Carlyle's Rubenstein warns against Roubini pessimism

“There are a lot of great opportunities we see in the United States (U.S.) and abroad,” Rubenstein said yesterday at the World Economic Forum's annual meeting in Davos, Switzerland. “Sometimes generals fight the last war, economists fight the last recession.”

Diverging outlooks of investors and economists are being thrown into relief in the ski resort as the worst financial crisis since the Great Depression ebbs. While the MSCI World Index has surged about 65 percent since March, Davos delegates including Roubini and Nobel laureate, Joseph Stiglitz, say the rally may end as the economic rebound loses steam.

“There is now a debate about the shape of this recovery,” Roubini, who predicted the crisis a year before it began in 2007, told the opening panel before Rubenstein challenged him. “I see a faltering of growth in the U.S., Europe and Japan.”

Rubenstein, who heads the world's second-largest private equity firm, identified emerging economies as “attractive places” for investors alongside U.S. markets for energy and health care. Prices are low and the risk of systemic failure has been eliminated, meaning deals done last year will be among “some of the best” struck in a decade, he said.

“The U.S. economy has largely recovered in the view of professional investors from the worst,” he said.

While he agreed that emerging markets will outperform their richer rivals, Roubini predicted growth in advanced economies such as the U.S. will slacken in the second half of the year. He cited weakening labor markets, declining consumer spending, tight credit, manufacturing overcapacity, government budget cuts and rising bond yields, he said.

“In advanced economies, the first half of the year is going to better than the second half,” Roubini said.

Roubini's caution was shared by Dennis M. Nally, global chairman of New York-based PricewaterhouseCoopers LLP. A survey conducted by his company found 81 percent of 1,198 chief executives in 52 nations are confident in the next 12 months, yet majorities are worried by the threat of a protracted recession and intend to cut costs deeper.

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