Billion Dollar Fund Managers Agree: The Government Never Fixed the Underlying Economic Problems, So We'll Have Another Crash

George Washington's picture

Washington’s Blog

While the snake oil salespeople at the retail investing
level and the bobble heads on the kool aid selling financial channels
have been saying for years that we're in a "recovery" (albeit a slow
one), the billion dollar fund managers are saying that nothing has
changed and we'll have another crash.

As Bloomerg reports:

Mobius, executive chairman of Templeton Asset Management’s emerging
markets group, said another financial crisis is inevitable because the
causes of the previous one haven’t been resolved.


“There is
definitely going to be another financial crisis around the corner
because we haven’t solved any of the things that caused the previous
crisis,” Mobius said ...“Are the derivatives regulated? No. Are you
still getting growth in derivatives? Yes.”


The total value of
derivatives in the world exceeds total global gross domestic product by a
factor of 10, said Mobius, who oversees more than $50 billion. With
that volume of bets in different directions, volatility and equity
market crises will occur, he said.

The global financial crisis
three years ago was caused in part by the proliferation of derivative
products tied to U.S. home loans that ceased performing, triggering
hundreds of billions of dollars in writedowns and leading to the
collapse of Lehman Brothers Holdings Inc. in September 2008.

Gundlach notes that we've still got a quadrillion dollar derivative
overhang which dwarfs the size the of real global economy, the
government hasn't done anything to fix the basic problems in our
economy, and so we'll have another crash:

Pimco co-CEO Bill Gross has repeatedly said that the U.S. is running a Ponzi scheme and says:

Ultimately creditors and investors are at the behest of a central bank and policymakers that will rob them of their money.

Pimco co-CEO Mohamed El-Erian predicts that "financial repression" in the form of a negative real rate of return for savers is coming to America.

The New York Times reports:

some senior Wall Street executives acknowledge the lack of change
surprises them, given how poorly the industry performed last fall and
the degree of government support necessary to keep it from collapsing.


was a general feeling that an enormous amount of additional regulation
should be put in place to prevent what happened that weekend from
happening again,” said Byron Wien, vice chairman of Blackstone Advisory
Services and the former chief investment strategist for Morgan
Stanley and Pequot Capital. “So far, we haven’t seen a lot of action.”


J. Shiller, the Yale University economics professor who predicted the
dot-com crash and the housing bust, said the window for change may be
closing. “People will accept change at a time of crisis, but we haven’t
managed to do much, and maybe complacency is coming back,” Professor
Shiller said. “We seem to be losing momentum.”


Kenneth C. Griffin,
founder and chief executive of the Citadel Investment Group, a
Chicago-based hedge fund that manages $13 billion, said that regulators
and lawmakers needed to impose rules so failing banks could be shut,
rather than allowed to operate indefinitely with taxpayer support.

taken a lot of steps for the worse, and not for the better, in terms
of the structural underpinnings of our capital markets,” Mr. Griffin
said. “We have to change the rules and correct the fundamental flaws in
the financial system.”

While the big boys try to sell the "dumb money" on a recovery under a "greater fool" theory, the smart money knows the score.

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ATG's picture

It is not a case of choosing those [faces] that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees

Keynes, General Theory of Employment Interest and Money, 1936

ATG's picture

Given enough inside information, I could ruin the Bank of England


ATG's picture

Markets can remain irrational longer than you can remain solvent


Pladizow's picture


digalert's picture

It was fixed by the twins Frank N Dodd...I crack myself up.

Gordon Freeman's picture

Byron Wien is a leprous, lying thief.  It is nauseating to listen to that fuck call for regulation, while simultaneously doing everything in his power to steal as much as possible from his customers...

max2205's picture

GW, only problem is we will crash from SPX 3,000 to 2,500... woop de do

P-K4's picture

Do you think Alice Cooper was thinking of QE when he sang "Billion Dollar Babies" ( a song of overindulgence according to ... or did he meet Blythe earlier in life ?

I would like to see a video remake with him tearing heads of dolls representing the bailout buffoons.

TheMerryPrankster's picture

Please clean your plate dear

the lord above can see you

don't you know people

are starving in Korea?

Smokey1's picture

Why bother to post a video of a dumbass who HATES gold but loves cash? You might as well have posted a video of Bernanke.

twotraps's picture

wow its all a silly game, there are no consequences for anything and the govt can finally admit after all these years that it really is a Pretend Account and all the crisis stuff is just for show.

SheepDog-One's picture

They never intended to fix the underlying problems in the first place.

ratso's picture

THE SKY IS FALLING! - It must be true - all the people who control all the money are saying it and we know how truthful they are.  CRASH HELMETS ON. 

pasttense's picture

"the smart money knows the score."

Well where exactly is the smart money investing?

The header was wrong. Instead of "Billion Dollar Fund Managers Agree: The Government Never Fixed the Underlying Economic Problems, So We'll Have Another Crash; it should read something like:

Billion Dollar Fund Managers Agree: We  of Wall Street and the Banks Paid off the Politicians So the Underlying Economic Problems Would not be Fixed. The Peons will Have Another Crash but We  of Wall Street and the Banks will have more Bailouts and will be Fine.

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reddweb's picture

They are just preparing the masses for the next round of bail outs. This media propaganda will reduce the shock factor, and cajole the masses into acceptance.


See they are too big to fail, your children/babies will hurt!

chartcruzer's picture

fiat currencies in the presence of debt bubbles fail.    It's just natural law.

Watch the long term trends for the pop.


Interest Rates[s218718281]&disp=P

Milestones's picture

As I previously posted on the fuck-a shima thread "do we need to execute every corporate officer in the world?" I wil now add all Board of Directors members also.    Milestones

sun tzu's picture

Don't forget all of the enablers in government - bureaucrats, Congress, judges, law enforcement, regulators, lobbyists, lawyers etc

ATG's picture

I work for a Government I despise for ends I think criminal


painequalschange's picture

"Everyone" agrees a crash is coming - does that mean it will?

What is a small time investor to do? looks better and better, at least you are helping a specific person towards a specific goal.