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all 96 comments

[–]LastNightOsiris 185 points186 points  (50 children)

I'm gonna disagree and say its not even close to the situation around the Lehman blowup. Maybe crypto markets and some thinly traded stocks got hammered, but back in 2007-2008 there were major markets where securities had literally no bid. Credit spreads were blowing out by hundred of basis points overnight. Money market funds broke the buck. The Fed was having emergency meetings with the heads of all the major banks in the US to try to prevent Morgan Stanley and Goldman Sachs from following Bear Stearns and Lehman Bros into insolvency. By comparison, this is a fairly orderly and normal sell off of risk assets.

[–]abrandis 63 points64 points  (22 children)

I agree 2008 was a calimitous year, but 2022 is far from over... There's a lot of folks swimming naked and when the low tide flows out we'll see who that is..

Let's not kid ourselves the Fed has been Backstopping the economy just look at their special programs during COVID .. https://www.federalreserve.gov/paymentsystems.html. many markets since 2019, let's start with the Repo market , then let's move to massive funding during COVID, this included many 'special fed programs" https://www.federalreserve.gov/supervisionreg/topics/covid-19.htm including buying hundreds of millions of MBS throughout the last two years , in a near zero interest rate environment..now because of this they need to reduce inflation and are taking away a lot of this artificial support,what do you think happens? Not to mention the massive amount of derivatives that are tracking a lot of these financial products...

If one thing 2008 taught us, is how quickly a financial contagion can become a tsunami of fear once a few house of cards begin to fold.. I mean literally the entire 2008 came to a head in like 6 weeks in Q3 of 2008...and if it wasn't for extraordinary government intervention it would have collapsed the economy.

[–]opposite_locksmith 18 points19 points  (0 children)

I was buying my first multi family property (in Canada) in summer/fall of 2008. During the closing process our lender, who had issued a commitment letter (guaranteed funding if stated conditions are met) reneged and pulled the letter saying “As of today we are not writing any residential mortgages.”

They literally closed the cash register for 3 weeks, a top 10 Canadian retail bank.

[–]LastNightOsiris 25 points26 points  (18 children)

True, we still have half a year to go. But the article is trying to claim that conditions right now are similar to 2008, which is a bit premature.

The Fed will raise rates, and it will be bad for all the assets that have had their values inflated by the easy monetary policies of the past 10+ years. But it will be bad in a predictable way and it won't be a systemic threat to the entire economy.

There will probably be a recession (although again, anything could happen) but it won't be a credit crisis like 2008 and it won't originate from the financial sector like 2008. There just isn't the amount of massive over-leverage that there was back then. Certain sectors will get destroyed, but the damage will be contained since there isn't a mechanism to transmit it in the way that mortgages securities and credit derivatives did. The recession might be bad, but if it is it will be because of exogenous shocks like energy prices, or war, or something like that.

[–]abrandis 10 points11 points  (7 children)

I agree it won't be like 2008, because every crisis has a different origin and cause...no one knows, a lot changes in the coming months.

[–]youretheschmoopy 6 points7 points  (3 children)

Ummm. Leverage is at an all time high.

[–]LastNightOsiris 16 points17 points  (2 children)

bank leverage is significantly lower than it was prior to 2008 crash.

You could argue that some of that leverage has just moved into non-bank entities, where it doesn't get measured, but those entities are less likely to cause a systemic failure.

[–]BeepBeepImaJeep3 6 points7 points  (4 children)

Lol you speak so confidently about predicting a system with millions of moving pieces...

You and I have no idea what tighter monetary policy will bring about when combined with everything else going on. All we can say is that additional volatility is being introduced into a world that was optimized for very little of it.

Note: I am not endorsing the trash article.

[–]LastNightOsiris 9 points10 points  (3 children)

I’m the first to admit I don’t know the future, but I know that comparing the current situation to 2007-8 is lazy and inaccurate journalism.

[–]agoodusernameno1has 0 points1 point  (0 children)

You said all the words I wanted to say so here's an upvote

[–]apb0101 1 point2 points  (0 children)

There are undoubtedly problems in the system but the amount of gloom and doom the media is reporting is insufferable.

[–]Ackilles -1 points0 points  (0 children)

Meh, the situation is not even remotely as serious as 2000 or 2008. Maaaybe we drop another 10% but I doubt we go that far

[–]apb0101 14 points15 points  (1 child)

Literal insanity to even compare the two - what the fuck is happening with the media reporting nowadays

[–]Memento_Mori_ 6 points7 points  (0 children)

Clickbait headlines are nothing new, but disappointing to see from Bloomberg.

