Guest Post: Why 2014 Is Beginning To Look A Lot Like 2008

Tyler Durden's picture

Submitted by Charles Hugh-Smith via Peak Prosperity blog,

Does anything about 2014 remind you of 2008?

For example, the increasing signs of stress in the global financial system, from periphery currencies crashing to China’s shadow banking bailouts to the constant flow of official assurances that all is well and whatever situations aren’t well are on the mend.

The long lists of visible stress in the global financial system and the almost laughably hollow assurances that there are no bubbles, everything is under control, etc. etc. etc.  certainly remind me of the late-2007-early 2008 period when the subprime mortgage meltdown was already visible and officialdom from Federal Reserve chairman Alan Greenspan on down were mounting the bully pulpit at every opportunity to declare that there was no bubble in housing and the system was easily able to handle little things like defaulting mortgages.

Some five years after repeatedly declaring there was no bubble in housing and nothing to worry about even as the global financial system was coming apart at the seams, Greenspan bleated out a shopworn and not very credible mea culpa, Never Saw It Coming: Why the Financial Crisis Took Economists By Surprise (Foreign Affairs magazine, December 2013).  First, he claimed no one foresaw the crisis, and second, he attributed this failure to a lack of insight into “animal spirits,” the emotional drivers of behavior.

Greenspan claimed that the herd behavior of animal spirits drove financial firms (i.e. Wall Street and Too Big To Fail banks) to keep extending risky bets lest they lose fat profits by exiting the risk-on trade too early. In Greenspan’s view, the abundance of apparent liquidity in the bullish phase created the expectation that the liquidity would be available when everyone decided to sell their positions and exit the risk-on trades.

In Greenspan’s words:

“Financial firms accepted the risk that they would be unable to anticipate the onset of a crisis in time to retrench. However, they thought the risk was limited, believing that even if a crisis developed, the seemingly insatiable demand for exotic financial products would dissipate only slowly, allowing them to sell almost all their portfolios without loss.


They were mistaken. They failed to recognize that market liquidity is largely a function of the degree of investors’ risk aversion, the most dominant animal spirit that drives financial markets. Leading up to the onset of the crisis, the decreased risk aversion among investors had produced increasingly narrow credit yield spreads and heavy trading volumes, creating the appearance of liquidity and the illusion that firms could sell almost anything. But when fear-induced market retrenchment set in, that liquidity disappeared overnight, as buyers pulled back. In fact, in many markets, at the height of the crisis of 2008, bids virtually disappeared.”

It wasn’t just gamblers and financiers who were mistaken—so was Greenspan. Numerous analysts waved the warning flag long before 2008, and the financial media began publishing stories about the housing bubble as early as 2005. In claiming no one foresaw the inevitability of a subprime mortgage meltdown and a domino effect on securitized debt based on those mortgages, Greenspan is flat-out wrong.

Greenspan is also off-track on another of his claims: that the global financial meltdown of 2008 was widely considered a “once in a lifetime” tail risk, too unlikely to ever happen.

The founder of fractal mathematics, Benoit Mandelbrot, published a book in 2004 titled The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin and Reward that completely eviscerated the standard portfolio model of immense faith in the low odds of major crises ever erupting in modern hedged markets.

On the contrary, Mandelbrot showed, major crises were likely to erupt far more often than predicted, and with less predictability than was assumed by the cohort of economists and financiers that dominated the Fed and Wall Street.

In other words, not only was the global meltdown of 2008 foreseeable, it was inevitable.

Looking to Charts for Clues

A number of technical analysts have been posting charts that suggest a meltdown-type decline in global markets could occur in 2014—there’s an analog chart of 1929 making the rounds, and Tom McClellan published a chart of the Coppock Curve indicator that looks like the next downdraft is imminent. 

Chris Kimble published a chart of the St. Louis Fed financial stress index that suggests market complacency has returned to the low levels last touched just before the 2008 global financial meltdown. (Kimble annotated his copy of the chart; this is the plain chart.)

There are a great many indicators, metrics and correlations to watch for signs of a breakdown: analog charts that overlay the current markets onto past eras, corporate earnings, credit spreads, volatility indices, investor sentiment readings, inflation expectations, and various carry trades and ratios such as the S&P 500 (SPX) to gold, oil, Treasury yields and so on.

Just for context, here is a chart of the S&P 500 (SPX) from 2005 to the present:

Hindsight is 20-20, as the saying goes, so it’s worthwhile to look at a chart of the Dow Jones Industrial Average (DJIA) I annotated on December 30, 2007. The head and shoulders visible in the above chart—a classic topping pattern—was already visible, but technically, a bullish case could still be made at the end of 2007.

