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.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!