The NEXT big crash????? by SignyM

REAL WORLD EVENT DISCUSSIONS

The NEXT big crash?????

POSTED BY: SIGNYM
UPDATED: Tuesday, October 27, 2009 12:26
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Friday, October 23, 2009 10:33 AM

I believe in solving problems, not sharing them.

Financial Times (of London)

Rally fuelled by cheap money brings a sense of foreboding
Published: October 22 2009

Earlier this month, I received a sobering e-mail from a senior, recently-retired banker. This particular man, a veteran of the credit world, had just chatted with ex-colleagues who are still in the markets – and was feeling deeply shocked.

“Forget about the events of the past 12 months ... the punters are back punting as aggressively as ever,” he wrote. “Highly leveraged short-term trades are back in vogue as players ... jostle to load up on everything from Reits [real estate investment trusts] and commercial property, commodities, emerging markets and regular stocks and bonds.

“Oh, I am sure the banks’ public relations people will talk about the subdued atmosphere in banking, but don’t you believe it,” he continued bitterly, noting that when money is virtually free – or, at least, at 0.5 per cent – traders feel stupid if they don’t leverage up.

“Any sense of control is being chucked out of the window. After the dotcom boom and bust it took a good few years for the market to get its collective mojo back [but] this time it has taken just a few months,” he added. He finished with a despairing question: “Was October 2008 just a dress rehearsal for the crash when this latest bubble bursts?”

I daresay this missive reflects some element of hyperbole. But I have quoted it at length because the question is becoming more critical. Six months ago, the financial system was in deep distress, reeling from a meltdown. Now despair and panic have been replaced not simply by relief – but, in some quarters, euphoria. Never mind the high-profile rally that has occurred in the equity markets; what is perhaps most stunning is the less visible rebound in debt and derivatives markets, as risk assets have displayed what Barclays describes as a “stellar performance”.

In the corporate bond world, for example, spreads have collapsed for both risky and investment grade credit. Emerging market spreads have shrunk too. Meanwhile, publicly traded real estate markets (the EPRA index) have soared some 70 per cent, according to Barclays, helping to spark a surge in its overall measure of market risk appetite – a pattern that is reflected, even more dramatically, in similar metrics compiled by Goldman Sachs.

No doubt many brokers would like to attribute this to fundamentals. After all, last year’s crash in asset prices was so extreme that some rebound was almost inevitable. And recent macro-economic data have been quite encouraging, particularly when compared with what was seen a year earlier.

Yet, if you talk at length to traders – or senior bankers – it seems that few truly believe that fundamentals alone explain this pattern. Instead, the real trigger is the amount of money that central bankers have poured into the system that is frantically seeking a home, because most banks simply do not want to use that cash to make loans. Hence, the fact that the prices of almost all risk assets are rallying – even as non-risky assets such as Treasuries bounce too.

Now, some western policymakers like to argue – or hope – that this striking rally could be beneficial, in a way, even if it is not initially based on fundamentals. After all, the argument goes, if markets rebound sharply, that should boost animal spirits in a way that could eventually seep through to the “real” economy.

On this interpretation, the current rally could turn out to be akin to the firelighter that one uses to start a blaze in a pile of damp wood.

Yet, what worries me is that it is still very unclear that that pile of damp wood – aka the real economy – truly will catch fire, in a sustainable way, if the current stock of firelighters comes to an end. After all, much of the current economic rebound seems to reflect stimulus packages (and flattering year-on-year comparisons) that will end next year. And while there are still plenty of firelighters around – in the form of monetary stimulus and ultra low market rates – there seems to be a good chance of a future interest rate shock as central banks implement their exit strategies. Meanwhile, the securitisation sector could yet deliver another credit shock next year, since that is the one part of the financial system that has not started working yet – but where government support measures are supposed to stop next spring.

So I, like my e-mail correspondent, am growing uneasy. Perhaps, the optimistic “firelighter-igniting-the-damp-wood” scenario will yet come to play; but we will probably not really know whether the optimists are correct for at least another six months.

In the meantime, it is crystal clear that the longer that money remains ultra cheap, the more traders will have an incentive to gamble (particularly if they privately suspect that today’s boom will be short-lived and want to score big over the next year). Somehow all this feels horribly familiar; I just hope that my sense of foreboding turns out to be wrong.

