Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Nouriel Roubini Is Wrong About His Negative Forecast For The Market

Yesterday Nouriel Roubini appeared on CNBC, and he was in full-on Dr. Doom mode, talking about the ISM, the question marks surrounding the initial claims report, and generally being himself.

 

Everything he said was perfectly defensible, except one thing didn't quite sit right.

He said equities had more to fall, because the bad news wasn't priced in, which he knew because the consensus GDP for the first half of 2010 is still way too high in his opinion.

Sorry, it doesn't work like that.

It may be totally true that consensus GDP is still way too high, but it does not follow that the market is necessarily taking its cues from the consensus among sell-side macro analysts. In fact, it almost certainly doesn't.

It's impossible to say what the market has "priced in" and it may be that the market does indeed fall a lot. But to say that the economic outlook has to fall more, and thus stocks have to fall more is inaccurate.

What's more, the connection, even over a decade, between economic health (as measured by GDP) and stock market performance is tenuous (per yesterday's Chart Of The Day), which makes investing based on this kind of reasoning even more hazardous.

chart of the day, economy change by decade, sept 2010



Read more: http://www.businessinsider.com/nouriel-roubini-is-wrong-about-his-negative-forecast-for-the-market-2010-9#ixzz0z8KAf4LX


Disclosure: No Positions