Economist Nouriel Roubini cooperates with Goldman Sachs Group to launch the first product in a series of planned financial products to provide investors with alternative hedging strategies when the market falls sharply.
Roubini is famous for foreseeing the crisis in 2008 caused by the real estate bubble. As the co-founder of Atlas Capital Team, Roubini helps formulate investment strategies to prevent high risk situations such as runaway inflation, climate change and social unrest.
The Atlas Capital Team Index (ACT) provides a portfolio of short-term and inflation protected US bonds, gold and US real estate trust investment funds after the stock and debt crash in the past year hit the so-called "60/40 portfolio". At the same time, Dalio of Bridgewater and Zoltan Pozsar, a strategist of Credit Suisse, are increasingly speculating about the future direction of the US dollar in the global monetary order, which has aroused interest in alternative hedging.
"The traditional safe haven asset is a long-term dollar fixed income instrument, such as long-term US debt," Roubini said in an interview that people must find new defensive assets to hedge against inflation risks: short-term US debt, inflation protected US debt, gold and real estate.
His comments coincided with the collapse of Silicon Valley banks, which triggered a sharp fluctuation from US Treasuries to US dollars to bank stocks. Although Silicon Valley Bank "has unique vulnerability in terms of unrealized securities losses erasing its equity, many other banks will erase one-third to one-half of their capital if losses are realized," Roubini also said, "these huge losses are related to the rise of long-term yield."
Atlas said that it planned to provide annuities, total return swaps and other derivatives based on the ACT index. A Goldman spokesman declined to comment. Atlas said that it plans to eventually launch exchange traded funds (ETFs) based on the index, and then will launch retail products, including blockchain based or token based products.
"If the average inflation rate in this decade is 6% - a moderate and possible scenario - instead of 2%, then the yield of 10-year U.S. government bonds must be at least 8%. Today, the yield of government bonds is around 3.5%, and last year fixed income and 60/40 portfolios were bloodwashed," Roubini added. The classic 60/40 and risk parity investment is based on "the negative correlation between stock and bond prices: risk seeking, risk aversion, growth and recession. But the premise is that inflation is low and stable."
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