His blog spoke of  "hard landing", "equity market slaighter",   "systemic financial meltdown"
                  and the  "coming US banking bust".  He correctly predicted that the Fed's easing of interest rates
                  would   not prevent a recession; there will be a consumer burnout, a global recession (no de-coupling)
                 and commodity  prices will fall sharply.  The US current account deficit is unsustainable.
                 Foreigners will at some point not finance US deficits.  (This prediction has not been born
                 out.   The Dollar is considered a refuge, as the world markets fall.) 
                 (Source - his entire speech to the IMF on September 7, 2006 is available on the internet: )

                                   Phase 1 - The burst of the housing bubble

                                   Phase 2 -  Rising mortgage defaults, homes prices start falling, sale volumes falls,
                                   housing starts and permits decline.

                                   Phase 3 - Home-builders’ bankruptcies, housing starts and permits crash,
                                   substantial layoffs in construction and real estate-related fields (mortgage brokers,
                                   mortgage lenders, etc.).

                                   Phase 4: substantial price declines in major metro areas, large rise in defaults of prime
                                   but low-equity mortgages. 
The stage we are now in, he thinks.

                                   Phase 5: Large-scale government intervention to help households going bankrupt.
                                   This is a political phenomenon, so the timing and nature of this cannot be reliably

                                  (See - http://www.rgemonitor.com/blog/roubini/242290/ )

                                                                                His Outlook Is Bleak

"I believe we're going to have two years of negative economic growth. The last two recessions
                       lasted only eight months each ... This time around this is going to be three times as long,
                      three times as deep.  This is going to be the worst recession the US has experienced since the
." He could have said 1930's!  But he predicted that hundreds of over-leveraged
                      hedge funds will be wiped out.  A global recession will make matters much worse. 
Bankruptcies and Plant Closings Rising in China  - Nov 1, 2008

                     As for the stock market, he predicts the worst lies ahead. 
There will not be a "V" bottom.  It
                      will be "L" shaped.  The recession will be long and drawn out, lasting 2 or 3 years. 
                      Offical unemployment will reach 9%.  Its now 6.1%.
  The government will need to double its
                      investments.   Private investors will be frightened away by more bank failures. The
                      total credit losses will be 2 or 3 times higher than the $1. trillion estimated by the IMF
                      (Intenrational Monetary Fund) on October 7.  (Source.)    If you can wait until 2012,
                      it will be descibed optimistially as a "U" bottom, if look out to 2012!  But, he assures us:
                      a 1930's, decade-long, Depression will be avoided.

Roubini's Prescriptions and Obama's "Economics Brain Trust"

                           His presecriptions are worth noting, as he has gained the ear of a powerful Obama
                       economics advisor, former Clinton Treasury Secretary and Harvard President,
                       Lawrence Summers.  This former exponent of deregulated banker claims:
I have in the last few months become more pessimistic than the consensus. Certainly,
                             Nouriel’s writings have been a contributor to that

                       1) An immediate stimulus package of $300-$400 Billion.
                       2) It should go to lower income consumers and include much higher unemployment benefits.
                       3) There should be a moratorium on main-home foreclosures.
                       4) A massive public works program is badly needed.
a massive direct government fiscal stimulus packages that includes public works,
                                    infrastructure spending, unemployment benefits, tax rebates to lower income households
                                    and provision of grants to strapped and crunched state and local government.
                       5) Banks
must be told to forego their dividends.    
                     (   Source. )

        "A Total Rep-Off", says Roubini

                          The Administration's top-down trillion dollar give-aways - bailing out banks by loaning
                       them billions and buying their "toxic" mortgages - are vastly too expensive and will not
                       prevent a deep recession.   He says the obvious: namely, that the Administration's
                       policies now are simply a huge subsidy for banks who have made greedily reckless decisions
                       and want their powerful Republican allies, Paulson and Bernanke, to rescue them.
Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System?
                                           No! It is Rather a Disgrace  and Rip-Off Benefitting only the Shareholders and Unsecured
                                           Creditors of Banks."

                                   Bad (toxic) debts should not have been purchased   Injections of public capital
                        could have more effectively and less expensively taken the form of the government
                        buying common shares.  Roubini reports this is the conclusion of an IMF study of
                        42 similar banking crises around the world.  What the US has done is follow the
                        example of Paraguay, Jamaica, Bolivia, Maylasia and Mexico. (Not a very
                        encouraging set of parallels.)

Thus the claim by the Fed and Treasury that spending $700 billion of public
                                       money is the best way to recapitalize banks has absolutely no factual basis or
                                       justification. This way of recapitalizing financial institutions is a total rip-off that
                                       will mostly benefit – at a huge expense for the US taxpayer - the common and
                                       preferred shareholders and even unsecured creditors of the banks. Even the late
                                       addition of some warrants that the government will get in exchange of this massive
                                       injection of public money is only a cosmetic fig leaf of dubious value as the form and
                                       size of such warrants is totally vague and fuzzy.

