Markets to shut down?

[ben_meyers]

Nouriel Roubini: I fear the worst is yet to come

When this man predicted a global financial crisis more than a year ago, people laughed. Not any more...Dominic Rushe
As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom.

For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis.

While the economic sun was shining, most other economists scoffed at Roubini and his predictions of imminent disaster. They dismissed his warnings that the sub-prime mortgage disaster would trigger a financial meltdown. They could not quite believe his view that the US mortgage giants Fannie Mae and Freddie Mac would collapse, and that the investment banks would be crushed as the world headed for a long recession.(snip)

What does Roubini think is going to happen next? Rather worryingly, in London last Thursday he predicted that hundreds of hedge funds will go bust and stock markets may soon have to shut – perhaps for as long as a week – in order to stem the panic selling now sweeping the world.

http://business.timesonline.co.uk/tol/business/economics/article5014463.ece

[lonestarnot]

1. Swell.

:( But we have to pay those bonuses to those rich bankers.

[DJ13]

2. That might be for the best

Consider it a cooling off period.

The only problems would be the market officials cannot know ahead of time (to prevent a desperate last minute sell off, because someone would spill the beans), and there would need to be tight circuit breakers in place when its reopened to prevent a panic.

[Neshanic]

3. He's the one thathas been pretty on the mark through thisand predicted our current mess.

[high density]

4. No. What good does that do?

Shutting the markets sounds like it would increase the amount of panic.

[RainDog]

5. The crisis is ongoing

http://www-tc.pbs.org/newshour/rss/media/2008/10/21/20081021_solman.mp3

podcast from pbs.

Taleb and Manlelbrot (fractals, chaos theory) discuss chain reactions and predicting the financial crisis.

http://www.pbs.org/newshour/bb/business/july-dec08/psolman_10-21.html

PAUL SOLMAN: Mandelbrot's key insight came in the '60s with a study of cotton price surges and plunges, suggesting the world moves in fits and starts, especially the human world.
Decades later, after the stock market crash of 1987, Taleb came to the same conclusion. He appeared on the NewsHour two years ago to help explain the death of a hedge fund before the current crisis. He dubbed the event "a black swan," impossible, Europeans had always thought, because they'd never seen one.

NASSIM NICHOLAS TALEB: We saw a lot of white swans. Every white swan was confirming that, you know, hey, all swans were white.

PAUL SOLMAN: Taleb's book, published in April 2007, was called "The Black Swan" because, in 1697, Dutch explorers discovered Australia and black swans.

NASSIM NICHOLAS TALEB: And, sure enough, they saw that black version and said, "Hey, one single observation, OK, can destroy thousands of years of confirmation." So, likewise in the markets, all you need is one single bad month to destroy years of track record.

[David Dunham]

6. He is wrong this time. This will not happen.

[Warpy]

7. I think he's probably right

because he's called a lot of this right along.

What they need to do is shut down after hours market futures trading since that's where it looks like a lot of the panic is coming from. These guys look at the growing mess in Europe and decide to short everything they can and the markets open down hundreds of points and scare the hell out of everybody else. Shutting the regular trading would then be an absolute last resort while the hedge funds go poof.

I don't think too many of us will weep for the hedge funds, those crooked bastards need to be run out of business for creating this whole mess. Unfortunately, they're going to take a lot with them, especially pension funds.

[RainDog]

8. they couldn't take social sec. by legislation, so they're stealing it.

whatever the causes, that's what has happened. -- and this is something I expect the new administration and house and congress to address.