Disclaimer

Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. But I can't by law give you advice, and I do make mistakes. Remember: the unexpected sometimes happens. Oddly enough, the expected does too, but all too often it takes longer than you thought it would, or on the other hand happens more quickly than you expected. The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

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Friday, July 13, 2012

Dr Gloom



Nouriel Roubini, who correctly forecast the GFC, more or less alone amongst his econorat colleagues(apart from a among others Gerard Minack at Morgan Stanley and yours truly), gives a deeply gloomy and reasonably convincing interview pointing towards a very bad 2013.  A double dip in the US, probable war with Iran, a slow-motion trainwreck in Europe speeding up, and an absence of government weapons to stop the economic and fiscal crisis.  He points out that the banks haven't changed, as evidenced by the Barclays Libor scandal.  And they haven't in respect of their behaviour, but they are far better capitalised now than then.  Some lessons have been learned.  Personally, I think the banks' proprietary trading should be split from the traditional banking business of borrowing short and lending long.  That's risky enough itself.  Add corrupt trading desks manned (and it's usually manned not womanned) by testosterone-high bullies interested only in short-term wins, still too low genuine capital (long term debt is NOT capital) and you have a toxic mix which will blow up again one day.  Maybe not in 2013, though.

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