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George Soros: Investing Legend Predicts Worst is Yet to Come
Renowned investor George Soros said Friday the world financial system has effectively disintegrated, and there’s no near-term bottom to this financial crisis in sight.
Speaking at a dinner at Columbia University, Soros actually compared the current situation to the breakup of the Soviet Union, and said that the whipsaw effects of the crisis are actually more severe than the Great Depression.
"We witnessed the collapse of the financial system," Soros told his audience. “It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom."
He said the bankruptcy of. Lehman Brothers Holdings Inc.…
23Feb2009 | Money Morning | 0 comments | ContinuedStudy of Great Depression Shows Intervention Postpones Foreclosures, But Causes Mortgage Rates to Spike
It was January 1934. The Great Depression was five years old – but still had another five years to run.
The carnage was horrific: From 1929 to 1934, U.S. personal income plunged 44%, real output nosedived 30% and the unemployment rate soared to 25% of the American labor force.
With the nation’s economic landscape laid to waste, it should be no surprise that home foreclosures were soaring, too: Residential real-estate foreclosures doubled between 1926 and 1929 – before the Great Depression actually began. According to a new study by the Federal Reserve Bank of St. Louis, the foreclosure rate jumped from 3.6…
6Nov2008 | Money Morning | Comments Off | ContinuedAs the Credit Crisis Deepens, There Are Still Many More Questions Than Answers
Is there any end in sight? Will the G7 provide strong actions (or statements of confidence) to support the global markets? Are these efforts by the world’s central banks helping or simply scaring investors? Should more regulatory actions be taken? Should exchanges suspend trading temporarily (as some suggest) until calmer heads prevail?
With Lehman Brothers Holdings Inc. (OTC: LEHMQ) gone, investor worry shifted to Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) and both stocks plunged accordingly. While Japan’s Mitsubishi UFJ Financial Group Inc. (ADR: MTU) still claimed to be moving forward with a deal that would bring Morgan a badly needed $9 billion capital infusion,…
13Oct2008 | Money Morning | Comments Off | ContinuedBailouts, bubbles, and bear markets
The bailouts have not halted financial institution failures, but have quickened the pace of failures.
As the stock market bubble was bursting in 2000 I suggested that readers keep notes or a journal, because someday they would be telling their grandchildren about the bursting of the tech bubble and its aftermath.
It’s only eight years later, and we have the potential for even more dramatic stories for our grandchildren than the 78% plunge of the Nasdaq in the 2000-2002 bear market.
If we believe one side, we might see the nation plunge into the next Great Depression.
What’s scary is they have some…
30Sep2008 | Street Smart Report | 2 comments | ContinuedBig Bailout: What The Fed’s Decision Means For Stocks – And For You – And How To Profit From It Anyway
The bailout made it official: Other than the week of September 11, 2001, last week was the most memorable of my career.
By the time the closing bell rang on Friday, investors were exhausted after an astonishing week of crazy activity, as the stock market swung from enormous losses, due to the fallout of the Lehman Brothers bankruptcy and AIG mess, to equally remarkable rallies amid talk of a massive government bailout plan.
Like many others, I knew I’d need the weekend to digest and make sense of everything that happened. The only reprieve I got was taking my 7-year old son…
25Sep2008 | Smart Profits Report | Comments Off | ContinuedThe Credit Crisis and the Real Story Behind the Collapse of AIG
There’s nothing fundamentally wrong with the core insurance business units of American International Group Inc. (AIG). Nothing at all. What imploded the venerable insurance giant was an accumulation of misplaced bets on credit default swaps.
By the best estimates of the International Swaps and Derivatives Association and the Bank for International Settlements (BIS), often referred to as the central banks’ central bank, the notional value of credit default swaps is some $62 trillion, or 35 trillion British Pounds at an exchange rate of $1.78.
A credit default swap (CDS) is akin to an insurance policy. It’s a financial derivative that a…
22Sep2008 | Money Morning | Comments Off | ContinuedCrisis Breeds Opportunity
Glass Half Full
When you have a lot of problems you also have a lot of opportunity. I want to start with some wise words from John Templeton. Templeton actually died a few weeks ago at the age of 95. His is a great story.
Born and raised in rural Tennessee, Sir John was the first person in his town to go to college. He went to Yale during the great depression and when things got tight, his father could no longer keep him there. So he helped pay his own way through college with his poker winnings, which sort of adds to…
15Aug2008 | Whiskey and Gunpowder | Comments Off | ContinuedPresidential Economic Policy
Economic Tectonics
Some of the greatest economic shifts in history are associated with big political swings, if not with politicians by name. Think of Hooverism, Roosevelt’s New Deal, Reaganism or British Thatcherism. But those are just labels. Things are not as simple as they imply.
They’re like plate tectonics in the field of geology. An earthquake can often be quite a serious event. But one earthquake is just an indication of the presence of a fault, if not a complex fault system. And that fault system may be part of a vastly larger structural zone at the edge of a shifting continent.
When…
13Aug2008 | Whiskey and Gunpowder | Comments Off | ContinuedEconomic Schools of Thought
Two Schools of Thought
There are two ways of studying economic theory. One approach is mathematical, and has been much enhanced by the computing power available to the individual economist. The other is historical and relies on the accumulated understanding of economic theory and practice.
The events of 2007 and 2008 have shown the limitations of the mathematical method. The credit crunch was not foreseen by anyone that I read, but it came as a shock to the number crunchers — it took them completely by surprise.
It did not come as a shock to the economic historians, who happily settled down to…
18Jul2008 | Whiskey and Gunpowder | Comments Off | ContinuedGRAND THEFT SOCIETY
A core problem with government is that its managers believe that all reality will conform to their wishes if they issue the right orders, pass the right laws, and put the right people in charge. Reality resists this simple-minded approach; witness the debacle of the war on terror. Sadly, the same group that has managed that war is now managing another one: the war on recession.
The tendency of these managers is to fabricate a view of cause and effect that conforms to what they would like to do. In the war on terror, we were told that the 9-11 attacks…
4Jul2008 | Daily Reckoning | Comments Off | Continued
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