By Rocky Vega
10/29/09 Stockholm, Sweden – New York University Professor Nouriel Roubini, who recently saw the recovery as “U-shaped,” is now concerned a dollar rebound will cause global markets to crash.
His main concern is the carry trade in the US dollar. The dollar is being borrowed at near-zero interest rates to then be invested into a wide array of now-popular assets including gold, commodities, equities, credit, and emerging markets. There are simply more dollars available in the system that are chasing the same types of things.
The risk is that the source of capital gain in these asset classes is simply due to the falling dollar, and is little more than a type of inflation. Because of this when the dollar strengthens he says, “you could have a market crash all over the world.”
More of Roubini’s latest words appear in Newsmax coverage of global markets crashing.
Rocky Vega is a regular contributor to The Daily Reckoning. Previously, he was founding publisher of UrbanTurf and RFID Update, which he operated from Brazil, Chile, and Puerto Rico, and associate publisher of FierceFinance. He specialized in direct marketing at MBI, facilitated MIT Sloan School of Management programs, and has been featured on CBS. Vega graduated with honors from Harvard University, where he was on the board of Let’s Go Publications and directed business programs involving McKinsey, Goldman Sachs, and Harvard Business School faculty. He is also enrolled at the Stockholm School of Economics.
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Definitely would agree. DeMark indicators show a multi-month top in almost every currency pair involving the USD. Look out below. I’m short the EURUSD from 1.501-ish area.