Nouriel Roubini, an economics professor at New York University known as “Dr. Doom,” warns that another spike in U.S. debt yields will cause financial market shocks and may cause more family finance offices and safe-haven funds to follow in the footsteps of Archegos Capital founder Bill Hwang. .
Roubini, who has served as an adviser to the U.S. government, said low or negative interest rates in developed economies, coupled with fiscal stimulus measures, have caused investors to take excessive risks. He said the cyclically adjusted cost-benefit ratio is now at a high level since 1929 and the beginning of the 21st century, which is one of the signs of reckless investment in the market.
Roubini said the financial markets are full of bubbles, risk-taking and leverage, and many investors are over-leveraged, taking too much risk, and some will lose.
Roubini and investment management agency Guggenheim Partners global investment chief Scott Minerd and others are expected, these factors or trigger more events similar to Archegos. Roubini said one of the reasons for the shock is the 10-year Treasury yield rose through 2% this year; other risks include a rise in inflation and the possibility of a hot war between the U.S. and the Chinese Communist Party.
Roubini believes that although the dollar strength has forced some safe-haven funds and investors to give up short selling the dollar, but with the U.S. twin deficits (current account deficit and fiscal deficit) to expand, the dollar will still be weak in the medium term. Meanwhile, U.S. sanctions may prompt countries such as China, Russia, Iran and North Korea to seek asset diversification beyond the U.S. dollar. He added that even if the U.S. short-term economic performance makes the dollar stronger, the long term remains down.
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