CNBC Unaware of Financial Crisis
This video is making the rounds in the financial blogosphere. Nouriel Roubini and Nassim Taleb are interviewed by a CNBC news staff that seems to be lost in their own little world.
The Video
Taleb and Roubini are exceptionally smart financial theorists who are gaining a lot of press for “calling the crash”. Not only that, but they are still extremely bearish.
Unfortunately for them, while they try to explain the massive problems in the system, these jokers at CNBC keep asking them for stock tips.
Two solid points made by other blogs include:
“It’s ludicrous. Wall Street media – CNBC at least – doesn’t realize how bad this is yet. They’re stuck in a bubble where they think everything will go back to normal in a few months…” – TPM Reader
“This is a seminal piece of video. You have to see it. I’m not sure I’ve seen anything that captures – albeit unintentionally – the vast disconnect over what is happening in the US economy.” – Talking Point
(As you can see, CNBC is also unaware of embedded video technology…)
Roubini and Taleb Bears
I agree with these guys that the economy is still in a lot of trouble. I think the delevering has only begun and I believe that home prices, the core of our credit bubble, still have a long way to fall. However, I am frustrated by these guys 15 minutes of fame.
These guys have been calling for a crash for far too long. Taleb, for one, has been bearish for 15-20 years. While the market is definitely crashing, it is also about 500% higher than where he first started preaching his Black Swan theory.
Even a broken clock is right twice a day.
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I’m not quite sure what side of this you’re taking. But I agree broken clocks are right twice a day. To say the press doesn’t understand we’re in a crisis is stupid. It’s the press that has been making this worse by focusing on all the negatives, not what’s going right.
Andrew, respectfully, I have to disagree. The press has not made this worse at all. In my opinion they have yet to convey to the public how bad this credit crisis will really be.
Please tell me what is going right in the economy? Little if anything is going right in the economy. The press and goverment are 8-10 months behind what is really happening. The spigot has been shut off and further disaster looms.
I was seriously starting to wonder if the government had told Roubini to lay low for awhile, it was like Mid-November through most of January he was not saying much, even made somewhat of a positive statement on Bloomberg if I recall. However they must have lifted his moratorium for Davos.
I am in agreement with you on the fact that this economy will get worse before it gets better, I think the uncertainty in the Geithner’s plan on Tuesday is more than a slight indication of the trouble we are in. Absolutely nobody and I mean nobody can place a true value on any of these level III assets that the banks and hedge funds are holding, the only way they are moving is if the holder is feeling generous that day and allows a low bid to take it. However, I don’t sit on a trading desk nor do I trade illiquid credit/rv type securities, so you might know better than I.
Also it is shocking how little people in our Government actually know, how can we nationalize the banks, who will run them? Guys that got us into this mess won’t work for nothing and people in Government truly do not know wtf is going on. Ask Obama a year and half ago or even a year ago what mark-market is and I bet you get an; uh, er, uh. That goes for the rest of his cabinet as well. There is no easy way to get this shit off the books, it is going to take years, but it has to be done.
Obama and Geithner are beginning to see the real trouble our economy is in. Obama is using words like “disaster” in reference to the recession much more often now. And Geithner is stalling in order to make sure it it is done correctly. I agree with his decision to make sure the decisions are made carefully and accurately, but the problem is that there may be no right answer for what he is trying to put together. In the end, we will have a second stimulus package for another Trillion dollars within 18 months, I’m sure of it.
Conor – Obama is using these words because he’s trying to push through his stimulus package. He doesn’t want his first big piece of legislation to hit any more roadblocks. Bush used similar language when he tried to get TARP passed.
I think we all know it will get worse before it gets better. But it will get better. The only thing that will make it not get better for a long time is protectionism.
Yes, it will get better. But how long before that happens?
Everyone seems to think within the next 6-12 months. I am not a believer. I’m thinking more like 2-3 years, minumum.
You’re definitely not alone in guessing more than 12 months. check out this interview with Dalio: http://online.barrons.com/article/SB123396545910358867.html?page=sp
he basically says a lot of restructuring is necessary across the private sector (real estate, companies, etc.) to get lending and growth going again, and that will take a couple years.
