Charting How Everything Changed In 2008

Tyler Durden's picture

Between macro-economic 'religious' experiences, regulatory uncertainty, and legislative gyrations, the world appears to be a very different place now than before 2008. It seems that from the 'Lehman' moment (some might call it an 'epiphany' moment), and later the US downgrade, markets realized that the impossible was possible and while every long-only manager will try to convince you that nothing has changed, these four charts (via Barclays) will go a long way to proving that everything has changed. Whether it is policy uncertainty, the frequency of 'fat-tailed' events, market illiquidity, or the domination of correlated 'macro' risk over idiosyncratic diversification; trading (or investing) has profoundly changed since 2008.

1) Regulatory/Legislative Uncertainty has experienced a regime shift.

Current issues include:

  • Markets continue to be affected by the uncertainty surrounding the implementation of Dodd-Frank
  • In addition, there continues to be overhang from the Supreme Court review of the 2010 federal healthcare law. A decision is expected Thursday
  • The uncertain outcome of the fall presidential and congressional elections, and the potential implications for legislative policy and the fiscal cliff will also begin to affect markets as we head closer to the election

2) Fat-Tails Are Fatter


Any policy/macro developments today have a more profound impact on risk assets than in the past.

3) Rising Systemic Correlation Has Caused Macro-Risk To Dominate Investing


Macro Forecasting vs "Stock Picking"

  • With heightened policy uncertainty and the prospects for a resolution to Europe driving markets, the past year has had, comparatively, the smallest opportunity set for single-name trades versus macro trades in the past 15 years
  • We believe this trend will continue throughout 2012 as broad concerns about European sovereigns/banking system, a global growth slowdown, and the US presidential elections dominate the investment decision process


4) Markets Have Become Notably Less Liquid


Fewer Participants, Less Liquidity

  • Dealers have shuttered their prop desks as a result of increased regulation
  • Hedge fund participants, especially those engage in correlation trading, have declined
  • With fewer participants and new entrants in the market, there are fewer cross currents and opportunities for price discovery
  • Market participants who were prolific sellers of protection prior to the crisis either no longer exist or are no longer actively engaged in the CDS market
  • The lack of prolific sellers of credit protection has made it more difficult for dealers to hedge and has consequently contributed to lower levels of dealer inventory



Change indeed - maybe this time it really is different


Source: Barclays 

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LawsofPhysics's picture

Gee, in an environment of regulatory capture (crony capitalism bordering on fascism) it appears that private losses are immediately socialized.  Now who would have thunk it?  Credit/debt markets tell the tale.  where is the fucking default and jubilee?

MarsInScorpio's picture

Thank you ZH for publishing the charts that show this is The Second Great Depression.


Yes, everything has changed. The market in so many things that mattered has collapsed - in one example as shown by the collapse of housing yesterday. The artificial wealth effect illusion notwithstanding, if the FED flow did not exist, that market would be at a collapsed level as well.


We are in a depression - accept that reality, and plan accordingly for the collapse of Europe, the US, and the so-called BRICs, when the inevitable collapse of the central bank ponzi collapses, and with it, the entire House of Cards it now supports.


veyron's picture

Emperor has no clothes

CaptainObvious's picture

Shhhh, don't say that out loud!  Don't you realize there are drones overhead, man?

TheEmperor's picture

The Sith have their black cloaks always...


Young fool, perhaps you speak of the imminent closure of the Comex..

I can assure you, we are safe from your silver vigilantes here. 

midgetrannyporn's picture

I for one am happy about the lower dealer inventory. Now if they would only unwind their derivative book in an orderly fashion before it all blows up.

TacticalZen's picture

70 Trillion in non-standard CDS's? Dream on. Orderly & $70 trillion don't belong on the same page.

CPL's picture

World derivatives market in 2007, last time anyone bothered to mention the size of it was 1.4 Quadrillion dollars.

Who knows what the shitpile looks like now...I doubt even the people managing it know anymore.  The power of large numbers and .01% interest could be a math specization focusing in the power of fractal growth...of debt.  in terms of 2007, the world had already spent 100 years well past it's break even point.


