Nouriel Roubini thinks the S&P 500 is going to 600. His arithmetic is pretty simple. At 12 times earnings and $50 in earnings the likely price of the S&P in 2009 is 600.
“My main scenario is that it’s highly likely it goes to 600 or below,” Roubini said today in an interview at the Chicago Board Options Exchange Risk Management Conference in Dana Point, California. A level of “500 is less likely, but there is some possibility you get there.”
“This onslaught of worse-than-expected macro news is going to have a negative effect on stock markets,” he said in his speech. “In the next few months many people are going to realize that many financial institutions are insolvent.”