Let's assume that the statement "its never different this time" is there for a reason, and is fundamentally correct. In which case this time is just like some other previous time. Furthermore, considering that the underlying reasons for the Great Financial Crisis of 2007 never went away but merely saw their symptoms masked by trillions of dollars in monetary and fiscal stimulus, it is safe to say that what is currently happening in Europe, accompanied by financial failures in the US, is merely a continuation of that epic collapse that started all the way back in 2007 with the failure of New Century. And since history always rhymes, and all too often it is easy to ignore the big picture of the past, we would like to remind readers of precisely what the key events in the first great collapse were, transpose these to the present, and attempt to predict the future. The questions are: who is next, when, where and how. To help us with the answer, here is a brief history of two timelines...
Here is the compare and contrast courtesy of South of Wall Street:
- April 2007 | New Century goes down SEC Filing
- June 2007 | Bear Stearns suspends redemptions from its High-Grade Structured Credit Strategies Enhanced Leverage Fund - (With that name, who put money in this thing? Enhanced Leverage...)
- July 2007 | Bear Stearns liquidates said funds U.S. Bankruptcy Filing -
- August 2007 | Countrywide borrows the entire $11.5 billion available in its credit lines with other banks. Fitch Ratings downgrades & SEC Filing
- January 2008 | Countrywide goes down - BofA 'buys' them
- February 2008 | Northern Rock goes down UK Treasury Release
- March 2008 | Bear Stearns goes down - JPM 'buys' them Federal Reserve Press Release
- July 2008 | SEC bans naked short selling in the securities of Fannie, Freddie, and banks SEC Press Release
- September 2008 | Fannie and Freddie are wiped out
- September 2008 | Lehman goes down - Merrill is 'bought' buy BofA
- September 2008 | All types of facilities, guarantees, and swap lines are extended (TAF, AMLF)
- September 2008 | JPMorgan 'buys' Washington Mutual
- October 2008 | Wells Fargo 'buys' Wachovia
- October 2008 | TARP comes to life H.R. 1424 | Public Law
Where are we now?
- February 2010 | EU and Greece reach austerity plan
- April 2011 | Portgual asks for a bailout
- October 2011 | Greece 'haircut' ruled voluntary - MF Global Goes Down - CDS now meaningless
- December 2011 | Greek default no longer the world's focus as Italy collapses
- January 2012 | Greece defaults
- March 2012 | Germany to leave the EU
- June 2012 | French banks fail - French yields soar as bond auctions fail
This WSJ timeline is worth considering as we are now 18 months into the 'crisis'.
Europe is no different than the US housing bubble that lead to the subsequent credit crisis. It was fairly straight forward that the housing mess would end poorly. However, it played out slowly ... until it didn't. The housing collapse and ensuing credit collapse were the most well documented events that no one was prepared for.... until Europe.
MF Global and Greece are NOT going to be the end of this story, they're the New Century or Bear Hedge Funds of this collapse. We're just beginning. Are you prepared?