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Be Risk-Averse in This Market: Roubini

Investors need to be risk averse and say in cash, economist Nouriel Roubini told CNBC Thursday after riots broke out in Greece following the passage of an austerity program.

Nouriel Roubini
cnbc.com
Nouriel Roubini

"The markets are going to be bumpy and very volatile," Roubini, RGEmonitor.com chairman and a NYU professor, said by phone. "Investors need to hedge themselves against risk and stay more in cash in the event of a sharp market correction."

"The rise in sovereign risk in advanced countries is the next step in this whole process," Roubini went on to say. "Public debt is going to increase in most economies."

Roubini also said that the markets are going to remain uneasy for some time and that there is a weak recovery in the US and the employment picture is still very weak, despite some job creation.

Roubini said that effects of such a Greek scenario won’t immediately impact the United States, but predicted that a rough road is ahead in the second half of 2010 due to other factors.

Just last week, Roubini told CNBC that Europe's current bailout plan for Greece "is not going to work because Greece is nearly insolvent."

"A restructuring of its debt is going to be necessary," said Roubini on April 28th.

A collapse of the Greek economy could have domino effect among other weak eurozone countries—including Portugal, Spain, Italy and Ireland, he said.

“Suppose you have a disorderly collapse of Greece, two things will happen," he added. "Financial institutions holding Greek debt—mostly European—will have massive losses. Secondly, a contagion from Greece to Portugal to Spain to Italy to Ireland will have a domino effect."

Eventually, debt increases and risk aversion is going to drive down asset prices globally. Roubini said last week.

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