What's the worst-case scenario for stocks?

Economist Nouriel Roubini thinks 2013 will be a lousy year, even if the fiscal cliff gets taken care of. But things could actually get worse. Here's how.

By Charley Blaine Nov 16, 2012 4:41PM
© Munshi Ahmed/Bloomberg via Getty ImagesNew York University economist Nouriel Roubini earned the nickname "Dr. Doom" after he predicted much of the 2008 financial collapse.

He's hardly been optimistic since the financial crisis. He thinks 2013 will be trying for the global economy. Europe will be struggling with recession. China's economy is still soft, and he thinks U.S. economic growth will be modest at best.

But a perfect storm of four issues could make 2013 truly awful, Roubini said on an interview on Turkish television. Here they are:

The U.S. fiscal cliff issue doesn't get resolved. That means tax rates go up and government spending gets cut. The result, many economists believe, Roubini among them, will be another recession. We should note that President Obama and House and Senate leaders met Friday and swore they'd get the problem fixed. That was enough to turn a bad day for stocks into a winner.

The European recession gets nasty. This would occur if Greece runs out of cash (a real possibility) and leaves the euro currency in a messy way. Read that as this: Greece basically defaults on its debt and plunges global credit markets into chaos.

China's economy tanks. It's possible. Real estate in many Chinese markets has been overbuilt, and construction spending has slowed. The Shanghai Composite Index, the benchmark Chinese stock index, is down 34% since April 2011 and 67% since peaking in November 2007. Hong Kong's Hang Seng Index, however, suggests things aren't that bad. The index is up 15% this year.

War erupts in the Middle East. This assumes Israel and Iran somehow go to war, not a huge possibility by itself. But the rising tensions between Israel and Syria and Israel and Egypt over what Israeli forces might do in the Gaza Strip could cause major disruptions in crude oil markets, with crude oil pushing toward $200 a barrel with serious effects on the global economy.

So far, however, oil markets aren't in a panic mode.

Crude oil
(-CL) for January delivery in New York settled up $1.05 to $86.92 a barrel Friday and was up 1% on the week. Brent crude, the better indicator to watch in this case, was up 97 cents to $108.98 a barrel and is down slightly for the week.

Wholesale gasoline futures for December delivery ended the day up 1.39 cents to $2.7101 a gallon.

AAA's national average retail price of gasoline was $3.43 a gallon Friday, down slightly from Thursday and down 9.4% this quarter.

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Tags: oil
136Comments
Nov 17, 2012 1:37AM
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God help us when the likes of KOO actually believes the stuff he writes!  Where exactly were these people raised and how did yhey get such convoluted opinions?  PLEASE, keep the guns out of these people's (and the likes of them) hands!
Nov 17, 2012 12:27AM
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The Koch Bro's are smiling at the turmoil. They can continue forcing there elected government lackeys to do there dirty work, while they count the profits. They have managed to brain wash lemmings into thinking they are helping them.  We the Sheeple need to stop them and wake up NOW.
Nov 16, 2012 11:19PM
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The same leaders said real-estate was not a bubble in 2007 and the bad loans were contained. So I'm convinced they will avoid going over the fiscal cliff. NOT. 
Nov 16, 2012 11:09PM
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Obama is giving stuff to his OCCUPIERS.........
Nov 16, 2012 11:07PM
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Dec 21, 2012 is the end of the world so whats everybody worried about?
Nov 16, 2012 10:52PM
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Hey rangerone, sorry to tell you this, but if you can't use the right words then probably you don't know what they mean and thus don't know what your talking about so piss off.
Nov 16, 2012 10:24PM
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HE kept HIS job

 

Now

 

YOU are losing YOURS........

Nov 16, 2012 10:20PM
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Are YOU kidding me?

WHAT IS WORSE THAN OBAMA IN THE WHAT HOUSE?

 

I will tell you what is worst:

it is all those who voted for this arrogant, inexperienced, liar and divider in chief....that's what.

IT IS SCARY when you CAN'T TELL SOMEONE WHO DON'T KNOW....AS....THE Democ.....RATS.

Nov 16, 2012 10:18PM
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16 trillion deficit equals. . . . 48k per US citizen.  Isn't this correct?  Worked it in my head.  So, everyone in the US owes not only his own debt, but a nice new car as well.

