April 14th, 2008 Alex Jurshevski
The markets continue to whistle past the graveyard. Most commentators are in fact suggesting that the worst is behind us and that the Fed’s rescue actions have saved the day yet again.
We couldn’t disagree more.
In her seminal work “On Death and Dying” Swiss Doctor Elizabeth KÃ¼bler Ross postulated that there were seven stages of coming to terms with reaity upon being told that one has a terminal illness. Denial is but the second stage following Shock. There are four more stages before Acceptance is reached and the stricken individual can again find his or her forward. We are obviously past the Shock stage. We suggest that markets are now experiencing Denial.
Anger and Depression lie ahead for investors who do not yet understand that the Bull is DYING and will soon be DEAD.
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April 3rd, 2008 Alex Jurshevski
In 2007 Recovery Partners became engaged in a $500 million bad loan remediation in Asia. Working for certain Multilateral Financial Institutions, in part our activities determined early on that the Central Bank of this particular country had attempted to shore up financial problems in the agricultural sector by using its balance sheet to support unprofitable borrowings by private sector entities. The game had gone on for a few years but was doomed to crash. Unsurprisingly, the finances of this country and the private sector entities involved are in a now in a shambles.
This morning we heard that the Fed is attempting to shore up liquidity problems in the shadow banking system (i.e. bankruptcy-remote private sector asset backed funding vehicles) by extending its balance sheet further. It has now encumbered more than half of it’s almost $1 TRN in financial resources, by supporting re-purchases of assets thatÂ are either non-financeable or non-priceable in the open market – in short, assets that are unsellable, unprofitable and illiquid.
Time to batten the hatches. This is going to get worse before it gets better.