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Soros: It's the 2008 crisis all over again

Discussion in 'Historic Market Crashes' started by Ahillock, Jan 7, 2016.



  1. Ahillock

    Ahillock A nobody Mother Lode

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    Soros: It's the 2008 crisis all over again
    Matt Clinch | @mattclinch81
    10 Hours Ago

    Billionaire financier George Soros is warning of an impending financial markets crisis as investors around the world were roiled by turmoil in China trade for the second time this week.

    Speaking at an economic forum in Sri Lanka's capital, Colombo, he told an audience that China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world, according to media. He added that a return to rising interest rates was proving difficult for the developing world.

    The current environment reminded him of the "crisis we had in 2008," The Sunday Times in Sri Lanka reported on Thursday morning. "China has a major adjustment problem," he added, according to Bloomberg. "I would say it amounts to a crisis."

    China's CSI 300 tumbled more than 7 percent in early trade Thursday, again triggering the market's circuit breaker. As well as roiling sentiment across Asia, it also battered European risk assets with the German DAX down 3.5 percent at 11 a.m. London time.

    U.S. stock index futures also indicated a sharply lower open as investors focused on China's swooning currency and economic slowdown.

    China, the biggest economic story of the last 30 years, has soured in the eyes of many analysts. A stock market crash that began in the country last summer has thrown the vast difficulties officials are now facing into sharp relief. A raft of data has disappointed in recent months as the country's leaders refocus the economy on consumption from manufacturing.

    Analysts also point to concerns over Chinese market regulators, who they believe do not appear to have a good grasp of the market, even with the introduction of the circuit breakers. In an attempt to stabilize markets, China's securities regulator has issued new rules to restrict the number of shares major shareholders in listed companies can sell every three months to 1 percent.

    Marc Ostwald, a strategist at ADM Investor Services, believes that Soros' comments — alongside a gloomy report Wednesday from the World Bank — only serve to cast a "long shadow" over global markets.

    "It should be noted that the current turmoil distinguishes itself from 2008, when reckless lending, willful blindness to a mountain of credit sector risks and feckless and irresponsible regulation and supervision of markets were the causes of the crash, given that central bank policies have been encouraged and been wholly responsible for the current protracted bout of gross capital misallocation," he said in a morning note.

    http://www.cnbc.com/2016/01/07/soros-its-the-2008-crisis-all-over-again.html
     
  2. Ahillock

    Ahillock A nobody Mother Lode

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    George Soros Sees Crisis in Global Markets That Echoes 2008
    Anusha Ondaatjie
    January 7, 2016 — 12:25 AM EST

    Global markets are facing a crisis and investors need to be very cautious, billionaire George Soros told an economic forum in Sri Lanka on Thursday.

    China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world, Soros said in Colombo. A return to positive interest rates is a challenge for the developing world, he said, adding that the current environment has similarities to 2008.

    Global currency, stock and commodity markets are under fire in the first week of the new year, with a sinking yuan adding to concern about the strength of China’s economy as it shifts away from investment and manufacturing toward consumption and services. Almost $2.5 trillion was wiped from the value of global equities this year through Wednesday, and losses deepened in Asia on Thursday as a plunge in Chinese equities halted trade for the rest of the day.

    “China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

    Soros has warned of a 2008-like catastrophe before. On a panel in Washington in September 2011, he said the Greece-born European debt crunch was “more serious than the crisis of 2008.”

    Soros, whose hedge-fund firm gained about 20 percent a year on average from 1969 to 2011, has a net worth of about $27.3 billion, according to the Bloomberg Billionaires Index. He began his career in New York City in the 1950s and gained a reputation for his investing prowess in 1992 by netting $1 billion with a bet that the U.K. would be forced to devalue the pound.

    Measures of volatility are surging this year. The Chicago Board Options Exchange Volatility Index, known as the fear gauge or the VIX, is up 13 percent. The Nikkei Stock Average Volatility Index, which measures the cost of protection on Japanese shares, has climbed 43 percent in 2016 and a Merrill Lynch index of anticipated price swings in Treasury bonds rose 5.7 percent.

    China’s Communist Party has pledged to increase the yuan’s convertibility by 2020 and to gradually dismantle capital controls. Weakness in the world’s second-largest economy remains even after the People’s Bank of China has cut interest rates to record lows and authorities pumped hundreds of billions of dollars into the economy. Data this week reinforced a sluggish manufacturing sector.

    http://www.bloomberg.com/news/artic...-of-a-crisis-george-soros-says?bcomANews=true
     
  3. Ahillock

    Ahillock A nobody Mother Lode

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    George Soros: It's 2008 All Over Again

    [​IMG]
    Submitted by Tyler Durden on 01/07/2016 06:00 -0500

    Surging volatility in global equity, currency, and credit markets and significant stress in a major world economy have George Soros on edge. Speaking at an economic forum in Sri Lanka, the billionaire hedge fund manager warned global markets are facing a crisis and investors need to be very cautious. On the heels of the second trading halt in four days, Soros exclaimed "I would say it amounts to a crisis... which reminds me of 2008."



    Volatility is surging everywhere...

    [​IMG]



    And as Bloomberg reports, Soros is worried...



    Global markets are facing a crisis and investors need to be very cautious, billionaire George Soros told an economic forum in Sri Lanka on Thursday.



    China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world, Soros said in Colombo. A return to positive interest rates is a challenge for the developing world, he said, adding that the current environment has similarities to 2008.



    ...



    “China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

    * * *

    Of course, this is not the message central planners and TV anchors want the mainstream to hear. Every dip is a buying opportunity, and "long-term" is how everyone should invest... no matter that your assets dropped 20% in a week... long-term!!

    How about this long-term?

    [​IMG]

    http://www.zerohedge.com/news/2016-...nas-currency-contagion-reminds-me-crisis-2008
     
  4. Ahillock

    Ahillock A nobody Mother Lode

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    Is this really 2008 all over again?
    Markets

    Jan 7th 2016, 10:10 by Buttonwood

    [​IMG]
    GEORGE Soros's record is sufficiently impressive, particularly on macro-economic calls, that it is worth taking notice when he sounds the alarm. His latest suggestion is that the current environment reminds him of 2008, the prelude to one of the worst bear markets in history. The reputation of George Osborne, Britain's finance minister, is nothing like as elevated but he is also set to warn today that the current year may be the toughest for the global economy since the financial crisis.

    Stockmarkets certainly seem to be acting as if Mr Soros might be right. China has suspended its share trading for the second day this week (as our correspondent argues, this looks like a counter-productive tactic). The sell-off has rippled through Asia and Europe, with London's FTSE 100 back below 6000 (it closed the last century at 6930; so much for the argument that stocks always pay off over the long term). As yesterday's post pointed out, the sell-off is down to a combination of worries about a slowing global economy and geopolitics.

    So is it 2008? Mainstream forecasters aren't predicting recession (but they never do). The World Bank has cut its forecast for global growth in 2016 from 3.3% to 2.9% (although that would be better than 2015's outturn). Perhaps one should look at the trend in forecasts, rather than the outright level; back in January 2008, Federal Reserve governors were looking for 1.3-2% growth that year. That was way too optimistic, but the direction of travel was right; the previous range of forecasts (in October 2007) had been 1.7% to 2.5%. Falling commodity prices and (in the first few days of the trading year) falling bond yields are an indication that investors are worried about growth.

    There are certainly signs of weakness in the manufacturing sector. The US manufacturing ISM indicator is at 48.2, below the crucial 50 level; the long-term picture shows that it has been weaker than this level, without indicating recession, but a fall below 45 would be a pretty reliable signal of a downturn. China's manufacturing PMI is at the same level. Global trade is also sluggish; something that economists struggle to understand.

    On the other hand, the services sector (by far the largest part of developed economies) is pretty robust; its December ISM was 55.3 in the US. The ADP figures showed a strong rise in US employment in December (the non-farm payrolls are out tomorrow). And not all the news in manufacturing is bad. German new orders were up 1.5% in November, the second consecutive strong monthly rise, prompting Andreas Rees of Unicredit to argue that

    the widespread pessimism, especially on stock markets, is largely exaggerated. Instead of further steep plunges in foreign demand for German exporters, it looks as if there is a turnaround.

    A judicious view might be that global growth is still sluggish, but it will probably need some trigger to plunge it into outright recession. Geopolitics is one possibility; Iran has just accused Saudi Arabia of bombing its embassy in Yemenand if the Sunni-Shia proxy war turned into a real war, that would surely have a powerful impact.

    But the 2008 parallel can only be sustained if we are talking about a debt bubble bursting, and Mr Soros specifically focused on China.

    [​IMG]
    To the extent there was euphoria and rampant speculation (as there was in 2006-07), we are really talking about China rather than Europe or the US.

    As the chart shows, there has been a sharp rise in China's debt-to-GDP ratio, with a 50 percentage point increase in the last four years. Just as with the sub-prime loan boom in the US, a rapid increase in debt suggests that loans are being made without sufficient attention being made to credit quality and that resources are being misallocated. The general consensus, however, is that China can handle a debt crisis; state control of the economy is much greater and the government has trillions of dollars of reserves with which to rescue the banks if it needs to. Nor are Chinese banks as tied into the western financial system as Lehman Brothers and Bear Stearns were; the contagion will be limited.

    Of course, this state control means that non-performing loans are not recognised as quickly as they are in the west and that, as a result, struggling companies do not go out of business. These zombies hang around and make it much more difficult for competitors (including western companies) to be profitable. So the contagion effect will not be via the financial system but via corporate profits.

    John-Paul Smith of Ecstrat, a noted bear on China, argues that

    Whilst the majority of industrial enterprises have reacted to the slowdown in demand in a rational manner by reducing capex as proportion of sales, the aggregate impact of their actions is exacerbating the pronounced deflationary tendencies in the broader economy, so that capacity utilisation at the majority of enterprises is still falling, while debt levels continue to move higher.

    The fear is that the Chinese authorities, desperate to avoid the social unrest that would result from unemployment if businesses fail, will choose instead to devalue their currency. The yuan has weakened at a measured pace already in 2016 and investors have reacted with concern, but the shock would come from a much bigger fall. China's real effective exchange rate (see the chart from the St Louis Fed) is now 130, compared with an index level of 100 in 2010.

    Capital flight from China is already occurring and the stockmarket falls are likely to encourage more outflows. As Mr Smith points out

    aggressive intervention to shore up the currency by selling dollars from the FX reserves, will tighten domestic liquidity and therefore risk exacerbating the very conditions, which have brought about capital flight in the first place, thereby triggering a vicious circle.

    If China devalues, then other Asian nations will come under pressure to follow suit, for fear of losing competitive position. That will trigger worries about those Asian companies that have borrowed in dollars. There could be banking issues in Asia (read more about emerging market debt problems here).

    This is a potentially worrying scenario. Whether 2008 is the right parallel is another matter. If the bearish case does come true, then it sounds more like 1998 when a round of Asian devaluations was triggered by the realisation that growth had been fuelled by speculation. Western economies did manage to overcome that crisis. The real worry is that emerging countries are a lot more important for the global economy than they were back then.


    http://www.economist.com/blogs/buttonwood/2016/01/markets
     
  5. Fanakapan

    Fanakapan Midas Member Midas Member Site Supporter

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    Prolly means he stands to make money off all those he stampede's to the exits, the Goldman Muppets maybe ?
     
