{"id":42252,"date":"2013-09-23T05:37:08","date_gmt":"2013-09-23T09:37:08","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=42252"},"modified":"2013-09-23T05:37:08","modified_gmt":"2013-09-23T09:37:08","slug":"should-we-be-fearful-of-another-epic-financial-collapse","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/09\/23\/should-we-be-fearful-of-another-epic-financial-collapse\/","title":{"rendered":"Should We Be Fearful of Another Epic Financial Collapse?"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> <\/p>\n

While September 2013 is shaping up to be a month to remember<\/a>, none of us will ever<\/i> forget September 2008.<\/p>\n

How could we? In a single month\u2019s time, the entire financial world imploded\u2026<\/p>\n

American International Group <\/b>(AIG<\/a>), Fannie Mae and Freddie Mac all needed to be bailed out by the government to survive.<\/p>\n

Lehman Brothers collapsed\u2026 Washington Mutual declared bankruptcy\u2026 And Merrill Lynch & Co. and Wachovia were sold at rock-bottom prices to avoid the same fate.<\/p>\n

As we all know, these unprecedented events sparked a global selloff. One that ultimately erased $11 trillion in equity values in the United States alone.<\/p>\n

Five years later, scars remain.<\/p>\n

Case in point: Although the S&P 500 Index has rebounded and gone on to trade at record levels, financial sector stocks remain 47% below their 2007 highs. That\u2019s more than any other industry, according to Bloomberg<\/i> data.<\/p>\n

As John Carey at Pioneer Investment Management Inc. says, \u201cThis crisis is certainly something that still troubles investors.\u201d Indeed! <\/a><\/p>\n

What\u2019s worse, we could be on the brink of yet another collapse, according to former Treasury Secretary, Henry Paulson.<\/p>\n

He told Germany\u2019s Handelsblatt<\/i> that \u201cthe world should prepare for a new financial crisis.\u201d<\/p>\n

Michael Lewis, author of The Big Short<\/i> (which gave us an inside look at the conditions that preceded the last crisis), agrees.<\/p>\n

When asked by BusinessWeek<\/i> earlier this month if there was another threat likely to strike soon, he said, \u201cThe answer is yes, but I can\u2019t talk about it yet, because I\u2019m in the middle of a book about it.\u201d<\/p>\n

Way to protect your own interests, Mr. Lewis!<\/p>\n

I refuse to be similarly selfish. So what could possibly spark the next global financial crisis?<\/p>\n

First, let me tell you what it won\u2019t<\/i> be.<\/p>\n

The Real<\/i> Threat is Never the Obvious One<\/b><\/p>\n

Most investors fear that Wall Street banks will cause the next financial crisis. After all, at its core, Wall Street is overrun with greed. And greed can\u2019t be contained.<\/p>\n

Sheila Bair, former Chairwoman of the Federal Deposit Insurance Corp., seems to think so, too. Even after five years of policy changes designed to rein in risk taking, she says, \u201cLarge financial institutions still have way too much leverage.\u201d<\/p>\n

As I\u2019ve shared before, though, if banks were truly a threat, credit default swap (CDS) prices<\/a> would be tipping us off. And that\u2019s not happening.<\/p>\n

Default risk for the major financial firms around the world has been trading sideways, based on Bespoke Investment Group\u2019s Bank and Broker CDS Index. Even in the face of the August selloff, default risk didn’t budge, indicating that there\u2019s no imminent threat.<\/p>\n

So what could the ultimate danger possibly be? All we have to do is follow the money.<\/p>\n

Since 2008, fresh capital has been pouring into one industry in particular \u201con a scale not seen before,\u201d according to the chairman of one of this industry\u2019s most iconic firms.<\/p>\n

So much so, that he fears the capital could become \u201cdetached from the underlying transaction of risk.\u201d<\/p>\n

Translation: The same trap that ensnared Wall Street\u2019s biggest banks is being set again. Only this time, it\u2019s targeting a different industry.<\/p>\n

Stayed tuned for my next column, where I\u2019ll reveal this unexpected threat – and, more importantly, the stocks we should be avoiding (before it\u2019s too late).<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n

The post Should We Be Fearful of Another Epic Financial Collapse?<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

Article By WallStreetDaily.com<\/u><\/a><\/p>\n

Original Article: Should We Be Fearful of Another Epic Financial Collapse?<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com While September 2013 is shaping up to be a month to remember, none of us will ever forget September 2008. How could we? In a single month\u2019s time, the entire financial world imploded\u2026 American International Group (AIG), Fannie Mae and Freddie Mac all needed to be bailed out by the government to survive. … <\/p>\n

Continue reading “Should We Be Fearful of Another Epic Financial Collapse?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-42252","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/42252","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=42252"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/42252\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=42252"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=42252"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=42252"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}