Is the credit crisis much more grave than what meets the eye?
*JSMineSet, by James Sinclair, August 27, 2007:
"People do not have a clue what is really happening. All the talk
everywhere, even by well placed people without a bone to grind
politically and economically, keep calling this a failure in sub prime
loans. This is presented as if securitized bonds (with the assumption
that the collateral for the bonds were mortgages themselves) has lost
all its value. This is not the case. What is worthless is a the mix of
credit and default derivatives that make up the vast majority of many
instruments held by financial and commercial paper dealing entities,
both private and public.
Even if you forget that the economic figures recently released are
whoppers and take them at face value as commentators are, you still
have to ask why the equities market fails to do better. The answer is
simple. Rallies in the equities are presently being supplied by those
that understand the grave nature of the present problem.
This is why the attitude of the Fed is not commensurate with the
gravity of the global problem being caused by the meltdown in credit
and default derivatives.
If it was simple mortgages it isn’t apparent because as bad as the
mortgage market is they have not all failed simultaneously as if all
sub prime mortgage holders have been foreclosed on at once. That alone
should give you a hint that the problem is not the advertised, but much
larger.
The Fed altering their banking regulations has to give you a hint that
the problem is not the advertised problem, but much larger.
The financial difficulty going global has to give you a hint that the
problem is not the advertised problem, but much larger.
When you see bank after bank needing liquidity in substantial amounts,
this has to give you a hint that the problem is not the advertised
problem, but much larger
The hope for every central bank is that the real problem can be kept
from public view. The truth is the public, even professionals in Wall
Street, have no clue what the problem is. They know it has something to
do with derivatives, but none realize it is a more than $20 trillion
dollar mountain of unfunded, unregulated paper that has just been
discovered to not have a market and therefore any real value.
This is why I have suggested you plan for the worst and hope for the
best. Taking cautionary action before a problem occurs only requires
some of your time. If you wait and try to clean up the mess after a
problem happens usually there is no action that can be taken.
When the US dollar realizes the seriousness of this situation, be that
now or sometime soon, the bottom will drop out."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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