The next banking crash?

[simoh1490]

Tin foil hats all round then!

[Brunolem]

6 minutes ago, simoh1490 said:

Tin foil hats all round then!

Here is an interesting documentary about the new British "empire".

 

You can watch without your hat...

 

 

[Jimbo2014]

6 minutes ago, Brunolem said:

Since the economies and the financial markets are now almost totally controlled by the states and their central banks, it seems unlikely that the crash will start from there.

 

It's like plucking holes in a dam with the fingers...they think they have things under control but soon enough another hole appears somewhere else and there is no finger left.

 

The most likely is a geopolitical crisis, already underway in the US and EU, that will intensify until it reaches the breaking point.

 

The elites are totally disconnected from the populations, hence Trump, Brexit, Italy, Hungary and so on...and despite these signs of rebellion, these elites refuse to change tack, and instead push for more of what has been rejected (globalisation, immigration...).

 

There are too many unsustainable situations (public and private debt, retirement funds, bankrupt cities...Chicago...and states, trade wars, sanctions...you name it) for the system to hold much longer.

 

Something has to give and will give...

 

 

Absolutely and well said.  Always lightest at sunset (or is it darkest before the dawn :)).  Also exacerbating the problem is over-stimulation of the American economy with the tax cut.  I read recently that major companies are struggling for expansion opportunities and are therefore using the cash windfall on share buybacks, this happened just prior to the 29 crash.  Over-stimulation will also lead to larger disappointment when investors realise that, post windfall, real growth eludes most companies and taxes eventually have to be raised to avoid massive widespread default of American debt.  Even now interest on US debt has to rise as it will get harder to convince bond buyers that US debt is a good investment.  Could indeed be time to buckle the seat belts.  However there will be bright spots in the crash and even if global growth is flat or slightly negative over the ensuing decade or half a decade there will be great buy opps for those with some cash in any crash.

[Brunolem]

36 minutes ago, Jimbo2014 said:

Absolutely and well said.  Always lightest at sunset (or is it darkest before the dawn :)).  Also exacerbating the problem is over-stimulation of the American economy with the tax cut.  I read recently that major companies are struggling for expansion opportunities and are therefore using the cash windfall on share buybacks, this happened just prior to the 29 crash.  Over-stimulation will also lead to larger disappointment when investors realise that, post windfall, real growth eludes most companies and taxes eventually have to be raised to avoid massive widespread default of American debt.  Even now interest on US debt has to rise as it will get harder to convince bond buyers that US debt is a good investment.  Could indeed be time to buckle the seat belts.  However there will be bright spots in the crash and even if global growth is flat or slightly negative over the ensuing decade or half a decade there will be great buy opps for those with some cash in any crash.

Share buybacks have reached insane levels...over one trillion USD this year.

 

It has been calculated that share buybacks are responsible for all the increases in the Dow and SP 500 indexes during this so-called bull market.

 

Professional investors, such as Buffett, and insiders, such as the CEOs who benefit from the buybacks, are either sellers or waiting on the sidelines with cash.

 

Meanwhile the US is running one trillion annual budget deficits as if it was 2009, except that the economy is supposedly booming!

 

It's easy to get a boom from unlimited credit...during the past decade, the US has borrowed 3 dollars for 1 dollar of increased GDP.

 

Yet, as the wise economist Ludwig von Mises said: 

 

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

[Jimbo2014]

23 minutes ago, Brunolem said:

Share buybacks have reached insane levels...over one trillion USD this year.

 

It has been calculated that share buybacks are responsible for all the increases in the Dow and SP 500 indexes during this so-called bull market.

 

Professional investors, such as Buffett, and insiders, such as the CEOs who benefit from the buybacks, are either sellers or waiting on the sidelines with cash.

 

Meanwhile the US is running one trillion annual budget deficits as if it was 2009, except that the economy is supposedly booming!

 

It's easy to get a boom from unlimited credit...during the past decade, the US has borrowed 3 dollars for 1 dollar of increased GDP.

