A year ago, Wall Street hotshots were living high on the hog, lying to and deceiving investors out of billions of dollars.
And now, they’re getting what they deserve.
Lehman Brothers is out of business. Merrill was lynched. Bear Stearns is hibernating. Banks have folded. Jobs have been lost. Consumers have stopped spending. And the global community has suffered. And now government officials and Wall Street are scrambling to fix the issue, throwing hundreds of billions of dollars at those who contributed to the mess.
But who didn’t see this coming?
Nouriel Roubini, a New York University professor who has emerged as a leading commentator during this financial crisis, predicted this would happen for years.
But no one listened.
Roubini tried to tell fellow economists at a September 2006 International Monetary Fund meeting that a crisis was coming… that a once in a lifetime tsunami would crush the U.S. economy, that consumers would stop spending, and that the country would face recession.
Still, no one listened.
Instead, the Street dismissed warnings that subprime mortgages would trigger a financial meltdown, as well as views that Fannie Mae and Freddie Mac would collapse, that investment banks would suffer, and that the global community was headed toward a long recession.
And we’re left with what we have today… global economic havoc.
And Roubini still sees more problems ahead, calling for U.S. stocks to fall further and predicting the nationalization of more banks as the economy contracts through the end of this year. “We’ll have some major banks going belly up that will need to be taken over,” he said today, according to Bloomberg. “It’s going to be bumpy ahead of us.”
Roubini also believes that U.S. Government bond yields will remain low and American house prices will fall as much as 20% in the next year and a half. And while the dollar will “initially benefit as investors seek a safe haven in the U.S., the currency will ultimately drop as the nation’s trade deficit shrinks.”
Bottom line, we’re in a tough spot going forward. But there is a way to profit from Roubini’s calls for the demise of financials, Treasuries, and the dollar, ways in which we’re currently profiting from in Options Trading Pit.
