Posted on 10/23/2009 10:06:28 PM PDT by blam
Nouriel Roubini: Big Crash Coming
Written by Dave Nadig
October 23, 2009 00:00 AM
Dr. Nouriel Roubini, professor of economics and international business at the Stern School of Business at NYU and chairman of RGE Monitor, is perhaps best known for his prescient predictions of the financial market collapse in 2005.
Dr. Roubini will be the keynote speaker at IndexUniverse’s upcoming “Inside Commodities” conference on Nov. 4 at the New York Stock Exchange. We sat down with Dr. Roubini ahead of the conference to take his temperature on global markets, the role of oil (NYSEArca: USO) and gold (NYSEArca: GLD) and the impact of regulation.
Index Universe (IU.com): You’ve said that you’re worried we’re already sowing the seeds of the next crisis. Where do you see that most directly?
Dr. Nouriel Roubini (Roubini): Well in commodities, I look at oil prices. They fell from $145 last summer, came down to $30 earlier this year and now they’re back close to $80. But if I look at the fundamentals of demand and supply, demand is down to 2005 levels, supply and inventories are at all-time highs. In my view, the movement in oil prices is not fully justified by the fundamentals.
There are improving fundamentals. There is a global recovery. But that justifies oil going from $30 to maybe $50. I think the other $30 is all speculative demand feeding on it—speculators and herding behavior. Last year, when oil was at $145, that killed the global economy. I worry that oil is going to go up above $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 would have the same negative effects on the global economy as oil did at $145 last year.
Last year, when oil was at $145, the global economy was still growing. Right now it has collapsed, and is recovering. Oil pushing above $100 would have nasty, negative real trade effects and real disposable-income effects on all importing countries: U.S., Europe, Japan, China, India; all the countries that were hit by the oil shock last year. So that’s an element that is in my view totally speculative, and dangerous to the global economy.
IU.com: Is that true elsewhere?
Roubini: I could make a similar argument for other commodity prices. In my view, rising commodity prices are not justified by the fundamentals.
There’s a huge bubble, because we have zero rates in the U.S., zero rates around the world and a huge carry trade. Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dollar is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re creating a bigger bubble than before.
It’s going to go crashing down, in an ugly way. That’s the basics of the argument.
[snip]
As long as the Obamaman gets to enjoy his waffle, why worry? All is well!
http://www.youtube.com/watch?v=zDAmPIq29ro
Like most liberal garbage, he blames the financial crisis on lack of regulation. There is no mention of CRA and the sub prime mess the government created.
..."we’ve had a disastrous banking and financial crisis. That was in part due to poor regulation and supervision of financial institutions.
He goes on to say...
Roubini: I don’t believe in market discipline. It doesn’t work. That was the ideology of the last 10 years; self-regulation means no regulation.
Lord Obama will save us all. Praise Obama.
Mmm mmm no.
Actually, I think the analysts are perplexed, although they must be dumber than previously thought if they can't figure it out. With companies like Microsoft and Amazon yesterday, they were scratching their heads and probably other parts figuring why the results weren't better.
I think the retail industry is going to really suck wind this holiday season. Black Friday should be a real interesting indicator on the level of spending to occur throughout the rest of the year. Until Obama is out, or at least Congress is under better control, I don't expect any sustainable improvement. Just one long roller coaster ride.
Plan to read more carefully later.
I'm not sure what you mean by that but in general, not really. If you are short a stock there is no time limit. If you are short stock index futures, well yes the contract has a date, but it's not a big deal since you just roll forward to the next period. You might be thinking of options (puts), where yes, they are dated and you are losing time premium while waiting.
Or the UN will create a whole new currency used by all countries.
He will make sure that evil Big Oil does not earn a profit because he will confiscate it. He will appoint Federal energy oversight committees who will take over the management of the Oil Companies like he did with the Auto industry.
In the mean time, those of us who are not inner city minorities will be forced to resort to horse travel again and become hunter gatherers if we want to survive. Provided we hunt with some other means than guns, that is.
And depending on your party status (and standing) you will be allowed your ration of gas for your Federally mandated vehicle, provided you comply with all regulations and emissions standards designated by the Federal Bureau of Transportation.
Light, world wide Weimar behaviour. Nice, real nice. /sarc.
Don't worry, be happy. Obama will have the middle class pay for it.
while it is true liberal tend to run to the comfy “regulation” excuse, it is also true that the derivative market - the credit default swaps - amplified the mess that was fannie/freddie.
Maybe amplify isn’t the right word.
They multiplied that problem by a factor of, what? a trillion? a gazillion?
Sometimes there are good “regulations”, sometimes bad.
There is something very odd about the swaps market.
The more I read about them, the more they appear to be a form of insurance fraud.
Fraud is not “free market”
Fraud is fraud.
I’ve been getting coupons in the mail from department stores I have accounts with.
$10 off $10 merchandise - just to get you in the store.
$20 off $40 merchandise.
They must really be hurting.
Thats what the risk is; Inflation of Stock prices vs Companies Democrats put out of Business, my 401K/ira is 100% stock
The subprime mess was indeed caused by poor regulation because the regulator was blocked by the Democrats who called the regulator racist. The statement that poor regulation resulted in the subprime crash is correct so far as it goes. It just doesn’t address the root cause, Government meddling in the housing market.
Black Friday
Another unexpected tea party could send a message to the 111th Congress, yes, hard for those running businesses, but those folks in Detroit where basically ignored by Congress inaction to cut taxes for the rich so the poor could find jobs
Yeah, wonder what local businesses would say if Omao told them not to profit now
What? you mean we will still have local business?
That’s an interesting perspective.
I would like to hear your explanation, what makes you think the dollar will strengthen.
The carry trade is now propped up by foreigners borrowing ultra cheap dollars. The only way I see the carry trade collapsing is for interest rates here to ratchet up. It’s hard to imagine that because the economy and especially housing are still really awful.
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