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Is it Just Me or is 2010 Feeling A LOT Like 2008?
Is it Just Me, or is 2010 Feeling a LOT Like 2008?
Haven’t we
been here before?
One of the
strangest aspects of history is that it not only repeats itself but that the
repeats often come in rapid succession. Today, the entire financial world is
repeating the 2008 debacle on a sovereign basis and few if any commentators
seem to sense it.
In 2008, the
financial world was first rocked by the Bear Stearns crisis. True we’d already
seen some major volatility in the credit markets since the Summer of 2007, but
Bear Stearns was the first sign that something MAJOR was happening.
Despite the
clear implications of this collapse (that investment banks along with the
entire financial system were in BIG trouble) most commentators shrugged the
issue off. In fact, the financial headlines for the Spring of 2008 largely
consisted of every Wall Street CEO on the planet publicly stating, “the worst
is over.” Most commentators bought into this and proclaimed Bear Stearns would
be an isolated event.
Then we had
Hank Paulson’s “Blank Check Bazooka” for Fannie and Freddie in July 2008. As
you no doubt recall, Paulson told Congress that if he had a “blank check” to
bailout Frannie, the mortgage market would stay afloat because “if everyone
knows you have a bazooka in your pocket, you won’t have to use it.” (I’m
paraphrasing).
Given the
level of this intervention (combined these two firms accounted for roughly half
of the US mortgage market) the Blank Check Bazooka was a wake up call for the
general populace that the worst was NOT over and that things were starting to
get REALLY messy in the financial system.
Then came
September 2008, when everything came unhinged in a matter of weeks. Various
financial firms that had been in business for decades vanished overnight
(Merrill Lynch, Morgan Stanley, Wachovia) being merged with larger entities.
And the entire financial system teetered on the brink of outright failure.
So what can
we glean from this Crisis and the psychology surrounding it? Well, we can see
that Systemic Crises follow a clear pattern when it comes to social psychology
and how people react. That pattern is:
1) A
minor player goes under and people shrug it off for a few months
2) A
larger issue arises requiring a vast sum of money and people begin catching on
that something LARGER is at stake
3) Suddenly
everything comes unhinged and the entire world panics
Today, no more than two years after this
debacle, we are witnessing the EXACT same pattern play out on a sovereign
basis.
For
starters, Greece is the Bear Stearns issue: a minor player (its GDP is that of
Massachusetts). And just as Bear Stearns was swallowed up by JP Morgan,
permitting the financial system and stock market to remain afloat for a few
months, Greece has been largely swallowed up by the European Central Bank and
IMF’s interventions.
The “Blank
Check Bazooka” issue this time around was the European Central Bank’s $1
trillion bailout in June. Just like Paulson’s Bazooka, the plan was rushed and
poorly organized. And just like Paulson’s Bazooka it has failed, accomplishing
nothing but maintaining the illusion that the financial system in Europe is OK,
when, in point of fact, it’s as busted as the US mortgage market was in July
2008.
Which brings
us to today.
Thus we have
already seen a minor player collapse (Greece) as well as a major issue (the
European banking system) require massive intervention to remain afloat.
What comes
next? The systemic collapse/ open panic.
The only difference between 2008 and this year is that this time around the
Crisis will be sovereign in nature.
We’re not
quite there yet, but given that my Crash indicator is on and we’ve received two
confirmed Hindenburg omens, we’re heading there sooner rather than later. This
Crisis will likely begin with the Euro breaking down again to new lows, but
will eventually spread to the Yen and ultimately the US Dollar.
I cannot
predict the speed or precisely how bad things will get, but if toxic debt on
Wall Street’s balance sheets nearly took us under in the Fall 2008, you can
imagine how what it will be like when the US’s balance sheet is the primary
issue.
KABOOM!
Good
Investing!
Graham
Summers
PS. If
you’re worried about the future of the stock market and have yet to take steps
to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE
Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages
contain a wealth of information about portfolio protection, which investments
to own and how to take out Catastrophe Insurance on the stock market (this
“insurance” paid out triple digit gains in the Autumn of 2008).
