Breakfast with Nouriel Roubini Post author By Philip Lane Post date May 7, 2010 The FT profiles ‘Dr Realist’ – you can read it here. Categories In Banking Crisis, Economics Tags Nouriel Roubini 20 Comments on Breakfast with Nouriel Roubini ← McCarthy on Greece and Ireland → European Stabilisation Mechanism Announced 20 replies on “Breakfast with Nouriel Roubini” @Philip Lane Very interesting article. I wonder what this means for us: “Having spent 10 years studying emerging markets, I know that you have patterns repeated over and over again,” he explains. @Philip He warned among other things about “trillions of dollars of mortgage-backed securities unravelling worldwide ” Nowadays it seems like cdos and other dodgy derivatives, are like the weather, which as Mark Twain pointed out – everybody talks about but nobody ever does anything about. And this comment “These days he is “centrist” on economic issues, since he believes that governments need to spend money in a crisis to support the system, in line with Keynesian economic ideals – but he believes that when a crisis is over, they should revert to free-market approaches, reflecting the so-called “Austrian school” of economics. “ Isn’t that a bit like St Augustines “give me chastity but don’t give it to me yet!” @Aidan McGrath maybe it is but isn’t it rational to not be stuck to a particular ideology and change course as your circumstances change, makes sense as long as it is not a flip flop every few months thereby bringing a lot of uncertainty. It reminds me of how people can be either Fianna Fail or Fine Gael no in between no matter what either of them do…..would love to give them the blind coke test and see whose policies they actually agree with more. Same with economics why not take the best from both worlds, the interests of the country should be at heart, not trenchent economic standpoints. http://www.bloomberg.com/apps/news?pid=20601087&sid=aNWWf33p7_Ro&pos=7 RBA warns …….. On NR When a system breaks down it must be fixed. Part of that process is to show confidence. Therefore the GFF cannot remain ….. The Austrian approach would have saved Ireland, at the expense of say 20% or so of the growth to 2005. Banks are restricted in the Austrian system, as they inevitably become a drain or nationalized. I wonder what he thought of that 1,000 point drop on the Dow on Thursday? Lots and lots of conspiracy theories going around in the good old USofA last night, ranging from big banks giving politicians a warning – through a software test that went wrong (done in production environment instead of test environment) – to attempted cyber-terrorism. Anybody know for sure why/how it happened? Last I heard, everyone was denying ‘fat finger’ problems on their patch. “governments appear to lack the stomach to tackle spiralling government debt” And so a new bubble inflates (€7bn thus far this year and that excludes €2.7bn to INBS and €8.3bn to Anglo). And what government wants to threaten growth prospects by either increasing taxes or cutting govt expenditure, particularly in a recession? And anyway, everyone else is doing it, even the US and Germany, so why shouldn’t Ireland? The fact that we have next-to-no control over money supply or interest rates doesn’t seem to worry us. Despite Roubini being on the money with some of his 2006 predictions – though wasn’t he wrong (thus far at least) on the oil shock? – what exactly is he saying in respect of his prognosis for sovereign debt ? Or for answers to that, do you need employ his consultancy? Or buy his book? An interview Lite, in my opinion and about as filling as granola with yoghurt. Just looking for some facts on it. Here’s the NASDAQ statement. http://ir.nasdaq.com/releasedetail.cfm?ReleaseID=467653&loc=interstitialskip Couldn’t spot a release on the NYSE but didn’t dig deep – SEC may have made one I guess. Is it true that there were 9 stocks in particular that are of interest to the investigation(s) and is it true that one of them, Accenture, dropped from around $42 to $0.01 ?? P&G and 3M were big fallers too. Anyone know for sure? I don’t have access to detailed enough info to find out. The timing looks interesting. My understanding is that for a trading halt to trigger, the Dow must fall at least 10%. If it happens before 1400hrs (ET), they halt trading for an hour – it’s a 30-minute halt if the drop is between 1400-1430hrs and after 1430hrs there is no halt. This all happened a fraction after 1430hrs and I think the actual drop was a fraction under 10%. Some coincidence. It probably won’t happen again? Will it? @Joseph Max Keiser believes the “spike” was caused by market manipulation using computerized high frequency trading. the same technology used in “front running” trades to make no risk profits. High frequency trades comprise 70% of the activity at least on NYSE and Nasdaq according to Keiser. Ellen Brown has a comment here. It’s a bit conspiratorial – but who knows these days. It is a better theory as “fat finger” which seems highly unlikely to me. http://www.huffingtonpost.com/ellen-brown/stock-market-collapse-mor_b_568164.html @Aidan McGrath – yes, I have seen other references to GS ‘demonstrating what they could do to the markets’ if the congressional heat isn’t taken off. Even if true, we will never find any evidence and I doubt the regulatory authorities will either. Did HFT play a part in it? Probably – but I suspect whoever initiated this (manipulation has to be a strong possibility) knew exactly what the HFT platforms would do to help the ‘chain reaction’ and achieve the desired outcome. You know the old saying: “follow the money.” p.s. Citi officially quashed the fat finger rumour very quickly on Thursday but many papers ran with that because most journalists are too lazy to look beyond whatever story on the wires takes least time to write up and sounds plausible. @myself – “You know the old saying: “follow the money.”” Of course, if the motivation wasn’t money….. that’s even more worrying. Joseph I’ve been waiting for a believable cover story to appear before commenting. But there hasn’t been one. That is by far the more interesting event! The dog that did not bark. It will recur. I believe it was a test of the “system”. There is a the PPT designed to intervene when irregularities happen. They move within seconds. But they did not! GS was an important part of the PPT. But not the only part. Who is warning whom?????? Bob Chapman supplies the below quote. I note he does NOT discuss the plunge either! VERY odd! “Americans seeking reward money are turning in neighbors, clients and employers they suspect of cheating on taxes to the IRS at a rate of nearly eight per day, the director of the agency’s whistleblower program said. Steve Whitlock, the director, told an audience of about 200 lawyers, investigators and government officials at a Miami Beach conference on offshore banking that his office receives 40 to 50 tips per month alleging tax liability in excess of $2 million. Americans submit another 200 per month alleging smaller violations, he said. Whitlock said submissions have surged since the enactment in 2006 of a law that requires the IRS to pay awards of between 15% and 30% in cases where more than $2 million is collected. Prior to the law, both the decision on whether to make an award and the amount of payment were discretionary.” This reuters report seems to link some evidence from a NYSE employee that is was triggered by a particular (maybe fat finger) trade with exacerbation by the HFT and a lot of “stop loss” trades converting to market trades as the stocks dropped in value. There probably is an element of complexity – but HFT is on the radar. http://www.reuters.com/article/idUSN0624451020100507 From Mish’s (Mike Shedlock) global economic analysis: “45 minutes before US equities went into a waterfall dive, the Yen went into a skyrocket rally vs. the US dollar. The Yen and the stock market magically stabilized at exactly the same time, right at the equity bottom.” http://globaleconomicanalysis.blogspot.com/2010/05/equity-plunge-yen-connection.html Can’t see the connection myself. But clearly they are ….! Mish does not wish to do more than to note the two movements and the timing. Clearly a message! Rational markets anyone? Stay tuned….. Roubini endorses the Austrian school in that article. @Ciaran Yes sort of – the discussion got sidetracked – he seems to be endorsing the Austrian school but only after first saving the system via the Keynesian approach. – a la carte approach or St Augustines approach to chastity ( which he probably also shares) Indeed, that (semi) endorsement is surely a ringing repudiation of the Fed, pre-crisis anyway. Comments are closed.