This blog post originally appeared on RealMoney Silver on July 19 at 7:40 a.m. EDT.
"I am ugly, but I have a beautiful mind." -- Nouriel Roubini
Yesterday afternoon, Nouriel Roubini was the speaker at the Summer Institute lecture series at the Jewish Center of the Hamptons.
I attended Nouriel's talk on Sunday, having previously presented my own talk at the Temple's Summer Institute lecture series exactly a year ago in the same forum and on the same subject: the economy and the stock market.
In the interests of full disclosure, I have been critical (perhaps, at times, too critical) about:
the way in which the media have embraced Nouriel;
in Nouriel's apparent inflexibility and dogma; and
in his inaccurate stock market forecasts.
In keeping with
, Nouriel was escorted by a young, attractive girl, with a skirt nearly up to her
. (She was clearly not a congregant at the Temple!)
After that entrance, things went downhill, as there was little in the way of added value (at least to this observer) extracted from his presentation, since I have heard all of it before.
Nouriel gave his standard talk: The U.S. is entering either a "U" (at best) or a "W" (at worst), while over there, he estimates 0% growth in the eurozone over the next 12 months.
Reduced fiscal and monetary stimuli, the cessation of temporary benefits (inventory build, Cash for Clunkers, homebuyer's tax credit, etc.) and diminished confidence (consumer and corporate) spell subpar growth (1.5% estimated second-half domestic growth). Deflationary pressures remain the mainstay in the aftermath of the last economic and credit cycle and in the face of tax policy (higher January 2011) and the obliteration of the shadow-banking system and securitization markets.
In the U.S., Nouriel says we are kicking the can down the road and that we face a fiscal train wreck with no visible exit strategy in sight.
The one part of his talk that stood out to me was in the section of his speech in which he talked about some possible solutions to our fiscal imbalances. Specifically, he feels that we, as a nation, have been overly preoccupied with housing-central policy. He argued that housing provides little in the way of sustained productivity and growth and that many of the benefits of home ownership (such as the mortgage-interest deduction) should be reassessed.
In the Q&A session, I asked Nouriel three questions:
How can he explain the schmeissing in U.S. equities when, at the same time, certain risk measures (lower bank swap spreads, Libor, junk bond yields, a higher euro, etc.) and risk markets appear to have stabilized?
Could the U.S. stock market be attractive in light of generally reduced economic expectations and lower corporate profit assumptions?
Could the U.S. stock market be attractive with markets selling at less than 12x realistic 2011 S&P 500 profits vs. an historical average of 15.5x and at 17.0x when interest rates and inflation are quiescent?
On the first question, Nouriel agreed with my observation that, unlike the May swoon, risk metrics had stabilized. I was delighted to hear that he said he now recognizes that his principal role is as an economist, as he has learned over the past few years that there are other influences that affect the equities market and that the stock market and the economy are often (especially on a short-term basis) out of sync. On the second and third questions I asked, he felt that the stock markets were still discounting higher and unrealistic economic growth and corporate profits. I responded that my impression is that economists have ratcheted down economic and profit forecasts -- many of whom are not materially higher than him now. On question three, he admitted that, absent another dislocation, stocks might be cheap relative to history.
Before Sunday, I had never met Nouriel Roubini. I came away from yesterday's lecture not learning more than when I entered but thinking that he is more well-intentioned and perhaps even more studious than I previously thought. He is an engaging speaker, and he seems to be a very nice guy.
So, in the future, I plan to go easy on the guy -- perhaps in the hope that he will invite me to one of
Party on, Nouriel!
Doug Kass writes daily for
, a premium bundle service from TheStreet.com. For a free trial to
and exclusive access to Mr. Kass's daily trading diary, please click here.
Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.