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Commenting on our piece here yesterday that pointed out that Nouriel Roubini botched his arithmetic in tallying Wells Fargo’s expected cumulative loan losses, reader T e-mails, and provides a succinct summary of conventional wisdom among the bears:
The main points of this discussion are that WFC’s ultimate charge-offs cannot be predicted with a high level of confidence. Dr R’s estimate is within the realm of possibility, whether his math was correct or not.
It is also interesting to note that it does not wipe out Wells, but certainly will require some dilutive capital raising.
Dr. R is also correct, as we pointed out, that WFC is no longer a super well capitalized [bank] after doubling assets in this acquisition.
So whether Roubini screwed up the math or not, his number is nonetheless “within the realm of possibility” since the future is unknowable. Anything could happen! That’s true, I suppose. But only in the most profoundly trivial way: the Roubini’s loss estimate is possible because anything’s possible. Rigorous!
If Roubini had come up with his bogus number as a purely academic exercise, to be debated among his colleagues down at NYU, I’d have no argument with T’s point, or any problem with what he has to say. I’ve certainly made my share of dumb mistakes putting together loss models.
But Roubini’s not just chin-pulling with other eggheads. Instead, he’s traipsing from media outlet to media outlet telling anyone who’ll listen that Wells Fargo—a federally guaranteed financial institution that you, dear taxpayer, would be on the hook for if Roubini’s rantings ever became a self-fulfilling prophecy—will shortly be on the verge of collapse. “Zombie” is his preferred term of art.
And now we see he has no basis to make that claim. He screwed up his math! And the best his defenders can come up with to support him is the anything-might-happen argument, above.
Sorry, not good enough. Roubini needs to a) pipe down about Wells, and b) fix his model pronto. He might also c) go back to the Journal and Time and all those other places and tell them he was wrong in the first place. But I somehow doubt that last is going to happen.
What do you think? Let me know! |