 

Yet, as the wise economist Ludwig von Mises said: 

 

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Spot on - the only question is when.  This is the issue I face.  A moderate share on the All Ords is at about 6% divies and 12-14 PE with 3-4% reserved for capital growth.  So waiting 2 years you effectively loose about 20% in gains.  In a drop the market would go to 50% on the Aussie.  Perhaps lower on the US given the depth of their problems.  Hard to time the drops so a 20-30% saving on a good share is probably the best to hope for - I calculated that Hathaway has about 25-30% in cash at present so presumably Buffet has a similar odds strategy.  Of course it could be catastrophic enabling a pickup of shares pennies on the pound but I doubt it.  Bad shares really tumble but as I found out in 2009 bad shares also get wiped out and often dont bounce back well.  I suspect the US market will be where the best gains are - the Amazons and Googles that are well cashed and unlikely to loose out long term - effectively monopolies.  So its hard to hold out for the crash but perhaps wise at the moment to do 30% cash.  A crash may take a long time to emerge - particularly if America takes the insane route of lowering tax on companies further - which I read congress is trying to do.  Very hard to time but the lights are certainly flashing red.

 

[jmd8800]

https://www.yanisvaroufakis.eu/2018/09/10/ten-years-after-lehmans-collapse-what-caused-the-crash-of-2008-is-now-shaping-our-post-modern-1930s-der-freitag/

[Brunolem]

27 minutes ago, Jimbo2014 said:

Spot on - the only question is when.  This is the issue I face.  A moderate share on the All Ords is at about 6% divies and 12-14 PE with 3-4% reserved for capital growth.  So waiting 2 years you effectively loose about 20% in gains.  In a drop the market would go to 50% on the Aussie.  Perhaps lower on the US given the depth of their problems.  Hard to time the drops so a 20-30% saving on a good share is probably the best to hope for - I calculated that Hathaway has about 25-30% in cash at present so presumably Buffet has a similar odds strategy.  Of course it could be catastrophic enabling a pickup of shares pennies on the pound but I doubt it.  Bad shares really tumble but as I found out in 2009 bad shares also get wiped out and often dont bounce back well.  I suspect the US market will be where the best gains are - the Amazons and Googles that are well cashed and unlikely to loose out long term - effectively monopolies.  So its hard to hold out for the crash but perhaps wise at the moment to do 30% cash.  A crash may take a long time to emerge - particularly if America takes the insane route of lowering tax on companies further - which I read congress is trying to do.  Very hard to time but the lights are certainly flashing red.

 

A crash in the classical sense, as in 1929 or 1987, seems unlikely once again because those who hold the bulk of the shares are not the usual investors who rush for the exits, but institutions such as the SNB, so-called "the world biggest hedge fund", or sovereign funds such as in Norway, Singapore and others.

 

These institutions won't sell, no matter what.

 

Thus the crash will more likely come from somewhere else, probably bonds and currencies, many of the latter being already in very bad shape even though we are just feeling the first tremors.

 

If the US Fed keeps on raising rates and shrinking its balance sheet, while the US government keep on spending like a drunken sailor, foreign dominoes are going to start falling following a massive repatriation of dollars, and with everything so interconnected (thanks to globalisation), there is going to be collateral damage in unexpected places...Spanish banks, for example, are stuffed with Turkish debt.

 

Once enough so-called EM are in trouble, the crisis is going to spread quickly to those who financed them, and so on.

[simoh1490]

1 hour ago, Brunolem said:

A crash in the classical sense, as in 1929 or 1987, seems unlikely once again because those who hold the bulk of the shares are not the usual investors who rush for the exits, but institutions such as the SNB, so-called "the world biggest hedge fund", or sovereign funds such as in Norway, Singapore and others.

 

These institutions won't sell, no matter what.

 

Thus the crash will more likely come from somewhere else, probably bonds and currencies, many of the latter being already in very bad shape even though we are just feeling the first tremors.

