Lehman

It Is Happening Again: 18 Similarities Between The Last Financial Crisis And Today

If our leaders could have recognized the signs ahead of time, do you think that they could have prevented the financial crisis of 2008?  That is a very timely question, because so many of the warning signs that we saw just before and during the last financial crisis are popping up again.  Many of the things that are happening right now in the stock market, the bond market, the real estate market and in the overall economic data are eerily similar to what we witnessed back in 2008 and 2009. It is almost as if we are being forced to watch some kind of a perverse replay of previous events, only this time our economy and our financial system are much weaker than they were the last time around. We have been living so far above our means for so long that most of us actually think that our current economic situation is "normal."

Here's What Happens When A Central Bank Goes Bust

Over the past several decades, people around the world have become so brainwashed that few people really give much thought anymore to the safety of their currency. It’s not something people really understand... there’s apparently some Wizard of Oz type figure at the top of the hill pulling all the levers of the monetary system. And we just trust them to be good guys. This power rests primarily in the hands of four men who control roughly 75% of the entire world money supply. So, how are they doing?

How Deep Is The Real Economic Problem In China?

This morning’s news that the China leadership has launched a “mini-stimulus” package might confirm what we’ve long feared – China’s economic situation is more perilous than we thought. It looks like a comparatively modest supply-side package of tax cuts, export boosts and railway stimulus, designed to “arouse the energy of the market” according the State Council. But it could be the first of many new programs according to analysts. The state is clearly concerned. That it has been forced to act should be a wake up and smell the coffee moment for markets – the implications of China slowdown could be this year’s game changer in markets.

SAC's Real Gross Exposure: Up To $44 Billion

While the conventional way of looking at hedge fund assets has traditionally been to simply add up the assets under management to estimate gross exposure, as so often happens conventional wisdom is wrong. Because what the "traditional" approach simplistically looks at is merely a fund's equity and ignores all leverage through assorted generic and "shadow" conduits such as repo, loans, rehypothecation, "hedging" and others. Luckily, as a result of Dodd-Frank, hedge funds were required to present their full market exposure when netting leverage as per an annual SEC form known as Form PF. It is here that we learn that SAC's market exposure, something very relevant now that the firm is facing an imminent or eventual winddown, is likely orders of magnitude above what the market believes.

Guest Post: Bankers Own The World

In every era, there are certain people and institutions that are held in the highest public regard as they embody the prevailing values of society. Not that long ago, Albert Einstein was a major public figure and was widely revered. Can you name a scientist that commands a similar presence today? Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value. Money is power. And history has shown that power is never ceded spontaneously or willingly. But the stability of this parasitical system begins to weaken quickly when the lifeblood it depends on begins to dry up. And that's when things can begin to go south in a hurry

Guest Post: Trying To Stay Sane In An Insane World - Part 1

Facts are treasonous and dangerous in an empire of lies, fraud and propaganda. It is maddening to watch the country spiral downward, driven to ruin by a psychotic predator class, while the plebs choose to remain willfully ignorant of reality and distracted by their lust for cheap Chinese crap and addicted to the cult of techno-narcissism. We are a country running on heaping doses of cognitive dissonance and normalcy bias, an irrational belief in our national exceptionalism, an absurd trust in the same banking class that destroyed the finances of the country, and a delusionary belief that with just another trillion dollars of debt we’ll be back on the exponential growth track. The American empire has been built on a foundation of cheap easily accessible oil, cheap easily accessible credit, the most powerful military machine in human history, and the purposeful transformation of citizens into consumers through the use of relentless media propaganda and a persistent decades long dumbing down of the masses through the government education system. This national insanity is not a new phenomenon. Friedrich Nietzsche observed the same spectacle in the 19th century: “In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.”

SEC Warns: Prepare For Repo Defaults

As we warned here most recently, the shadow-banking system remains the most crisis-catalyzing part of the markets currently as collateral shortages (and capital inadequacy) continue to grow as concerns. In recent weeks, between The Fed, Basel III, and the FDIC, regulators have signalled the possible intent to change risk, netting, and capital rules that could have dramatic implications on the repo markets and now, it seems, the SEC has begun to recognize just how big a concern that could be. As Reuters reports, the SEC urged funds and advisers last week to review master repurchase agreement documentation to see if there are any procedures to handle defaults, and if necessary, prepare draft templates in advance. A retrenchment in repo markets is unwelcome news for the liquidity of the underlying securities and the impact on the derivative portfolios should not be underestimated.

Stocks Close At Another All-Time High On Lowest Volume Day Of Year

Thank to Boeing's 'recovery' - since there was no fire today - the Dow gained 20 points (of which 29 points were Boeing). The S&P managed new closing all-time highs on the lowest non-holiday volume day of the year. Bonds were well bid early in following the bad-is-better retail sales print (-7bps from early high yields). Commodities were leaking lower into the early macro data but as soon as it was confirmed that the US consumer is tapped out - gold, silver, copper, and WTI all started to surge higher. Homebuilders notably underperformed, Utilities significantly outperformed with the rest treading water. Early USD strength (on ripping JPY weakness) was removed rapidly following the 'yes, the US economy is dismal' confirming data and the slide continued all day - leaving the USD practically unchanged by the close. This is the 14th up-day in a row for the Nasdaq (longest streak since May 1990), the Russell is over 15% above its 200DMA (a multi-year record), and volume has cratered in the last 14 days.