WHEN: Today, Wednesday, May 9, 2012
WHERE: CNBC’s “Fast Money Halftime Report”
Following is the unofficial transcript of a CNBC interview with Nouriel Roubini, Chairman Roubini Global Economics.
Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000089119&play=1
All references must be sourced to CNBC.
SCOTT WAPNER: LET'S GET TO THE MOMENT I KNOW A LOT OF YOU HAVE BEEN WAITING FOR, AND THAT'S LEGENDARY BARRON NOURIEL ROUBINI. NOURIEL, WE HAD A CONVERSATION LAST NIGHT OVER DINNER IN WHICH YOU SHARED SOME PRETTY INTERESTING THOUGHTS ABOUT WHAT'S TAKING PLACE OVER IN EUROPE. CLEARLY THE MARKET IS TRYING TO DIGEST WHAT'S TAKING PLACE THERE. DOW IS DOWN 185 AT THE START TODAY. IT'S RECOVERED. YOU’VE CALLED WHAT'S HAPPENING THERE A SLOW MOTION TRAIN WRECK. EXPAND ON THAT FOR OUR VIEWERS, IF YOU WOULD.
NOURIEL ROUBINI: WELL, IT'S A SLOW MOTION TRAIN WRECK IN THE SENSE THE EUROZONE IS NOT GOING TO COLLAPSE IN THE NEXT SIX MONTHS OR 12 MONTHS. BUT GREECE IS NOT GOING TO BE THE ONLY COUNTRY THAT HAS TO RESTRUCTURE IN A CURRENCY WAY. I THINK IT'S GOING TO HAPPEN IN PORTUGAL, IN CYPRUS, MOST LIKELY IN IRELAND, AND EVENTUALLY TO THAT EVEN IN SPAIN AND ITALY TWO OR THREE YEARS DOWN THE LINE. SECONDLY, I THINK BY NEXT YEAR I DELAY THIS GREECE IS GOING TO EXIT THE EUROZONE. THAT'S GOING TO LEAD TO CONTAGION TO OTHER WEAK DESTRESSED MEMBERS OF THE EUROZONE. AND GREECE IS NOT GOING TO BE THE ONLY ONE TO EXIT THE EUROZONE. NOW IF A SMALL GROUP OF COUNTRIES, GREECE, CYPRUS, PORTUGAL, RESTRUCTURE AND EXIT THE EUROZONE SURVIVE. BUT IF DOWN THE LINE THE PROBLEMS THAT GROWTH AND SUSTAINABILITY SPREAD TO SPAIN AND ITALY, THEY LOSE MARKET ACCESS IF THE BAIL OUT DOESN’T WORK, THEY HAVE TO RESTRUCTURE THE DEBT AND EVENTUALLY THEY MIGHT HAVE TO EXIT. THAT WOULD BE A BREAK UP OF THE EUROZONE. IT IS A SLOW MOTION BECAUSE IT MIGHT TAKE THREE OR FOUR YEARS BEFORE HAPPENING, BUT THREE OR FOUR YEARS IN WHICH ALL THE RISK COMING FROM EUROZONE, ECONOMIC, POLITICAL, PHYSICAL, FINANCIAL ARE GOING TO GET GRADUALLY WORSE.
WAPNER: WHEN YOU SAY SLOW MOTION, AND BY THE NUMBER OF COUNTRIES THAT YOU EXPECT TO EXIT THE EUROZONE, HOW MANY COUNTRIES ARE WE TALKING ABOUT? TWO, THREE, FOUR?
ROUBINI: AS I SAID, I THINK GREECE IS GOING TO HAPPEN EVENTUALLY PORTUGAL AND CYPRUS WILL HAPPEN. I DON’T THINK IRELAND IS A PROBLEM IRELAND CAN REMAIN IN THE EUROZONE BUT HAS TO RESTRUCTURE. EVENTUALLY
WAPNER: WHAT ABOUT SPAIN? HOW WORRIED ARE YOU ABOUT SPAIN TODAY, WHEN WE SEE WHAT YIELDS ARE DOING , TALK ABOUT THE BANKS NEEDING TO HOLD ON TO MORE CAPITAL?
ROUBINI: I'M WORRIED ABOUT SPAIN, BUT AS I SAY, IT'S GOING TO BE SLOW MOTION. BY THE END OF THE YEAR, SPAIN IS GOING TO LOSE MARKET ACCESS AND ARE GOING TO REQUIRE A BAILOUT IS GOING KEEP THEM OUT OF THE MARKETS FOR A YEAR OR TWO. THAT'S NOT GOING TO WORK OUT. MAYBE THREE YEARS DOWN THE LINE, THEN THE COURSE OF RECONSTRUCTION OF THE DEBT. THAT IS WITH THE DEBT PROBLEM, RESTORE ITS COMPETITIVENESS AND EVENTUALLY EVEN SPAIN COULD EXIT THE EUROZONE. IT'S NOT SOMETHING THAT'S GOING TO HAPPEN IN 12 MONTHS. THAT'S WHY I THINK OF IT AS BEING A SLOW MOTION PROCESS TO UNRAVEL OVER THE NEXT FEW YEARS.
