All Posts Tagged With: "credit crisis"
Welcome to the Financial Whirlpool
“It is not just a few investment decisions that are being corrected, it’s the delusions of an entire generation.” says Bill Bonner in The Daily Reckoning. What’s happening is “a huge anti-bubble is forming … a financial whirlpool marked by exaggerated thrift, debt destruction and sweaty-palmed investors.”
James Kunstler: ‘A Cascading Collpase of Finance Is Underway’
Clusterfuck Nation author James Howard Kunstler says “a cascading collapse of international finance is underway.” And it makes makes the 1929 crash and the events of the 1930s “look like an orderly small town auction of somebody’s grandmother’s effects.”
Early Indicators: Europe Acts to Rescue Banks… Stocks Up…
– The German government is gearing up today to pump cash in the the bank and insurance sector. Talk is that Germans will stump up €470bn as part of the much-hyped ‘coordinated bailout’ campaign by European governments.
– The move has set off a rally in European banking stocks.
– Asian markets were also up this morning. Hong Kong shares shot up over 10%. It was the biggest one-day rise in more than 33 years.
– Meanwhile, European central banks have promised unlimited dollar funding.
Nouriel Roubini: Markets Will Fall Another 20%
Economics professor, former Clinton advisor and perma-bear forecaster Nouriel Roubini says the “severe systemic financial crisis” ripping through the markets will get worse before it gets better.
He warned investors on Bloomberg TV that the US now faces a meltdown in financials that Hank Paulson’s bailout bill won’t fix. Roubini says the bill is merely a way of “privatizing gains and socializing losses.”
He also warned investors that stock prices could fall another 20% and trigger a period of severe deflation.
Government Rescues Will Trigger a Bull Market in Gold
It looks like we’re going to be graced by a “joint response” to the financial crisis by the G7 leaders.
Paul Tustain says it was government action — slashing interest rates — that caused the crisis. Now they tell us slashing rates further and nationalizing banks is the way to ‘fix’ the economy.
This ‘fix’ will and lead to a protracted period of underperforming stocks and bonds… and create the perfect conditions for a bull market in gold.
CDS Market Is a $50 Trillion Blind Date from Hell
The market for credit default swaps is unregulated, untransparent, and highly dangerous. And its estimated worth is over three times the total value of US equities. “A CDS is a bit like a blind date,” says Andrew Snyder, “at first, they sound like a fantastic idea. But we all know differently.”
Natural Gas and Water Are the Investments of the Future
Commodities across the board are being taken down by the deepening credit crisis. But energy policy is a big issue in the coming presidential elections.
Energy investor T. Boone Pickens says “natural gas is the fuel of the future.” He also says water will become an increasingly scarce commodity with major implications for the agricultural sector.
Chris Mayer agrees with Pickens. He says once the financial crisis ends natural gas and water stocks will attract big bucks.
Lehman’s $400bn Debt Settlement Could Set Off CDS Time Bomb
At 2pm New York time,the settlement auction for $400 billion of credit default swaps connected to bonds issued by Lehman Bros (NYSE:LEH) is due. This opaque derivatives market is a mystery to most investors. Dave Gonigam says the revelation of major losses is the last thing the market needs right now.
Early Indicators: Dow 5,000?
– The Nikkei 225 got wiped this morning in Asian trade. Japan’s benchmark index lost another 11% of its value. It is now touching 20-year lows.
– Other world markets India dropped 9.6% as Mumbai opened for business. South Korea fell as much as 9%, Hong Kong by 9.7%, Australia by 8.4% and in Singapore lost as much as 8.4%.
– European equities “collapsed,” according to the Financial Times, “left vulnerable after a dramatic late sell-off in New York extended the sustained losing streak on world stock markets.”
Damage Limitation in a Systemic Financial Meltdown
Nouriel Roubini - a professor of economics at NYU - says it is futile to think about avoiding a global recession now. We are already there. The only objective for governments and central bank now should be damage limitation.
This from rgemonitor.com:
“So we are now very close to the systemic financial meltdown that I outlined in my February paper. But radical action can be taken and should be taken to control the damage and prevent this meltdown from occurring. At this point the US, the advanced economies (and now most likely even some emerging market economies) will experience an ugly recession and an ugly financial and banking crisis regardless of what we do from now on. We are already now in a global recession that is getting worse by the day. What radical policy action can only do is preventing what will now be an ugly and nasty two-year recession and financial crisis from turning into a systemic meltdown and a decade long economic depression. The financial and economic conditions are extreme; thus extreme policy action is needed now to save the global economy from an ugly depression.”
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- Early Indicators: Europe Acts to Rescue Banks… Stocks Up…9:19am CDT
- Nouriel Roubini: Markets Will Fall Another 20%5:55pm CDT
- Goerge Soros: Financial Crisis Is the ‘End of an Era’1:48pm CDT
- Government Rescues Will Trigger a Bull Market in Gold11:22am CDT
- Natural Gas and Water Are the Investments of the Future2:41pm CDT
