The worst may be yet to come.
Investors are shorting a falling US dollar to fund speculation in risky assets observes Nouriel Roubini in the FT. Around the world and across the board, the price of risky assets -- equities, commodities, emerging market asset classes and credit instruments -- is rising on the account of investors' ability to profitably leverage bets against the US dollar.
But the dollar cannot continue falling forever, and its tradictional function as a safe-haven suggests that it could rise suddenly if an international crisis develops. Roubini warns, " . . . one day this bubble will burst, leading to the biggest co-ordinated asset bust ever. . . . A stampede will occur as closing long leveraged risky asset positions across all asset classes funded by dollar shorts triggers a co-ordinated collapse of all those risky assets.
Roubini expounded further on the "comming commodoties correction" in a recent interview.