Flashback:
– It Has Started: Wall Street Is Preparing For A Doomsday Scenario (Business Insider, July 21, 2011):
If you’re simply looking at their public statements, Wall Streeters seem to be alarmed about the debt crisis, but don’t appear to be sliding into panic mode.
In fact, they’re just really good actors.
Across the financial sector, many are preparing for a debt doomsday scenario, in which the U.S does in fact default, the New York Times reports.
Firms are “taking steps to reduce the risk of holding Treasury bonds or angling for ways to make profits from any possible upheaval.”
It’s clear hedge funds have changed gears and many are in heavy de-risking mode, with billion dollar firms like Moore Capital and Soros Fund Management moving their flagships into majority cash.
This was a tactic implemented by a ton of hedge funds when the financial world imploded in 2008 — so it’s a very big statement on how bad they think things may get.
While “hedge funds are stockpiling cash so they can buy up United States debt if other investors flee,” banks are looking hard at their treasury holdings and mutual funds “are working on presentations to persuade their boards that they can hold the bonds even if the government debt is downgraded,” the NYT reported.
And certainly,
One of the worst possibilities that people in the financial industry… have been discussing is that scores of insurance companies, pension funds and mutual funds might be forced to dump their Treasury holdings.
But the problem with trying to prepare for default in a meaningful and specific way is best summed up by the CFO of Wells Fargo (which is stockpiling cash just in the case): “Because nobody knows what is going to happen, nobody knows how to prepare.”
The stock market is so corrupt and rigged beyond understanding. 80% of all trades on the Big Board are known as High Frequency Transactions. A few people controlling hundreds of millions of dollars buy and sell huge blocks of stock in less than 8 seconds. That is hardly investment, that is skimming, and ought to be illegal. They are sucking every penny out of this country. The market shows activity, but there is nothing there but paper.
IN 1929, the stock market failed thanks to heavy 90% margins on stock purchases. If you had $100.00, you could buy $190.00 in stock. This worked while the stocks went up, but when it started collapsing, the margin calls started and people began to look for their money. Very soon, it was obvious there was a lot less money in reality than on paper. The runs on the banks caused many to fail.
Today, a huge fund will take $100 million in cash and leverage it into $100 Billion. That is far deeper than 90% margins of the 1920s. Shortfalls in real cash vs paper have already shown themselves. About 3 months ago, the NYSE was sold to Germany for NO CASH all Stock. Germany now holds 60% to 40% to US holdings. Money has been racing out of this country as soon as investors realized how corrupt the US markets are, and saw nothing would be done to fix it to avoid another crash. Also, no laws to stop the crooks, instead our corrupt government enables them to steal everything in this country.
There are trillions less money than our markets show. The only reason it has not collapsed again is due to the FED stepping in and buying treasuries. I don’t know how much longer the charade can go on, but it is on thin ice now.
When I was 14, my father took me to buy my first block of stock. Then, you had to buy stock in blocks of 100. There were regulations that made investors hold stock for several months before selling; there were rules to keep the market stable. Now, thanks to the repeal of Glass Steegle, there are none. The shadow economy we suffer with today would have been illegal.
We have a world economy that generates about $50 trillion a year. The shadow economy in the USA is between $600-800 Trillion a year. Like 1929, it will soon become apparent there is much less money than on paper, but it will be much worse thanks to the leveraging. In 1929, our currency was backed with gold, we were the world’s largest lending nation and an emerging mfg economy. Now, that is all gone.
Thanks for an excellent article.
Marilyn Gjerdrum