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Friday, October 23, 2009 11:18 AM

RIVERLOVE

oh great! Well, what's another crash anyhow? Like water off a duck, right? And why not. All the crooks are still there. They're hardly reformed or ashamed of what they did. They certainly have oodles of our bailout money for important things like unlimited use of corporate Gulfstream jets for friends and family, country club golf course gold premium elite apartheid memberships, strippers, limos, jewelry, home theaters, spa retreat treatments with special flown-in lava packs from Fiji, 5-star executive dining with the finest steaks and wines from all over the world, and firsties on all the skyboxes in the sporting and entertainment world. Gorrammit it, why didn't I go into the rutting financial world 20 years ago when I had options? I could'a been somebody, a big-time, playa! I chose the education field. What a dumbass!

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Friday, October 23, 2009 1:08 PM

FREMDFIRMA

BOINK!
http://en.wikipedia.org/wiki/Dead_cat_bounce

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Friday, October 23, 2009 3:25 PM

ANTHONYT

Freedom is Important because People are Important

Hello,

In my own industry, I am seeing signs of the same mentality that brought us into the banking mess in the beginning. Money is cheap, opportunities are plenty, and the survivors are competing to re-consume a market lost. How can we make more loans? What tweaks can we make to our policies? What new angles can we take advantage of?

This is all fine if it doesn't get out of hand. However, I'm not sure what has changed to prevent the whole thing from happening again in 5-10 years. And next time the country may not be able to afford to buy its way out of trouble. We'll still be busily paying off the current titanic debt. What then?

I worry.

--Anthony

"Liberty must not be purchased at the cost of Humanity." --Captain Robert Henner

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Friday, October 23, 2009 4:24 PM

KWICKO

"We'll know our disinformation program is complete when everything the American public believes is false." -- William Casey, Reagan's presidential campaign manager & CIA Director (from first staff meeting in 1981)

Shit, Tony - we're still busy paying off the debt from the LAST time this very thing happened! The '89 S&L debacle's last payment on the money we borrowed to bail them out? Yeah, that payment's due in 2013. I'm not convinced we won't be borrowing MORE money to pay for MORE bailouts to cover MORE garbage loans by that time.

Hey, proof that capitalism works! All hail the free market!

Mike

Let the wild rumpus start!

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Friday, October 23, 2009 4:34 PM

ANTHONYT

Freedom is Important because People are Important

Hello,

That's not quite genuine. In free market capitalism, there'd be no bailouts. Bad companies would simply fail.

What we have here is something more insidious- social wellfare programs for corporations.

--Anthony

"Liberty must not be purchased at the cost of Humanity." --Captain Robert Henner

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Friday, October 23, 2009 7:15 PM

KWICKO

Well, yeah - we let these people take incredible risks with investors' money, and if it all goes to hell, we bail them out - the banks, NOT the investors. If it all goes well, then they make out like bandits. Actually, either way, the banks make out like bandits. I wonder why they use that expression... maybe because it's so goddamned close to the truth.

So we have a system now where all profits are privatized, and all losses are socialized. Does that seem right to you?

And to make matters worse, we've implemented, so far as I can find, not one single piece of REAL legislation to stop this shit from happening again. And we've already PROVEN to the banks that they can do whatever they want, and we've got their backs. So now, they're not only going to go forward with ridiculously dangerous investment scams, but they've now been given carte blanche to go into even RISKIER ventures. After all, what's the worst that can happen? The investors lose their money? Big fucking deal - the bankers still get THEIR bonuses, right?

All I ask is that nobody actually asks me to feel one fucking iota of sympathy for these pukes when they start getting dragged out of their mansions and shot down like rabid dogs in the street, or hanged from the light standards of their gated communities. I don't know about you, but I'll be manning one of Frem's Pitchforks, Rope, & Axe booths.

Put it this way - if Al Qaeda or some foreign nation had done this much damage to our country with a terrorist attack on our financial centers, what would our response have been? So why haven't we started bombing Greenwich Connecticut or The Hamptons? Why isn't the Army occupying West Chester? If we can hang Saddam, why is Alan Greenspan still sucking air through his hole?

Mike

Let the wild rumpus start!

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Friday, October 23, 2009 9:37 PM

FREMDFIRMA

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Friday, October 23, 2009 9:48 PM

FREMDFIRMA

Hoo Lordy, that's even FUNNIER!
http://www.pitchforkandtorch.com/
Damn scalpers.

