Now could be the best time to be of the opinion that cash is king.

Just sayin'.

This guy is hinting that the financial stock exchanges will be shut for a week or two until everything is sorted out. This may not be great news for our, the little guys, stock/pension portfolios near-term. OMG!



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http://www.theaustralian.news.com.au/business/story/0,28124,24547842-20142,00.html

Financial expert Nouriel Roubini foresees hedge calamity
October 25, 2008

REGULATORS could be forced to shut down markets for as long as a fortnight to staunch the panic beginning to beset the hedge fund industry.

A leading expert Nouriel Roubini, a professor at New York University, told a London conference that hundreds of hedge funds were poised to fail as frantic investors rushed to redeem their assets and force managers into a fire sale of assets.

"We have reached a situation of sheer panic. Do not be surprised if policymakers need to close down markets for a week or two in coming days," Professor Roubini said.

Jon Moulton, the private equity investor behind Alchemy Partners, forecast a tidal wave of hedge fund collapses in the next three months.

"We estimate 60 per cent of the capacity of UK hedge funds will go this year, through bankruptcies and redemptions," Mr Moulton said.

Professor Roubini is a former senior adviser to the US Treasury. A well-known bear on economic prospects for the world economy, he predicted in February that a catastrophic financial meltdown was on the way.

"This is the worst financial crisis in the US, Europe and now emerging markets that we have seen in a long time," he told the Hedge 2008 London conference.

There are widespread predictions of calamity in the hedge fund sector, which has been thrown into crisis by the collapse of Lehman Brothers, the Wall Street investment bank, and the ensuing turmoil in world markets.

Andrew Umbers, the chief executive of Evolution Securities, said as much as 25 per cent could be wiped off the value of hedge fund assets under management as a result of the combined effects of performance losses and redemption calls this year.

Mr Umbers has predicted that one hedge fund in four will fail by the end of the year. If right, his forecast could mean that hedge funds have lost up to $US500billion ($746 billion) of assets over the full year, having peaked with investments at $US2trillion.

Emmanuel Roman, the co-chief executive of GLG Partners, a New York-based hedge fund, joined other experts in predicting that hundreds of hedge funds would fail before the end of the year.

"In a fairly Darwinian manner, many hedge funds will simply disappear," Mr Roman told the conference.

He said that regulators would move to impose order on the industry.

Performance at hedge funds has plummeted this year as unprecedented market turbulence and unpredictable changes in economic forecasts, particularly involving inflation, have placed many investors on the wrong side of big directional bets.

Investors redeemed about $US31 billion of hedge fund assets globally during the three months to the end of September and a further $US179 billion was wiped off the value of their holdings by falling markets, according to Hedge Fund Research, a Chicago research firm.

Hedge funds lost 4.6 per cent during September, according to Eureka Hedge, another research firm, which said that the investment class was on course to post annual losses for the first time since 1998.

Several legendary funds have suffered heavily this year, including Toscafund, which is down 55 per cent year to date, and Citadel, which has lost an estimated 27 per cent for investors.

The Times

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also:

http://syndicated.livejournal.com/nakedcapitalism/649124.html

Roubini Foresees Possible Market Shutdown

After the Fed, ECB,, Bank of England, and other central banks took unprecedented measures over the last month to restore liquidity and recapitalize banks, Nouriel Roubini sounded slightly less gloomy. He had deemed that the authorities has avoided a systemic financial meltdown, but a nasty, protracted recession was in the offing.

It appears that Roubini has reversed himself with his latest remarks He now says systemic risks are increasing due to hedge fund margin calls, redemptions, and liquidations, and the authorities may be forced to close financial markets. Note that this is not a new line of thought. During the turmoil of the last month, particularly the week of October 6, some professional investors were quietly discussing the possibility of short-term market closures.

From Bloomberg (hat tip readers Dwight, Saboor):

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....

``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.....

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...

``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.''

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also:

http://www.nakedcapitalism.com/2008/10/roubiini-foresees-possible-market.html

...."Anonymous said...

The seemingly inevitable election of Obama could spark a honeymoon bear rally, forestalling any alleged need for a market closing.

Traditionally, right after a US election, the newly elected (or re-elected) president enjoys a post-election bump in approval ratings. This is true even in the case of close-fought elections like 1960 Kennedy-Nixon or 1948 Truman-Dewey (although Bush-Kerry 2004 was apparently an exception). Psychologically, people have a tendency to close ranks and buy into a collective decision, at least for a honeymoon period.

Here is a list of New York Stock Exchange special closings since 1885. Note July 31 - November 27 1914 (for the outbreak of World War I), several one-day closings in November 1929 (to deal with heavy-volume paperwork, supposedly), and March 6 - 14 1933 (national banking holiday), and September 11 - 14 2001. Nothing for Pearl Harbor, but they did delay the start of trading on January 24 1925 for a solar eclipse.

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I don't know about all this but I do think that the thing of it is is this: don't panic, but be diversified financially, and look for opportunities now and be patient, very patient. Things will bounce back, they always do, eh?

bye