Dr. Doom Gets Bullish?


As if we weren’t already concerned about certain sectors of the share market thanks to speculative excesses, now the US’ very own Dr. Doom, Nouriel Roubini had to make things worse.

What’d he do? Well, the good doctor shed his metal mask and fearsome demeanour and made some decidedly bullish comments.

Yes, you heard us right, bullish. On CNBC recently, Roubini said:

I think tactically for the next few months equities could rise because corporate profits are still strong … But the question is whether the economic recovery is going to be sustained and whether some of the risks we’re seeing down the line on the financial markets are going to materialise.

Granted, that’s not exactly drunken-grin, fifth-mortgage-on-the-second-home optimism, but when your nickname is “Dr. Doom” a little positive sentiment goes a long way.

So how exactly does this make things worse? Well, Roubini’s specialty is economics, and he hasn’t exactly been a seer of particular note when it comes to the shares market.

While we can connect his earlier dire warnings with the financial and share market collapse of a couple years ago, we’re not quite ready to don him “Presto the Amazing Share Picker!” on the strength of one call.

The problem is that normal people don’t really care about economics unless it’s going to make them money somehow. Thus, Roubini the economist becomes Roubini the market caller — whether or not he’s particularly good at it.

Drip, drip, drip

We’d hardly be surprised if there hasn’t been some impact on Roubini from hearing an endless refrain about how he missed the share market run-up after the 2009 bottom.

And that is how financial markets get you — they wear away at those that oppose them until the naysayers finally give in and cry “uncle!” and bend to their will.

But of course once even the die-hard bears like Roubini have been worn down enough to start making bullish calls then who’s left to drive the market higher?

Don’t get us wrong, we don’t foresee gloom and doom ahead. However, we’re conservative investors who like to keep a keen eye on valuations. Boring it may be, but history has generally shown such strategies to outperform their more speculative cousins. Just check out Warren Buffett’s $50 billion fortune for proof.

As such, we like to dig around amongst the group of boring, dividend-paying shares that are still reasonably valued.

Over the past year or so, a number of value-priced shares have done poorly relative to riskier and high-growth fare. But the future doesn’t necessarily mirror the immediate past, and one day investors will remember that valuation also matters. Again…

As for Roubini, in the last couple of years people have been concerned about where the market was headed due to his pessimism. Today, the contrarian in us is much more worried about the state of the market due to his optimism. We’ll see…

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