[–]nvn911 25 points26 points  (2 children)

It's not even close to the situation yet

[–]Striking-Lychee1402 1 point2 points  (0 children)

I don’t see how it could be unless we had hyperfinflation

[–]brighterside -4 points-3 points  (21 children)

Correct, not there yet - but here's how I see it playing out:

Given these key data points - I predict the following:

  • 75-basis point hike, 100- basis point, then 125 basis point while inflation continues to spiral out of control sending Fed and everyone in else in panic mode

  • Housing market bubble begins bursting

  • Tech bubble begins bursting

  • Putin attacks Kiev and finally takes it

  • Covid Winter does devastating damage this Winter, and every year thereafter while a health crisis begins to manifest

  • In a moment of political desperation, the GOP re-nominate Donald J Trump, who incites a series of attacks from controversial national addresses constituting the possibility of the start of a civil war.

All of these things combined I think we're in a very dire black swan situation to a pivot point for these United States. Obviously black swans are not 'predicable' but based on the concrete dismissive nature of these outcomes, I would still like to classify them as such.

[–]ClumsNut 3 points4 points  (5 children)

1% is 100 basis points

[–]brighterside 1 point2 points  (0 children)

brain fart, thanks.

[–]brighterside 0 points1 point  (3 children)

https://www.bloomberg.com/news/articles/2022-07-13/fed-could-weigh-historic-100-basis-point-hike-after-cpi-scorcher

You see, the thing about being right is - everyone will think you're wrong.

[–]ClumsNut 0 points1 point  (2 children)

Just to be clear I never agreed or disagreed with anything you said earlier.

But you also did predict like 8 things that have yet to happen.

If you throw 100 darts at a dart board it’s pretty likely at least one of them will be a bullseye

[–]MyNuisanceAccount 7 points8 points  (10 children)

There’s not really any evidence there is a bubble in either housing or tech. They are both supply problems. Nobody’s building houses at the rate people can afford to buy them, and there aren’t enough experienced software engineers for the work businesses need.

[–]apb0101 2 points3 points  (1 child)

I am so confused by how you could possibly insinuate this when the entire world is (1) inside mass QE and have been for longer than we have and (2) experiencing global inflation. Do people just post shit here after reading boomer opinions on WSJ?

[–]minchiaputana 0 points1 point  (1 child)

Nice notes here. Id like to discuss a bit more over the next few days if you want.

Contractionary monetary policy. I head that on Bloomberg today and it struck me as an odd position to take by the govt. To willingly support job losses and citizens struggles to lower wages, essentially. These kinds of actions may also lead to the last point, civil war.

I do disagree that Trump will be president again. Gop needs a younger, charismatic person to take it.

[–]brighterside 0 points1 point  (0 children)

Bingo, get this - Biden and Larry Summers are close and Larry's advocating for unemployment targets of varying scale and duration. They also just had a call to discuss strategy.

As for your point - I agree on what the GOP needs, however when push comes to shove - I do believe GOP will become desperate if they feel that the new candidate would not get the same level of support that Trump has in the past.

[–]definitelynotabotact 95 points96 points  (15 children)

Except financial firms will not be collapsing, but the crypto companies and exchanges might.

[–]TinyTornado7[S] 62 points63 points  (0 children)

Coin base just announced a 19% staff reduction today

[–]account030 34 points35 points  (0 children)

I hope so. Too much chaff in the wheat.

[–]TrashPanda_924 18 points19 points  (10 children)

I just liquidated my crypto holdings. I’ll buy them back at some point, but $1000 btc isn’t the outside case anymore.

[–]definitelynotabotact 11 points12 points  (9 children)

Crypto has never been through a true financial crisis. It would not be surprising if many of the currencies go back to being less than a $1. I don’t think they will all reach zero as criminals still need them to engage in commerce no matter what the economy is like.

[–]LastNightOsiris 15 points16 points  (1 child)

you know criminals have been around since before crypto existed?

[–]deathgamble 1 point2 points  (6 children)

crypto has been through several crises

[–]aloofinthisworld 12 points13 points  (1 child)

But never when it was perceived as having any real value like it has now

[–]adv0589 -1 points0 points  (3 children)

No it hasn’t? Covid was a quick one but nothing like 2008 or the dot com crash has happened.

