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
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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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.