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What do you do when you’re a famous permabear, but your apocalyptic predictions consistently fail to materialize?
You launch an exchange-traded fund (ETF), obviously!
That’s exactly what economist Nouriel Roubini, aka Dr. Doom, is now doing.
You may recall that Roubini was right about something very big a couple of decades ago. Before the global financial crisis of 2007-2008, he predicted an impending housing crash.
Roubini wasn’t the only prognosticator to call the crash, and the consequences of it played out differently than what he expected.
Still, he got the gist of it right. Yet since then – perhaps emboldened by his big call – the NYU economist has predicted a handful of recessions, depressions, and economic collapses that never materialized.
That includes his latest prediction (made back in 2022) of another imminent great depression driven by runaway inflation and ballooning debt.
Such an economic cataclysm has yet to materialize. And it looks less likely by the month, with inflation back near central bank targets and global economic growth accelerating.
In 2022, Roubini also published Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them.
The dark tome enumerates 10 grave threats – more than risks, perhaps call them likelihoods – that include economic, financial, technological, trade, political, geopolitical, health, and environmental issues that will rock our world and transform entire societies.
“Megathreats are careening toward us,” Roubini concludes. “Their impact will shake our lives and upend the global order in ways no one today has ever experienced. Fasten your seatbelt. It’s going to be a bumpy ride.”
Trigger warning: The book is not for the faint of heart.
So what is Dr. Doom’s latest venture, given that you can only sell so many books that claim the sky is falling?
Launching a Fund
It’s the Atlas America Fund ETF, which will invest in a variety of assets including real estate, equities, and gold – along with government, corporate, and municipal bonds.
The ETF will be co-managed by Roubini and, as you might expect, will assume a defensive posture designed to protect against downside risks during periods of financial market stress, according to documents filed with the Securities and Exchange Commission.
It’s sensible to invest a portion of your portfolio in defensive assets, as the future remains unpredictable. And a black swan event – one with major repercussions that could not have been predicted – is always a tail-risk possibility.
And to be fair, many of the threats Roubini warns about in Megathreats are years away and based in fact. Is climate change a real threat to human prosperity and safety? Certainly. Rising debt levels? Absolutely. A new cold war? We can’t rule it out.
But trusting your money in the short term to someone who predicts a recession every four years or so seems unwise…
After his initial 2006 prediction of a housing collapse, Roubini predicted several more extreme crashes in the years that followed.
Had you listened to him and avoided risk assets like stocks, you would have missed out on one of the longest bull markets in history. After recovering from the Great Recession, the bull market that began in March 2009 lasted 132 months and produced a 400% gain in the S&P 500. It was the second-longest bull market in the history of that index.
And it’s worth noting that since 1926, bull market years have been much more prevalent than bear markets.
As you can see, bull markets last much longer than bear markets and deliver gains that more than make up for losses during market downturns.
“We totter on a precipice, the ground shaking beneath us,” Roubini wrote in his 2022 book.
If that’s your outlook, you’re going to miss out on a lot more market returns going forward.
That’s my own dark prediction.