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We Are Facing Another Global Financial Crisis Of Epic Proportions


suntory

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HOLA441
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HOLA442

Steve Keen: "Can We Avoid Another Financial Crisis?" (Spoiler Alert: No!)

20170417_keen.jpg

"Too many illogical and irrational assumptions are the reasons why mainstream economics is suffering from a crisis of confidence... too many countries rode a wave of private debt explosion during the last boom, and are now in the equivalent of economic purgatory."

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HOLA444

Theresa May is about to make a statement in parliament (just after 11 am today), many are speculating that she is going to call an early election. Could it be she knows something is about to break and wants a longer term to sort it whatever it is so Labour doesn't get a look in?

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HOLA446

New Global Financial Stability Report: https://www.imf.org/en/Publications/GFSR/Issues/2017/03/30/global-financial-stability-report-april-2017#Summary

"The April 2017 Global Financial Stability Report (GFSR) finds that financial stability has continued to improve since last October. Economic activity has gained momentum and longer-term interest rates have risen, helping to boost the earnings of banks and insurance companies. Despite these improvements, however, threats to financial stability are emerging from elevated political and policy uncertainty around the globe. If policy developments in advanced economies make the path for growth and debt less benign than expected, risk premiums and volatility could rise sharply. In addition, a shift toward protectionism in advanced economies could reduce global growth and trade, impede capital flows, and dampen market sentiment...

In Europe, domestic banking systems continue to face significant structural challenges. Furthermore, there should be no rollback of the postcrisis reforms that have strengthened oversight of the financial system...

Combined with low credit demand, [prolonged low growth / interest rates] would lower bank earnings, particularly for smaller, deposit-funded, and less diversified institutions, and presenting long-lasting challenges for life insurers and defined-benefit pension funds."

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HOLA447

Venezuela continues its descent into chaos and bloody violence.

https://www.theguardian.com/world/2017/apr/19/venezuela-protest-mother-of-all-marches-maduro-violence

Quote

At least two people have been killed and dozens injured in Venezuela as street battles erupted alongside a mass anti-government demonstration that the opposition billed as “the mother of all marches”.

A 17-year-old boy was fatally shot in the head in a neighbourhood of Caracas, while several hours later a woman was killed in gunfire during a rally in the Andean state of Tachira near the Colombian border.

At least one legislator had to be hospitalised, and images posted online showed opposition leader and former presidential candidate Henrique Capriles choking on teargas.

Fears of bloodshed had been stoked after President Nicolás Maduro put troops on the streets, supplied guns to sympathetic civil militias and called for a simultaneous rally of his supporters against what he said was a United States-backed coup.

Wednesday’s deaths brought the total number of deaths at protests this month to seven.

The first victim on Wednesday, Carlos Moreno, was not taking part in the demonstration but was shot when government supporters approached an opposition gathering and opened fire, witnesses told Reuters. Moreno, who was three days from his 18th birthday, was shot in the head, and later died in the hospital.

Hours later, university student Paola Ramírez died in the opposition stronghold of San Cristóbal, after she and her boyfriend, were shot at by a group of men as they left a protest.

“We were on a motorbike and they were following us, shooting,” her boyfriend told Reuters. “I left her on a block where she was going to find her sister and I went to hide the bike. I heard shots and when I arrived she was on the ground. I tried to protect her as much as I could,” he said.

State TV images showed red-shirted government loyalists on the rival march “to defend the homeland”.

 

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HOLA448

i have been constantly wrong guessing when the next crisis will come. Mid 2015 and early 2016 really did look like the start of a crash, and then suddenly we have had this massive spike higher in the stock markets.

the momentum since the start of 2016 has been mindblowing, huge gains. 

was that the final blow off top? are we about to finally dive into another recession? its overdue, doesnt seem like there is much gas in the tank.

Will 2017 be our year? 10 years on from the start of the last one?

