Nouriel Roubini, the New York University professor who has emerged as one of the leading commentators during this financial crisis, continues to say frightening things. His latest comments, made on CNBC, give a good overview of why markets have been roiled lately by economic news.
“The worst is still ahead of us,” Mr. Roubini said, noting that the flow of macro-economic news over the next several weeks and months will be worse than expected. (You can see the full segment here, at Calculated Risk.)
He believes that there will be a sharp decline in earnings, and not just for financial firms. Emerging markets, he said, will fall into crisis. And hundreds of hedge funds will close down, putting additional pressure on the stock market as they liquidate their positions, and making cash the best possible investment.
Yes, recent government actions have probably averted the risk of a systemic financial meltdown. But the risk of an L-shaped recession, where two years of economic contractions are followed by a lengthy period of subpar growth, is realistic. And that doesn't just apply to the United States, but to all developed economies, including Canada.
As for commodities, including oil, expect another 20 per cent slide.
Mr. Roubini is not uplifting, but you can't look away.
