Stocks Could Drop 20%, No Safe Haven: Dr. Doom

CNBC.com
Wednesday, Jan 28, 2009

US and global stocks are still likely to fall because the corporate and economic news will be worse than expected, Nouriel Roubini, RGE Monitor Chairman, told CNBC.

Investors will be hit by the realization that many banks are bankrupt, that companies will have to rein in debt and sell assets and that emerging markets may get into trouble, Roubini said.

“I think that there’s a 20 percent downside risk to US and global equities,” Roubini told “Squawk Box Europe.”

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The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that “banks are getting the money and they are hoarding it, they’re not lending it,” because they expect higher losses.

There is no safe haven from the crisis as all countries are affected, and the collapse in aggregate demand may bring about prolonged deflation, Roubini added.

“We have to worry today about not ending up like Japan. That’s the risk for the global economy,” he said.

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