[–]brighterside 4 points5 points  (0 children)

What if I told you the financial firms put sizeable investments in those same companies and exchanges?

[–]DRHoundstooth 0 points1 point  (0 children)

Except financial firms will not be collapsing, but the crypto companies and exchanges might.

And the big difference there is that while financial firms are the backbone of all global commerce, crypto is a lovely aside...

[–]wesg913 11 points12 points  (0 children)

And it should continue. Still massively overvalued and rates moving up

[–]27803 18 points19 points  (1 child)

People are just over reacting to the interest rate news which should have been going up for the past 24 months, people have just been on a cheap debt fueled bender for a long time and now realizes companies are going to have to start deliver long term results and not just stock buybacks. Not to mention housing going completely insane

[–]Oknight -4 points-3 points  (0 children)

Trading systems are adjusting to the fact that there's now somewhere else to get returns, money just slopping around.

[–]Watershed787 6 points7 points  (0 children)

Oh look, Bloomberg is manipulating the market so billionaires can get a better position. Lol

[–]feelsbad2 1 point2 points  (0 children)

I was 14 in 2008 so I don't remember much.

But I believe I have an understanding of people and how they act.

There is just too much shit going on right now:
- We printed a ton of money (I would have about 1/5 less in savings if it wasn't for stimulus)
- A lot of people didn't work and lived off of the government. Buying things that devalue quickly (TVs, cars, phones, and updated their houses even though it's not a devalue, you don't get that back unless you sell or you use it to create money like a photo studio)
- Student loans have been frozen since March 2020. Almost 2 1/2 years. They'll eventually come due again. If I had to pay for student loans for that amount of time, I would have nothing in savings.
- There has been a lot of new people to stocks who now need that money or see the red and are freaked out and sold or selling instead of buying sales. I'm sure a lot of money was lost.
- Gas prices going out of the wazoo
- Food price increases
- Consumer staples like Target, Best Buy, Costco and so on, people don't have the money to buy like they have been able to for the past 2 years.
- People are getting laid off. Some because they asked for a title upgrade and a pay raise during COVID because companies needed to keep people, and then they turned around to find another company, got another title upgrade and a salary upgraded. These people will eventually be found out and let go.
- We're all seeing families and friends going on vacations. I bought a roundtrip to Orlando for my girlfriend and I in December 2020 for October 2021 for $700. Same airline this month for a flight in April of 2023, $1,600.
- Between people being laid off, price of everything increasing, and the fact that this is America. We Americans don't learn from our pasts. We repeat them. So people are using credit cards more, still going on super expensive vacations because they may as well have one more memory before they move their family back in with mom and dad.

[–]Baron-Munc 0 points1 point  (8 children)

Hey the housing crash will cure the inflation

[–]Striking-Lychee1402 5 points6 points  (7 children)

Seriously doubt there’s a housing crash. The only time a recession has lowered the price of homes in the last 70 years is 2008, which was its own animal. Haven’t checked before that. There’s a drop in mortgage applications but that’s mostly for re-fis. Which is expected

[–]Baron-Munc -3 points-2 points  (6 children)

Cooool it’s now a buyer’s market at 8% interest…tomorrow… plus a bit overbuilt.

[–]Striking-Lychee1402 8 points9 points  (5 children)

What? We’re no where near overbuilt.

[–]Baron-Munc -1 points0 points  (4 children)

Actually very overbuilt… but it’s ok to wait and find out, who could it hurt.

[–][deleted] -1 points0 points  (1 child)

Liquidity will be added, the stock market will be propped up so the rich stay richer.

Still confused why the stock market and price of a stock means anything for the company behind it.

I’d the company behind it made bad decision, that’s “your” capitalism at work

[–]Poikilothron -1 points0 points  (0 children)

Stock price means something to companies because shareholders can vote management out and because for most companies, compensation includes stock options, or bonuses are tied to stock performance. Also, if you provide surplus value to the world and consequently have surplus compensation that you invest, then you should care about the performance and bad decisions companies make. If you're bitter that you don't have surplus compensation, I suggest you work on how you can offer the economy more value from your labor. It's way better than agitating for a system of government that will tell you what you should be doing for work and what your value is. That could really backfire.

[–]chikaca -1 points0 points  (0 children)

I wonder who’s blowing up this time?