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.