I’m here today with what I believe is a critically important message. The global Bubble – history’s greatest Bubble – is bursting. The previous cycle has ended, and a new cycle has begun to unfold. We are about to commence an adjustment period that I fear will shake us to the core.
Some refer to a “Lehman” or a “Minsky moment.” I call it the “holy crap moment”. Suddenly, things are not as we thought; they might be spiraling out of control, and our government benefactor no longer has an answer.
In particular, I fear concurrent crises of confidence in policymaking and market structure. De-risking/deleveraging will feed illiquidity and market dislocation. Global derivatives markets will be severely tested.
There are a lot of financial nuclear land mines that will be going off as rates are normalized. Maybe that is why the Fed is having an emergency meeting Monday.
“the sudden appearance of the Bond Vigilantes in the gilts markets (after all these years) was the most portentous market development in a week of portentous developments.”
When wall street analyst start talking about deflation, they are talking about financial asset prices NOT consumer inflation. Sorry wall street, but bubbles have to deflate.
Bailing out the Wall Street megabanks that are serially fined and hit with felony counts appears to be catching on as a major career advancement strategy at the New York Fed.
After overwhelming evidence was obtained of wrong doing, nothing was done, no body wants to talk about it, minimal changes were made.
The Super Credit Bubble is at the brink.
I fear the next phase of financial asset repricing will be both disorienting and destabilizing.