Nouriel Roubini: The Hottest Economist in the World Today 9 comments
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Saturday Night Live recently had a strange skit about a talk show hosted by the Bee Gees. Honestly, it wasn’t terribly funny but what struck me was that one of the guests was supposed to be Nouriel Roubini (I think it was Fred Armisen).
The Roubini character was the straight man in the skit, but it’s telling that he’s reached the point where he can be a typical “important person” you’d see on a talk show, even a parody of one.
Roubini is probably the hottest economist in the world right now. More tellingly, we live in a time where there is a hottest economist in the world.
Roubini just got another honor, a profile in the New Republic. It’s a pretty good profile. One complaint I have is that these profiles often try a tired formula—that the person’s ideas are an outgrowth of who they are. The New York Times tried that recently with Freeman Dyson and it didn’t work.
The truth is that you often can’t see a connection between important thinkers and their personalities or backgrounds. This sort of game can easily descend in psycho-babble. It will read something like, “His ideas are outside the mainstream and in high school, he was...wait for it...an outsider. Hello, Theme!!”
There’s even a theory that the stalemate in economics between investment (the male) and savings (the female) was finally broken by Keynes, the homosexual. That’s totally loopy to me but hey, it's not my idea.
I’ve never met Roubini, but I would think the interesting angle to take is that he seems to be the opposite of his ideas—the playboy professor with the buzz kill forecasts.
Unquestionably, Roubini is an important thinker. However, I was glad to see the profile mention that Roubini hasn’t been as prescient as many people believe:
Anirvan Banerji, an economist with the Economic Cycle Research Institute, has been particularly dismissive of Roubini's forecasting abilities: "The average time between recessions is about five years in the postwar period," he says. "So, if you forecast a recession one year and it doesn't happen, and you repeat your forecast year after year ... at some point the recession will arrive."
And Roubini has undeniably overshot. In 2004, he predicted that the oncoming recession would precipitate the crash of the dollar. The crisis has mainly buoyed it. On September 1, 2005, three days after Hurricane Katrina made landfall, Roubini told Reuters that economic disaster was imminent. What followed instead was a bump in financial activity that forestalled the recession for more than two years.
If you’re waiting for Jon Stewart to do a sanctimonious takedown of Roubini, I wouldn’t hold your breath. Though I nearly choked when the profile mentioned Nassim Taleb, “who also predicted a catastrophe in his book The Black Swan.” The old adage is true: It's not what books say that's important, it's what people assume they say that's important.
I’m glad to see Roubini get the attention, fame and fortune he deserves. But I have to add we shouldn’t judge economists by how accurate their macro forecasts are. That’s a losing game. Instead, we should focus on the power of their ideas to explain the economy, and see the connections that they see.
If you want to be a prognosticator, then go on the record with specific advice. If not, then you should try to explain the economy as clearly as you can.
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This article has 9 comments:
2. Roubini has been far more accurate than most other economists. He is still predicting no recovery in '09. I do tend to agree with him. Rather than dissing him, lets wait for the results to come out only 7/8 months left in the year.
And well, three months later the cat's still alive - I think that perhaps if the S&P 500 doesn't go down lower than 660 by July (the normal definition of a dead-cat-bounce is that the market goes down lower than the "point of impact"), that he was probably mistaken on that.
But that's the thing when you get on the big stage, it's so easy to talk about stuff you are not qualified to talk about - and Roubini's reputation was built on economics, not markets.
But Hey - maybe it will turn out he was right and the S&P will go down to 450?
Leaving that aside - even if he was early in his prediction he got the fundamental reasons right, and if people had listened to him in 2004 instead of writing him of as a crank (then), perhaps all this would not have happened.
"As if we did not have enough problems, banks are now more vulnerable to the Black Swan and the ludic fallacy than ever before with "scientists" among their staff taking care of exposures. ... Likewise, the government-sponsored institution Fanny Mae, when I look at their risk, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events "unlikely."
Show me an economist who was bullish for most of the 1990s, took profits or got out near the top in 1999 or 2000, got back in or added shares in late 2002 or early 2003, then took profits or got out again in 2007 or early 2008 then got bullish in Nov 2008 or early this year when the market was lower... and I'll be all ears.
For predicting the business cycle, ECRI has been hard to beat.
ECRI Calls it "A Recession of Choice"
kirklindstrom.blogspot...
A RECESSION OF CHOICE: A Special Report
By ECONOMIC CYCLE RESEARCH INSTITUTE
March 28, 2008
But a wise investor stays cautious and suspicious and understands that where great rewards have been gained, risk is greatest.
In every case of an overbought market that crashed in a serious way (even 1929 and 1987) a simple 50 day moving average would have warned of the change in market direction in time to get out before the crash. The key is not ignoring warning signs by avoiding a pollyannaish view of the market in which you are investing.
> ECRI Calls it "A Recession of Choice"
> kirklindstrom.blogspot...
>
Everyone is wrong at times. ECRI says this:
"Make no mistake – the opportunity was there for prompt action in terms of both fiscal and monetary policy to avert this recession. At that juncture, prompt stimulus to boost consumer spending could have made a decisive difference"
Yes, we could have seen and even bigger crash!
This is Greenspanian thinking that would have blown up the bubble even farther, though I don't think that would have worked again, given the structural problems with our economy...that even ECRI doesn't seem to understand.
> Well he said on 14th March that this rally was a "Dead-cat-bounce-sucke...
> was a pretty clear prediction.
>
> And well, three months later the cat's still alive
The value in Roubini is his precise and clear data.
...which is precisely why this statement is misleading: If the rally has topped as it appears to have, you have ascribed an extra 1/2 month to it.
Roubini certainly didn't predict that the rally would only last a week and so in this you have ascribed to Roubini a prediction he did not make. He simply said it would be a "sucker's rally" and anyone who knows about such rallies knows the bigger they are and the faster they ascend the more suckers jump on towards the top.
A clear example was how people who thought $100 oil ridiculous bought in as it approached $150 for fear of missing out on the gains...Ouch!
He is one of my most valued sources which I refer to in formulating my own macro view on things.