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HOLA449
9 minutes ago, jiltedjen said:

i have been constantly wrong guessing when the next crisis will come. Mid 2015 and early 2016 really did look like the start of a crash, and then suddenly we have had this massive spike higher in the stock markets.

the momentum since the start of 2016 has been mindblowing, huge gains. 

was that the final blow off top? are we about to finally dive into another recession? its overdue, doesnt seem like there is much gas in the tank.

Will 2017 be our year? 10 years on from the start of the last one?

I seem to recall you were buying equities as you saved though.  Did you continue with this or did I have that wrong?

This thread started on the 18 August 2015.  Since that time my wealth has grown by 45%.  I'm doing nothing special - buy a balanced portfolio of asset types, hold, rebalance with new money, minimise expenses, minimise taxes...

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HOLA4412
1 hour ago, winkie said:

I don't like to look upon it as a crisis, more of a reality check.....people being accountable for the actions and consequences that they take....;)

You won't be saying that when a cancer diagnosis comes through and you have to wait two years for an operation!

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HOLA4413
7 hours ago, wish I could afford one said:

I seem to recall you were buying equities as you saved though.  Did you continue with this or did I have that wrong?

This thread started on the 18 August 2015.  Since that time my wealth has grown by 45%.  I'm doing nothing special - buy a balanced portfolio of asset types, hold, rebalance with new money, minimise expenses, minimise taxes...

summer 2016 i was in the process of buying a house which then fell through. i liquidated my bonds and my shares but not my gold holdings. Since then it worked out nicely due to bonds falling, but it didnt take long before shares rose sharply again, at which point i did not buy more. I have read permanent portfolio and fully subscribe to the theory and it treated me very well. But with hoping to actually buy a house in the next 12 months i would struggle to buy, hold and sell for long enough to actually cover the fees, permanent portfilio simply does not work in a 12-18 month time span, but the previous years i used it, it worked beautifully. 

My SIP however is looking rather healthy with its shares up around 14-20% bonds down lots and gold slightly up, thankfully my shares is by far my biggest holding. 

Cash although constantly devalued seems ok for my shorter time spans, especially as against houses its actually climbing in value currently. 

i thought i would re-visit this thread. Nothing booms forever. it might be happening now, or in 3 years time but a 'big one' recession is due. perhaps the severity of the last one has made everyone slower to react with blowing the current bubbles, maybe its laws or restrictions on lending. But recently its been looking crazy, we must be due a recession, or at least a large correction soon.

maybe this broken clock is due to be correct just from the passage of time. 

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HOLA4414
24 minutes ago, jiltedjen said:

...Nothing booms forever. it might be happening now, or in 3 years time but a 'big one' recession is due. ... we must be due a recession, or at least a large correction soon.

maybe this broken clock is due to be correct just from the passage of time. 

I agree with this.  A bust must follow a boom just as night follows day IMHO...  The problem is knowing when.  The market can remain irrational longer than you can remain solvent was a valuable strap line I once read.  

The S&P500 is at valuations that are so high there has only ever been two higher in the history of the US stock market.  Those two were the dot com bust and the great depression.  Dividends in the FTSE100 aren't covered by earnings.  The FTSE Japan Index is yielding something like 1.5%.  Public debt levels are high.  Private debt levels are high.  House prices are ludicrous.  Is the crash coming in 2017?  I wouldn't bet on it.

Early in my journey to FI I'd tried to trade and market time.  I continually lost.  Now I just assume there will be booms and busts.  I just use historical worst sequence of returns and 'hope' that we don't get worse than history has ever served up previously.  If we do then I'm just going to have to adapt or live of beans under a railway arch.

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HOLA4415

i agree hard to time, and stupid to try a bet on timing with monies.

My personal circumstance does favour cash at the moment, but that in itself is risky.

There does not seem to have been a pause in the recent wall-climbing shares, so maybe momentum alone will cary them though the rest of this year. But equally a sudden correction could happen again soon.

