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 LEH,MS,MER,JPM,BAC,C">here for Part 3 of the interview.
Source: Yahoo News, July 22, 2008.
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