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Alternative Market Briefing

Roubini: we are paying the consequences, Sound advice on fair value, GLG: Some strategies will have to die – Hedge 2008 conference (day 2)

Friday, October 24, 2008

Opalesque’s London news editor Benedicte Gravrand reports ‘live’ from the HEDGE 2008 conference (details here) in London.

Bear Roubini Economist and founder of rgemonitor.com Nouriel Roubini showed no mercy on his audience: “The tsunami of defaults is only just starting,” he said. Hundreds of hedge funds will go bust. We are reaching a point when systemic danger becomes larger rather than smaller – we are at panic point, under the falling knife. “I would not be surprised if some Western stock markets were to close for a few days".

There will be severe recession in the U.S. and in Europe and this will be the worst in decades. $600bln minimum would be needed to save credit markets. Financial markets are becoming completely “dysfunctional”.

To illustrate the systemic collapse, even a small country such as Iceland (who borrowed 12 times its GDP’s worth) can have significant effect on the world economy. Emerging economies are on the tipping point too.

Everyone has been in favour of financial innovation which has lead to more complexity in the markets and more systemic risk; now we are paying the consequences.

“The only light at the end of the tunnel is that it will come after the financial train wreck. That’s my only assessment,” he said. Roubini also warned about future geopolitical consequences and the beginning of the decline of t......................

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