(Cribbed from above URL)

ALREADY bitin into MY market, AGAIN.
And while sucking Rethug cock with a chug and a guzzle, do they even KNOW how stupid they are ?

What are they gonna do, burn down the local welfare office and scream about that 1% they just "saved" while the other 99% go into the pockets of the grinning psychopaths who put them up to this shit ?

Do those grinning psychopaths realize they are gonna fry too, cause when that mob gets a rollin do you think they'll stop to check party affiliations ?

Do THEY HAVE ANY IDEA just how fast someone like me with a bullhorn could take that mob from them ?

Yeah, keep right on playin right into my hands, hand me everything I need to crush you, ya damn bloody fools...

-Frem

It cannot be said enough, those who do not learn from history, are doomed to endlessly repeat it

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Saturday, October 24, 2009 1:34 AM

ANTHONYT

Freedom is Important because People are Important

Hello,

With all this talk of torches and pitchforks, of people being dragged out and shot...

I find myself envisioning the need of a Scarlet Pimpernel to balance the unrestrained vengeance of revolutionary murderers.

--Anthony

"Liberty must not be purchased at the cost of Humanity." --Captain Robert Henner

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Saturday, October 24, 2009 2:12 AM

PIZMOBEACH

... fully loaded, safety off...

HI Mike, Frem, Signym, or any other rich-folk-bailout-receiving haters... Hi, Devil's Advocate here

I thought the idea of the bailouts was that to not do it would have been worse. My life is pretty much the same as before 'cept the balance sheet for America looks pretty effed. Day to day, not so different though, and my few investments haven't gotten worse.
Without bailouts the money that would have been drained from the system would have been mine and yours and every other small investor... who's dinero do you think would have been flushed first without the bailout?

I'm sincerely uncertain.

I do think the pitch forks and torches are an apt icon for any "revolt" - like marching on castle Frankenstein AND a bit backwards... getting into reactionary tea bag territory. They are funny, glad to see someone seizing the opportunity to make a few bucks on it.

Scifi movie music + Firefly dialogue clips, 24 hours a day - http://www.scifiradio.com

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Saturday, October 24, 2009 4:00 AM

NCBROWNCOAT

Quote:
Originally posted by AnthonyT:
Hello,

In my own industry, I am seeing signs of the same mentality that brought us into the banking mess in the beginning. Money is cheap, opportunities are plenty, and the survivors are competing to re-consume a market lost. How can we make more loans? What tweaks can we make to our policies? What new angles can we take advantage of?

This is all fine if it doesn't get out of hand. However, I'm not sure what has changed to prevent the whole thing from happening again in 5-10 years. And next time the country may not be able to afford to buy its way out of trouble. We'll still be busily paying off the current titanic debt. What then?

I worry.

--Anthony

"Liberty must not be purchased at the cost of Humanity." --Captain Robert Henner

Hate to say it but I'm seeing it too from the big guys at least. At the "small town, community bank" level things are going on very, very conservately and they are trying to retrench. Something the big guys aren't doing at all.

Loans are a bitch to quality for especially on the consumer side. One thing to watch out for is the commercial property side of things. Lots of money was given out freely and that may be the next thing to tumble.

http://fireflyfaninnc.livejournal.com/

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Saturday, October 24, 2009 5:22 AM

KWICKO

Quote:

HI Mike, Frem, Signym, or any other rich-folk-bailout-receiving haters... Hi, Devil's Advocate here

Hi Pizmo - I think you may have read me wrong, a bit. I was actually somewhat (note the *somewhat*, because there was, and still is, trepidation) in favor of the IDEA of the bailouts - that we have to help these industries out, or they will suck the rest of us down in the whirlpool left behind when they sink (to reference an old seafaring myth...). I *get* that part. But where the hell do multi-million-dollar "bonuses" come into that equation? Where I lose all sympathy is when I hear things like Company A was given $33 billion in bailout funds to keep them alive, and now they've reported $3.9 billion in profits, so they've set aside - by remarkable co-inky-dink - $33 billion in bonuses to be handed out to the people who "saved" them. Uhhhhh... wouldn't that be US? You know, the taxpayers? The people whose money was actually given to them, against the will of a great many of us?