                                 Read the Roubini's entire condemnation here:


                                   Nouriel Roubini - Born Jewish in Iran, he went to an Italian univeristy and got a
                                   Harvard Ph.D. - He is now an associate professor of economics and international
                                    business at the Stern School of Business, New York University.

                                   He had been a faculty member of the economics department at Yale University (1988-95).
                                   Yale denied him tenure.  He was senior economist for international affairs at the
                                   White House Council of Economic Advisers (1998-99) and senior adviser to the
                                   undersecretary for international affairs and the director of the Office of Policy Development
                                   and Review at the US Treasury Department (1999-2000).

                                   He has been a long-time consultant to the International Monetary Fund .
                                   He is a fellow at the National Bureau of Economic Research and the Centre for Economic
                                   Policy Research. He is coauthor of Bailouts or Bail-Ins? Responding to Financial
                                   Crises in Emerging Economies
(Institute for International Economics, 2004) and
                                   Political Cycles: Theory and Evidence (MIT Press, 1997).

See Riubni's daily comments  RGE Monitor.

                                                   Financial Panics, Recessions and Depressions

                                            Severe financial panics do not always produce a recession.  The Bunker
                                    Hunt-Silver Bubble Collapse in early 1980 saw a "V" bottom and new
                                    highs were made only 4 months after the March 1980 low.   The Ocober 1987
                                    34% drop in the DJI owed to Greenspan's reckless tightening of interest rates
                                    and reckless program trading in derivatives and futures.  It did not lead
                                    to a recession and the DJI recovered all it lost in 23 months, by September 1989.
                                    Greenspan reversed course and provided all the liquidity that market makers

                                           But recklessly laissez-faire financial policies produced a Depression
                                    from 1930 that continued until the start of World War II.   The stock market shows
                                    what lies ahead, I would suggest  A second set of new lows by the DJI was a bad sign
                                    in October 1930.  By this thinking, it would be extremely bearish, and likely lead
                                    to a sustained recession, for the DJI to make a new set of lows below the
                                    lows of this year. 

                                           In addition, "normal" bear markets do last more than 24 months. 
                                    The 1973-1974 bear market was 23 months in duration.  That marks the
                                    outer boundaries, unless there is an exogenous event, as the 9/11/2001
                                    attack on the US and we are cursed again by having a recklessly aggressive
                                    war-initiating President. (The DJI peaked in January 2000 and under Bush
                                   there was no final bottom until March 2003, 39 months!)  

                                          The DJI in 1973-1974 fell from 1250 (January 1973 high)  to 580 (December 1974 low),
                                    about 44%.  A DJI decline of more than 44% must also be considered very bearish. 
                                    The DJI's 2007-2008 decline is 43%, so far.  The SP-500, howver, has fallen 46%
                                    from its highs to its lows.

                                         The 1929-1933 bearish experience stands out.  In October 1930, the DJI
                                    started making lows below ts lows of 1929.   That proved to be very bearish
                                    for stocks and the economy.  So, a DJI close much below 8000 would run
                                    that risk.  As a warning, that we are not out of the woods yet,  I must
                                    note that Paul Volcker has been designated by Obama to be his chief
                                    economic advisor.  Volcker  was associated with stratosphere-high interest
                                    rates and repeated stock market collapses, October 1978, October 1979,
                                    February 1980 and the 1981-1982 bear market.  He is credited with killing
                                    inflation, but the cost to investors in these years was very high.  One had
                                    be very agile.   Our Peerless Stock Market Timing did very well in this
                                    period.   Investors would, I think, be smart to employ it.  You can see how
                                    well it did by studying the charts of bear markets since 1915.
                                                  The Biggest U.S. Stock Market Declines: 1915-2008

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                                               Follow-up Comments
CNBC.com | 10 Nov 2008 | 09:48 AM ET

The economy will worsen in the coming months and caus e the market to fall another 20 to 25 percent in the Un ited States and abroad, said Nouriel Roubini, a New Yor k University business professor, on CNBC’s “Squawk Box” on Monday.

“There's going to be negative growth all the way to t he end of 2009," he said. “The surprises from now are g oing to be on the downside, for the economy, for earnin gs, for the financial system." (See video of Roubini, l eft.)

Job losses will accelerate in the next months, Roubin i said, and he expects a weak economic recovery in the short and mid-term.

“There's going to be a very slow recovery, because yo u have the financial system that's impaired; earnings a re not going to grow very fast, and therefore the stock market will go sideways for quite a while,” he said.

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