If using Greece as the model, I suppose the world being sold under derivative chains by this point in time would amount to 340 years of human labour and effort pissed away.

francis_sawyer's picture

RobotTrader has become a 'market maker' with his single trade every day in Lululemon...

Cursive's picture

These charts read like an EKG of a heart attack victom in the ER.  It's a "Fourth Turning."  Expect shitstorms until the reset.

EL INDIO's picture

I had no gold or silver prior to 2008

midgetrannyporn's picture

lulz. yeah, don't buy it when it's cheap like it was in the 90s.

EL INDIO's picture

The old money is worth more than the new one so PMs are as cheap now as they were before.

EL INDIO's picture

In fact, PMs are never cheap. At every moment in time their price is considered high, that’s why they are PMs.

francis_sawyer's picture


I'm not trying to fight you here with this comment (so don't take it that way)... But in reality, who the fuck cares if you bought Au or Ag in the 90's or in 2008?

If you bought it in 2000 you made a GREAT trade... If you bought in 2008 you made a good trade... If you buy it today, you're probably making a good trade... & so on...

midgetrannyporn's picture

I sold around 2008. Did I not make a good trade as well or does it only ever go up (like houses?). For every buyer is a seller but in your world only buyers are wise?

EL INDIO's picture

You’ve made a good trade if you bought back at lower price otherwise you lost.

luna_man's picture




When it comes to PM's...SELL????  Last resort!!!!


Even...If, to the grave!  Got that?

francis_sawyer's picture

I'd say 'YES' (buyers are wise), because of, what I imagine, will be 'scarcity' issues nowadays that many have caught on to the paper ponzi & there are enough people who would have the desire to stack a little... If 'paper' gold & silver drop too low, it'll be difficult to keep it out of the hands of the unwashed masses (which is the opposite effect of what the central banks want)... It's getting harder & harder to just juice the stock market to keep Jow Six pack interested there, & bond yields don't even keep up with inflation...

Therefore, for me, the trade is easy...

- When Au is going down... stack

- If it starts to climb too fast... Stack 'nickles', food, 'fuel', 'ammo', or whatever else you can get your hands on...

Edit: Answer to this part... "does it only ever go up (like houses?)"...

It's not an issue of it always going up... Instead ~ the answer is... PAPER always goes down & eventually passes away to nothing...

BlueCollaredOne's picture

I agree, but don't forget that alot of people buy PM's because it is a logical store of value.  Your average PM owner isn't looking to trade, they just don't want to lose all their money if/when the collapse comes.  The fact that PM's should keep increasing in value is a pretty nice fucking perk. 


francis_sawyer's picture

People need to stop thinking of gold in terms of its paper price... During the years that financial assets (stocks, bonds, house prices) got inflated, the rules changed in a way to keep them locked in to those...

Now they're told that if they, say, liquidate, their 401k, they will pay a substantial penalty... They never stop to think of currency devaluation, or worse, collapse... That's the utility of gold, it has always been valued as paper currencies have come & gone (as well as the 'assets' such as stocks & debt) that represented that illusional wealth...

monad's picture

Started buying it in 1978. Remember 1978? Same hand, different names

francis_sawyer's picture

dude ~ the pin is out of your grenade & you want to talk about hands?

battle axe's picture

So the markets hate uncertainty and Broker dealers are getting killed because trade volume/new issuance is thru the floor. Because the investor got ass raped in 08 and has said screw it. So what have we learned, take a look at Japan, we are about to copy them ( or have already started), and the lost decade, they have been and will be experiencing.... 

vote_libertarian_party's picture

Japans stock market is down about 80% from it's highs.  We are down 10%.


So obviously we know the secret sauce...right...anybody???...Bueller???

battle axe's picture

Japan's economy has  been in this dismal shape for a decade+, we are just getting warmed up, as for the secret sauce, nope, we do not have it. If I knew what it was, I would be in Thailand, on a beach with a beautiful 20yr old women. Instead, here I sit. 

