Nouriel Roubini: As his reputation grows, so does his list of critics

Nouriel Roubini is rarely identified these days without his foreboding nickname, “Dr. Doom” — a recognition of his dire and accurate warnings about the bubble swelling for nearly a decade within the U.S. housing market.

The professor of economics at New York University’s Stern School of Business hasn’t backed off even an inch from his apocalyptic stance, even though the economy seems to be recovering.

In early December, for example, he warned that the weak U.S. housing market could cost banks another $1 trillion in losses. He also warned of defaults by eurozone nations which could divide the European Union. And he recently called Japan’s economy an accident waiting to happen.

As his reputation as a doomsayer grows, so does the list of his critics; many of whom are starting to view Mr. Roubini as a grandstander intent on shocking the world.

“He tries to jar you with things, and I think he takes an extremist perspective,” said economist Michael Moebs, president of the economic research firm Moebs Services.

“I think he’s permanently negative, and once in a while, after a certain number of years, he will be right,” Mr. Moebs added.

Eric Tyson, a former financial adviser and author of several financial books in the Dummies series, has made a hobby out of critiquing Mr. Roubini’s financial predictions.

On Mr. Roubini’s January 2009 warning that oil would stay below $40 a barrel for the entire year, Mr. Tyson pointed out that it climbed to $80 a barrel 10 months later.

He cited a March 2009 call by Mr. Roubini that the S&P 500 would fall below 600. The index gained 65% over the next nine months.

According to Mr. Tyson, after predicting recessions every year from 2004 through 2008, Mr. Roubini “was finally right in 2008.”

SCARE TACTICS

“I would put him in the category of people to ignore because the influence he’s having is forcing financial advisers to have to work harder in dealing with clients that have heard his predictions,” Mr. Tyson said.

The risks associated with following the direction of a “perma-bear” such as Mr. Roubini is becoming too conservative, according to Tom Lydon, president of Global Trends Investments.

“If you follow his advice, you might miss some opportunities because perma-bears won’t ever have a lot of stock market exposure,” Mr. Lydon said. “But he uses scare tactics to sell you, and it all fits with his flamboyant accent and his disheveled hair and his necktie that is never straight.”

Mr. Roubini has his bullish moments. He’s interested in the emerging markets, as long as the developed markets don’t drag down those smaller economies.

He also likes the outlook for many of the cash-rich U.S. blue-chip stocks.

“I’m not a perma-bear or Dr. Doom; I just try to be realistic,” Mr. Roubini said. “You have to be reasonable and sensible, and so far, unfortunately, a number of the points I’ve been expressing have materialized.”

The economist said he is not oblivious to his critics, but requests only that they don’t “blame the messenger.”

“Our success is based on being right, and it’s not just one call from three years ago,” he said. “If one reads carefully what I have said, it’s not the case that I’m always negative, but you cannot just keep your head in the sand.”

— Jeff Benjamin