Predictions of the “The Great Roubini”

Yesterday, I came across the September, 2009 issue of the CFA Institute’s Conference Proceedings Quarterly. In it, I re-read the text of Nouriel Roubini’s (aka “Dr. Doom’s”) predictions made at the CFA Institute Annual Conference on April 26th, 2009 concerning the global economy over the coming 18 months or so.

For an economist who made his reputation as the intellectual renegade who accurately predicted the collapse of the global economy, Roubini’s assessments for the year ahead were astonishingly off the mark.

1) Roubini’s projected economic growth rates in the U.S. in Q4 to be -2%.
Reality: Growth rates hit 5.6% in Q4 of 2009. Roubini was off by an eye-popping 7.6%.

2) Roubini’s projected economic growth for the U.S. in 2010 was 0.5%- above the IMF’s projection of 0%.

Reality: Today, the IMF’s predicted growth rate for the U.S. in 2010 stands at 3%.

3) Roubini dismissed the then “green shoots” of economic recovery in the global economy by stating: “The United States is not at the end of a severe recession.”

Reality: Robert Gordon of Northwestern who sits on the National Bureau of Economic Research – the official body that is responsible for setting an end date to the recession –  stated last week that indicators of industrial production, manufacturing and other economic variables pointed to last June as the trough of the contraction- just five weeks after Roubini gave his speech in Orlando.

4) Speaking after a 25% rally since the March 9th lows, Roubini wrote: “Worse than expected macro news, worse than expected earnings news, worse than expected financial shocks indicate we have not yet reached the bottom of the economic contraction, which means that the current rally is indeed a bear market rally.”

Reality: The S&P 500 has rallied from a low of 666 to over 1200 in the last 14 months.

At times like this, I keep returning to George Soros’ throw away comment in an interview with John Train many years ago.

“My system doesn’t work by making accurate predictions. It works by recognizing when I am wrong.”

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