 

If the US Fed keeps on raising rates and shrinking its balance sheet, while the US government keep on spending like a drunken sailor, foreign dominoes are going to start falling following a massive repatriation of dollars, and with everything so interconnected (thanks to globalisation), there is going to be collateral damage in unexpected places...Spanish banks, for example, are stuffed with Turkish debt.

 

Once enough so-called EM are in trouble, the crisis is going to spread quickly to those who financed them, and so on.

The tenth anniversary has spawned a raft of articles and opinions on the timing of the next crash, even the BIS made it an agenda item at their last meeting, guessing when it will happen etc has become a cottage industry and judging by some of the doom and gloom posts in this thread, with great effect I might add.

 

Of course there will another crash, that is without question, trying to time it though is not that much easier than picking the winning Euromillions lottery numbers. I recall having similar discussions to these with folks back in 2004, we were all convinced the UK housing market wasn't sustainable so some of the group actually decided to sell on that basis, the top of the market has been reached they thought. Hmmm, we all know how that went! The same is true of people who have invested in the markets, when the next crash does come some will get burned, most likely those holding single share units - those holding funds will fare better and those holding risk averse IT's will far even better still. I guess the message here is: if you're holding risky assets that have now exceeded your appetite for pain, get out of them. Failing that, sit back and enjoy the ride and in six months time you can look back at today and laugh at yourself and wonder what all the fuss was about.

[Brunolem]

18 hours ago, Jimbo2014 said:

Very hard to time but the lights are certainly flashing red.

 

Here is an intetesting article

 

https://www.globalresearch.ca/conjuring-up-the-next-depression/5653926

[simoh1490]

13 minutes ago, Brunolem said:

Here is an intetesting article

 

https://www.globalresearch.ca/conjuring-up-the-next-depression/5653926

An excerpt from your link (About) reads:

 

"In an era of media disinformation, our focus has essentially been to center on the “unspoken truth”.

 

Hmmmm!

[Jimbo2014]

On 9/25/2018 at 12:59 PM, Brunolem said:

Here is an intetesting article

 

https://www.globalresearch.ca/conjuring-up-the-next-depression/5653926

Nice article - we may be seeing the 1930s emerge which was a time of polarised political ideals exacerbated by wealth polarity and the great depression.  Hard to say.  There is alot of growth in Asia and despite the debt issues in China, most of Asia still grows at 6+% annually.  The next crash may be disparate between east and west.  Europe is facing huge debt and demographic issues, America massive debt, political and wealth polarity issues.  However China, Indonesia, Philippines, India - these economies are still rocketing and each year account for a greater % of the global economic pie.  It may be that the next crash is the last one in which America features so prominently.  

[Brunolem]

35 minutes ago, Jimbo2014 said:

Nice article - we may be seeing the 1930s emerge which was a time of polarised political ideals exacerbated by wealth polarity and the great depression.  Hard to say.  There is alot of growth in Asia and despite the debt issues in China, most of Asia still grows at 6+% annually.  The next crash may be disparate between east and west.  Europe is facing huge debt and demographic issues, America massive debt, political and wealth polarity issues.  However China, Indonesia, Philippines, India - these economies are still rocketing and each year account for a greater % of the global economic pie.  It may be that the next crash is the last one in which America features so prominently.  

It most probably will be the last crash for America and the West...yet don't forget that Eastern Asian economies are highly dependent on exports...to the West!

 

They basically grow at the same rate as Western debt, and not GDP, grows.

 

Which is why China is so desperate to develop its BRI massive project, in order to free itself from its dependence on the West.

 

Which is also why the US sees the BRI as a threat, hence the multiple maritime provocations.

 

The situation of the world has probably never been so precarious...a single small event could blow up the whole fragile edifice.

 

From a US strategic point, China should be destroyed one way or another, otherwise it will soon surpass America, which is unacceptable for the latter.

 

And the hate toward Russia comes from the fact that it has chosen to side with China, instead of becoming a vassal like most European states, thus making the fight against China much more difficult.