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FFS, history doesn't repeat itself. It's just us here for a while and the same day repeating itself on the globe. When you've got the same system with the same pawns, it's likely that you think you see similar patterns. It's just that the crisis that started in 2008 was never solved. It was just put in a cryogenized state. You know, like those bodies of famous presidents that they one day hope to revive. Similarly here, decision-makers, TPTB, were caught totally unprepared for what happened in 2008. Just read the news again, the interviews with the IMF director, the G8 meetings and backdoor frenzy to get a grasp on what was happening. They did not fully understand the extent of the crisis, because they run out of textbook text on this, no one ever saw anything similar, because it's not 1929 again, folks. Wake up!
Back in 1929, you could still build a new ideological perspective, which was this version of capitalism. At the end of the 90's everyone knew socialism was over, kaput, done, book closed. Capitalism forever! In 2008 TPTB understood that it was a crisis of capitalism itself, the system, the ideology and there was nowhere to go, no other tested paradigm available to shift to.
So they shrugged it off and focused on trying to fix the system back to its former state, but this time... with regulations and safety knobs. It doesn't matter, those who are trying to fix it are people educated within the span of a few generations, in schools in which their teachers and professors taught them how to implement the same system that failed in 2008. There is nothing else in their brains at the moment. Just look at this Bernanke guy, he knows he's too small to solve anything about this crisis other than playing his monetary lego. So he passes the burden on to the legislative and executive powers, because the situation is way beyond his institution's power or scope. Why?
I tell you why, because the solution to this crisis can no longer be economic. How much illusion can the system inject into people's brains to continue to consume like it's their reason to be? I bet no Harvard can teach you that.
Bernanke could fix this problem at any time, unfortunately the fix involves slamming on the brakes (raising discount interest rate(s) to 5%+), and watching the resulting gravy-train wreck as the biscuit wheels come flying off!
Ass clown alert! - Ass clown alert! This ass-clown would have us profit from the collapse. As governments were mortgaging our children's future to the 4th and 5th generation to bail out the bankers, this ass-clown was concerned about how get triple digit returns:
... and your point is ?
What goes up, must come down. If it doesnt, call your doctor who will probably say stop stimulating your economy. Thats where we are now, except our economy never went up after over stimulation . Perhaps its just living to high and too long on credit --or old age
It feels *WAY* too similar to 2008. The entire summer of 2008 I just WAITED for the shoe to drop, but I knew it wouldn't crash 'til the Fall, 'cause that's when we take things seriously.
It is exactly like that now. There is no reason why things shouldn't just completely fall apart right now, but I am sure that once again, the collapse won't happen until at least Back to School time is here.
I think Kunstler's nailed it pretty good:
http://www.kunstler.com/blog/2010/08/skidding-toward-fall.html
Unfortunatly Bernankie a Student of the Depression is playing out his Thesis on us. I am one that believes that Teachers are not good at implementing their thoughts or principals.
I believe that their logic is usually flaued and biased by thier own theorys of what could have would have been done. But, put into practical application never work/
I think Bernankie is afraid to do anything. So he sits on his hands and just prints money to placate the banks.
I have never seen him even in Senate Hearings were he does anything but stare like a lost soul. Heaven help us a the soul he has lost is the soul of the United States of America.
When they said he was a student of the depression, I thought they meant he knew how to avoid another one....
See what happens when I assume...
He was the student. Now he's the teacher and we're the students..
Obi-wan: "Only a master of evil, Darth!"
WTF?
I closed my shorts yesterday.
This wasn't supposed to happen until next week!
Fuck. Where do I enter now? This is too hard! (that's what she said).
Yea, i realized the repeat cycle after watch Batman Dark Knight the other night and reading Tyler's entry re Lunatics Running the Asylum.
Lets not forgot one other commonality, it's an election year and one side is trailing the other - crisis begets bailouts begets votes
Color me unimpressed with the commentary. Didn't everyone on this site say the same thing months ago?
Didn't you mean '28 instead of '08?
We are entering the 2008 Fall period over again to perfection. The real collapse started to begin around Sep/Oct, then markets really fell off the cliff quickly in the Jan/Mar frame. Here we go again, yet this time this scam market falls further into the abyss, due to the currency having been slaughtered by Benny boy and his cronies.
Hyper-inflation on the way, with rates soaring on Treasuries, and markets still crashing to new lows as the dollar is shredded from fear of default.
If this turns into Argentina,they will close the banks for a "Holiday".Do I put my cash next to the ammo or do you have a better idea?
"Maybe if we listened to hisstory, she wouldn't have to repeat herself" Lilly Tomlin.
