Friday, February 19, 2010

Roubini Was Right About The Dollar Carry Trade

Remember last year when Dr. Nouriel Roubini said that any sudden rise in the U.S. dollar's value would put risky assets in a world of hurt? That world is starting to dawn on us:



The dollar posted its sixth straight weekly gain against the euro, the longest streak since 2000, as investors speculated on when the Federal Reserve would withdraw monetary stimulus after it raised the discount rate on Feb. 18.


See what happens when you keep interest rates artificially low just to artificially stimulate the economy? Stock prices become artificially high and you end up living in a world full of artifice.

We're entering a very difficult period for U.S. stocks, IMHO. Anybody who goes long stocks right now without doing serious fundamental analysis will probably be kicking themselves for many years.