 

Along with many unbiased observers, I am convinced that the whole thing is going to explode/implode one way or another during the next decade.

 

[ExpatOilWorker]

"Too big to fail" or banks with systemic risk was originally defined in 2008 as any bank with assets above $50 billion. Later in 2017 that was revised to $150 billion, but yearly stress-tests have kept the appetite for risk at the bigger banks under control.

 

Now, take a look at China. They have one $4 trillion and another three $3 trillion banks and no stress tests. The 4 biggest banks in the world are all Chinese and have been funding lavish state project for 10 years now. If just one fail, it will make Lehman Brothers look like a failed bar closure in Pattaya. Happens all the time and the world move on.

[Brunolem]

4 hours ago, Jimbo2014 said:

There is alot of growth in Asia and despite the debt issues in China, most of Asia still grows at 6+% annually.  The next crash may be disparate between east and west.  

Here is an interesting article about China's debt situation...

 

https://dailyreckoning.com/rickards-debt-bomb-ready-to-explode/

[ExpatOilWorker]

49 minutes ago, Brunolem said:

Here is an interesting article about China's debt situation...

 

https://dailyreckoning.com/rickards-debt-bomb-ready-to-explode/

The clock is ticking for the Minsky Moment:

 

A Minsky moment is a sudden major collapse of asset values which is part of the credit cycle or business cycle. Such moments occur because long periods of prosperity and increasing value of investments lead to increasing speculation using borrowed money. The spiraling debt incurred in financing speculative investments leads to cash flow problems for investors. The cash generated by their assets is no longer sufficient to pay off the debt they took on to acquire them. Losses on such speculative assets prompt lenders to call in their loans. This is likely to lead to a collapse of asset values. Meanwhile, the over-indebted investors are forced to sell even their less-speculative positions to make good on their loans. However, at this point no counterparty can be found to bid at the high asking prices previously quoted. This starts a major sell-off, leading to a sudden and precipitous collapse in market-clearing asset prices, a sharp drop in market liquidity, and a severe demand for cash.

 

https://en.wikipedia.org/wiki/Minsky_moment

[Naam]

3 hours ago, Brunolem said:

Here is an interesting article about China's debt situation...

 

https://dailyreckoning.com/rickards-debt-bomb-ready-to-explode/

yeah, yeah... good ol' James Rickards, gloom&doom prophet, gold speculator and former counsel of

Quote

Long-Term Capital Management L.P. (LTCM) was a hedge fund management firm^[1] based in Greenwich, Connecticut that used absolute-return trading strategies combined with high financial leverage. The firm's master hedge fund, Long-Term Capital Portfolio L.P., collapsed in the late 1990s, leading to an agreement on September 23, 1998, among 16 financial institutions—which included Bankers Trust, Barclays, Bear Stearns, Chase Manhattan Bank, Crédit Agricole, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Paribas, Salomon Smith Barney, Société Générale, and UBS—for a $3.6 billion recapitalization (bailout) under the supervision of the Federal Reserve.^[

another verse from Rickards' various poems

Quote

On March 24, 2009, Rickards presented his view at a symposium at Johns Hopkins, that the U.S. dollar was facing imminent hyperinflation and was vulnerable to attack from foreign governments through the accumulation of gold and the establishment of a new global currency

yawnnnn...

[Naam]

On 9/24/2018 at 4:39 PM, Jimbo2014 said:

However there will be bright spots in the crash and even if global growth is flat or slightly negative over the ensuing decade or half a decade there will be great buy opps for those with some cash in any crash.

[Brunolem]

9 minutes ago, Naam said:

yeah, yeah... good ol' James Rickards, gloom&doom prophet, gold speculator and former counsel of

another verse from Rickards' various poems

yawnnnn...

Sure...if you look for economists and related professionals who have never made mistakes in their forecasts, you won't find any!

 

Anyway, the interesting part of the article is not the forecast, but the information regarding China's financial situation...

[Naam]

1 minute ago, Brunolem said:

Sure...if you look for economists and related professionals who have never made mistakes in their forecasts, you won't find any!

 

Anyway, the interesting part of the article is not the forecast, but the information regarding China's financial situation...

China's financial situation is a unique one which can't be measured with our western capitalistic yardstick. on top of that China's "ruler" XI can introduce crisis counteractions over night for which our western governments would need weeks or even months of discussions and political horse trading to reach consense. the latter is something that the self-appointed gurus and theorising eggheads never take into consideration. more yawnnn...

[Brunolem]

3 minutes ago, Naam said:

China's financial situation is a unique one which can't be measured with our western capitalistic yardstick. on top of that China's "ruler" XI can introduce crisis counteractions over night for which our western governments would need weeks or even months of discussions and political horse trading to reach consense. the latter is something that the self-appointed gurus and theorising eggheads never take into consideration. more yawnnn...

Meaning that...China's economy cannot crash?

Because Xi knows the exact remedy to any situation?

Lucky them!

 

[Naam]

12 minutes ago, Brunolem said:

Meaning that...China's economy cannot crash?

Because Xi knows the exact remedy to any situation?

Lucky them!

of course its economy can crash but highly unlikely for the reasons which are since several years published by envious U.S. American China haters and (i repeat) theorising eggheads.

 

Quote

Anyway, the interesting part of the article is not the forecast, but the information regarding China's financial situation...

my comment refers to "China's financial situation".

Edited October 31, 2018 by Naam

[James Roderick]

On 9/19/2018 at 1:36 PM, Brunolem said:

You are perfectly right.

 

There are plenty of very serious and reliable authors who are expecting what you describe, sooner than later...and most of them indeed strongly recommend to have some gold, preferably in coins and safely stored with you.

 

What some members above don't understand is that in case of major inflation, or even hyperinflation, which is to be expected, as in some EM now, is that the price of gold inflates simultaneously, so that whatever the prices are, you keep your purchasing power, while those who are in fiat currency cash lose 10% or more every week, or month...

 

It is also very likely that the next crash will be much bigger than the previous one, because the amount of debt is at record levels everywhere, especially in the junk debt market.

 

Where things will start to unravel doesn't really matter since, thanks to globalization, everything is connected to everything everywhere.

 

And yes, bail in, as in taking money out of customers' deposits to refinance a bank, are more than likely...why would they have created the new regulations for that otherwise?

 

Normally, one is safe up to 100,000 dollars or euros, guaranteed by the FDIC or other entities.

 

Yet, it may be prudent to reduce that amount by half.

 

Also prudent is to avoid dealing with the too big to fail banks, which are the most rotten ones (Deutsche Bank, BNP Paribas, HSBC, Italian banks and so on...).

 

If you want more information, I can give you a long list of websites and blogs run by serious people, such as David Stockman, former Director of Budget in Ronald Reagan administration.

 

 

 

 

So Brunolem what strategy would you follow to protect your hard-earned savings if and when the next banking crisis falls on us  all!!o

[Brunolem]

4 minutes ago, James Roderick said:

So Brunolem what strategy would you follow to protect your hard-earned savings if and when the next banking crisis falls on us  all!!o

It doesn't have to be a banking crisis, and probably won't be.

 

Many other types of events could affect the markets.

 

Almost all those who are not on the bullish/rose tainted side, recommend  very similar strategies.

 

Instead of getting them from a tangential source like myself, you might want to read the articles published by John Mauldin, Doug Casey and his team, Bill Bonner, Chris Martenson, Jim Rogers and others...

[Naam]

Quote

Brunolem said:

There are plenty of very serious and reliable authors who are expecting what you describe, sooner than later...and most of them indeed strongly recommend to have some gold, preferably in coins and safely stored with you.

 

What some members above don't understand is that in case of major inflation, or even hyperinflation, which is to be expected, as in some EM now, is that the price of gold inflates simultaneously, so that whatever the prices are, you keep your purchasing power, while those who are in fiat currency cash lose 10% or more every week, or month...

my personal view -shared with millions of fellow investors- is that anybody who uses the expression "fiat money" is decoupled from financial reality. 'nuff said!

