Nouriel Roubini, "I think we are in trouble"

By on January 30, 2010

Simon Kennedy of Bloomberg reports the latest views of Nouriel Roubini on the latest GDP report and real state of the economy.

Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.

“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”

Roubini said while the world’s largest economy won’t relapse into recession, unemployment will rise from the current 10 percent, posing social and political challenges.

“It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said.

SMA Comment: The reaction of the stock market to the GDP report has to be discouraging to anyone who increased their allocation to equities recently. The consensus of the “experts” at the beginning of the year was overwhelmingly bullish, and at this point wrong, as the market put in a dismal performance for January (Vanguard’s Total World ETF (VT) was down over 4.5%).

Source: Bloomberg
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