This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

SALT 2013: Roubini vs. Goolsbee

LAS VEGAS (TheStreet) -- At the Skybridge Alternative Investment (SALT) Conference, Nouriel Roubini -- whose bearish economic views have earned him the nickname 'Dr. Doom' was asked, "just how pessimistic are you?" - generating a light chuckle from the crowd. But while Roubini acknowledged the rally in risk assets over the past few years, he stuck to his pessimistic view, saying that while the market has rallied, there is a notable gap between the markets and the real economy--between Wall Street and Main Street. Ultimately, he said, much of the rally is the product of work from central banks, something that signifies a potential bubble.

Austan Goolsbee, former chairman of the President's Council of Economic advisers and professor of economics at the University of Chicago, presented a different view on the panel and when I spoke with him one-on-one. To Goolsbee, the market rally reflects improving fundamentals. "After all, companies have been able to do more with less, ensuring their survival and then high productivity," he said. In other words, as fundamentals have improved at individual companies, profits are up. And thus, with valuations that are not stretched, he disagrees with Roubini that the markets reflect a bubble.

That said, Goolsbee clarified that Wall Street and Main Street do tell different stories in one significant way: employment. Much of the improvement in fundamentals at companies has come despite, or in some cases, because of lack of employment growth. Importantly, for a sustained rally, we need to see the employment picture get rosier. Importantly, Goolsbee noted that the majority of net job creation through the 1990s was from small, new firms, while the existing 'big guys' were net job losers. We have cited this analysis as well behind the scenes on Mad Money, looking at the Dow stocks, where a good majority are working with many fewer employees than pre-recession.

Of course, though, real job creation could be the impetus for the next leg of the rally. Goolsbee cited two areas where we should see jobs growth: (1) Construction--where over the course of the recovery thus far we were just filling in vacancies (surplus supply) in housing, and (2) Small business, where financing has remained troubled thus far. Remember, in construction, we are starting to get very bullish data on both pricing and starts. And while small business growth remains anemic, efforts are in place to aid in financing initiatives.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 0.21%
FB $116.73 0.00%
GOOG $691.02 0.00%
TSLA $247.54 -0.07%
YHOO $36.59 0.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs