Saturday, October 9, 2010
2008 redux (updated)
I won't make a habit of posting on weekends but this is important.
Grain markets are dislocating upwards. Oil has surged 14% in two weeks. The Aussie is threatening parity. Gold is rocketing to new highs. Everyone is on one side of the emerging markets trade. The Dow is powering on easy money. BHP is in the midst of a huge debt-funded monopoly play. US housing is in trouble and its structured finance complex is threatened again (see today's links).
The parallels are disturbing.
As Felix Salmon of Reuters said, it is very difficult to know where the "foreclosuregate" scandal will lead but it looks insurmountably complex. In an echo of the 07/08 securitisation freeze, this blog fears it will have a corrosive effect on confidence in US bank accounting.
To offer some insight into what to look for and what to ignore, find below Chapter 6: Things Fall Apart from The Great Crash of 2008, this blogger's co-authored book with Ross Garnaut.
Don't miss "Foreclosure fraud for dummies" at Rortybomb. Having read that, and realised the depth of the debacle will be determined by the (in)competence of the mortgage originators through the last cycle, read at least the first few pages of the below chapter. Be afraid.
Chapter 6- Things Fall Apart