"Panic over hedge funds could close markets," says the bold headline in The Times, a large London newspaper on Friday October 24, 2008. The article states that Nouriel Roubini, a professor at New York University, told a London investment conference audience that "...hundreds of hedge funds are poised to fail as frantic investors rush to redeem their assets and force managers into a fire sale of assets...We've reached a situation of sheer panic. Don't be surprised if policymakers need to close down markets for a week or two in coming days." Roubini went on to say, "Things will get much worse before they get better. I fear the worst is ahead of us." Those are pretty bold and scary predictions. Telling investors that the worst is yet to come after global stock markets have been hammered down by about half since late 2007 is pretty amazing.

Roubini has been getting tons of press of late for having supposedly predicted the financial mess that unfolded in 2008. A recent Bloomberg article said, "Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a ‘catastrophic' financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ‘sharp drop' in equities."


Roubini earned his undergraduate degree at Bocconi University in Milan, Italy in 1982.

According to his consulting firm's web site, "Professor Roubini served as a senior adviser to the White House Council of Economic Advisers and the U.S. Treasury Department"

That sounds impressive but on the web site for the NYU Stern School of Business (where he teaches) it says, "He was also the Senior Economist for International Affairs at the White House Council of Economic Advisers from 1998-1999; then, the Senior Advisor to the Under Secretary for International Affairs and the Director of the Office of Policy Development and Review at the U.S. Treasury Department from 1999- 2000." That sounds a lot less impressive.

As for Bloomberg crediting Roubini for predicting the current financial meltdown, stock market plunge and recession, some perspective is in order. Back in the summer of 2006, Roubini spoke at an International Monetary Fund event and predicted an imminent U.S. recession according to economist Anirvan Banerji who participated with Roubini in a panel discussion. A transcript of that event shows that Roubini did not predict a market meltdown or any of the other problems he now claims to have predicted as quoted by Bloomberg. Banerji says that Roubini predicted a recession in 2004 caused by U.S. trade deficits, federal reserve interest rate hikes and high oil prices. (His recession calls dating back to at least 2004 is verified by a Business Week article I'll get to in a moment).



Here's another quote with Roubini's poor predictions from an article on his own business school's web site: "Among those sporting a red face at Christmas dinner was Nouriel Roubini...Roubini was featured in The Enigmatic Greenback, specifically suggesting the US dollar was in an "anti-gravity" phase that was about to reverse. He has kicked off 2006 with a mea culpa, admitting that he had indeed called 2005 incorrectly. Dispirited? No way. Roubini is back and he's not taking a backward step. 2006 will be the year of the US economic slowdown, and thus the global economy will hit slowdown as well."



So there you have it. Roubini predicted a recession in 2004, 2005, 2006, and 2007. He was wrong four years in a row. So, in 2008, his prediction appears to be finally coming true. Well, a stopped clock is correct twice each day and as Banerji says, "Roubini is the Boy Who Cried Wolf."