January 8, 2009 - 11:27 am
Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.
``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. ``There will be massive dumping of assets'' and ``hundreds of hedge funds are going to go bust,'' he said.
Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.
``Systemic risk has become bigger and bigger,'' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,'' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,'' he said.
Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a ``catastrophic'' financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.
Bear, Lehman
The comments preceded the collapse of Bear Stearns & Cos. and Lehman Brothers Holdings Inc. as well as the government seizure of Freddie Mac and Fannie Mae. The Dow Jones Industrial Average, a benchmark for American equities, has lost 37 percent this year, including its biggest daily drop in more than twenty years on Oct. 15.
The Dow average rose 2.5 percent to 8728.73 as of 10:55 a.m. today in New York.
Italian Prime Minister Silvio Berlusconi roiled international markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.
``In a fairly Darwinian manner, many hedge funds will simply disappear,'' Roman said, speaking at the same event as Roubini.
The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
`Very Ugly'
``Things are getting very ugly also in the emerging markets,'' Roubini said. ``The usual saying is when the U.S. sneezes, the rest of the world catches a cold. Unfortunately, this time around the U.S. is not just sneezing, it has a severe case of chronic and persistent pneumonia. It's becoming a mess in emerging markets.''
Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.
``There are about a dozen emerging markets that are now in severe financial trouble,'' Roubini said. ``Even a small country can have a systemic effect on the global economy,'' he added. ``There is not going to be enough IMF money to support them.''
Roubini, a former senior adviser to the U.S. Treasury Department, earlier this month said that the world's biggest economy will suffer its worst recession in 40 years.
``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''
Tags:
Leave a Reply
Posted Videos |
January 8th, 2009 at 12:00:24 Peter Schiff and Nouriel Roubini are like Thomas Jefferson and Alexander Hamilton respectively. Schiff's ideas are too idealistic like Jefferson thinking that the farmers are the best and simplest individuals. Times have changed, in any way, there will always be leverage whether gold standard is in place or not. The Fed can print all the money that they want, but if the money is not being flowing, there will be no concern for any inflation until the economy starts to recover. People can't save.
January 8th, 2009 at 12:23:23 it can't happen, there are too many dollars floating around and too many countries have them, this was all done by design.
January 8th, 2009 at 12:46:22 You need to listen to the work of Nassim Taleb, his ideas make sense without outright destruction and major disruption of society. Turn the banks into utilities, which are owned by the government, which is in the process of happening. THe Days of super high paid bankers is over.
January 8th, 2009 at 13:09:21 Im pretty sure he is a member of CFR too. I know Brad setser is CFR and he is close to Roubini.
January 8th, 2009 at 13:32:20 Until we get rid of the Fed, we will continue to be slaves bled to death by Wall Street, the Central banks worldwide and their political powerhouse.
January 8th, 2009 at 13:55:19 wow that kinda sux. how can any believe in the fucking FED, look at the mess they made, not exactly a good track record either.
January 8th, 2009 at 14:18:18 Roubini isn't pro gold or silver. He's a believer in Keynesian economics and the Federal Reserve.
January 8th, 2009 at 14:41:17 Between Schiff and Roubini, I have to disagree. While they both say we're in for some seriously hard times, Schiff supports a gold standard and higher savings rate as a solution and Roubini supports massive rate cuts by central banks and the bailing out of banks. They have completely different views on macroeconomic issues.
January 8th, 2009 at 15:04:16 Please, post more something like this ...
January 8th, 2009 at 15:27:15 what does he predict for gold or silver?
January 8th, 2009 at 15:50:14 they cant. they have too much of their reserves in USD.
January 8th, 2009 at 16:13:13 Where we should get economists from : watch?v=-xP_aIvp56A
January 8th, 2009 at 16:36:12 The rest of the world needs to disconnect from the US dollar and let it burn.
January 8th, 2009 at 16:59:11 Roubinis right ,all we need is LUV AND RECOUPLING
January 8th, 2009 at 17:22:10 Everything in life last forever until it ends. I feel bad for the few nice, honest, hard working Americans. On the other hand, this is an opportunity for the shallow, spoiled brat Americans to adjust their (grandiose, God chosen people) attitude and live within their means just like everyone in the world have done it for years.
January 8th, 2009 at 17:45:09 I saw that show and I thought he painted a very bleak picture consistant to this video. He stated that the worse is ahead of us on the CNBC show.
January 8th, 2009 at 18:08:08 i guess u mean ... "are sound".
January 8th, 2009 at 18:31:07 I am willing to bet that more will melt down then just the economic system.
January 8th, 2009 at 18:54:06 Or Civil War II...
January 8th, 2009 at 19:17:05 this guy is on the money
January 8th, 2009 at 19:40:04 I'd think he can't just let everyone in the US know that the cat is being cremated at this moment. We could be bombed today and mainstream news would be talking about OJ Simpson next week.
January 8th, 2009 at 20:03:03 This will not be called the Second Depression, this will be called The Very Great Depression.
January 8th, 2009 at 20:26:02 i believe that everyone is in denial, its far worse than is being reported. The Federal Goverment and world governments are in "Panic Mode". America will never be the same. This will last for at least a Decade. Read GEAB/LEAPS 2020 Feb. 2008 Special Edition. They predicted this then and WORSE.
January 8th, 2009 at 20:49:01 Roubini is too pessimistic. U all should listen to Bernanke. The fundaments of the economy is sound.
January 8th, 2009 at 21:12:00 Maybe so. Still it makes you question the integrity of the man, maybe he was drunk when he did the CNBC interview.