Nouriel Roubini was recently on CNBC (the video is provided below) discussing his views on the economy, and clarifying his recent comments last week that were interpreted as being more positive than earlier in the year. Some comments/observations from the interview include the following:
- Roubini still believes the recession will last 24 months, causing it to be over by the end of this year.
- The recovery will be weak, sub-par, and below trend, with 1% growth for a few years.
- The "recovery" will feel like a recession, even if growth is positive.
- The unemployment rate will peak around 11% next year.
- Including partial employed/unemployed workers, the unemployment rate is over 16%.
- We have seen the worst, given that the free-fall in the economy is over.
- Nonetheless, even though we will not have an "L" shaped depression, we will also not have a "V" shaped recovery, and he has worries of a "W" shaped double dip recession.
- The slow and lower growth are being driven in-part by current debt and spending levels.
- There is a thin line as to when it is best to exit current monetary policy. This also adds risk.
- A second stimulus bill is needed by the end of the year (we need to wait until later in the year to let the current stimulus start working).
- The second stimulus should include more shovel-ready infrastructure projects.
- If the second stimulus is too small, it will not be effective. If it is too large, the bond market will panic. He believes it should be around $200 billion.
- He feels that the U.S. will be the first advanced economy to exit the recession. While China and India are seeing growth already, it will be weak until the G3 recover and start helping to drive their economies.
- Equities, commodities, and credit markets have gone up too far, too fast.
- There is possible downside surprise regarding marcoeconomic numbers, earnings, credit shocks.
- The risk in the market is still on the downside. Investors should continue to stay away from risky assets.
- The market will not test the lows of March (the levels of which were pricing in depression), but could see a sell-off below current levels and the March lows if his forecast of downward surprises in economic data come true (which he still expects to happen).
Source: CNBC Video