George Soros Warns Of Biggest Market Crash To Come, As "We Are Facing A Yet Larger Bubble" Than During Credit Crisis

Tyler Durden's picture

George Soros, speaking at a meeting organized by The Economist, warns all those who are throwing their money into the equity pit, that "the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis." Advice from Soros or from CNBC. You decide. Reuters reports that Soros said "the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned." We hope all those who are buying stocks have very tight stop loss triggers.

“The success in bailing out the system on the previous occasion led to a superbubble, except that in 2008 we used the same methods,” he told a meeting hosted by The Economist at the City of London’s modern and impressive Haberdashers’ Hall.

Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble.

“We have added to the leverage by replacing private credit with sovereign credit and increasing national debt by a significant amount.”

The one thing allowing those invested to sleep at night is the observation that it took 10 years between the 1998 Asian crisis and the 2008 credit crisis. "If the pattern is repeated, it should at least mean we have another 8 years to go before the next crash."

We would take the under on that. In 1998 and all the way through 2008, developed countries as a percentage of their GDPs were at most half od where they are now. At this point the entire credit house of cards continues to exist only so long as credit conditions for US sovereign debt can be massaged by the Fed enough that the world forgets there are is $10 trillion in debt issuance on deck over the next decade (a conservative estimate). It is a virtual impossibility that the money printer of even what may still be considered the reserve currency (although that distinction is rapidly shifting back to gold once again) can withhold a multi-trillion issuance onslaught and a multi-trillion corporate/CRE refi wave with 10 Years at under 4%. The next crisis will, as Soros points out, begin in the sovereign debt arena. In fact, it has already begun. Here is Reuters with an extended report on Greece's formal request for IMF aid. Net result - add another $560 billion in public leverage to the system.

h/t Chris

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spyware-free's picture

The decrepid old vampire speaks. Hey George, we can see your shorts.

Cognitive Dissonance's picture

This decrepit old vampire is no less nor no more credible than the new vampire, that lovable squid we call GS.

So your point is?

spyware-free's picture

my point is nothing more than stating the obvious, Soros is a vampire. Much like your useful and obvious response that GS is the new vampire.

Every thread has it's arrogant asshole. I sense a touch of arrogance in your question. If that is the case you are hereby nominated.

Cognitive Dissonance's picture

K-Y please.

Now why would you edit your comment after telling me to shove it where the sun don't shine?

andy55's picture

Perhaps because your tone warrants it?

merehuman's picture

there's some truth to that CD

Cognitive Dissonance's picture

And so there was nothing wrong with the ad hominem attack by spyware-free against Soros? I'm not defending Soros. I'm defending his comments, which are completely valid. The poster is attacking Soros in a effort to discredit the comments. This is the purpose of the attack. So everyone who agrees that Soros is a scum bag is dismissing his comments? Come on people, it works both ways. Information is information regardless of the messenger or speaker.

I pointed out that the validity of Soros (and thus his comments) is no better or worse than GS. So it's the information that's important, not the speaker. In an article highlighting Soros's comments, what is the purpose of attacking Soros except to diminish his comments. On a web site/blog whose only purpose is to disseminate information, the first comment under the article ignores the information and attacks the information speaker. And my tone is bad because I ask the poster the purpose of the attack?

Wake up people. Your programming and conditioning is showing. Your view is distorted by your distaste for Soros.

http://en.wikipedia.org/wiki/Ad_hominem

tip e. canoe's picture

over the last 12 months, if i had more carefully considered the position of those who i did not agree with for whatever philosophical or emotional reason, i might not be a wiser man, but i'd certainly be a richer one (then again, i would have also had to give up 28% of that to help buy more toys for the boys).

Miles Kendig's picture

White noise Friday CD.  Always the process of attempting to create another villain, loser or whatever to try and shift blame or impropriety onto rather than simply addressing the content of the message will rear its head from those that demand what they refuse to provide.  Just because someone has a commercial interest or position does not render their observations moot.  In the case of Soros it can be a challenge to discern the influences that effect his judgment, as hold true for most of us rendering the basis of the challenge to Soros's position as either an observation of the whole, themselves included, or as a willing refusal to acknowledge it.  This seems especially germane since the information that is being demanded as some sort of requirement to discern validity is not being furnished by the person making the demand.

Problem Is's picture

Well Blondie...

I think Colonel Douglas (CD) Mortimer just shot off the tip of your cigar...

Or as Colonel Mortimer said to the Hunchback:

"I generally smoke just after I eat. Why don't you come back in about ten minutes?"

Uh... I think I better move along...

