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The result of this "Great Global Macro Experiment" is a market crash that never completed. BoomBustBlog subscribers should reference 
The Inevitability of Another Bank Crisis while non-subscribers should see Is Another Banking Crisis Inevitable? as well as The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance.
All four corners of the globe are currently "hobbling along on one leg", under the pretense of a "global recovery".
Simply sit back and look at the (supposed, none of these should truly be considered surprises) Black Swan Catalysts that we now face:
- US Housing, you know, the the thing that kicked this all of to begin with - The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance Friday, March 11th, 2011
- US and/or European Commercial Real Estate - Reggie Middleton ON CNBC’s Fast Money Discussing Hopium in Real Estate Friday, February 25th, 2011
- MENA, the Middle East & North Africa - Egypt’s Social Unrest As A Pan-European Economic and Financial Contagion? It Can Happen!!! Friday, January 28th, 2011 or First Tunisia, Then Egypt, Now Yemen: Will This Reach The Powder Keg That Is The EU & What Will Happen If It Does? Wednesday, February 2nd, 2011
- Japan - Can Contagion Be Avoided Considering The Magnitude Of Japan’s Woes? Tuesday, March 15th, 201
The list can go on. The most likely catalyst is described as follows...
The advice coming from both the government agents (ex. central bankers) and those whom these government agents have pledged to rescue at the absolute cost to the average tax payer (the FIRE sector, particularly the banking cartel) has been absolutely horrendous. First let's take a look at the most respected of these agency protected players - Goldman Sachs. From my missive, Is Another Banking Crisis Inevitable? posted last month, I excerpt the following:
Today, Bloomberg reports that Goldman Sachs Turns Bullish on Europe Banks as Debt Risk Eases.The report goes on to state:
The U.S. bank that makes the most revenue from trading advised investors to take an “overweight” position on banks, raising its previous “neutral” recommendation, according to a group of equity strategists led Peter Oppenheimer. Investors should pay for the trade by lowering holdings of consumer shares, he wrote.
“For financials the narrowing of sovereign spreads in peripheral eurozone, which our economists expect to continue, is a clear positive,” London-based Oppenheimer wrote in the report dated Feb. 3. “Banks are one of the least expensive sectors in the market and the trade-off between their growth prospects and earnings in the next few years looks especially attractive.”
Unfortunately, the risks of this particular trade were not articulated, and I feel that the risks are material. Far be it for me to disagree with the “U.S. bank that makes the most revenue from trading”, but they have been wrong before – many times before. Reference Is It Now Common Knowledge That Goldman’s Investment Advice Sucks??? or Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?for more on this topic.
| Attention subscribers: A new subscription document is ready for download The Inevitability of Another Bank Crisis |
So where is the risk?
The impact of the Asset Securitization cum Sovereign Debt Crisis to bank balance sheets should become the market and media focus. The full cost of cleaning up the balance sheets of financial institutions particularly against the backdrop of adverse macro shocks emulating from sovereign defaults is not fully known. Structural weaknesses in sovereign balance sheets could easily spill over to the financial system due to the fact that most banks are stuffed to the gills with sovereign debt – highly leveraged, and marked as risk free assets at par. This can have broad, adverse consequences for growth in the medium term.
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BoomBustBlog has taken the opposite stance: The Inevitable Has Finally Been Admitted In Europe: The Macro Experiment Has Ignited Inflation Without Commensurate Growth & Rates Will Spike. I have queried many times in the past, Is It Now Common Knowledge That Goldman’s Investment Advice Sucks???. Those who follow me regularly know that I have no problem running up against these big investment houses in terms of analytical accuracy and veracity. See Did Reggie Middleton Best Wall Streets Best of the Best? to ascertain who has been most accurate throughout this entire fiasco since 2007. I am not that smart, and I don't have a crystal ball. I simply understand and respect the Circle of Life and I do not need to screw my clients in order to make my profits. Let's see where the news of today puts those Goldman proclamations in reference to my perspective...
From Bloomberg - Socrates Defeat Pushes Portugal Closer to EU Bailout: Portuguese Prime Minister Jose Socrates tendered his resignation after plans to cut the budget were rejected by parliament, pushing the country closer to an international bailout.
BoomBustBlog analysis:
- Portugal’s Debt Ridden Finances: An Analysis of Haircuts, Restructuring and Strategy – Professional Analysis
- The Anatomy of a Portugal Default: A Graphical Step by Step Guide to the Beginning of the Largest String of Sovereign Defaults in Recent History Tuesday, December 7th, 2010
- The Truth Behind Portugal’s Inevitable Default – Arithmetic Evidence Available Only Through BoomBustBlog Monday, December 6th, 2010
- CB Swallows Massive Portuguese Bond Losses As It Is Clear That The Third State Will Soon Join The Bailout Brigade – Haircuts, Here We Come!!! Friday, February 18th, 2011
- The Coming Interest Rate Volatility, Sovereign Contagion, Geo-political Unrest & Double-Dip Recessions: Here’s The Answer To Valuing Global Real Estate Through This Mess Tuesday, February 15th, 2011
Bloomberg - Irish GDP Fell 1.6% in Fourth Quarter on Investment, Exports : I have warned on Ireland and its banks repeatedly
- BoomBustBlog analysis: Here’s Something That You Will Not Find Elsewhere – Proof That Ireland Will Have To Default…Tuesday, November 30th, 2010
- Ireland’s Bailout Is Finalized, The Indebted Gets More Debt As A Solution But The Fine Print Is Glossed Over – Caveat Emptor! Monday, November 29th, 2010
- The BoomBustBlog Contagion Model: How We Predicted 9 Months Ago That The UK and Sweden Would Rush To Bail Out Ireland, and Why Friday, November 26th, 2010
Bloomberg: U.K. Retail Sales Declined More Than Forecast in February
Osborne to Ease U.K. Voter Pain by Taxing Oil, Banks, Rich
European Services, Manufacturing Growth Slowed in March
- BoomBustBlog analysis: Subscription only - UK Public Finances March 2010
Bloomberg: Spanish Bank Ratings Cut at Moody’s After Nation Downgraded
BoomBustBlog analysis:
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As If On Cue After My Step By Step Illustration Of A Spanish Default, Spanish Yields Climb at Auction As Pressure Continues Thursday, December 16th, 2010
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Will Spain Default? The Answer Is Not Hard To Determine If You Take An Objective Look At The Numbers And Recent History! Monday, December 13th, 2010
- Subscribers only - Spanish Banking Macro Discussion Note
Click here for the Pan-European Debt Crisis series or here for my latest on the topic.