By late summer 2008, just before the collapse of Lehman Brothers unleashed a cascading decline in global markets, the technical picture was much uglier:

The Bullish case had been extinguished by June, when the recovery broke down at the uptrend line, and as a result there were technical reasons to target the 10,300 level (and once below that, then on to even lower targets). 

Properly used, charts help us anticipate what might happen once various targets are hit, but that’s not the same as forecasting a timeline for a global crisis and meltdown. To do that, some fundamental and/or cyclical analysis must be brought to bear.

For example, consider this chart from my friend and colleague Gordon Long of Gordon T. Long Market Analytics & Technical Analysis.

This chart combines an analysis of trend lines and patterns with cycles of speculative bubbles and inflation, deflationary fear, reflation and real deflation.

Martin Armstrong and other analysts have published forecasts based on cycles: the four-year cycle, the 8.3 year cycle, etc.  It is noteworthy that the market peaks in January 2000 and late 2007 were about eight years apart, as were the bottoms in 2002 and 2009.

It’s tempting to extend these cycles and forecast the next top in 2015 and the next bottom in 2017, and perhaps that’s exactly what will transpire. But if we take Mandelbrot’s lessons to heart, we have to accept the fractal nature of markets and the possibility that these cycles may not be reliable guides.

Here are three more charts for your consideration, of income and employment. I’ve annotated the first chart to match what I view as the waves of financialization that have inflated speculative credit bubbles and temporarily, incomes:

Notice that the current asset reflations (or bubbles, if you dare speak the word openly) in stocks, bonds and real estate have failed to lift the year-over-year rate of change in disposable per capita income, which has been declining since 2007.


Income per capita doesn’t reflect the enormous divide between the top 10%, who have seen their incomes rise in financialization, and the bottom 90%, who have seen their income stagnate for four decades:

The number of full-time jobs has also failed to reach the peak set in 2007; clearly, the current asset bubbles have failed to boost meaningful (i.e. full-time) employment.

The Party Is Clearly Ending

Collectively, these charts above force us to ask two questions:

1.  If asset bubbles no longer boost full-time employment or incomes across the board, what is the broad-based, “social good” justification for inflating them?

2.  If employment and incomes are stagnating for the vast majority of Americans, how much longer can assets increase in price, presuming there is still some correlation between incomes and sales, profits, creditworthiness, etc.?

In Part 2: What Will Be Different About the Crisis of 2014/2015, we unpack the unprecedented state and central bank policies that turned a global financial rout into one of the most extended Bull markets in history, and make the case that these -- policies designed to combat a liquidity crisis and then a collateral crisis -- have reached diminishing returns.

As a result the next crisis will not be a repeat of 2008 but a much less fixable and much more monumental crisis.

Click here to access Part 2 of this report (free executive summary, enrollment required for full access).


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Serfs Up's picture

Yeah, that brontosaurus formation on the S&P 500 looks real natural...good luck with that one there, Yellen.

HyBrasilian's picture

 "Why 2014 Is Beginning To Look A Lot Like 2008"


Goldman Sachs [& fellow tribe], have finally built an adequately profitable leveraged position on the SHORT side...

next story!...

DoChenRollingBearing's picture

Well to me 2014 feels a lot like 2008 (or 2007 maybe, no BIG failures yet like the Bear-Stearns hedge funds in 2007), but 2014 also feels like 1976, 1978, 1992 and various other grim-looking years.

Do not ask the Bearing Guy for short term predictions, unless you want to take the other side of the bet...

Just buy and hang on to some gold and you will be better off in case of problems.

spastic_colon's picture

yes well, with the amount of leverage in the system if you're not first out the door, 2 thru infinity will be considered last.


in ten years we will be saying that 2024 feels alot like 2014.

strannick's picture

Is he kidding? 2014 is gonna make 2008 look like 2007.

Its beginning to feel its not like Christmas...

spastic_colon's picture

yes well, with the amount of leverage in the system if you're not first out the door, 2 thru infinity will be considered last.


in ten years we will be saying that 2024 feels alot like 2014.

max2205's picture

Why does Charles keep ignoring that the Fed printed and lied to hide that it printed 4x more than reported.  So now that pandoras box is open it will never be closed.   

Don't forget that tbe only fiscal policy thats affordable comes not from who it should, Congress,  but the Fed without any checks and balances.


Print print print they will till the economy's fixed or blows up

Kirk2NCC1701's picture

"Why 2014 is beginning to look a lot like 1914" is more like it, and more worrisome.

madcows's picture

So, so I says to the Dali Lama "What's in it for me?"