America is finished.  We cannot tax or grow our way out of this disaster.
Nov 16, 2012 9:31PM
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You know I work for a very large global corp and he has it correct. Recently we have anounced temperary lay offs around the country and most likely more to come and maybe some permanent next year for already weak sales. We went thru this in 2008 as well with rolling lay offs. This feels like it could get alot worse for an extended time. I have a family to support and have been fortunate enough to be with this company for 15 years. I am very concerned now more than any time before about this country and our future. I was hoping for a change and it did not happen. I guess you just cannot change the outcome of the future. Oil prices (gasoline) is still high and is probably going to climb more with what is going to happen in the Mid East. You can try to blame the housing market for the prior recession but I believe it was the oil prices and gas tripling in price that started it. I am not a religious finatic, I don't go to church every Sunday, however I do believe in God and the Bible. The road we and the rest of the world are on is written in it. God bless us and especially our children for what lies ahead.
Nov 16, 2012 9:12PM
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obamacare will be the final nail in the coffin for the US economy
Nov 16, 2012 8:53PM
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vote for me and you dont have to work.  this is what the country has become, real sad, i feel real bad for us and especially for our children. its like a ponsy scheme sooner or later the money dries up
Nov 16, 2012 8:51PM
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DR Doom's been saying same crap for the last 4 years. It'll all be over on Dec 21st, 2012 anyway.
Nov 16, 2012 8:45PM
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Dr. Doom is wrong. Budget will be fixed before the fiscal cliff and the First World Nations will be profitable again by removing themselves from the money-draining pointlessness of being in Iraq or Afghanistan. We have the technology this week to be independent of foreign oil if we switch to hybrid plug-in cars or all-electrics and save the natural gas for pickups or semitrucks or power-generating plants. Enforce federal laws and send all the illegal alien cowards home who won't fight for their own country but have the gaul to take our money and fly a mexican flag from their rearview mirror. Make drug smuggling, human smuggling and weapons smuggling death-penalty level offenses and the Mexican Civil War is over. We could be doing many things besides tolerating thuggery in our society. Socialism can be successful if we promote good citizenship and eliminate for good all the evil-doers. Why do we show mercy to those who come here to steal, murder, extort and kidnap? Seal our borders, change the laws and let's move the economy forward. Yes, Republicans, our police officers should have the right to ask for a license and arrest you for being illegal !!! Your vote-getting scam failed to attract hispanic voters. They are sick of the crime too.
Nov 16, 2012 8:31PM
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HIGHLIGHTS OF THE WEEK:

 

1. Senator John McCain loses his TEA PARTY mind screaming conspiracy in Benghazi then fails to show up for the Benghazi hearing. Instead, being a media whore, he decides to go on television bashing Obama. Shameful.

2. Bobby Jindal tells party Romney was wrong. Republicans lost because of Romney's 47% comments. Bobby Jindal is a hero because he tries to bring GOP back to the center away from the religious kooks.

3. Governor Rick Perry of Texas advocates overthrow of U.S. government and/or secession for his Tea Party buddies then quickly backs off when he realizes he can be impeached or imprisoned.

4. Republicans shamed Israel into land-for-peace deal which Palestinians deliberately scrub by allowing armed gangs, thugs and terrorists to occupy their new land in Gaza strip. They attack Israel.

 

John McCain needs to stay off television and do his damned job and get this budget done. Then he can retire to crazyland. Rick Perry's interpretation of the bible is him sitting on a porch in a rocking chair watching all his plantation niggas (all of you regardless of race) slaving away while he gets richer and closer to heaven with Romney and Lyin' Ryan. Enough is enough. We won. Tea Party (sore losers) you lost. When the civil war ended, all of the racists who couldn't bear to live here left and went down to Bolivia and Argentina. Tear ****, Rick Perry!!

Nov 16, 2012 8:19PM
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GOD BLESS OUR COUNTRY AND OUR PRESIDENT. A new centrist movement is forming within the GOP and a budget that is right for our country will be accomplished before the fiscal cliff. I have confidence in our President to make this happen so we can quickly accomplish the remainder of what he was originally elected to do. Obamacare will be a blessing for those who can't afford insurance. Illegal aliens should not take precedence over Americans for health care. We also need to immediately seize upon the brightest minds in the world to rebuild our aging energy grid and prepare for a huge influx of amazing all-electric and plug-in hybrid vehicles. What a wonderful future to look forward to with zero dependence on foreign oil. The Israelis did not want to give Gaza over to the Palestinians as land-for-peace because they knew the day would come when that land would be used against them to launch an assault. That day has arrived. If we can't remove the thugs and gangs who occupy Gaza then we should carpet-bomb the whole damned place since we were the ones who forced Israel to do the deal. When we are gone and their oil and gas is no longer needed, the Arabs will find out real quick the price of immorality. Then again, could this all be a result of conspiracy between BIG OIL and the Jews to make Obama rethink our new policy on being energy independent? Such is the power of BIG OIL that they can force even GM to build gas-guzzlers at a time when the owners cannot afford to gas up their cars. Enough is enough. Throw the Tea Party out and let's build on the dream. Energy independence in 10 years!!!!!!

Nov 16, 2012 8:00PM
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It's OK, we have Obamanomics - that'll take care of everything.
Nov 16, 2012 5:27PM
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Roubini is a Nutcake. Anyone  paying attention to his drivel is also nuts.
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