  6. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    I read an article tonight that told about Warren Buffet buying hundreds of billions (in 3 purchases) of Phillips 66 refining. If HE is loading up on oil refining, then he probably thinks oil/gas/fuel is about to head back up. At some point, it is....which means a price spike right?
     
  7. Goldhedge

    Goldhedge Modal Operator/Moderator Site Mgr Site Supporter

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    ^^ You didn't think low oil was going to last forever did you? Just until the competition was eliminated and the junk bonds were toast...
     
    earplugs and Thecrensh like this.
  8. Buck

    Buck Fabian Society Gold Chaser

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    George is still alive?
     
  9. BUILT TO LAST

    BUILT TO LAST Gold Member Gold Chaser

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    LOL! I was looking at the bags under his eyes & wondering the same thing!

     
  10. Ahillock

    Ahillock A nobody Mother Lode

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    Europe on the verge of collapse: Soros


    Billionaire financier George Soros has warned that the European Union is on the "verge of collapse" over the migrant crisis and is in "danger of kicking the ball further up the hill" in its management of the issue which has seen more than a million migrants and refugees arrive in the region in 2015.

    In an interview with the New York Review of Books, Soros added that the German Chancellor Angela Merkel is key to solving the crisis.

    Merkel led Europe's response to the migrant crisis, opening Germany to the refugees that had travelled from the Middle East, in particular Syria, to try and find a new home in Europe. The decision by the German leader marked a sea-change in her policy. In the interview, Soros said he welcomed Merkel's move.

    "There is plenty to be nervous about," the financier said.

    "As she (Merkel) correctly predicted, the EU is on the verge of collapse. The Greek crisis taught the European authorities the art of muddling through one crisis after another. This practice is popularly known as kicking the can down the road, although it would be more accurate to describe it as kicking a ball uphill so that it keeps rolling back down."

    "Merkel correctly foresaw the potential of the migration crisis to destroy the European Union. What was a prediction has become the reality. The European Union badly needs fixing. This is a fact but it is not irreversible. And the people who can stop Merkel's dire prediction from coming true are actually the German people. "

    "Now it's time for Germans to decide: Do they want to accept the responsibilities and the liabilities involved in being the dominant power in Europe?"

    Soros' comments come as Finland's Finance Minister, Alex Stubb, told CNBC that Germany's open policy on migrants was, "humane, that was probably the right thing to do at the time but the key issue here is that one of the fundamental freedoms of the European Union is under threat and that is the free movement of people and the whole Schengen agreement."

    "On top of that, we've had a Euro crisis which is about free movement of money so two of the core pillars of European integration are under threat right now," said Stubb, to CNBC in Davos.

    In his interview Wednesday, Stubb denied the idea that the Schengen zone, which allows the free passage of EU citizens through almost all of its members, is a security threat to Europe.

    "We shouldn't draw parallels between [the] refugee crisis and terrorism. The roots of terrorism are much, much deeper than that."

    "What we need to watch out for is radicalization. What does this mean? It means we need to get these people to work, we need to give these people employment, we need to give them hope, we need to integrate them into our societies, they need to learn our languages," said the Finance Minister, to CNBC.


    Stubb, known for his fiscally hardline views,explained to CNBC why he wants to introduce a 15 percent cut to wages in Finland.

    "We basically need to do what Germany did in the late 1990s, early 2000s. We need to take some hard reforms; basically, I'm looking at a positive circle or a virtuous circle of the economy, that means number one, we become more competitive, number two, we get more exports, number three, we get more jobs, number four, we get more taxes, which I like as finance minister, and then number five, in order to finance our welfare state, we use those taxes."

    Stubb also shared his thoughts on the UK referendum vote.

    "I think it would be a great travesty both for the UK, economically, politically and otherwise, and a travesty for the European Union if there was a divorce," he said to CNBC.

    http://www.cnbc.com/2016/01/20/europe-on-the-verge-of-collapse-soros.html
     
  11. Ahillock

    Ahillock A nobody Mother Lode

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