<div id=”js-article__body” itemprop=”articleBody” data-sbid=”WP-MKTW-0000222259″>
“‘We are seeing widespread foam, bubbles, risk taking and leverage … A lot of players have taken too much leverage and too much risk and some of them are going to explode.’ ”- Nouriel Roubini,
That’s prominent scholar Nouriel Roubini, a professor of economics at New York University’s Stern School of Business, who explains in an interview with Bloomberg TV that aired Tuesday that risk-taking on Wall Street is reaching dangerous levels, in your opinion. He told the business network that liquidity in financial markets and aggressive use of borrowed money would likely create more trouble episodes in markets where investors gorged on leverage to the detriment of the broader market.
Roubini’s comments follow the collapse of Archegos Capital Management, about two weeks ago, which sent ripples in the markets, briefly and has so far resulted in Credit Suisse AG taking on a $ 4.7 billion charge for loans to the family-run office. by Bill Hwang. Archegos is Hwang’s family investment arm and he was forced to liquidate billions in assets after bets on stocks like Discovery DISCA, + 4.80% and ViacomCBS VIAC, + 4.01% suddenly turned against him and forced his lenders. to undo your leverage investments. Roubini said that a rise above 2% for the benchmark 10-year Treasury bond TMUBMUSD10Y, 1,676%, which is used to set rates on everything from mortgages to auto
loans, could encourage more investor explosions. Rising returns have prompted investors to sell more speculative bets because higher returns mean that borrowing costs are also increasing for investors, making these speculative bets less economically attractive. Known as “Dr. Doom ”in some circles for his bearish predictions, Roubini has been persistently pessimistic about his outlook for markets and the economy since the pandemic took hold in serious ways in the United States last year. Last year, he said that the V-shaped bounce “is turning into a U, and the U could turn into a W if we don’t find a vaccine and we don’t have enough stimulus
.” Roubini was once named one of the “Top 100 Global Thinkers” after his pointed calls about the impact of the housing
crisis more than a decade ago. Meanwhile, US markets were trying to extend gains, after the Dow Jones
Industrial Average DJIA, -0.00%, and the S&P 500 SPX Index, + 0.11% on Monday, both ended at records. Meanwhile, the Nasdaq COMP Composite Index, + 0.07% was trading
within 3% of its all-time closing high.