THAT is the shameless greed that grinds my gears. And note, I'm not calling for violence, I'm not advocating murdering anyone in the streets; I'm just saying that WHEN it happens, let's don't pretend shock, horror, or surprise. It's not as if anyone shouldn't have seen it coming. And I'll express EXACTLY as much remorse and sorrow as conservatives expressed upon the execution of Saddam, because if these robber barons are any better than him, it's only by the tiniest measure of degrees. They've hurt as many people, or more, and they've doubtless been key in the deaths of a great many people through their actions and inactions.

So when bad things happen to bad people, don't be surprised to see me trying to stifle a bit of a smile, or silence the tiniest of giggles.

Mike

Let the wild rumpus start!

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Saturday, October 24, 2009 5:34 AM

KWICKO

Frem: What cracks me up the most is that the Pitchfork and Torch Society says they're "PEACEFUL", and all they want is the kind of reform the French got during the Revolution in 1789, which is why they chose the pitchfork and torch as their emblem.

Which is rather like saying that I'm a peaceful German who just wants his country to be rich and powerful again, and that's the only reason I fly the flag of the Third Reich.

Here's part of their "credo", taken from theirwebsite:

Quote:
One hundred senators, 435 congressmen, one president, and nine supreme court justices, 545 human beings out of 300 million, are directly, legally, morally, and individually responsible for the domestic problems that plague this country.

So much for taking personal responsibility, eh? EVERY problem of yours is the direct fault of those 545 people. You have nothing to do with the bad choices you've made that have led you to this point in your life. :)

Mike

Let the wild rumpus start!

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Saturday, October 24, 2009 6:06 AM

PIZMOBEACH

... fully loaded, safety off...

Quote:
Originally posted by Kwicko:

THAT is the shameless greed that grinds my gears.

I am right there with you on that - "bonuses???" Fer screwing up?

Yeah... wonder if there's a watchdog group monitoring that other than journalists? Google after football.

Scifi movie music + Firefly dialogue clips, 24 hours a day - http://www.scifiradio.com

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Saturday, October 24, 2009 6:18 AM

SIGNYM

I believe in solving problems, not sharing them.

Pizmo- several large components of "the system" were tottering last August/Sept/Oct. In fact, one of my investments crashed when Lehman went belly up.

I wouldn't have minded the bailout so much if it had been done differently. The problem is... bear with me, but please keep in mind what I'm telling you is the god's honest truth... Bank A made a series of bad and quite probably fraudulent loans. They took those loans (listed as "assets" b4 it all went belly up) and loaned out roughly eight times that amount to others... including Bank B. Which took THAT money (listed as assets), and loaned out about eight time that, including to other banks, including Bank C. Which loaned out about eight time THAT amount.... In fact, there was nothing preventing two banks from bouncing the initial asset back and forth between themselves, multiplying and re-multiplying the initial loan value more than a hundred times. (If you're thinking to yourself... "Why... does that mean the banks are creating money???" the answer is "Exactly!")

What Bush did... and Obama continued... was to go to Bank C, and make up their loss. And go to Bank B, and make up their loss. And go to Bank A, and make up their loss. And go to the insurance company which insured these investments, and make up their loss. And go to the bond-insurers (monolines) and make up their loss.

IF they hand simply supported the initial loans, all of the follow-on assets would have been stabilized.

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Saturday, October 24, 2009 7:46 AM

OLDENGLANDDRY

I'm afraid this latest "Rescesion" is just the first step in a long staircase down to the end of Capitalism.
Now, it can be replaced by something better, or....
Something worse.
You decide.

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Saturday, October 24, 2009 7:57 AM

PIZMOBEACH

... fully loaded, safety off...

Quote:
Originally posted by SignyM:
Pizmo- several large components of "the system" were tottering last August/Sept/Oct. In fact, one of my investments crashed when Lehman went belly up.

I wouldn't have minded the bailout so much if it had been done differently. The problem is... bear with me, but please keep in mind what I'm telling you is the god's honest truth... Bank A made a series of bad and quite probably fraudulent loans. They took those loans (listed as "assets" b4 it all went belly up) and loaned out roughly eight times that amount to others... including Bank B. Which took THAT money (listed as assets), and loaned out about eight time that, including to other banks, including Bank C. Which loaned out about eight time THAT amount.... In fact, there was nothing preventing two banks from bouncing the initial asset back and forth between themselves, multiplying and re-multiplying the initial loan value more than a hundred times. (If you're thinking to yourself... "Why... does that mean the banks are creating money???" the answer is "Exactly!")