@ Conor – I don’t think it’s 6-12 months before we start noticing an improvement. It may happen in the next 12 months, but we won’t notice it for longer than that.
@ Shiphouse…let me count the ways:
1. The government is pumping money into the economy at an unprecedented rate. It has made it clear that it will act this time (unlike before the great depression)
2. The dollar has rallied over 10% against other currencies
3. Oil is off over 50% from its highs
4. Unemployment rates are not high — they’re higher, but not too high
5. Earnings yields on the the stock market are very high
6. There’s a lot of cash on the sidelines, which eventually needs to be invested somewhere
7. Inflation is low
My problem with the media is how they’re trying to highlight pain. Like showing some mortgage broker that used to make 6 figures and is now looking for a $10 an hour job. This person never should have made 6 figures in the first place.
1) The Government is pumping money into the economy at an unprecedented rate. It has made it clear that it will act this time (unlike before the great depression).
The government has been pumping money into the system for the past six months and the credit markets are frozen. Where it is the concise action plan? How is the money they are spending going to create jobs? Infrastructure is one way to go, but get projects going now, not three years from now.
2) The dollar has rallied 10% against other currencies.
See your first point. This will not last; it is simply not sustainable if the government continues to inject a trillion dollars into the economy every six months.
3) Oil is off 50% from its highs
That is nice for Mr. and Mrs. Johnson who drive a SUV and a Mini-Van to work and don’t have to pay $60+ dollars to fill up anymore, but oh wait, they don’t have to drive to work anymore because they have been laid off. As the world economy has come to a screeching halt obviously the need for oil has come down, it won’t stay this way forever, oil will rise again. Not to mention it seems like any type of off-shore drilling/exploration projects in combination with alternative energy projects have been put on the back burner as well be it lack of demand or lack of funding/credit this will prove to be disastrous. We will see $75 Oil before we see $20 Oil.
4) Unemployment rates are not high – they are higher, but not too high?
Huh??… If you get laid off today tell me where you can go get a job, good luck if you work in the financial or legal sector. While main street America thinks that bankers and lawyers are scumbags these are the guys that buy stuff; cars, boats, tv’s, houses, vacations. Layoffs of mid to high wage workers are going to trickle down and result in many more layoffs. The guy working 85 hours a week that has a handy man come over to hang a picture or a TV because he doesn’t have the time doesn’t have that problem anymore, see ya handy man. Oh the maid and nanny can kiss their jobs good-bye too, and daycares? Why send your kid to daycare if both parents are home and unemployed.
5) Earnings yields on the stock market are very high?
Yes, for now. These yields are artificial, of course the yield is going to be high when a company’s stock has been beaten down 30-50% and they have not yet lowered their dividend. Company’s are cutting dividends left and right, yields will come down.
6) There’s a lot of cash on the sidelines, which eventually needs to be invested somewhere.
That was my thinking for a long time too, but I am not so sure anymore. There was allot of wealth destruction last year, there is allot of cash that has vanished. In addition, your large institutions and pensions who have invested in hedge funds and other investment vehicles now have allot of money tied up as it as their redemption requests have been gated, I think it is difficult to gauge how much cash is truly waiting to come off the sidelines.
7) Inflation is low
See your first point, inflation will not be low for long. I don’t think we will be buying bread with wheel barrels full of cash, but I don’t think it going to be pretty. You said it yourself the government said it is going to act, you are correct, they are going to inflate us out this problem. With that said points 2, 3, and 7 are all void.
Shiphouse – all of your points are valid counterpoints to the arguments. I can’t disagree that inflation will take off (which is why I’m buying inflation protected securities). And we’re in for a long, hard recession. There’s no doubt about that.
As for unemployment, it’s a natural cycle. Yes it hurts everyone. Perhaps I’m insulated being in Austin, Texas. Jobs are scarce, but I don’t personally know a single person that has been laid off. In the tech downturn earlier this decade I knew plenty of people laid off. But it’s just not hitting close to home now. Places like Detroit are in big trouble because they’ve never accepted fundamental change. Places like California are in trouble because they want everything but don’t want to pay for it.
One one more point, this defeatism is exactly the reason I’m an asset buyer right now. I’m being cautious, but the fact that everyone says the sky is falling means that assets are going cheap. They may go down more, but eventually will rebound.