Cover Story June 10, 2010, 5:00PM EST

Time to Slip into Something Less Comfortable?

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Back in the U.S., where he recently celebrated the publication of Crisis Economics: A Crash Course in the Future of Finance with a lavish party hosted by Ken Griffin of Citadel Investment Group, he remains skeptical of the banks, as well as the debts run up by the federal government to resuscitate them. In a May 11 interview with Charlie Rose, Roubini pointed out that the government had picked up roughly $40 billion of soured debt from now-deceased Bear Stearns and said "this buildup of public debt is something I worry about." He called the bailout of AIG (AIG) "a mistake," and when prodded by Rose said that "zero interest rates are leading to an asset bubble globally." In the first chapter of Crisis Economics, Roubini argues that financial crises are predictable and not merely random events. In discussing this with Rose, he said: "When you live in a bubble, everyone is delusional." Present company excepted, naturally.

Roubini is the leading brand name in the community of market prognosticators who pride themselves on being outside the Wall Street Establishment. This independence, they say, allows them to see the fictions that people inside the system are blind to. Compared with the others, Roubini's forecast is mild. Most tend to view a double dip as a near certainty, with the second leg more brutal and destabilizing than the first.

One of the most famous of these extremist outsiders is Robert Prechter. In the 1970s he revived an old system of measuring investor psychology called the Elliott Wave Principle and used it to advise subscribers of his investment newsletter on Oct. 5, 1987, that they liquidate their stock holdings. Two weeks later, the market crashed. Prechter was hailed as a genius—though the label didn't stick. In 1993, The Wall Street Journal ran a page-one story headlined "Robert Prechter Sees His 3600 on the Dow—But 6 Years Late." He stayed pessimistic through the 1990s, and in 2002 said the Dow Jones industrial average would fall below 1000. It surged 25 percent the following year and kept going up until 2007.

According to Prechter, 61, the market's failure to crash as he predicted only set it up for more devastating blows down the road—which could be right now. Last March he correctly called the market bottom and predicted a rally. That has now run its course. The Standard & Poor's 500-stock index, he says, will dip below its March 2009 low. "From a peak in 2010, the stock market should fall for six years," he says.

Although his pessimism remains the same, the basis of it has changed. This time around it's rooted in the actions of governments. "Government is acting like the last drunk at the party. Government is spending at an unprecedented rate, regulating the minutest areas of our lives, and strutting around as if it's solving problems as it creates them." Coming up next, according to Prechter? Another crisis in real estate and stocks. "The next crisis will encompass markets that are already off their highs: stocks, commodities, and real estate. But it will also extend to areas that have so far sailed through, namely corporate and municipal bonds, asset-backed bonds, and even many sovereign government bonds."

Money manager Peter Schiff was born an outsider—his father was a famous tax objector who is serving a lengthy sentence in an Indiana prison. Like Panzner, Schiff had a book on the shelves (Crash Proof: How to Profit from the Coming Economic Collapse) when the financial panic struck. His thesis, which revolved around the major structural flaws of the U.S. economy as well as what he saw as the inevitable collapse of the U.S. housing market, proved to be half correct. The second part of it, that investors could protect themselves by plowing their cash into foreign stocks, didn't pan out so well.