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

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

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

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!