Dubai shows limits of government rescues: Das

Roubini's 2006 warning about the crisis shielded clients from the worst slump in global equities since at least 1988. He said in March that the stock rally that began that month was a “dead-cat bounce” and that it may “fizzle” in May. The MSCI World Index of has since rallied 68 percent, and the Standard & Poor's 500 Index has climbed 64 percent in the steepest rally since the Great Depression.

Roubini warned in July that the economy is “not out of the woods.” Reports since then have shown that the U.S. exited a four-quarter contraction in gross domestic product, expanding 2.8 percent from July through September.

The benchmark index for U.S. stock options, which measures the cost of using options as insurance against declines in the S&P 500 over the next month, has dropped 49 percent this year. It surged last November to a record 80.86, a level almost four times higher than its 20.28 average over its 19-year history.

Market Correlation

The so-called correlation coefficient that measures how closely markets rise and fall together reached the highest level ever in June, with the S&P 500 and benchmark measures for raw materials, developing-country equities and hedge funds rallying in tandem, according to data compiled by Bloomberg. Oil has jumped 71 percent this year, the Reuters/Jefferies CRB Index of 19 raw materials climbed 21 percent and the MSCI Emerging Markets Index soared 69 percent.

“All this should magnify differentiation between riskier and less risky asset classes and names, after a couple of quarters in which correlations have risen sharply as market participants put on risk pretty much across the board,” Das said. “That will make it harder to make money simply by riding the liquidity wave from central banks. People are going to have to start focusing even more on the fundamentals.”

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