Tags: Roubini | risk | asset | bubbles

Roubini Sees Risk of Asset Bubbles

By    |   Tuesday, 10 March 2015 07:00 AM

Ace economist Nouriel Roubini of New York University is concerned about the steep ascent of many financial markets.

The S&P 500 index, for example, has soared threefold in the last six years.

"Roubini believes asset reflation can lead to asset inflation, which in turn can lead to asset frothiness, eventually turning into asset and credit bubbles, and ending in a crash," Usman Hayat of the CFA Institute, wrote in a description of Roubini's speech at a CFA Institute conference in Kuwait City last week.

"The dilemma facing the Fed, Roubini contends, is that if it tightens monetary policy too late, it could lead to 'the mother of all bubbles' by 2017. And if the Fed tightens too soon, it could cause a hard landing of the real economy."

The central bank has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008. Analysts' consensus forecast is that the Fed will begin raising rates around mid-year.

Newsmax Finance insider Sean Hyman doesn't expect a move until September or October, he told Newsmax TV.

"I don't think that rate hikes are something to be feared at this point, because even if they start hiking, and even if they put in a couple of hikes this year, it'll probably be 25 basis points," the editor of Ultimate Wealth Report newsletter, told Newsmax TV's "Midpoint" show.

"So if you get 0.5 percent, is that going to kill companies in America? It's not. The earlier hikes never hurt companies. It's those later hikes, so I don't think we have anything to fear for quite some time on the rate front."

CNBC commentator Ron Insana sees it a bit differently. "The strong [February jobs] data suggests to the bond market that June is back on the table," he writes on CNBC.

"I have argued that the Fed will not, and should not, raise [interest] rates this year. . . . However, if the data remain this strong in the next two months, it will be increasingly difficult for the Fed to refrain from making its first move."

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Ace economist Nouriel Roubini of New York University is concerned about the steep ascent of many financial markets.
Roubini, risk, asset, bubbles
Tuesday, 10 March 2015 07:00 AM
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