SemperFord's picture

I think the difference between us and Japan is that we have the reserve currency of the world so if confidence is lost it would be worse than what happened on the Island, then again I know nothing.

d2themfi's picture

Something d-o-o economics, voodoo economics

insanelysane's picture

Even after the Titanic scraped the iceberg, it still moved forward for a little bit and then floated some when it stopped.  Would the plunge protection team have stayed on board?

francis_sawyer's picture

The plunge protection team would have been busy locking up all the exit gates from 3rd class steerage...

crawldaddy's picture

hell you could still eat and drink and the band was playing, if it wasnt for the icy water , it was all bullish good.  I mean 3 out of 4 is good news isnt it?

francis_sawyer's picture

 "Everyone has a plan until they get hit in the face"

~Mike Tyson

(never gets old)

dracos_ghost's picture

Isn't there another Debt Ceiling crisis coming up again soon? It's in September I believe. That would dovetail into the Art Cashin thesis a couple of posts back.

insanelysane's picture

As tax receipts get smaller and smaller, the debt crisis becomes the Wall that is moving towards us.  Original estimate was January and reality will be September or sooner.

crawldaddy's picture

the sun could fucking explode, and some of these instutional investors would still be buying.

TwoHoot's picture

They didn"t even mention the deterioration of property rights and contract law.

BurgundianRon's picture

An income gap chart would be cool too

Sudden Debt's picture

Jeeezz... Already 4 years of this crap, going 5....
Let's do something new! I'm bored!

Hedgetard55's picture

ZIRP has disconnected the price of assets from reality, thus all assets are now overpriced. ZIRP ends, the world ends. ZIRP continues, it is even worse. Great job Benny.

Paul451's picture

Is the issue really uncertainty?

Or is it really that the degree to which financial markets are FUBAR is now clear to anyone with a pulse?

The little squiggly lines just go up and down more now because of a never ending repeating pattern (tell me again: what is the definition of insanity?) of comfortable self-delusion followed by the sledgehammer of reality. That would be my explanation...

exi1ed0ne's picture

The issue is absolutely uncertainty. The vultures can't circle and implode this bitch because the rules are nowhere to be found. I wouldn't short this market even though I agree it is all FUBAR like you said. The way it should work:

1) Identify shitty company with problems
2) short the fsck out of it
3) wait for payday
4) Hookers!

The way it has been working:

1) Identify shitty company with problems
2) short the fsck outta it
3) PPT says thou shall not profit
4) Homeless

Paul451's picture

FUBAR and nothing can be done about it.

Thats FUBAR2.

exi1ed0ne's picture

No, there is plenty that can and will be done. Nothing pleasant to be sure, but certainly not nothing. Best part - it's gonna happen with or without actually doing anything. Eventually the grass will grow again, but how much it will be fertilized by blood will be determined by the ass-clowns currently running the show sadly.

My plan for economic recovery:
1) Crash this shithouse and burn it down all the way to the roots (should be good for 1 or 2 generations, maybe)
2) Enforce rule of law (rule of law or mob justice - you're gonna get one or the other you motherfuckers!)
3) Chop the "favorite part of anatomy" off of anyone who attempts to make stupid not hurt

Paul451's picture

I wish I had your optimism.

spinone's picture

The more things change, the more they stay the same.

potlatch's picture

Just as a side note, I realized the other day I am not looking forward to anything.  What does that translate into re: a consumer confidence #?

earleflorida's picture

Chartist... picture this ->   (^GSPC) Jan/97 - Jan/12

*Great momentum (Bull) beginning at the *Begin Oct/94 __ 459.3

Low Jan/97 __ 757.1 **  

High Jan/00 __ 1498.6

Low July/02 __ 815.3

High July/07 __ 1526.8

Low  Jan/09 __ 797.9

High  Jan/12 __ 1408.5 

***~ Present  June/12  __ 1320.9

just observing?

firstdivision's picture

Several time issues in this chart.  Obama was elected in November 2008, TARP started disburstments in October 2008.  Lehman failed on September 15, 2008.  I really get annoyed with these financial analysis becoming laddened with policital bias.  Whomever made the charts should be fired for making such political biases obvious.