Fish Gone Bad's picture

For a moment I thought I had accidently gotten onto Myspace.  Nope.  This certainly isn't Kansas.

dumpster's picture

well Dorothy just follow the yellow brick road

Sqworl's picture

Yikes!!!!!! Runnnnnnnnnnnnnnn  

Miles Kendig's picture

This I gotta see.  Peace pal

williambanzai7's picture

I remember Soros saying this in his book which was released about 2 months before the last meltdown.

plocequ1's picture

Does this mean Google won't reach $19,000 per share?

SgtShaftoe's picture

It will, but a 6 piece chicken nugget will be the same price...

zenmeister's picture

Do chicken nuggets count as tangible assets?

contrabandista13's picture

chicken nuggets are financial assets that can be used as collateral for TARP/KFC.....

 

I just doubled down.....

 

Best regards,

 

Econolicious 

dumpster's picture

just doubled down

so you bet another 250 bucks  lol

dumpster's picture

sure chicken nuggets are tangible assets .. but try eating gold ...

Yes We Can. But Lets Not.'s picture

This talk is making me hungry for some gold nuggets

JW n FL's picture

Soros, Chanos Blast Banks

Apr 14 2010 | 11:52am ET

Two top hedge fund managers piled on U.S. banks this week, with George Soros and James Chanos offering pointed criticism.

Soros said yesterday that the U.S. bank “oligopoly” needs to be broken up. The Soros Fund Management founder added that he backed the so-called Volcker Rule, which would ban banks from owning, operating or investing in hedge funds and private equity funds, as well as from proprietary trading, as well as putting limits on their size.

The four largest banks in the U.S. are an oligopoly that “does need to be broken up,” Soros told an Economist magazine event in London. Soros, a top donor to the U.S. Democratic Party, is the richest alternative investments titan in the world; his $25 billion hedge fund has about 6.6% of its assets invested in financials; Citigroup, one of the oligarchs, is its fifth-largest holding.

Meanwhile, Chanos is calling for an investigation of the banks, saying that their proprietary trading operations—and not hedge funds—were to blame for the financial crisis.

Kynikos Associates’ Chanos told PBS’ Charlie Rose this week that regulators need to have a look at the bank’s prop trading records from 2008 [See Full Transcript]. He said that banks were the largest buyers of credit-default swaps that year, not hedge funds.

“We need to find out because hedge funds and short sellers are being vilified and being pointed to as the cause or additive to the problem,” he said. “And, in fact, people like me were covering our financial shorts in 2008. We had put them on in 2005 and 2006.”

http://www.finalternatives.com/node/12129

________________________________________________________________________________________________

 

It seems to me that Wall Street is now sqeezing even the big boys... Oops, welcome to the Main Street club boys... take your shoes off and open a beer and enjoy the show...

 

I wonder who has the more powerful lobby? Sorros with his monies or Wall Street with un-limited tax payer monies?

Never mind, I answered my own question.

Commander Cody's picture

Welcome to bailout universe, where every financially inept, corrupt, irresponsible, and/or complicit company/government/individual/institution gets a bailout to continue the illusion that all is well.  And, the bailer is the US middle class.  I feel so powerful.  Question is, when will I shrug.

AnXmarine's picture

Question is, when will I shrug.

It depends.  Who is John Galt?

curbyourrisk's picture

I am John Galt.  I gave the world the idea of securitization.  It was supposed to free mankind from risk.  Instead you stole it and turned it around.  You turned unmitigated risk into the biggest risk of all.  You made it bigger than life.  You chopped up the paper so many times, no one knows who really holds the notes anymore.  Who gets paid?  Who gets bankrupted?  No one really knows anymore....so guess what, you're all bankrupt.  Because you could no longer manage the risk, you created off balance sheet entities and special purpose vehicles.  When you could no longer count high enough to determine your exposures, you sold CDS's against them to further reduce spread the risk.  You ruined a good thing.  I never should have given it to you.  You never understood the risks involved in going risk free.  You never explained the inherent risk to those you sold it to.  You collected fees on the pooling, you collected fees on the sales, you collected fees on the creation of the derivatives.  You sold things of no value, you did not deserve your profits.  Securitization is non-productive.  You bring no value stripping things apart for the sole purpose of raping and stealing from someone.  You have poisoned my message.  It must end......It will all end.  Will it matter?  Does anyone care???  There comes a time when you can no longer service the debts, can no longer collect your management fees and when you can no longer restructure the cash.  Cash flow is king and without it, we die.  The math is never wrong, and the system has been broken.  It is time we take back what you stole.  It is time bring down the house.  I am John Galt.

