What next? Roubini says we have time before next catastrophe

“Most investors follow the same strategy of borrowing in dollars and investing in assets across the world and when the greenback’s downward trend reverses, there may be a crash in global assets” Nouriel Roubini, Chairman, RGE Monitor, told CNBC Monday. There is a wall of liquidity…chasing assets,” Roubini said “Now we are in the mother of all carry trades,” he added. “Asset prices have been inflated by the cheap funds but the dollar cannot keep falling forever, and there could be “a market crash all over the world” when the currency’s course is reversed. But this will not happen too soon as the real economy is still very weak and the Federal Reserve is likely to keep interest rates close to 0 percent for longer”, Roubini added. “The reality is that the U.S dollar is the funding currency of the carry trades. Because of that the dollar weakness is going to continue for a while.”  [Roubini was not the only one predicting the GFC ]

Comment from broker in the market Jeremy O’Gorman: ‘I am not sure what scares me more, the absolute need for trading houses around the world to work out ways to manipulate the financial system or the lack of regulations that allows the exact same situation to occur less than 2 years after our first melt down in the GFC.’

So what does myself, Philip Madden say? I the am thinking the same, as I believe are you. How to get set and take advantage? Rather basic but if one accepts this analysis best to stay in cash as it is impossible to predict timing. Roubini could be wrong about interest rates staying very low for longer – why would anyone invest in USA with such low returns?

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