Roubini VS Buffett

Dr Doom Roubini speaks out today. The following are some of the minutes of his speech.

1. Those aren’t “green shoots”–they’re yellow weeds
2. The crisis isn’t over, and everyone has become way too complacent
3. We’ll be in recession for another 6-9 months
4. The recovery after that will be weak
5. Big risk of a double-dip
6. Households aren’t deleveraging
7. Oil could go to $200 just as economy starts to recover
8. Real interest rates could spike, killing housing, etc.
9. Concern about hyper-inflation
10. All this could lead to “perfect storm” that will clip wings of economic and financial recovery
11. So we need to stay focused on averting disaster before we redesign regulatory architecture.

See original here

So Roubini or Buffet who is going to be right? Buffet was very optimistic. He called for the stock market bottom last quarter when the Dow was at around 8000 and it later dropped to 6500. Roubini called for the financial melt down more than a year ealier and he was right. Buffet was onto banks and he was right too. For most part their views may not be contradicted with each other. For example their views on the risk of inflation. But their views on housing seem to be different. Buffet was optimistic on housing market going forward. Roubini’s view was kind of depressed. Who do you believe.

I am more on Roubini’s side on housing because I just don’t think housing price will go back to 2006 without a major raise in wage. Banks will not provide those exotic mortgages again. Housing price went crazy during 2005 and 2006 majorly because of those exotic mortgages. No money down, stated income, 110% finance and reverse mortgage. Those things are not easily coming back.

As for inflation some economist think it won’t come until consumer borrowing increase. But consumer borrowing is still decreasing so inflation will probably come eventually but not that early. However inflation expectation will built into commodity price before the economy recover. Roubini predict “Oil could go to $200 just as economy starts to recover” that is about 6 to 9 months later. So it is probably a good move to load up the oil share like CEO or PTR now.

Banks in a short time will run up because some of them will repay TRAP and no matter what it will be seen a positive sign for the sector. Anyway I just want to jog down some of the ideas I want to keep in mind going forward.

I make some profit today and I feel comfortable with it. I said I didn’t want to trade option but I trade again. I sold USB put again. Next weekend will be the expiration day let’s see if I can pocket the $450 bucks. I said I want to be on the long side of banks but I took the short side when BAC was above $12. I trade a couple times and make profit. Another thinking I change is that I don’t want trading cost get into my mind and affect my decision whether to close a position or not. As long as I can make money net of commission I don’t want to care about how much it is.

Account Balance Change: +$196.98