What Bush did... and Obama continued... was to go to Bank C, and make up their loss. And go to Bank B, and make up their loss. And go to Bank A, and make up their loss. And go to the insurance company which insured these investments, and make up their loss. And go to the bond-insurers (monolines) and make up their loss.

IF they hand simply supported the initial loans, all of the follow-on assets would have been stabilized.

SignyM: Thanks for the recap - my initial reaction is "couldn't have been that simple" - if it had been then surely there would have been enough folks/competitors circling who wanted harm to come to Banks A, B and C, that there would have been a bigger sh*t storm.

And if it was that simple then why not just do it ("simply support the initial loans")??

Where was Paul Krugman?

Scifi movie music + Firefly dialogue clips, 24 hours a day - http://www.scifiradio.com

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Saturday, October 24, 2009 8:37 AM

OUT2THEBLACK

Really , this isn't setting up a 'next' crash...It's just a carefully-orchestrated same-old crash-in-progress...Controlled demolition .

'" A currency reflects the strength of an economy and society over time. Of course, if the US were stupid enough to enact the 10-year spending plans projected by the White House — with a deficit of $1.9 trillion in 2019 — the country will be ruined. I do not think America has so far lost its senses that it will commit suicide in this fashion," reports London Telegraph's Ambrose Evans-Pritchard.'

https://secure.swissamerica.com/offer/thestory.php?tcode=SA-$story

'Geopolitical-Economic Story of the Year!

Dollar Crisis: THE Story of 2009-2010

As faith in Obamanomics flickers, the U.S. dollar burns

BY DAVID BRADSHAW ~ Editor, Real Money Perspectives
October 22, 2009

The dollar is making new economic headlines daily as the world rushes to find a new reserve currency with a more trustworthy store of value. Meanwhile, the Fed, Treasury and White House are embracing a weaker dollar, while espousing a "strong dollar". These October news headlines detail what's at stake as the world makes plans to ditch the dollar ASAP.'

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Saturday, October 24, 2009 2:37 PM

KWICKO

Quote:
Where was Paul Krugman?

He was (A) decidedly NOT being listened to by the Bush administration, who think he's the anti-christ, and then he was (B) decidedly NOT being listened to by the Obama administration, who think he's too much a leftist.

But yes, if Bush had initially stepped in and had Paulson inject bailout fund AT THE BOTTOM OF THE MARKET, where the real risk was (people defaulting on home mortgages was what set all this off, remember), then those payments would not have been missed, which would then not have caused the loans that were borrowed against those mortgages, upstream at the next investment bank, do go belly-up. Instead of, say, paying ONE loan off and making it good, and thereby injecting confidence in the market, the Paulson plan was to in effect inject the money to pay off those eight-cubed and more loans that had been made off the basis of that original single loan, the only actual loan that had really gone bad.

Only it wasn't just banks loaning out EIGHT times the value of the loan; in many cases, it was banks loaning out 75 or 100 times the value of the original loan. So one loan goes toxic, and infect 75-100 others, each of which does the same, ad infinitum...

But yes, it really could have been stopped in its tracks, or forestalled, by a minimal investment at the bottom. But that runs counter to trickle-down theory, and besides, you'd never want to give "the little guy" a break and NOT the big banks, right?

Mike

Let the wild rumpus start!

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Monday, October 26, 2009 2:15 AM

KWICKO

Madoff cohort found dead in pool behind his mansion.

http://www.foxnews.com/story/0,2933,569514,00.html

I know an alleged human being is dead, but my first reaction when hearing this was, "That's ONE down... NEXT!"

Like I said, the milk of human kindness has done run out for these fuckers.

Mike

Let the wild rumpus start!

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Monday, October 26, 2009 1:04 PM

DREAMTROVE

This cracked me up. After ten years as a financial analyst I didn't need the id on this one ;)
Yeah, I concur.
Actually, to be more specific I'd go with late kondratieff wave. 2012 bottoms the long cycle, which means Obama's re-election chances look dim, and it will coincide nicely with a mayan apocalypse.

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Tuesday, October 27, 2009 12:26 PM

OUT2THEBLACK

http://www.globalresearch.ca/index.php?context=va&aid=15838

Fall of the Dollar on G-20 Finance Ministers Agenda

by Bob Chapman

Global Research, October 26, 2009

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