False_Profit's picture

i am john galt.  i am anonymously buried in the payroll of large corporations that are so blind, they cannot see the hand of tyranny in front of their face.  so encumbered by government bureaucracy as instituted by the looters, that their free-market inertia is grinding to a collective halt.  so exposed by the corrupt banking policies that have evolved since the inception of the federal reserve, that their overseas markets have not only dried up, but are now stronger than they.  moochers demand more meat fron their carcass, however, the dried, decaying skin has not yet been removed to expose the dry, hollow bones beneath, as the taxidermist bankers have labored galiantly to hide the shell of a body which the hagfish hath carnivorously devoured in the name of equality...justice...progression.  there is no more meat to be had.  the die is cast.  fate will not be cheated through fiat manipulations.  the moochers have demanded to be satiated and delivered from the evil of consequence, and the looters have obliged the former, while of course taking their due along the way, but know that the latter is an unavoidable consequence.  the moochers have demanded "we are americans!  we have a right to what is not rightly ours!"  and the looters have obliged over and over.  freedoms have been stripped.  rights have been awarded.  circuses have been performed.  bread has been provided.  industry has been usurped.  finance has been regulated.  taxes have been levied.  debt has been monetized.  wealth has been redistributed.  contracts have been abandoned.  government has become the savior of the moochers, and their numbers are growing.  government is now the executioner of the producers...and our numbers are diminishing.

the paradigm has changed.  "to each according to their need, from each according to their ability" has replaced "endowed by our creator certain unalienable rights, of which include the right to life, liberty, and the pusuit of happiness."

i am john galt.

we are john galt.

 

George the baby crusher's picture

Actually I am John Galt, and so is my wife.

dumpster's picture

john galt he is not lol    long paragraphs of mismash they are  .  burma shave. 

mouser98's picture

i read the book, but i skipped over the 40 page speech... thanks for paraphrasing it for me lol

Anonymouse's picture

That was the best part of the book.  Nothing you didn't already know, but well stated.

tip e. canoe's picture

john galt has left the building.

anony's picture

“There might be some sort of justification for the savage societies in which a man had to expect that enemies could murder him at any moment and had to defend himself as best he could. But there can be no justification for a society in which a man is expected to manufacture the weapons for his own murderers.”
 (h reardon)

Crime of the Century's picture

"That's just wepwehensible teabagger talk"

(b frank)

Carl Spackler's picture

While I do not disagree with the fundamental structural issues he points out, what I get out of this is that he has amassed a major short-on-equities position and is asking others to put tight stops in now (as opposed to hedge with puts) to help build up the downside, sell momentum.

Soros just needs the fuse to be lit to get the equity plunge machine in motion.

 

 

fuggetaboutit's picture

So? How is that any different from every idiot on CNBC who runs the "mid cap growth fund", that is long the bottom decile of the russell 2000 because hey thats there the action is, getting on tv every half hour assuring you that 2008 never happened and its all up and to the right for asset prices?

 

Racer's picture

The Russell is smaller businesses right?

Well how come small business confidence is still falling?

Lux Fiat's picture

Mish/Shedlock also raised some interesting questions about the apparent disconnect between the latest retail numbers (up), and state sales tax revenue (down).  Could be due to legitimate differences in time frames represented by the data, or other factors.  But it does make me want to look into it further.

hamurobby's picture

I think it is because he sees more frailty in the market because it is so relatively THIN (volume), something the vix does not always see? This might be why the market has gone up so fast, and why he thinks it will go down even faster with moderate selling.

 

 

Rider's picture

Next cry-sis 10 years, from now... really?!

Racer's picture

And what about the dotcom bust in the middle of those 10 years?

Bam_Man's picture

"Oops. Forgot about that one. So many bubbles...so little time."

zeroman's picture

While he is telling us this, he is probably one of players.  Nonetheless, a tea party can go on for a while such as we saw after 2001 recession.  It took nearly 7 years for another bust.  I am bearish on our markets due to knowledge.  The reality is that everyone agrees that the emperors clothes look great.  As such, they intend to stick to that story.

fuggetaboutit's picture

true, it did take 7 years, but guess what, from the bottom in 2001 it took almost 5 years AND a giant credit bubble AND booming internatinal growth AND a housing bubble to get the S&P to 1200 - 5 years PLUS all that

From the bottom in 2008 it took less than 18 months with NONE of that (yes, emerging economies doing better, but Europe is doing terribly and is materially bigger)

Maybe the crisis is a ways off (personally, not so sure) but anyone who thinks equities should be here is nuts

sgt_doom's picture

Probably@!!!!!!!

You might want to check with his cousin, Madeleine Albright, on that "probably."

 

lbrecken's picture

Why continue to babble about greece as no one cares until it blows.......why i cant explain but thats a fact.