Business booms as Dr Doom plans company expansion
Global financial meltdown is a winner for economic forecaster Nouriel Roubini
Friday 06 November 2009
The depths of a financial crisis might not seem the most auspicious moment to be setting up a new investment advisory business, even if you are one of the bigger optimists about the economic recovery. How much more surprising, then, that a new entrant into the industry is Nouriel Roubini, the dour New York University economist whose predictions of financial disaster earned him the nickname Dr Doom.
Professor Roubini's economic forecasting business, RGE, is planning to increase six-fold in size, marking him out as one of the few winners from the global financial meltdown.
His warnings since the middle of the decade that the US was sitting on the economic precipice, facing a housing market collapse, a financial crisis and a deep, long recession proved all too true, and turned Professor Roubini into one of the most famous commentators in the world – and one of the most bankable.
Barely a day goes by without some public appearance by the economist, which he most often uses to issue new dire proclamations of impending doom. Earlier this week he took to the stage at a New York commodities trading conference to warn that the oil price was gripped by a speculative bubble, the inflated value of gold was "utter nonsense", and that the rise in asset prices that has accompanied the economic recovery had been "too much, too soon, too fast".
As well as speaking engagements and the penning of editorials, the professor has also gained lucrative new followers of his paid-for forecasting business, which is why the expansion plans have been put in train. RGE – which stands for Roubini Global Economics – was set up in 2004 and promises "ahead-of-the-curve global economic insights that financial professionals need to know".
It also hopes to capitalise on Professor Roubini's close ties with policymakers, who have clamoured for an audience as the economic calamity has unfolded in line with his predictions. Professor Roubini was a member of Bill Clinton's White House Council of Economic Advisers and has been senior adviser to Timothy Geithner, now US Treasury secretary. A new London-based operation will dispense advice to investors who trade stocks, bonds, derivatives, commodities and currencies. RGE's market research and strategy group will grow to about 20 people from three, said Arnab Das, who joined RGE last month to lead the team in the UK.
The strategists will pay particular attention to "systemically important" companies such as banks and utilities – just the sorts of companies that governments might decide are too big to fail in the next crisis. Mr Das told Bloomberg News that RGE would build the group gradually and would be "flexible" on the final number of strategists.
Professor Roubini was born in Turkey to Iranian parents, and had lived in Tehran, Tel Aviv and Italy before his school days were done. In New York he patronises the arts, hosting "high brow and low brow" salons, film screenings and parties, and collecting sculpture – and pictures from his 50th birthday party in March finally revealed the "vagina-studded walls" that have been a staple of gossip columns. It is a "tasteful art piece", he says.
Profits of doom: In the black
NASSIM TALEB In 2007, Taleb – already a best-selling author – made dire predictions of a global banking crisis in his book, The Black Swan, that earned him the flat disagreement of many financiers. When his forecasts came true, not only did sales of the book skyrocket – it has sold more than 1.5m copies so far – but his personal finances were similarly boosted. His hedge fund made huge gains, and Taleb is said to have earned millions.
RAGHURAM RAJAN At a 2005 economic conference on the legacy of US Federal Reserve chairman Alan Greenspan, most other contributors lauded his role in ensuring economic growth. Rajan, then chief economist at the IMF, issued dark warnings – focusing on how massive bonuses were incentivising banks to take huge risks. Shortly after the economic crisis broke, he was named economic adviser to Prime Minister of India.
ROBERT SHILLER A noted economist for many years and the man behind a key house price index, Shiller was scoffed at for his repeated warnings that the real estate bubble was close to bursting. Now his hedge fund is launching new products to let investors bet on house prices – and he has published a well- received book of popular economics.
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