Roubini Is A Better Indicator Than Peter Schiff

The great stock market crash created a lot of losers. But it also created a few winners. Clearly, Nouriel Roubini has been at the top of the winners list. His popularity skyrocketed and for the most part, remained. Now, it may seem as though he’s on TV only when volatility spikes and the markets are crashing. The truth is, our Granger causality tests show differently- that with a very high degree of statistical significance, the Roubini Sentiment Indicator leads the VIX and the stock market by up to two weeks. Unbelievable…

When we published our results, Roubini immediately shared our article with his followers via twitter. We don’t blame him. Still, the results didn’t really make a whole lot of sense. Everybody knows that permabears like Roubini and David Rosenberg have been wrong about the stock market for the past 18 months. Back before they realized the economy had come out of the recession, they were predicting a loooong U shaped recession. Then they changed their tune to a ‘double dip recession’. To his credit, Roubini never said “Hey, I predicted a double dip, and the economy slowed down, so I was right”. It was more like he was predicting defaults/depression for European countries like Poland, Hungary, Austria, Estonia, Latvia, Lithuania, and finally the PIIGS (Portugal, Italy, Ireland, Greece, Spain). If We asked Roubini to guess which number we picked between 1 and 10, and gave him 9 trys, he probably would have gotten it right.

Then, why would Roubini’s popularity be a leading indicator for the VIX and the stock market? Roubini’s popularity is only a short term indicator. The Roubini Sentiment Indicator is a proxy for the media’s and investors’ pessimism. Whenever the media feels pessimistic about the market, they do pieces which cite permabears, including Roubini. This affects investors’ psychology and starts a chain reaction that leads to lower stock market returns in the following week or two. As long as Roubini’s credibility is above a threshold, his popularity will continue to be a successful stock market indicator.

Nouriel Roubini is A Better Indicator Than Peter Schiff

Many of our readers told us that Roubini’s prime time has passed and the Roubini Sentiment Indicator is not a reliable indicator anymore. Yes, he may have been more popular during the Great Recession. But when we focused in on only the past 12 months, our results show that the correlation coefficient between the Roubini Sentiment Indicator and the S&P 500 Index had been -0.51 during that whole time. The correlation coefficient was 0.68 during the past 4 years. So, the Roubini Sentiment Indicator’s predictive power has weakened but is still at a significant level.

Another alternative we have is the Peter Schiff Sentiment Indicator. Schiff came to the spotlight a little after Roubini. Schiff trailed him for a while, but recently his popularity declined at a slower rate than did Nouriel Roubini’s. So we also calculated the Peter Schiff Sentiment Indicator’s correlation coefficient with the market. It was -0.42 during the past 12 months. Peter Schiff also appears to be a good proxy for the media’s and investor’s sentiment, but not as good as Roubini. It seems Roubini is a better indicator than is Peter Schiff.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!