 

[James Roderick]

29 minutes ago, Brunolem said:

It doesn't have to be a banking crisis, and probably won't be.

 

Many other types of events could affect the markets.

 

Almost all those who are not on the bullish/rose tainted side, recommend  very similar strategies.

 

Instead of getting them from a tangential source like myself, you might want to read the articles published by John Mauldin, Doug Casey and his team, Bill Bonner, Chris Martenson, Jim Rogers and others...

Yes Brunolem that's good advice

 

Is there any particular website ( or websites) you'd recommend to a novice who needs to get up to speed !!

 

 

 

[Brunolem]

1 hour ago, James Roderick said:

Yes Brunolem that's good advice

 

Is there any particular website ( or websites) you'd recommend to a novice who needs to get up to speed !!

 

 

 

You can start by subscribing to their free newsletters.

 

Mauldin has a very good one.

Bonner and his team publish through the Daily Reckoning.

Casey and his team are on International man

Martensen and his team on Peak prosperity

There is also Wolf Richter on Wolfstreet, and they will lead you to others since they often refer to each other.

 

 

[Brunolem]

2 hours ago, Naam said:

my personal view -shared with millions of fellow investors- is that anybody who uses the expression "fiat money" is decoupled from financial reality. 'nuff said!

 

Good...then how do you cal! the money created by the banks these days?

[Naam]

4 hours ago, Brunolem said:

6 hours ago, Naam said:

my personal view -shared with millions of fellow investors- is that anybody who uses the expression "fiat money" is decoupled from financial reality. 'nuff said!

Good...then how do you cal! the money created by the banks these days?

you are now diverting from a general use of "fiat" for any money to the specific money "created by the banks".  the overwhelming majority of assets acquired is not paid for with created but with "solid" moneys who's values are backed by various means (too many to list). that these values fluctuate is quite normal as money is a commodity that moves based on offer and demand.

 

having said so, i claim it is nearly impossible to have a meaningful discussion with a counterpart who's view is:

Quote

Brunolem said:

What some members above don't understand is that in case of major inflation, or even hyperinflation, which is to be expected, as in some EM now, is that the price of gold inflates simultaneously, so that whatever the prices are, you keep your purchasing power, while those who are in fiat currency cash lose 10% or more every week, or month...

because here's the reality as far as the "simultaneously inflated gold price" is concerned.

 

     

[Brunolem]

12 hours ago, Naam said:

you are now diverting from a general use of "fiat" for any money to the specific money "created by the banks".  the overwhelming majority of assets acquired is not paid for with created but with "solid" moneys who's values are backed by various means (too many to list). that these values fluctuate is quite normal as money is a commodity that moves based on offer and demand.

 

having said so, i claim it is nearly impossible to have a meaningful discussion with a counterpart who's view is:

because here's the reality as far as the "simultaneously inflated gold price" is concerned.

 

     

It appears that you have a very limited understanding of economic and monetary affairs.

 

Let's start with gold.

I never mentioned the US which, as far as I know, is not in a situation of massive inflation and currency devaluation.

I mentioned EMs...such as these days Turkey, Iran, Venezuela and the likes.

Now go look how gold has fared with respect to their respective currencies...

 

As for the assets paid by supposedly "solid money", where do you suppose that money was created?

It is simply money created by the banks, the only authorized issuers, which has found its way into the economy and is constantly changing hands.

 

The term "fiat" refers only to the creation of the money.

 

It doesn't mean that there no tangible wealth in the country, just that, at the time of creation, there was no tangible wealth to back it, hence "fiat", meaning "out of nothing" with emphasis on the "out" which refers to the moment of creation...

[Brunolem]

12 hours ago, Naam said:

 

     

Just for the record, here is how the mighty USD has fared against gold since the inception of the Federal Reserve in 1913...

 

Short term comparisons are meaningless, considering the ongoing manipulations on the gold paper market...