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Wednesday, November 11, 2009

Roubini Commodities and assets bubbles about to burst

Nouriel Roubini in an interview with HardassetsInvestor :"commodity prices have increased since the beginning of the year too much, too fast, when compared to the improvement in economic fundamentals. Some of that increase is justified. But if the global economy were to have a more anemic, subpar recovery—if instead of a V-shaped recovery, there's going to be a U-shaped recovery—then I actually think demand for commodities would be weak compared to supply, and there could be a correction in commodity prices in 2010.
Take oil prices: They have gone up from $30/barrel to over $80, at a time when demand is back to 2005 levels, and oil inventory is at all-time highs. Part of the increase is justified by fundamentals. But part of it is essentially this wall of liquidity chasing assets, and the effect of carry trade on the U.S. dollar, driving further higher these commodity prices.
So these nonfundamental factors can push oil and commodity prices higher, especially if there's going to be an increase in expected inflation. But the fundamentals of supply and demand actually suggest that, from now on, oil and other commodity prices should be lower, rather than higher."

Full Interview >>>
NOURIEL ROUBINI BLOG

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Nouriel Roubini nicknamed Dr. Doom and lately Dr. Realist by CNBC , is a professor of economics at the Stern School of Business, New York University and chairman of RGE Roubini Global Economics, an economic consultancy firm . Prof. Nouriel Roubini A world-class economist who offers an unflinching look at the global meltdown and distinctive insights into its course going forward. His research on financial crisis in emerging economics has yielded a unique and now vindicated approach to future collapses. Roubini speaks on the global economic outlook and its implications for the financial markets. From his analysis of past collapses of emerging economies, he has identified common factors that support his predictions of crisis in the US and world markets. He has held several high-level advisory positions in the US government and international finance organisations, published numerous policy papers and books on key international macro-economic issues and is regularly cited as an authority in