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Other than telling us how smart they are, I am not sure what economists like
“Dr. Doom” Nouriel Roubini accomplish with repeated warnings that, ultimately, amount to little more than self-aggrandizing and incessant self-promotion. Roubini’s continued calls for Armageddon provide as much utility as a Southern California traffic report. The 405 is jammed and so is every nearby alternate route, so just stay where you are. Even meteorologists offer more useful information. There’s a heat wave — seek shade, drink plenty of water. Or it’s going to rain, grab an umbrella as you head out the door.
So says Rocco Pendola (www.thestreet.com) in his introduction to an article* originally entitled “Doctor Doom’s Crash Tweets Make Investors Sick” which is provided to you below, in totally unedited form, by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds).
Pendola’s post continues as follows, and I quote:
“Over the weekend, via his Twitter feed, Roubini provided an update we never asked for on his latest “perfect storm” prediction:
@Nouriel 2013 perfect storm scenario I wrote on months ago is unfolding: EZ crisis, US stall speed, China hard landing, EM stall, MidEast time bomb
Really? I was born in 1975. From my perch, the Middle East has been a time bomb for at least 37 years. Every once in a while, like everything else in the world, it explodes.
Some people I see on the beach walk around high all day. Some economists argue that the sky is always falling or about to fall. The rest of us find a little buzz as well as our doom and gloom in moderation.
In other words, we seek ways to live and live well, rather than let some self-promoting Econ professor scare the crap out of us on regular basis so he can continue to get paid and paid well. Roubini sure as heck will not suffer if his dire predictions come true. He’s insulated from pretty much any and all global financial carnage.
With his Tweet, Roubini managed to get his “Global Perfect Storm” blog post back on the front page. Many major media outlets ran with the story. “Roubini Says Roubini’s Prediction of Global Economic Calamity on Track”. For some reason, outlets that cater to investors cannot get enough of Roubini.
In his blog entry, Roubini tells us “equity markets are falling everywhere.” That’s a nice, broad statement to make. I guess that’s why he teaches “macro” economics.
I would argue that equity markets, particularly in the U.S. and Canada, are volatile, not necessarily falling. It’s all about your historical and forward-looking time frames and, even more so, the stocks you pick.
Take Note:
Even if Roubini is correct, if this hellish confluence leads to a train wreck that’s far worse than what we saw in 2008, what should citizens, specifically investors, do?
Do you build a bunker? Do you buy a gun? Do you sell all of your belongings and put the proceeds behind some drywall? Should investors go to all cash positions? If so, can we keep that money in the bank or will they go down with the FDIC?
I think Roubini wants us to worry and get real anxious so we wait for his next Tweet, attend his next speech, watch his next interview or blow whatever savings we have left to send our kids to NYU.
The doomsayers would do actual service to society, namely investors, if they made more of a show of practical solutions for the typical household in an uncertain world economy than they do their calls of “Look at me, I’m about to be right!”
I learn quite a bit by reading thinkers like Roubini. There’s no question that he’s sharp and provides information worthy of consideration and reflection. But he does nothing to have an impact on my life one way or the other. And you should not let him have an impact on yours. He’s akin to the so-called conservatives on Fox News and the alleged liberals on MSNBC brainwashing the minions into believing that a political party controls your destiny.
You control your own destiny, particularly if you’re an investor, regardless of what Roubini says or thinks will happen.
Investors should never make things more complicated than they need to be.
Consider how long you have until you need your money and devise a plan that makes sense leading up to the time you’ll start cashing out.
The market crashed in 2008. Since 2009, the SPDR S&P 500 Index ETF(SPY) has returned roughly 45%. If you bought SPY all the way down to $68.92 on March 2, 2009, you’re better off for it today. It closed Monday’s session at $135.20.
The story of the century is not the financial crisis. The greatest period of world-changing technological innovation we have seen for generations deserves headlines. Not the crash of 2008. Not the pessimistic musings of a well-off economist who travels the globe regurgitating the same speech.
By no means do I take a “stick your head in the sand” mentality. Absolutely proceed with caution. A crash triggered by global economic strife could very well be imminent. If you’ve lived long enough, you realize that some level of carnage always lurks around the corner.
What irks me about Roubini is that he serves nobody but himself with his predictions. There will be a crash, just as there will be large earthquakes in California at some point. Who really cares if his version of events leading up it, whenever it goes down, plays out or if it’s somebody else’s brainstorm?
I proceed with two plans, Plan A and Plan B. Plan A means I consistently purchase the equities I like no matter what’s going on the world. Plan B means I increase that buying as much as I possibly can when corrections and crashes play themselves out. If you implemented Plan B throughout the end of 2008 and beginning of 2009, you’ve done well.
Not only is SPY up since 2009, so is the PowerShares NASDAQ 100 Index ETF(QQQ) by a whopping 106%.
If you picked the right stocks, as usual, you’ve done well. Apple(AAPL) is up about 576% since 2009. Even less-publicized names such as Intel(INTC) have performed remarkably well, up 72% over the same period.
Of course, if you picked the wrong stocks on the 2008 collapse, you barely broke even or you got hurt. Cisco Systems(CSCO) is down about 2% since 2008. Hewlett-Packard(HPQ) shed about 47% of its value.
That’s the sort of thing investors should concern themselves with: stock- and sector-specific vision and analysis, not macroeconomic prognostications.
Simply stated, macro-economists are useless to investors. As such, I really wish outlets that help inform investors would focus less on them.
Give me something I can use. Consider history. Think about all of the crises you, your parents and your grandparents lived through.
Have a Plan A. Have a Plan B. Stick to them. If Roubini is right, 2013 might end up worse than 2008, which could make the recovery that much sweeter.”
*http://www.realclearmarkets.com/articles/2012/07/10/doctor_dooms_crash_tweets_make_investors_sick_99757.html
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