Meredith Whitney and Nouriel Roubini now say the panic is over. Should we care?
These two analysts are now enjoying their 15 minutes of fame as two who correctly foresaw the financial issues surrounding toxic assets, excessive leverage, and unsustainable consumer spending. The Brown University graduate and New York University professor are both admittedly very smart. But do we need to jump at everything they say?
Every market is different. In the late ‘90s Henry Blodgett and Mary Meeker understood how the internet was changing retail and business dynamics. In the late ‘80s it was Abby Joseph Cohen. These people see something different about the current economy and get one big market call right. But it doesn’t really serve investors to name anyone as a market oracle.
These people make a correct short-term prediction and the media showers them with laurels. Nouriel Roubini gets to show off those natty suits. But when the moment passed, did the Abby Cohens and Mary Meekers of the world see it coming? Not really. They kept riding their own personal express until it went off the tracks.
Most traders know that only half of their market calls turn out to be right. They try to set things up so that their good trades pay off more than their bad trades lose. But when the media darlings start to believe their own press clippings, other investors get persuaded that Roubini and Whitney have it all figured out. And no one has it all figured out.
We don’t know what the future holds. The best we can do is keep questioning and maintain our disciplines.
Douglas R. Tengdin, CFA
Chief Investment Officer
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