Monday, August 18, 2008

I Want A Cool Nickname Like Dr. Doom...

There's was a brilliant article profiling Nouriel Roubini in the NY Times Magazine this weekend. Dr. Roubini's work was once ignored as permanently pessimistic, but today realism seems to be gaining traction again and his star has never been brighter (although I'd guess many on Wall Street wish he'd go away).

The whole article is worth a read but the key paragraph is below:

For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”

Markets: The great commodity unwind continues and I don't see any reason for it to change this week. Short oil, short corn and long equities (particularly large cap tech) is the trade until Labor Day. The one variable is that the next two weeks are the big vacation weeks on Wall Street. Most of the players will be with their families in the Hamptons, flying to Nantucket, sitting in traffic on the Garden State Parkway. This can lead to some wild trading particularly on Friday which is option expiration for August.

* Disclosure I have a position in DUG (an ultra-short oil fund).

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