‘We are seeing widespread foam, bubbles, risk taking and leverage,’ warns Dr. Doom ‘on state of the stock market
This is the eminent scholar Nouriel Roubini, professor of economics at the Stern School of Business at New York University, explaining in an interview with Bloomberg Television who broadcast Tuesday that risk-taking on Wall Street is reaching dangerous levels, in his opinion.
He told the Business Network that the swirling liquidity in financial markets and the aggressive use of borrowed money were likely to create new problematic episodes in markets where investors gorged themselves on debt at the expense of the larger market. large.
Roubini’s comments follow the collapse of Archegos Capital Management about two weeks ago which took its toll on the markets, briefly and so far Credit Suisse AG takes $ 4.7 billion charge loan to the family office headed by Bill Hwang.
Archegos is Hwang’s family investment arm and was forced to liquidate billions of assets after bets on stocks like Discovery and ViacomCBS suddenly backfired and forced his lenders to unwind his leverage investments.
Roubini said a hike above 2% for the benchmark 10-year Treasury bill, used to set rates on everything from mortgages to auto loans, could spur further investor explosions.
The rise in yields has prompted investors to sell more speculative bets, as higher yields imply that borrowing costs increase for investors as well, making these speculative bets less economically attractive.
Known as “Dr. Doom ”in some circles for his bearish forecast, Roubini has been consistently pessimistic about his outlook for markets and the economy since the pandemic took hold in the United States in earnest last year. Last year, he said that the V-shaped bounce “becomes a U, and the U could become a W if we don’t find a vaccine and don’t have enough stimulus.
Roubini, was once named one of the “the world’s top 100 thinkers»After his specific calls on the impact of the housing crisis more than ten years ago.
The American markets, on the other hand, were try to extend the gains, after the Dow Jones Industrial Average and the S&P 500 Index on Monday both finished at record highs. Meanwhile, the Nasdaq Composite Index was trading below 3% of its closing high.