tag:blogger.com,1999:blog-4102429195693595750.post938441282965618546..comments2024-03-22T05:15:17.042+02:00Comments on Sudden Debt: Hellasioushttp://www.blogger.com/profile/03564511281240682625noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-4102429195693595750.post-19910213141357324042007-05-26T19:42:00.000+03:002007-05-26T19:42:00.000+03:00The fact that the financial system, throughout the...The fact that the financial system, throughout the world, had to take asset inflation and debt assumption to such great lengths, proves that they have been running from a debt deflationary contraction for most likely the good part of the last decade (Milton Friedman says it has been since 1932). Ultimately, it is impossible to avoid the inevitable reconciliation of such credit excess.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4102429195693595750.post-8065238547036288442007-05-25T13:16:00.000+03:002007-05-25T13:16:00.000+03:00Based on current debt levels and the record amount...Based on current debt levels and the record amount of highly leveraged investments globally, the world's financial system is no longer positioned to withstand even a minor recession.<BR/><BR/>In the event of a widespread slowdown in global economic growth, the resulting deflationary forces and accompanying debt liquidation will bring about massive dislocations in the financial markets and their underlying economies.<BR/><BR/>We will likely witness the value of traditionally uncorrelated asset classes in diverse geographic regions dramatically decline in lock step. This outcome will totally belie the notion that derivatives and other financial innovations have somehow efficiently distributed risk in a fashion that promotes long term financial stability. To the contrary, the Great Moderation will be suddenly tranformed into the Great Unwind.<BR/><BR/>Just as it is impossible to determine which snowflake is the one that finally sets off the avalanche, it is virtually impossible to predict what will be the final triggering event. It could be any of a number of the usual suspects including the continuing saga of the subprime mortgage market in the US, a geopolitical crisis in the Middle East, or the bursting of the equity bubble in China. Regardless,once the conditions are right even the most normally insignificant and mundane event can become the final catalyst.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4102429195693595750.post-63947833894641716252007-05-25T10:19:00.000+03:002007-05-25T10:19:00.000+03:00Hi Hellacious,The number of smart bears has grown ...Hi Hellacious,<BR/><BR/>The number of <I>smart bears</I> has grown tremendously over the last two years. <BR/><BR/>A lot of people agree 100% with what you, Bantham, Faber, a seasoned list of austrian-minded economists plus a quite a number of anonymous blogger and forumers (the main French-speaking CAC 40 discussion list is 80% "intellectually full bear". A lost of us have indeed lost some money shorting a bit ahead of time...).<BR/><BR/>The no-tongue-in-cheek Trichet should not be forgotten in this list. He has been extremely clear about a significant "re-pricing" of assets during the Davos event.<BR/><BR/>The output looks clear to most of them, a significant market adjustment of all class of speculative assets, i-e most of them will take place. <BR/><BR/>At least if the choice is not made to let the currencies drop wildly. Nearly impossible in Europe because of the constitutional set-up for the ECB and the balance of power within the Zone. <BR/><BR/>Well concerning the Fed, it looks like the inflationary option is still there. At least on a longer run.<BR/><BR/>The only key point is now when and how will these adjustements take place? This may of course depend of the class of assets. <BR/><BR/>Stock markets tend to crash whilst real estates ones may move à la japanese. It looks like the housing market down trend has started in a series of the key bubbly markets (the US, Spain). <BR/><BR/>So it looks like the only remaining issue is: when will financial markets start to adjust and how?<BR/><BR/>FrançoisAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4102429195693595750.post-14417243482509653992007-05-25T07:40:00.000+03:002007-05-25T07:40:00.000+03:00Mark my words, the final party is going to end thi...Mark my words, the final party is going to end this year. In fact, I think we are about to experience a global stock market correction before the final rally occurs later this summer. What I can't tell yet is whether we will rally into new highs or whether the correction will be deep enough that the rally will fail to take out the recent highs. In any case, based on various data, the whole mess has no more than five months to run. Then, what you have warned about for a long time, namely Peak Debt, will rear its ugly head like no body's business.Edwardohttps://www.blogger.com/profile/03613197383283896190noreply@blogger.com