The conservatives calling a snap election, america suddenly talking about war with north Korea, it seems to me that the powers that be have a lot more data and foresight that we do about where the world is heading. If there was another recession/crisis coming you would 1. want to make sure you can stay in power long enough to get at least reach the 'green shoots of recovery due to the conservatives' stage. and 2. nothing like a 'good war' to stimulate the economy and act as a scape goat at the same time.

i think 2017 is 2007 and 2018 will be 2008 all over again, if not sooner. Even the news is starting to pick up on the excess credit building. 
 

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HOLA4416
3 minutes ago, jiltedjen said:

i agree hard to time, and stupid to try a bet on timing with monies.

My personal circumstance does favour cash at the moment, but that in itself is risky.

There does not seem to have been a pause in the recent wall-climbing shares, so maybe momentum alone will cary them though the rest of this year. But equally a sudden correction could happen again soon.

The conservatives calling a snap election, america suddenly talking about war with north Korea, it seems to me that the powers that be have a lot more data and foresight that we do about where the world is heading. If there was another recession/crisis coming you would 1. want to make sure you can stay in power long enough to get at least reach the 'green shoots of recovery due to the conservatives' stage. and 2. nothing like a 'good war' to stimulate the economy and act as a scape goat at the same time.

i think 2017 is 2007 and 2018 will be 2008 all over again, if not sooner. Even the news is starting to pick up on the excess credit building. 
 

Maybe or maybe not.  I honestly don't know.

Cash in itself is risky even if you stay under the £85k FSCS limit.  Inflation just eats it alive.  What's a best rate savings rate these days.  About 1%.  Meanwhile RPI is running at 3.1% and possibly heading higher if the £ doesn't recover a little.  If you then dare work that interest then gets taxed making you even more negative in real terms.

As I write this I have £155k tucked up in savings accounts being nicely eroded by inflation and a devalued £.  I then have a further £46k in P2P. Along with NS&I ILSC's it's my future home purchase.  So I know the feeling of seeing the value of cash eroded.  I also don't have an alternative to cash to offer if you need a 'guaranteed' amount of money for something within the next 5-10 years.

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HOLA4417

put my timeframe is pretty much 12 months. there are few investments i can get into with a relatively humble pot, make a return on, and then cash out without fees making the whole thing pointless.

pretty much my whole life savings will be a deposit when prices finally reach reasonable value. 

if my time frame was more like 2-3 years or more then i would follow the permanent portfolio theory.

but more generally i can feel it in my bones that change is coming, i had the same feeling in 2007. at the time i thought it was just the feeling of starting Uni, but now i know its more of a feeling in the air.

the stars are finally aligning. i think the crisis is heading our way. And im sure we will get some economic indicators flashing red in the coming months. 

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HOLA4418

I've lurked on this site for quite a few years now and whilst there seems to be general agreement that a big correction is due (timing: who knows?) I've never seen such disagreement as to how best one should position oneself.

 

There are those saying everything from gold, shares, Cash, antiques, classic cars,  Bonds, even BTL.

 

"Knowing" disaster is coming is one thing, deciding how best to survive it is quite another.

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HOLA4419
19 hours ago, Futuroid said:

You won't be saying that when a cancer diagnosis comes through and you have to wait two years for an operation!

......so be it, least we have a waiting list, thousand don't, or drugs that can prolong life three months or so....very philosophical, but we all have to die at some point......IMO we have more control over how long we live than we are led to believe, more control than any system.....instead of blaming the system, how about putting some of the blame onto our own lifestyles.... personal responsibility.;)

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HOLA4420
9 minutes ago, winkie said:

......so be it, least we have a waiting list, thousand don't, or drugs that can prolong life three months or so....very philosophical, but we all have to die at some point......IMO we have more control over how long we live than we are led to believe, more control than any system.....instead of blaming the system, how about putting some of the blame onto our own lifestyles.... personal responsibility.;)

I'll let you wander the cancer wards telling young mums and dads that "we all have to die at some point" and "at least we have a waiting list" ;)

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HOLA4421
14 minutes ago, Futuroid said:

