FORTUNE -- Recently the famously gloomy economist Nouriel Roubini has been talking up stocks. He says the Federal Reserve is pumping up the U.S. market and that the weak global economy will require it to do so for the next two years. That's an opportunity for anyone who has money in the market. After that, watch out.
But speaking at the SALT hedge fund conference in Las Vegas on Wednesday on a panel with other economists and financiers, Roubini come under fire for his stock market boom and bust investment thesis.
Austan Goolsbee, a former top economic advisor to President Obama, said the idea that the Fed is the only thing making stocks go up is bogus. Goolsbee pointed out that U.S. corporate profits are way up, and that the market is reflecting that. What's more, Goolsbee said there is little evidence that Bernanke has created any bubbles. Based on historical valuations, Goolsbee said, the market doesn't look expensive.
MORE: Stocks are too expensive
Larry Meyer, a former Fed governor also on the panel, said that the Fed will be quick when it eventually raises rates, it won't do it slowly as Roubini suggest. He said the Fed learned its lesson in the run-up to the housing bubble. "You will never hear the term 'at a measured pace' again at the Fed," says Meyer.
But Roubini said U.S. corporate profits alone couldn't explain the stock market rise. The market trades on future growth. And he didn't see where the growth would come from. Roubini said the U.S. economy isn't accelerating. European countries are either stuck in recessions or depressions. China, Brazil, and other emerging market economies are slowing. What's more, corporate profit margins are at an all-time high. Roubini said that is likely to revert to normal soon, taking bottom lines down with it.
"Markets look happy, but what is going on in the general economy is not," says Roubini. "We are stuck in a two-year boom and bust cycle. That's what I am most worried about."
MORE: How to fix Europe
If Roubini is right, the Fed could be tricking policy makers who think like Goolsbee into believing the economy is better than it is. That could be stopping them from doing more to stimulate the economy and hopefully create jobs -- and it could end up being the biggest downside of the Fed's policies.
After the panel, Goolsbee said he didn't think policy makers are being tricked. He said that the increase in corporate profits is a long-term trend that started before the recession and is likely here to stay. And it will presumably eventually lead to more hiring and a better economy.
Most economists aren't factoring the doomsday scenario into their forecasts.
Fortune -- Here we go again. Wall Street has a history of not focusing on bad news until it's too late. Then panic ensues. We might be seeing that pattern again with the so-called fiscal cliff.
A recent survey found that 93% of top Wall Street strategists and economists still aren't factoring into their estimates for next year the epic mix of MOREStephen Gandel, senior editor - Jun 28, 2012 11:56 AM ET
FORTUNE -- The outlook for the global economy got a bearish blast of cold air from the Great White North. --Alex Konrad
David Rosenberg Gluskin Sheff
The worse things get, the more accurate David Rosenberg looks. The longtime bear decamped from Merrill Lynch following the Bank of America (BAC) takeover and returned to his home city of Toronto, where he became chief economist at Gluskin Sheff. Since then he has consistently nailed his economic MOREDec 12, 2011 5:00 AM ET
A look back at the highs and lows of the past year in the financial markets.
FORTUNE -- To borrow from the 1978 camp classic, "Greece" is the word. Looking back at 2011, the European debt crisis -- particularly Europe's protracted will-they-or-won't-they debate over coming to the aid of their Greco-roamin' common currency partners -- was probably the single biggest factor to impact the financial markets. As if that weren't enough, MOREDec 12, 2011 5:00 AM ET
Economists say the odds are against a double dip recession, but remember 2008? They've been very wrong before.
By Mina Kimes, writer
FORTUNE -- As stocks took a blistering dive this week, Wall Street economists scrambled to readjust their forecasts of the likelihood that the economy is headed for another recession. In a matter of days, a consensus quickly emerged: Most strategists now place the odds of a double dip at 30-40%.
Goldman MOREAug 12, 2011 5:00 AM ET
The fragile U.S. economy still faces headwinds, but just how much will they hinder growth? No one's quite sure, but everyone has an opinion.
Economists are still kicking themselves for failing to predict the impact of the financial crisis on the economy. So perhaps that's why they've been particularly vigilant lately in their predictions for just how much the many headwinds we still face will slow the economic recovery.
It was only MORENin-Hai Tseng, Writer - Feb 28, 2011 12:06 PM ET
Judd Apatow's latest film, Get Him to the Greek, hit theaters on June 4. The film stars Jonah Hill and Russell Brand, but it's a cameo in the film that's getting the most attention in some circles: that of Nobel Prize-winning economist Paul Krugman.
Fortune's Alex Konrad caught up with the New York Times columnist and Princeton professor to hear about his potential next career.
How many takes did the role require? MOREJun 11, 2010 3:08 PM ET
|McDonald's gives Charles Ramsey free food for a year|
|4 federal agencies to shut Friday|
|Mailbox comes to the iPad|
|Chrysler jabs Tesla over loan repayment|
|Stocks claw back from steep losses|