Market bear Roubini sticks to forecasts...Market bear Roubini sticks to dour forecasts
By Jennifer Kwan
TORONTO (Reuters) - There's still bad newsahead for the U.S. economy and the bear market for stocks is not overyet, according to a prominent economist who foretold much of thecurrent turmoil.
Nouriel Roubini, a professor at New YorkUniversity's Stern School of Business and chairman of economic researchfirm RGE Monitor, said on Tuesday that he expected more dourmacroeconomic data and problems in the banking and housing sectors, aswell as pressures on consumers.
Big stimulus packages will eventually slow the rate at which economies contract, but that will take time, he added.
"Therewill be a light at the end of the tunnel somewhere down the line, laterrather than sooner," he said at a Toronto news conference, which tookplace ahead of a Sprott Asset Management event entitled "A Night withthe Bears."
Roubini, who made a name for himself by soundingearly warning signs about housing bubbles and credit crises, earliertold Canada's BNN television that he still believed the recent marketupturn represented a bear market rally, and not a change in sentiment.
"Macronews, earnings news and financial shocks are going to be worse thanexpected and that's why I believe this is still a bear market rally,"he told BNN.
Markets logged four straight weeks of gains untilthis week on optimism that unprecedented interest rate cuts andbillions of dollars of stimulus will eventually fight off the worstglobal downturn since World War Two, and on upbeat comments from U.S.banks on their performance so far in 2009.
The fact that someindicators did not match pessimistic expectations was also a positivefactor, as were last week's pledges by world leaders to do more tofight the crisis.
But Roubini played down the rally.
"I ammore a realist than a pessimist. I'll be the first one to call for thebottom of this economic contraction, recovery of the market when I seea sustained economic and therefore financial recovery," he said.
MeredithWhitney, chief executive of Meredith Whitney Advisory Group, saidstabilization in the banking sector would hold the key to a turnaround.Whitney, one of Wall Street's most bearish bank analysts, has forecastanother rough year for banks as they shed assets to raise capital.
"It'snot just the banks that have to stabilize their own lending it's thatthey have to make up for the void of the shadow banking industry thathas been shut down since the summer of 2007. We've got a ways to go,"she said.
Canadian banks have largely shrugged off the severe banking troubles south of the border.
But commodity prices have fallen sharply from the peak of last summer and the Canadian auto sector is hurting badly.
"Thefundamentals of the (Canadian) economy are robust, but when the U.S.sneezes the rest of the world catches a cold," said Roubini. "This timearound the U.S. is not just sneezing, it's a severe case of pneumoniaand the biggest trading partner next door is Canada."
SprottAsset Management's Eric Sprott said his pessimistic view on the economyis based on the "overleveraging of the banking system."
"When welook at the systemic financial system we're in -- and it affects everycountry in the world including Canada -- I think staying bearish is theroute to go," he told BNN.