Friday, October 23, 2009

Roubini: Oil To Drop $50, Gold Has Nowhere To Go, Huge Bubble Being Created Will Crash In An Ugly Way

IndexUniverse interviewed Nouriel Roubini, "Dr. Doom". He says that he sees improving fundamentals and a global recovery. I would argue that it would hardly have gotten worse without all the massive stimulus being pumped. Economic indicators were bound to recover, relatively speaking, but that's about it. But this is what he had to say.

On Oil

Roubini says the "recovery justifies oil going from $30 to "maybe $50". Since oil is today at $80, the remaining $30 are speculation, and speculators and herding behavior.

However, there is a Finnish proverb: "Sh*t must be good. Millions of flies can't be wrong" (not Roubini who said that) , so oil can still go higher.

However, $145 oil killed the economy last year. He is worried that oil is going to go over $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 right now will have the same effects on the economy as $145 in 2008. No matter what GS says.

USD Carry Trade and Commodities Bubble

Roubini believes there a huge bubble fueled by zero interest rates in the U.S. and in other countries which are causing a huge carry trade. The dollars are invested in risky assets such as commodities, equities, and credit. An even bigger bubble than before is being created.

"It’s going to go crashing down, in an ugly way." "I don’t know when the correction is going to occur, it could be a while longer, but eventually it will be a pretty ugly correction, across many different asset classes."

On Gold:

He does not believe in gold. He says there are two reasons gold can go up:

1. Inflation, not the case now as are are in deflation (capacity glut, weak demand, big unemployment).
2. Armageddon, or another depression. He thinks this has been avoided will all the massive printing.

"So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go".


Oil up or down, gold up or down? These are extremely nervous and overvalued markets. Here are the oil and gold straddles (strangles) for today. These are not Roubini's!

A 4% maximum move will make the gold position profitable at these prices.

Not advice! Please do your own due dilligence.

Stumble Upon Toolbar

No comments:

Financial TV

Blog Archive

// adding Google analytics