And, And he says, he says "on your CDS soiled sheets, you will make dirty whoopee with old Yellen."

So, I got that going for me, which is nice.

DoChenRollingBearing's picture

It is not my place to contend with the Dalai Lama, but I would probably have suggested that you might just have your date with Rosie Palm and her five little daughters.  You could always think about Yellen, but, hey you know, each to his own...


madcows's picture

it's carl the greenskeeper from caddy shack.  go watch it.  it'd be good for cultural development.

AgShaman's picture

I don't care if you poke me in the neck with a pitchfork....

I'm not goin' there

BlueStreet's picture

China and the EM charts are the ones to look at.  Monthly, quarterly, yearly, they are all broken.  There isn't much the fed will be able to do if those charts prove correct. 

Groundhog Day's picture

Yellen doesn't think we are in a bubble and she has a PHD.  Nothing to worry about, move along..go to a baseball game, eat a hot dog and burger and wash it down with some ice old beer

Jurassic's picture

Aarrrggghh. Its coming!

fonzannoon's picture

What makes this article so important is that we have not had similar "Why 2013" or "Why 2012" is starting to look like 2008 articles, and by this I mean the opposite.

Cursive's picture


SSDD, bro.  Until it's not....

HyBrasilian's picture



I'd say we need the 'kito' WEATHER BALLOON in a case like this... [see comment above ^^^]

I always thought 'indians' stick knives in the ground, and put their ear to them, to detect oncoming stampedes... Or is that a lost art in this day & age?...

Cursive's picture


You can't hear the freight train a coming?  The vibrations are so thunderous, you don't even need ears, much less put one to the ground.  Enjoy today, because tomorrow is filled with trouble....

fonzannoon's picture

Lalalalala (singing with fingers in ears)

This might be crazy what I'm about to say.

(see how far you can make into that without thinking you want to kill that fkin guy.)

Cursive's picture


Prozac nation.  :)


BTW, I've become quite a fan of the cello.

HyBrasilian's picture



prozac ~ meh... Hey ~ in a weird twist of fate... I've become a BILLY JOEL fan...

'Friday night I crashed your party
Saturday I said I'm sorry
Sunday came and trashed me out again
I was only having fun
Wasn't hurting anyone
And we all enjoyed the weekend for a change ..."

HyBrasilian's picture



From where I stand... EVERY DAY is the same as the last... & it's the same as the next... It's the peace & tranquility of NATURE that moves me, [or actually ~ keeps me STILL]... Some people should try it on for size... They might find that they like it...


Only IDIOTS worry about the fate of joobux [& 'especially' ~ their own consideration of their own wealth, or WORSE, 'value' to society predicated upon that false wealth, especially if they only use that in a way to harm aggregates of others ~ & ESPECIALLY further if they're so blind & ignorant that they don't realize that it does]...

In time ~ that concept will become [WAY] apparent to most [but sadly & MOSTLY ~ most of those will only be rosters of generations of ancestors who happen to only 'read' about in a dusty old history books ~ and ask themselves ~ 'how could supposedly THINKING people ever of let that happen]...

Of course ~ the ANSWER to that question will be that there are always ZEALOTS [like 'VD'] around to make sure that that occurs [in the name of HUMANITY ~ Which is also known as "DOING GOD'S WORK"]...!

Groundhog Day's picture

The freight trains have rubber wheels now so hard to hear them coming.....and if your japan, your trains are on magnets so you definately can't hear them coming....until you get hit by one of course

Miffed Microbiologist's picture

Of course you can hear them coming. The problem is the optical illusion. Have you ever stood on a track and watched a freight train approach? If you did you probably wouldnt be alive to tell about it. It has the illusion it is farther away so you don't react in time until too late. Hearing and knowing when it will arrive are two separate things.

However, I do wonder, if "Financial firms accepted the risk that they would be unable to anticipate the onset of a crisis in time to retrench"' would they had done so it they were staring at my shotgun in case they screwed up?


HyBrasilian's picture

@Miffed ~ "Financial firms" is ambiguous [it's as 'faceless' & 'nameless' as saying 'THE FED']...


In the end ~ trying to identify an AGGREGATE is a false pursuit... Why?... Because the PLAYERS change... IOW ~ whilst some students of the technique may latch on [owing, perhaps, to CREED, or IDENTIFICATION, or SUCH]... Ultimately ~ the 'non believers' will disperse [& finally become their own true entities unto themselves]...


