Mobius Says Financial Crisis ‘Around The Corner’

[marmar]

(Bloomberg) Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said.

The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46 percent between Lehman’s downfall and the market bottom on March 9, 2009. ..............(more)

The complete piece is at: http://www.bloomberg.com/news/2011-05-30/mobius-says-fresh-financial-crisis-around-corner-amid-volatile-derivatives.html

[xchrom]

1. who ever thought derivatives were a good idea in the first place?

the business of making money & investing & raising revenue should never be this complicated.

& while i kinda like marc mobius -- i'm guessing he'll make money off of a crises -- while others suffer.

[ozone_man]

8. Clinton?

Today marks the tenth anniversary of President Clinton's signing of the Commodity Futures Modernization Act (CFMA). At passage, the bill was said to establish "legal certainty" for derivatives. In other words, the bill assured bankers that they wouldn't face any legal consequences in the United States when they manipulated, defrauded, and colluded their way to billions in profits using financial derivatives that no one understood.

http://www.huffingtonpost.com/kevin-connor/celebrating-ten-years-of_b_799981.html

[FreakinDJ]

9. It took a LOT More then Clinton's signing to cause the collapse

Failure to fill ALL the Federal Reserve Board Seats - 3 unfilled during Bush years, and only the president can assign them

Failure of the DEMs to stop the repeal of the Glassman - Steagal Act

Bush policies of selling Debt to China to fund 2 wars.

RATpubliCON administration manipulation of near record low interest rates to fuel "The Paper Economy" 2003 - 2007

[marias23]

2. Advise Needed: : How Do We Protect Ourselves?

I Don't Like Thinking This Way: Any of you know enough to advise us how to protect our savings, retirement accounts, etc? The big guys will profit. We small folk need to know too. Thanks

[Pale Blue Dot]

13. Start here:

http://www.chrismartenson.com/page/what-should-i-do

Unfortunately, it's not about protecting savings and retirement accounts. It's about learning to live a completely different way. I wish there was an easier answer, but anyone who tells you there is lying or selling something.

[snot]

3. It's not really all that complicated; they just make it sound/look that way to discourage us

from trying to understand it.

It's as if we allowed people buy insurance policies on buildings they don't own. Pretty soon, lots of people would buy them on properties they're pretty sure WILL be destroyed by fire, flood, etc., because it's a bet likely to pay off. If there are ten times more policies than there is actual value, paying off on all them becomes a problem, esp. if we bail out the stupid or complicit insurers that issued all the policies, as we did in the case of AIG (to the great benefit of Goldman Sachs et al.).

This is why it's generally ILLEGAL to buy an insurance policy on a building you don't own. Allowing people to make such bets is not only economically unsustainable, but it creates a positive incentive for arson.

I have no problem with derivatives sold for the purpose of enabling a person or company that owns an insurable interest in the underlying property to hedge risks s/he/it's genuinely exposed to through actual ownership of that property.

But the sale of derivatives to those with NO insurable interest should be illegal, period.

And Glass-Steagall should be restored and expanded to address the new kinds of entities.

[Scuba]

4. "mobius" and "around the corner" interesting

[Lucky Luciano]

10. Hah! A fellow topology geek! nt

[Never Stop Dancin]

11. mobius around corner

http://www.youtube.com/watch?v=ivtKcM1DGeY

[Coyote_Bandit]

5. The derivatives market clearly needs to be better regulated but

it alone was not the cause of the previous financial crisis.

Fixing Wall Street financial measures will do little to fix the Main Street economy.

[fasttense]

7. Fixing Wall street will do a lot to lower gas prices.

Stopping banksters from re-inflating a bubble this time in commodities would bring down gas prices and greatly help the main street economy. Ravi Batra predicted this bubble when the recession 1st hit. Since we have rescued the banksters, they have to find a place to park all their unnecessary money. Since the CDOs and other mortgage backed crap is known to be worthless, they need something solid and real. So, speculators are buying up gold, oil and other commodities. Simply put, with the help of the bailout, they are re-inflating a bubble.

"“That’s how we have developed a massive glut of 677 million barrels worth of contracts in the front four months on the NYMEX and, come rollover day – that will be the amount of barrels ‘on order’ for the front 3 months, unless a lot barrels get dumped at market prices fast.

“Keep in mind that the entire United States uses ‘just’ 18M barrels of oil a day, so 677M barrels is a 37-day supply of oil. But, we also make 9M barrels of our own oil and import ‘just’ 9M barrels per day, and 5M barrels of that is from Canada and Mexico who, last I heard, aren’t even having revolutions.

“So, ignoring North Sea oil, Brazil and Venezuela, and lumping Africa in with OPEC, we are importing 3Mbd from unreliable sources and there is a 225-day supply under contract for delivery at the current price, or cheaper, plus we have a Strategic Petroleum Reserve that holds another 727 million barrels (full) plus 370M barrels of commercial storage in the U.S. (also full) which is another 365.6 days of marginal oil already here in storage in addition to the 225 days under contract for delivery.“

These contracts for oil outnumber their actual delivery, a sign of speculation and market manipulation, as oil companies win government authorizations for wells but then don’t open them for exploration or exploitation.

It’s all a game of manipulating oil supply to keep prices up. And no one seems to be regulating it."

There is so much oil out there, they can no longer store it in the US.

The complete piece is at: http://www.consortiumnews.com/2011/041911a.html

[FreakinDJ]

6. Naa..... let the markets regulate them selves

[socialist_n_TN]

12. It's capitalism. A bust is ALWAYS around the corner

How else could the wealthier capitalists buy up the assets of the bankrupt for pennies on the dollar?