Caros – na 5af o Nouriel Roubini fez uma palestra num evento em Londres. Ele ousou prever – e dizer – que o mercado entrará em colapso proximamente (dias), obrigando as autoridades a fechar o mercado por uma semana ou mais.

Brilhantemente (ele diz numa frase o que levei um post inteiro), Roubini vaticina que O QUE IMPORTA AGORA SÃO FLUXOS (A BOA E VELHA LIQUIDEZ) E NÃO MAIS ESTOQUES E FUNDAMENTOS (e.g. valuation, longo prazo, etc.).

Na 5a, em Londres, ele foi atacado como alarmista. O mercado deu a resposta no dia seguinte, 6af, derretendo sem piedade! Em linha com suas previsões anteriores, a desalavancagem de hedge funds é o que está por trás deste movimento – aparentemente sem volta.

Boa leitura, Fernando

Yesterday Thursday I gave a speech in London (see video below) arguing that markets were in sheer panic and becoming literally dysfunctional and unhinged. I also made the point that policy makers may soon be forced to close financial markets as the panic selling accelerates.

Indeed, we have now reached a point where fundamentals and long term valuation considerations do not matter any more for financial markets. There is a free fall as most investors are rapidly deleveraging and we are on the verge of a a capitulation collapse. What matters now is only flows – rather than stocks and fundamentals – and flows are unidirectional as everyone is selling and no one is buying as trying to buy equities is like catching a falling knife. There are no buyers in these dysfunctional markets, only sellers and panic is the ugly state of this destabilizing game.

And while panic and destabilizing market dynamics is the driver of financial markets even economic fundamentals are awful as investors are finally realizing that a severe US and Eurozone and G7 and emerging markets and global recession is coming and will be deep and protracted. As I have argued for a while equity prices may have to fall another 30% based on fundamentals alone before they bottom out. Why so? In a severe two year US and global recession S&P 500 firms earnings per share (EPS) could realistically fall to $50 or $60. If P/E ratios fall to 12 this implies the S&P 500 index falling to a 600 to 720 range. If P/E ratios fall – as likely in a recession – to 10 then the S&P 500 index could fall as low as 500 to 600. So even based on fundamental factors alone there is another 30% or more downside risk to US equities; and now, on top of such fundamentals, thee is also an ugly and nasty panic-driven market dynamics at work. 

I was accused yesterday of being alarmist arguing that policy makers may have to shut down financial markets. But today Friday Asian markets and in free fall and European markets are also in free fall. And US equties futures have fallen so much today before the US markets have opened that trading in the S&P futures index and the DJIA futures index has already been suspended in Europe as these indices reached their daily limits of a 5% drop. So it has taken only one day for my prediction that markets will be shut down to start to be realized. If – as possible -the free fall will continue today once US markets open then automatic circuit breakers on the S&P 500 may be triggered and trading may be stopped; and if – as likely – the capitulation panic continues today and in the next few days authorities may be forced – as I argued yesterday – to close down financial markets for a week or more in the next few days. We have reached the scary point where the dysfunctional behavior of financial markets has destructive effects on the financial system and – much worse – on the real economies. So it is time to think about more radical policy actions and government interventions of the type I discussed in my London talk yesterday.