But then, OTOH... There are types who 'NEVER' escape the gravity... & usually... 'THOSE' types end up [& remain dedicated players in]:

- banking

- main stream media

- political activism

- jurisprudence


Thus: it would WRONG to blame the 'folk' who, formerly, had incompatible associations, but were able to achieve ESCAPE VELOCITY... But it would be ACCURATE to characterize others, who, as the case may be, represent a MATHEMATICALLY IMPOSSIBLE ASYMMETRIC ratio within the rosters of those pillars of power...


Miffed Microbiologist's picture


You are right. When you say faceless what you are indeed saying they have 1000 faces. Each is employed appropriately to whom they speak. Ambiguity serves it's purpose. Those unnamed ones are as the hydra we spoke of before. As individuals they are relatively innocuous but as an aggregate they are a formidable foe. The stalk is massive and it's roots form masses around numerous countries enslaving millions unbeknownst to their parasitized hosts. A few can see it and realize it will take much more than a sword to lop it off.

I have had interactions with this Hydra. A loved one of mine tried to do battle with it and eventually lost his life for the struggle. They reaped millions upon millions with their victory. I will never forget this. It is personal for me.

"Folks" are never to bear full responsibility for the actions of The Few. However, if history is a teacher, they often suffer unfairly for their association.


Sudden Debt's picture


PlusTic's picture

Blah, blah, blah...nothings going down until the Ponzi stops...and the FEd aint gunna stop anytime soon

Fuh Querada's picture

These technical "analysts" are just fucking incurable. Martin Armstrong consults his Commodore C64 and comes up with a 9.65 year cycle. Oh, no its 8.67 years. Calling Robert Prickter...

Grande Tetons's picture

The last bubble has no playbook. Agreed, fuck the charts. 

disabledvet's picture

1983 was a great time to go long recovery...and obviously equities.

I still think the biggest reason be negative on "stawks" is for the reason i am negative...still..on "stawks"...there simply hasn't been any recovery in the economy at large to justify the returns in the equity space.

Did this stop Wall Street from lending Puerto Rico three billion in a private placement? Nope.

In other words the fact that there is a lot of money sloshing around out there is reason enough to be bullish...this being especially true if you earn your living on the Street. (for the record...obviously...I do not.)

Gold has had a great start to the have treasuries. Equities have really had some spectacular volatility. The fuel cell space alone is worth a dissertation.

Did the world end today? Nope. Tesla up big, Solar City up even bigger.
The only truism since 2008 that has worked is "those who have shorted this market have been annihilated." I made the argument (as a bear) insofar as last year was concerned "you could get a p/e expansion ala 1998." I wish i'd listened to my own advice as i missed out on 20 of the 30% return.

I did just put a buy recommendation out on capstone...which i highly doubt was followed...and that's gone up twenty percent since then even with the collapse of the fuel cell complex yesterday (which was bid and bought today btw.) I will regularly use this forum to air my bitches/gripes, complaints, etc against General Electric Corporation...just because.

To their credit "they haven't gone full retard General Motors yet"...but i would emphasize the term "yet." And i state for the record "capstone energy is the Next Tesla." If you've made your fortune in Tesla I would sell and move into the micro-turbine business. Those things can run on any fuel...and if Russia and Europe are well underway going toe-to-toe over Ukraine then obviously fuel prices are going drop dramatically in order to finance the "collective security arrangements."

I can see oil dropping to 30 bucks a barrel from here...or even lower. And for a LONG time as well.
Already the money center banks have seen their fixed income business vanish...and that's just in New York where they actually have such a business to begin with. It's obviously far worse in Japan and Europe. If the commodity complex starts to head south that will leave only equity issuance and "corporate accounts" for our "Too Big to Fail" institutions as "lending for a profit is simply not part of the business plan." If the USA really has hit the 1983 lows here...this is a great time to not only be a small Bank but an even better time to be one of those "monolithic Federal loan guarantors."

Quus Ant's picture

And what did 2008 look like?

Grande Tetons's picture

Ah man, it was a great time, 2008. Change was in the should been there.

Crying for the arrival of the saviour. 

We need another one...this one did not pan out. 

Bullish Kleenex...and false messiahs.  

Quus Ant's picture

And where are those Obama bling glasses now? 

A whole village in Indonesia is decked out in them no doubt.

Grande Tetons's picture

The whole world is decked out in bling n bullshit. And...they be lovin it, dude. 

Substance, that is so old school. 

Shizzmoney's picture

I feel so glad not voting for that guy (or anyone for that matter).  My bullshit-o-meter still working!

Save_America1st's picture

hasn't each year since 2008 been worse statistically in pretty much every category than the year before it? 

