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A Brave Perma-Bear

11/12/2013

Readers know I have been mildly bullish about the economy for some time, despite its being constrained by our politics.  While recoveries from financial crisis are almost always longer than recoveries from recessions, this particular recovery has been painfully slow.  But, the economy clearly has the potential to grow much faster.

There is an old Wall Street adage that anybody can be a bear, but it takes courage to be a bull.
So, imagine my surprise that Dr. Doom himself (AKA Nouriel Roubini) has turned bullish.  He famously predicted the 2008 crash.  Because he has predicted so many dire events, he has been known as a “perma-bear,” always full of gloom.
As reasons for his change of mind, he cites:  “One was the reduction of tail risk of a eurozone disaster, a reduction of tail risk of a U.S. massive fiscal cliff, a reduction of  tail risk of a Chinese hard landing, and a reduction of tail risk of a war between Israel and Iran.”  (Tail risk is a favorite term of statisticians and refers to low-probability events that can be highly destructive.)  With an economy slowly improving and uncertainty falling, the markets logically begin rising.  
While he doesn’t seem to share my concern about a sudden “Jim Fixx” moment or an economic cardiac event from our dark pool of derivatives, it is comforting to imagine that Dr. Doom may become Dr. Boom?

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