Just like nature, the mind abhors a vacuum. When facts are obscured we look for patterns and similarities. In actuality, every situation is different. This time is different from all others. But the old axiom does hold true: Those who ignore or forget the lessons of the past are doomed to repeat them. The lessons learned were good for their periods -- what are going to be this period's lessons? Therein should lie our efforts.
This feels more like 1931 probably felt. When does this end? It's been nearly three years, do I have to relocate to Costa Rica to live in an economy that isn't terrible?
Chile is looking better and better. Right now they're actually trying to rescue some trapped miners even though it will take months and cost money. If the same mine were here they'd probably drop some VX down the shaft, seal it up and report that all were killed in the initial cave-in.
Don't give 'em any more ideas after the Corexit in the Gulf.
See ya for the party in Sept./Oct.!!!!!!
Got Tea?
Obama 2008: I will create 3 million jobs
Obama 2009: I said, save or create jobs
Obama 2010: MY recovery has touched all of you
Don't ever touch me like that again!!! Or I will . . .
Obama 2011 Q2: the American people should stop clinging to their lives and property!
Obama 2011 Q4: no, I don't see any tanks rolling down the streets of DC.
Obama 2012 Q2: Oh, great King Blankfein, I humbly beseech thee to shelter your faithful, poor servant who so nobly followed your commands! Please, please, PLEASE let me into your island fortress!
Obamatron = Baghdad Bob V2.0! :D
Now show us where on the doll the recovery touched you...
holy shit that made me laugh out loud!
Right there ... It hurt and made feel bad.
ObaMao 2012: How can you racist pigs have not reelected me to a second term?
It's not just you.
Agreed. It feels strangely similar to 2008.
However, the participants are prepared with cash. Liquidity is not the issue this time around and even in event of defaults, CDO contracts will not get paid out. They will go up in smoke and the derivatives casino stops. Merkel is preparing for that and her stance is unwavering. Geithner can take a page from her playbook.
The lower the calls for the indexes or the higher the calls for PMs and other resources, the less believable a crash scenario is becoming.
There won't be a short game to play.
I agree with your sentiments. TPTB will just not allow a crash to happen. They justify it under the auspices of 'National Security'. Who knows what measures they will employ to prop up the markets this time.
I don't agree with it, I hate it, but unfortunately I've resigned myself to the notion that our markets will remain broken indefinitely...
TPTB will just not allow a crash to happen.
You mean like 2008?
No, like 1929, when the Fed had all the power it does now.
Even TPTB were caught flat-footed in late 2008/early 2009. They, like the rest of the market, had no idea it would get as bad as it did. But they are ready this time around. Couple the preparation time with the flows out of equity mutual funds - i.e. no retail investors left - and you have a market comprised of government and institutional players only. The institutions are aware and will play the game to protect themselves and their outrageous bonuses. TPTB look the other way as long as they tow-the-line. These circumstances can continue indefinitely...
Soliders carry out their orders till they can't.
But, as ususal the "experts and central planners" may be prepared for the last crisis but not this one. How, for example, will pension funds pay out on their leverage soverign CDS insurance sells except by massive liquidation of equities to meet collateral calls? My guess they won't be able to do so. And they have to pay the pensioners don't they? A recent article showed just how little cash and cash equivalents the pension funds are carrying-no yield in cash eh? Their yield chasing will be the next thing that crashes the market-and except on this site no one in the MSM is even considering this possibility.
Time is nature's way of keeping everything from happening all at once!
What do you do when ALL the dynamite in the World blows??
Everyone agrees that TPTB should have avoided the LEH collapse. They didn't and some here know why and understand.
If it crashes again, it's because TPTB are on the other side of the trade - AGAIN.
They try to collect on their CDO's or point a gun to the head of taxpaying citizens in the G8 and say, "pay up or die".
Really, it's not that difficult to grasp. But this time they know that everyone is predicting the crash and positioning on the other side or not at all and waiting for a super cheap stock entry level. Like IBM at 50 cents or something stupid.
They turned the market around yesterday and couldn't keep it together today for some reason. Why?
If you think 2008, 2009 and 2010 are bad...
JUST WAIT TILL WE HIT 2011!!
Its called GOLD REVALUATION.....
They can revalue whatever they want as long as they don't meddle with my supply of lead.