Great article. It lays out exactly what I have been saying. We have created an inverted pyramid, supported at the bottom by assets which are of questionable value.
My only disagreement is his belief that this will only slowly develop and worsen. In order to keep the money machine functioning, it had to grow exponentially. As soon as the growth stops, the machine explodes. You can easily see that. One year of flat to slightly negative growth in housing values, and a slight increase in mortgage defaults has basically collapsed the mortgage lending industry. Another year, and the banks and hedge funds are toast.
Add in peak oil and I basically see no good outcome to this situation. I got completely out of the stock market 3 months ago, and there is no scenario that would get me out of cash and precious metals and into any other kind of investment. As far as the dollar, it may not weaken against other currencies as much as people think. I believe that every other country will destroy their currency in order to maintain rough parity with the dollar. Until we go back to gold-based currencies, it is basically a race to the bottom. The dollar is winning the race right now, but just watch england and europe catch up.
My only disagreement is his belief that this will only slowly develop and worsen. In order to keep the money machine functioning, it had to grow exponentially. As soon as the growth stops, the machine explodes. You can easily see that. One year of flat to slightly negative growth in housing values, and a slight increase in mortgage defaults has basically collapsed the mortgage lending industry. Another year, and the banks and hedge funds are toast.
Add in peak oil and I basically see no good outcome to this situation. I got completely out of the stock market 3 months ago, and there is no scenario that would get me out of cash and precious metals and into any other kind of investment. As far as the dollar, it may not weaken against other currencies as much as people think. I believe that every other country will destroy their currency in order to maintain rough parity with the dollar. Until we go back to gold-based currencies, it is basically a race to the bottom. The dollar is winning the race right now, but just watch england and europe catch up.
Sorry if this is off topic or a repost.
Hi, Markam,
I hate to say it, but you may be right. Read the
Are we headed for an epic bear market?
by Jon Markman (ed. I hope it's not you)
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years. He seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whetherthe credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
An epic bear market
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions. The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
He's not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.
....
So, tell me, Markm. Is it time to close all my long stock positions? As the Dollar hits the all time low against euro and canadian, time to short the Dollar?
they also said that alot of people are calling...