I mean from a normal human being type stand point, of course. 

As for the sociopath, psychopath, globalist, NWO, Cloward and Piven-style MUTANTS who love to see chaos, death and destruction; well, I'm sure they couldn't be happier with how things are turning out up to this point.


Pareto's picture

Add 10 new bear charts = Add 10 new additional pts to the SnP.......or at least thats what it feels like every time ZH posts the chart porn.

_SILENCER's picture

I see squiggle lines on graphs. That doesn't mean much to us common yokels that don't work in NYC skyscrapers and push phantom dollars around. Even I, though, can see that the Dow at 16K is surreal.

What makes everything real however is that I see Made In China on goddamned everything. I see stupid fat control freaks operating body scanners at airports. I see NSA fingers snaking into everything. I see cameras all over the place. I see drugged fat morons believing what they're told.

But as long as the sociopath nightmare-winged fucks that we allow to run this world keep the ponzi alive and control the energy sources they have corraled us into using, we will remian their subjects instead of their conquerors.

Sleepless Knight's picture

S&P   Sucker & Profit

Dr. Engali's picture

Didn't I read this post in 2013? Coming next March : Why 2015 is Shaping up to be A Lot Like 2008.

Shizzmoney's picture

I called a minor to major crash of something as early as 2011, thanks to my "Presidental End of Term Financial Crisis" theory.

Ever since the end of Bretton Woods, there has been some kind of economic turmoil at the end of Presidental terms (or in the case of Bush I and Carter, their first term as it became clear both would lose those elections thanks to shitty economic conditions).

Nixon and Ford had oil cost pressures effecting emerging markets in the Middle East, like the stock crash of Kuwait's market in 1975.  The effected the US greatly as inflation, high unemployment, and crime all rose thanks to the cost of oil (and the political pressures that came with it) *and* the movement from the Gold Standard for the USD.

Carter had "Silver Thursday" in 1980, which would cascade into a high variance in commodity prices into an already shitty economy he took over. A steep fall in silver prices led to panic on commodity and futures exchanges. Volcker raised interest rates in 1982.   

Reagan had the "Flash Crash in 1987", this was the first of the many "bubbles-n-bursts" neoliberal financialization are wrought onto our nation.

Bush I's recession in 1991 was probably the most structural out of all of these.  He raised taxes into stagnant job growth to pay for a war as well as "Bailout, Part 1" (i.e. least at that time, William Black threw the bankers in jail).

Clinton had the "Asian Stock Market Crash" in 1997, and the "DotCom Crash" in 1999 (which created a recession that lasted until we went to war with Iraq in 2003.  What a coincidence!)

Bush II had "Housing Crash" that we still feel effects from.  

The key point here: these crashes keep getting bigger and worse.  All thanks to Fed policy and ball-less politicians.  They also occur somewhat structurally because, well, folks are concerned what their tax rates are going to be!  Add that onto the malfeasance that "the market" creates thanks to its lust for greed at all costs, and its truly a disaster.  Unless you are a 1 percenter.  Then you are probably hedged, and welcome the crash as Mitt Romney once said what he thought of recessions: "Great tiime to buy!".

My prediction in 2011 was that bonds would be the big loser this time (which would force austerity on Western countries).  The market itself could dive, and we've seen all the charts that compares previous similiar data points to crashes in 1929, 1987, etc.  But the Fed's QE4EVA policy ensures that the "Bernanke put" is really "The Federal Reserve Put" and that they will do ANYTHING to prop up this awful, failed, flawed, bullshit of an economic system.  Think Japan, except instead of everybody there agreeing with printing until the trees all die, they just entertain folks like Plosser and Fisher talking shit, and then their TBTF lords promptly telling them to STFU as they print more to prop up asset prices.


nickels's picture

Fool me once, shame on me. Fool me twice, shame on me. Fool me three times, shame on me. etc.

nightshiftsucks's picture

The next time down is the last time,I see a big govt work project and 100 billion a month QE coming.Hell they might even refinance all debt,what choice do they have ?

Shizzmoney's picture

They will never print for people or for works projects.

You're confusing the neoliberal governance with socialist governance.  At least socialist governance (like in France) *pretends* they care about the people.  The neoliberals are all about the "YOLO" ethos.

nightshiftsucks's picture

So China is crashing our ecnomy is stating to take a big dump,what are they going to do ? Let it all fall apart and wait for the sheep to realize they've been fucked ?

dobermangang's picture

We need another large country to cook their books and start building lots of giant ghost cities.   See can.  Kick can down the road.  Repeat.