I'll let you wander the cancer wards telling young mums and dads that "we all have to die at some point" and "at least we have a waiting list" ;)

Could never do that.....all death is traumatic for all concerned, loss and grief is hard to handle.... losing young innocent life is a great sadness a tragedy, can affect future life progress and own health if unable to accept......just sometimes we expect medicine and procedures to cure all, a magic wand.....we can only hope for the best, nothing more nothing less.;)

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HOLA4422

Key Economic Data Continue To Show A Recession

...'As for derivatives…On its 2016 10-K, Goldman is showing a “notional” amount of $41 trillion in derivatives in the footnotes to its financials. This represents the sum of the gross long and short derivative contracts for which Goldman has underwritten. Out of this amount, after netting longs, shorts and alleged hedges, Goldman includes the $53 billion in “net” derivatives exposure as part of its “financial instruments” on the asset side of its balance sheet. Goldman’s book value is $86 billion'...

'If Goldman and its accountants are wrong by just 1% on Goldman’s “net” derivatives exposure, Goldman’s net derivatives exposure would increase to $94 billion – enough to wipe out Goldman’s book value in a downside market accident (like 2008). If Goldman and its “quants” have mis-judged the risk exposure Goldman faces on the $41 trillion in gross notional amount of derivatives to which Goldman is involved by a factor of 10%, which is still below the degree to which GS underestimated its derivatives exposure in 2008, it’s lights out for Goldman and its shareholders.'

http://investmentresearchdynamics.com/key-economic-data-continue-to-show-a-recession/

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HOLA4424
On 4/30/2017 at 1:42 PM, jiltedjen said:

i have been constantly wrong guessing when the next crisis will come. Mid 2015 and early 2016 really did look like the start of a crash, and then suddenly we have had this massive spike higher in the stock markets.

the momentum since the start of 2016 has been mindblowing, huge gains. 

was that the final blow off top? are we about to finally dive into another recession? its overdue, doesnt seem like there is much gas in the tank.

Will 2017 be our year? 10 years on from the start of the last one?

It's an interesting thread but it's predictive power was pretty poor.

OP hasn't been around for a while, maybe he went balls out on doom and lost the lot.

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HOLA4425
On 30/04/2017 at 10:58 PM, jiltedjen said:

put my timeframe is pretty much 12 months. there are few investments i can get into with a relatively humble pot, make a return on, and then cash out without fees making the whole thing pointless.

pretty much my whole life savings will be a deposit when prices finally reach reasonable value. 

if my time frame was more like 2-3 years or more then i would follow the permanent portfolio theory.

but more generally i can feel it in my bones that change is coming, i had the same feeling in 2007. at the time i thought it was just the feeling of starting Uni, but now i know its more of a feeling in the air.

the stars are finally aligning. i think the crisis is heading our way. And im sure we will get some economic indicators flashing red in the coming months. 

I think your instincts are sound.

It's still 2007 as far as the private sector is concerned (below). Debt-to-GDP is around 165%, more or less unchanged from the day (14th September) Northern Rock blew itself to pieces.

Hard to see vigorous support for the economy coming from either consumers or businesses going forward. Debt composition has changed a little but there's been no meaningful deleveraging.

Carney's £100bn Term Funding Scheme continues to trickle into the economy. Spent around half of it thus far. Effects seem modest. He really needed to deliver it in one or two lumps to generate a robust credit acceleration. Fail.

Hammond's brought the deficit down to demonstrate fiscal 'prudence' before the GE when in fact all he's been doing is starving the economy of credit. Epic fail. Sure, he'll open up the spigot again if re-elected but a broad recessionary trend may have established itself before then.

Unsecured debt has recently been growing at 10+% p.a. A significant credit impulse but is it sustainable? Not if it's distress spending to compensate for falling real wages.

All in all, the UK economy looks as sick as a dog to me too. B)

Screen-Shot-2017-04-21-at-14.36.03.png

Edited by zugzwang
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