American star economist Nouriel Roubini is often regarded as a pessimist for whom hardly any scenario is too gloomy. At an appearance attended by finews.asia, he showed a surprisingly fatherly side.
Nouriel Roubini does not like the «Dr. Doom» moniker he has earned as a prophet of negativity, preferring to call himself «Dr. Realist» who looks at the world's numerous problems straight on.
In his latest volume, «Megathreats,» published in October, he once again lives up to his reputation as a pessimist. In it, he describes no fewer than ten trends that could pose major threats over the next two decades.
At a webinar organized by Zurich-based private market investment boutique Petiole, which finews.asia attended, Roubini commented on his future scenarios. Petiole's head of investment Naji Nehme was not only interested in what the economist Roubini had to say, but also the professor who mentors young economists at New York University. Nehme wanted to know what advice he was giving his students for a risk-laden future.
White Collar Jobs at Risk
If you are young today, you have to expect to live to be 100 years or more he said, and must be taken to avoid being overtaken by rapid technological development and made professionally irrelevant. Roubini assumes future technologies like machine learning or artificial intelligence will not only take over manual work but pose a threat to white-collar jobs.
Accordingly, training in STEM subjects is advisable, but with a humanities supplement. One should make the assumption changing jobs ten times throughout a career. That's when you need to have the oral and written skills to present yourself to the next employer, he advised.
Avoiding Meme Stocks
He also advises against pursuing quick riches by investing in meme stocks. Instead, it is better to save consistently and put the money into a diversified investment portfolio to provide for old age, because government pension plans can no longer be relied on to be there. In short, «learn, work hard, invest,» is his advice to the young.
The traditional portfolio of 60 percent stocks and 40 percent bonds is out of date, warns the founder of Roubini Global Economics (now Continuum Economics), a US provider of capital markets and economic information. Inflation is hitting equity investments hard losing, on average, 20 percent of your wealth with them, Roubini said. Because of rising yields, bond prices have also fallen, and investors have lost twice as much as with stocks. What is an investor to do?
Golden Advice
In the current environment, he advises investors to buy high-quality government bonds with short maturities, inflation-linked bonds, and precious metals, especially gold.
The yellow metal is benefiting from an inflationary environment, and inflation will continue to accompany the global economy for a long time and stubbornly at that. Roubini's scenario is stagflation in developed economies and massive growth losses in emerging markets, and another debt crisis. Because interest rates have risen, the cost of servicing debt has become much more expensive.
Tech Superpower Confrontation
In his view, the advance of future technologies such as artificial intelligence has economic as well as geopolitical elements. Because wars in the future will be fought in cyberspace, with drones and robots, a technological lead will result in strategic dominance. Tech superpowers US and China will decide this race between themselves over the next two decades, he believes.
Although he talks at length about dangers and dark scenarios, Roubini has sketched out a utopia for the world in the last chapter of his book. For what that looks like, you will have to read his book.
