Tuesday, May 5, 2009

Roubini: Don't Believe the Stress Tests or the Bank Rally

Back on March 26 famed bear, Nouriel Roubini, said that stocks would go down and the banks are doomed. (I mentioned this in my blog back then.)

Here's where the market averages were back then:

Dow 7924
Philly Bank Index (BKX) 29.16
S&P Financial Sector Spdr (XLF) 943
S&P 500 816
Nasdaq 1545

Since that time the Dow is up 6%, the BKX has climbed 23%, the XLF has gained 25%, the S&P 500 is higher by 11% and the Nasdaq has leaped 13%.

Some "perma bears" may eventually throw in the towel and declare that the bear market is over and a new bull market has begun, but you can be certain that won't happen until stocks are significantly above current levels.

When it comes to Roubini, however, I will make this prediction: He will never, EVER, concede his bearish case for the United States because he harbors a deep resentment toward the country that made him rich and famous.

The good news is, Professor Roubini's 15 minutes of fame are nearly up and that goes for the likes of Peter Schiff, Mike Mayo and Meredith Whitney too!

Oh and one more thing...When Roubini says, "Don't believe the stress tests" he is right, but not for the reasons he puts forth. Investors shouldn't believe them because they are ill-timed. The economy is improving, which means that bank earnings will be rising, perhaps sharply.

No comments: