60 Minutes has done a superb job of explaining how this worldwide financial crisis lies at the feet of Wall Street. Watch the two videos called Wall Street’s Shadow and Derivatives
Agoracom Blog
Two Videos Everyone Should Watch
Posted by
at 8:41 PM on Sunday, October 26th, 2008
Hi Peter!
Thanks for the link; I finally understand the CDS market, (BS Market)
If 60 minutes would have explained it in October last year
They would have called for Man your Battle Station!!
I really appreciate your constant flow of info
After understanding it a little bit I wouldn’t be surprised if the capitulation in the market this week will be caused by a bankruptcy at GM and then a run on AIG that would do the job. (Bank Holiday???)
I hope I’m wrong.
Thanks!!
The World Will Only End Once
Choose Your Life boat
Rather than open this with an amusing analogy, maybe it’s better to skip the humor in this message to share with you a casual meeting with a long time financial acquaintance.
So you understand where we both come from I have not worked in the Bond Market, but have been around corporate Income Statements and Balance sheets long enough to understand the fragility of a profit. A profit, incidentally, is a measure of efficiency in a competitive environment.
My acquaintance has worked in the Corporate Bond Market for decades, first as an analyst, later in sales and a while back he was constructing financing deals in the High Yield market. He has stayed ahead of the carnage, moving from a major to a Boutique Shop type house not long ago, involved in all aspects of High Yield Corporate Bonds. He was either wise or lucky enough to move from the houses holding Mortgage Backed Securities.
He did in the past tell me about dangers in Mortage backed securities. We have shared recommendations over the years, and he did successfully own Cameco & Kinross Gold, exiting the resource area too early in my opinion at the time, but still leaving with profits which is more than I can say after giving up an 810% profit earned in just two years.
The only reason that SGGroup is not destitute and discouraged is that I had the wisdom to obey my wife’s wishes to keep a sizeable portion of our savings in the most secure of all positions she wanted – Short Term U.S. Treasury Obligations. So this is my confession to tell you that I’m not all that bright and charts can get you in trouble if they’re not matched with fundamentals.
Regardless of what happens in my ‘Double Leveraged Gold & Oil’ positions (DGP & DXO), along with Major & a few Junior Precious Metals issues, someday I will mount a recovery when the markets turn in my favor. The problem is that I rode a Bear Market in resources closing my mind to repeated warnings and reentering too early. So let me share the insights from this valued professional contact……
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Generally an optimist, my acquaintance has become quite morose since we last met several months ago. At the time, I offered opinion that the D.J.I.A. would end up worth 25% of the peak reached in 2007.
He rebuffed my idea, but now agrees believing ‘The Bottom May Fall Out Any Day’. The Corporate Bond Market has dissipated for all but the most credit worthy of companies, and even there, nterest and resources are weak. The High Yield Corporate Bond market is the back bone of mid- sized and less credit worthy companies and that has disappeared while the Banks have become strict lenders.
Back in 1999 and 2000 at the crest of the Technology boom, Telecommunication & Technology companies borrowed heavily under favorable rates and terms in the High Yield Market. Ten Year issues were heavily favored and next year there will be numerous maturities with no possibility of re-financing, while the bank borrowing doors are closed. A rash of high profile bankruptcies will depress the market cascading into lower prices for corporate debt & equity issues.
The Municipal Bond Market is an equal shambles with numerous States in dire circumstances unable to renew issues or borrow. The $700 Billion that the U.S. Government is holding as a firewall can only serve to bolster confidence in the short term because it will be quickly expended to assist multiple needs in an attempt to avoid a systemic collapse.
We talked about ‘Credit Default Swaps’ which I do understand a bit, and he went into technical detail about the threat to the system. While my eyes may have glazed over while he spoke of the intracacy, I was fixed upon his mannerisms and tone which spoke of grave potential consequences to the system.
All the while, I related this to the optimistic, practical and conservative investor acquainted to me for years. When speaking of the several ‘Stock Market Indicators’ that I have developed, and intention to use my wife’s money capturing a refief rally, he had this advice – There are too many threats and the bottom may fall out at any time, invalidating your indicators.
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There’s an old trader’s tale that “It’s not wise to plan for the End Of The World because it will only happen once and all the other times you will be wrong.” This is it folks, choose your lifeboats.
Completely agree, excellent videos, frightening to some I’m sure … the corruption knows no bounds and greed was completely unchecked … as dubya said, fool me once …. shame on me … you can’t fool me twice. In 02 when I read the prechter book … I was aware the economy was in bad shape … but was not aware that most every macro economic financial measurement was worse then 29. I was alarmed and went long on gold and gold stocks.
The conditions have worsened by at least a factor of 2 since that time … probably 3. No one wants to think the worse but if your prepare for it … you will still have something and you will be able to help others … at that time there will be no greater feeling then having planned the way our parents or grandparents taught us … the realization that they were right and you were smart enough to accept their free advice meant only to protect you.
Plan for the markets to drop 90% … after all at this point how much more will you lose … there is no reason to believe in the short term anything will increase … the most important asset a person owns is their home and that value is declining … it will be a place to live and help others during their time of need if you paid for it as quickly as you were advised by dad.
Orgy.
Great video! Thanks for posting this link. I’m going to share it with others. I saw another interesting video interview over at Trading for the Masses ~ Worse Than Great Depression?. Very interesting and scary. Sort of fits Orgy 90% loss forecast.
Thanks for the video links–very informative.
Peter, can you comment on what the ramifications would be to the U.S. if the dollar is no longer the world’s reserve currency?
Thanks,
Bud
Bud – I think that possibility is years away. But our children and grand-children should leaen how to speak Chinese.
Peter, in my honest opinion … i think it is much sooner and in reality will be the basis for a chance at the next run or prosperity. Of course I also believe the US gov’t and its pupeteers (the central banks) will do anything including major wars to prevent the US$ no longe rbeing the world currency.
Gold is the only answer … a basket of currencies can not be trusted … As this gets deeper watch the Central Banks by gold/and miners and possibly make the holding illegal again as FDR did. This time with much more sinister intents.
Again … I can not think of anything that would delight me more than to be completely wrong.
Could the G7 and G10 have anything to do with the book of Revelation? Are we on our way to one world government … the thought has been very remote from my mind for some time … but this crisis could actually be the sign of the end times.
In any case, I’m in good hands.
Orgy
Org – The U.S. is about to make a big move to the far left. Monetarily and fiscally, I believe it will be highly inflationary when we come out of this deep recession.
I hope the good hands you speak of his God and not me. My wife has seen our portfolio and won’t let me hold her until the syocls go back up big time-lol