WAPNER: WHAT DOES THAT MEAN FOR NOT ONLY FOR THE U.S. MARKETS BUT THE U.S. ECONOMY?
ROUBINI: CERTAINLY THERE IS A RISK OF CONTAGION. THE TRADE LINK BETWEEN EUROPE AND U.S. ARE MODEST BUT THE FINANCIAL LINKS ARE IMPORTANT. IN THE SPRING OF 2010 WHEN THERE WAS THE FIRST GREEK CRISIS, YOU HAD THE CORRECTION OF 20% NOT ONLY OF EUROPEAN EQUITY BUT THE U.S. EQUITY. LAST SUMMER WHEN WE HAD THEWORRIES ABOUT THE EUROZONE PROBLEM SPREADING TO SPAIN AND ITALY, IT WAS A 20% CORE ACTION IN EUROPE. ALMOST AS MUCH AS CORE ACTION IN EMERGING MARKET IN THE UNITED STATES. WHEN TROUBLE OCCURS IN THE EUROZONE THE RISK OF SOMETHING DISORDERLY IMPLIES THE RISK IS OFF, RISK AVERSION IS HIGH AND THAT AFFECTS GLOBAL EQUITY MARKETS NOT JUST THOSE IN THE EUROZONE.
WAPNER: BUT YOU'RE NOT EXPECTING THE U.S. ECONOMY TO GET THE CONTAGION TO FALL INTO A DOUBLE DIP BY ANY STRETCH, IN FACT, YOUR PREDICTION TO ME FOR WHAT ECONOMIC GROWTH WAS GOING TO BE FOR THE REMAINDER OF THE YEAR, I WAS SOMEWHAT SURPRISED BY THAT. YOU'RE LOOKING FOR SLOW BUT 2% GROWTH.
ROUBINI: WELL, I SEE, 2% GROWTH IS BETTER THAN EUROPE THAT IS ONE BELOW U.S. POTENTIAL OF UNEMPLOYMENT BEING HIGH. BUT I WORRY ABOUT NEXT YEAR BECAUSE BY NEXT YEAR THERE IS A FISCAL DRIVE AND GIVEN THE FISCAL CLIFF AND WAGES ARE NOT GROWING REAL TERMS , SUSTAINABLE INCOME GROWTH THAT'S BEEN TAXES AND TRANSFERS. SOME OF THEM ARE GOING TO EXPIRE NEXT YEAR SO DOUBLE WHAMMY. FISCAL DRIVE AND ANOTHER DELEVERAGING ON HOUSE NOTES. THAN IF THE GROWTH IS ONLY 2% YOU GET THIS DRAG, GO TOWARDS 1% IS BACK TO STALLED SPEED, THE RISK OF A DOUBLE DIP IN A SITUATION IN WHICH EUROPE IS IN TROUBLE AND WE MIGHT HAVE A WAR WITH IRAN, THE ISSUE OF THE NUCLEAR PROLIFERATION, CHINA IS RUNNING DOWN, EVENTUAL HARD LANDING SO BY NEXT YEAR YOU COULD HAVE A PERFECT STORM.
WAPNER: FUNNY THING IS, PEOPLE LISTENING TO OUR CONVERSATION HERE WOULD THINK THAT ROUBINI MUST HAVE 100% OF HIS MONEY SITTING IN CASH WHEN I'M STRUCK BY THE FACT THAT YOU TOLD ME YOU HAVE 70% OF YOUR MONEY INVESTED IN GLOBAL MARKETS THROUGH EQUITIES AND ONLY 30% IN CASH AND 50% OF YOUR 70% IS IN THE U.S.
ROUBINI: WELL, THERE IS A REASON THERE'S BEEN A GLOBAL ECONOMIC RECOVERY FOR THE LAST THREE YEARS. ECONOMIC RECOVERY FINANCIAL MARKET RECOVERY, EARNINGS RECOVERY. AS I SAID, FOR THE REST OF THE YEAR, I EXPECT THAT ALL THE POLICY MAKERS ARE GOING TO KICK THE CAN DOWN THE ROAD. IN THE EUROZONE, IN THE UNITED STATES, AND CHINA THE TROUBLE IS GOING TO OCCUR BY NEXT YEAR WHERE WE CANNOT KICK THE CAN DOWN THE ROAD IN THE EUROZONE, EVEN THE U.S. WITH THE FISCAL DRIVE, EVEN IN CHINA WITH THE POLITICAL TRANSITION, REQUIRES A CHANGE OF ECONOMIC POLICY. THEREFORE, TIMING IS IMPORTANT. RIGHT NOW I DON'T SEE THE MARKETS FALLING SHARPLY I SEE THE U.S. STOCK MARKET BEING FLAT FOR THE REST OF THE YEAR. AND THEREFORE I HAVE THAT POSITION.
WAPNER: NOURIEL, THANKS SO MUCH.
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