Tuesday, October 27, 2009

Roubini and the Carry-Trade Bubbles, Where Has He Been?

Bloomberg reports that New York University professor Nouriel Roubini is warning about a commodities bubble fueled by the U.S. dollar carry trade. One wonders where he had been lately. This is what we were discussing over the last couple of months.

We track all commodity ETFs in the market here.

Roubini says the bubbles that may spark another financial crisis as we have “the mother of all carry trades,” “Everybody’s playing the same game and this game is becoming dangerous.”

He also said said the dollar will eventually “bottom out” (really??) as the Fed raises borrowing costs and withdraws stimulus measures including purchases of government debt. That may force investors to reverse carry trades and “rush to the exit,”. “The risk is that we are planting the seeds of the next financial crisis,” “This asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.”

Does Dr. Roubini know that the top commodity ETF YTD is one that tracks lead? From the above tracking site:

(please click to enlarge)

In all fairness, we do not know why or how he made these declarations. It would all be the medias' fault as they pressed him for any declaration, thus he stated the obvious.

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