Fortune's scariest predictors side-by-side

Wednesday, December 10, 2008

Read excerpts of what the eight scariest predictors have to say in Fortune Magazine (most scary to least scary is the order that I interpret):

1. Nouriel Roubini : For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too.”

2. Bill Gross: “The outcome essentially depends on the ability of the Obama administration to rejuvenate capitalism's "animal spirits" by substituting the benevolent fist of government for the now invisible hand of Adam Smith. Federal spending and guarantees in the trillions of dollars will be required to fill the gap created by the deleveraging of private balance sheets.”

3. Robert Shiller: “That P/E ratio got up to 44 in the year 2000, which was a record high. Recently it was down to less than 13, which is below the average of around 15. But after the stock market crash of 1929, the price/earnings ratio got down to about six, which is less than half of where it is now. So that's the worry. Some people who are so inclined might go more into the market here because there's a real chance it will go up a lot. But that's very risky. It[P/E ratio] could easily fall by half again.”

4. Sheila Bair: We need to return to the culture of thrift that my mother and her generation learned the hard way through years of hardship and deprivation. Those are lessons learned that the current crisis is teaching us again.”

5. And then Jim Rogers differs a bit from Roubini: Virtually the only asset class I know where the fundamentals are not impaired - in fact, where they are actually improving - is commodities. Farmers cannot get a loan to buy fertilizer right now. Nobody's going to get a loan to open a zinc or a lead mine. Meanwhile, every day the supply of commodities shrinks more and more. Nobody can invest in productive capacity, even if he wants to.”

6. And John Train also opposes from Roubini: “Investment opportunity is the difference between the reality and the perception. And since many equities are priced as though a depression might be on the way, many of them are attractively priced.”

7. Meredith Whitney: “There will be banks getting smaller, banks going away, and banks consolidating. At the same time, though, I think you'll see more new banks created. We've already seen more applications. And it's a great idea: You start with a clean balance sheet and make loans today with today's information.”

8. And Wilbur Ross seems optimistic that Bill Gross’ best outcome will prevail: “I'm optimistic about the choices that President-elect Obama has made for his economic team, and I've got some suggestions for what they should do. Hopefully the new Treasury Secretary, Tim Geithner, will incentivize lenders to restructure mortgages by guaranteeing half of the reduced principal amount and sharing among the government, homeowners, and lenders any subsequent appreciation. Lenders would gain liquidity by selling the Treasury-guaranteed portion of the loan, and government would receive annual insurance premiums to further protect it against loss. That would cost taxpayers nothing now and probably little or nothing in the future.”

RW: The fact that they don't agree tells me that there are still a lot of question marks out there. The U.S. economic outcome is still quite uncertain.

I can see why Nouriel Roubini is the top scary predictor…it’s all about cash assets – saving, bonds, etc. – no stocks, no commodities, no nothing. And Bill Gross is a very distant second, who actually finds value in corporate bonds.

Rebecca Wilder


Alice Cook December 10, 2008 at 1:54 PM  

"the benevolent fist of government"


Janie December 10, 2008 at 5:54 PM  

Adam Smith arise!!
Some traders have been in all cash since at least 1/08 and only venture into the markets buying EFTs a few shares at a time. Hold for a minute or a few days and then get out depending. Of course, end of the year/tax trading is upon us, too. Lovely.

Smack MacDougal December 11, 2008 at 4:52 PM  

It's hard to believe that Nouriel Roubini can earn a living as an economist until you discover he's in Academe.

Look at the many mistakes he says

Roubini foolery: "the stock market"

Which one? the market for IBM? for XOM? for DIS?

He should say, the Stock Exchanges, which are the casinos where secondary gambling games get played.

Roubini foolery: "You should preserve capital."

Talk about jargon parroting.

Capital is what a man buys when he rents his cash to another. Capital, from Old French, in turn from Latin means "head", implying to get at the head of the line to be paid from earnings.

Does Roubini mean hold onto cash, hold onto commercial paper, bonds or what?

As you can see, guys like Roubini lack the wit to tell others went to enter into markets or gambling games at exchanges because they lack fundamental knowing about relation.

One key indicator of relation is the ratio of personal disposable income for 18 to 49 year olds (leading) relative to consumer credit outstanding (lagging).

If spending income is growing and there's room for credit, the potential to sell more stuff increases.

That signals a time to bet long on stock markets at Exchange Casinos like NYSE, NASDAQ.

Anonymous December 12, 2008 at 9:30 PM  

Rogers has become a charicaturte of a race track tout. At the highs of the CRB index he was saying how these new instruments (commodity ETFs) would have tons of money flood into them and create bull markets. He has been crushed on his commodity play.

Anyone know when he was rigght last? He decided to move to Singapore. I guess when you partner up with Soros you can wreck a currency from anywahere. I'm glad to see him become a laughing stock.

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