As many long time readers know I’m not one to make market predictions. After all, over 99% of analysts get it wrong since there is no way to predict the future.
I’m no fortune teller. I look for long term economic trends (years & decades) and optimize my investments to take advantage of them.
This means I rarely make a move since I have such a long term approach.
That being said, we currently counting down to a big, big move in the markets. It’s a signal of the end of a 5 year plus market trend.
Greek debt problem is about to reach critical mass the take the world down with it.
What most don’t understand is, it’s not the debt itself you need to worry about; it’s what’s been done with the debt that is going to blind side millions of investors across the globe.
I encourage you to read this all the way through so you can protect yourself from the gigantic market crash that is headed your way.
Here’s what’s happening:
Large Hedge Funds bought up a bunch of the garbage Greek debt. They did this because they get a whooping double digit return if Greece pays and can insure their investment against loss.
The kicker is in how they insure the investment. You see, when Hedge Funds “Hedge” against losses, they always pile on more protection than they need.
Let’s say ABC Fund purchased 10 million in Greek bonds. When they go to insure their investment, they will insure it for 100 million. 10X the actual value of the bonds that are being insured.
In 2008, AIG was the insurance company that banks and hedge funds went to get this kind of insurance. Of course AIG didn’t have a faction of money it needed to cover all the insurance claims that came flooding in back in 2008.
If Greece defaults (they already missed their 175 million payment last month), then the hedge funds are going to come knocking to cash in their insurance.
In this case, they are headed straight for the derivatives market to get paid. The derivatives market is where these kinds of contracts are bought and sold on a daily basis.
In these markets, those who insured the debt have two weeks to come up with the money to pay the hedge funds and banks.
We are in that two week period right now!
There is not enough money in existence to cover the “insurance” the hedge funds and banks have on the Greek debt.
This is like being told about the 2008 crash a week in advance. The general market has no idea there is a ticking nuclear weapon in the derivative market.
Could this be just another “scare” that results in nothing happening? Not likely, which is why I am writing this.
Over the last 3 years of this manipulated bull market, this is the closest we have come to repeating the events of 2008. (For those of you just joining, banks have already successfully lobbied away all the safe guards that went up after 2008.)
My purpose here is not to scare. The coming weeks will show us how much power the banks and Federal Reserve truly wield to prevent the enviable collapse. They have dogged the bullet countless times over the past 3 years.
What hasn’t changed is how this all ends. The next crash is going to make 2008 and 1929 look like child’s play.
Now most writers would go into how to use this coming collapse to make a killing. Like I said in the beginning, I’m not a fortune teller. We know the market is headed for a crash, we just don’t know when.
The best way to win, is to not play. It’s time to jump ship.
Let the banks, hedge funds, fund managers, and Federal Reserve play their games.
Not quite convinced?
Even if nothing happens in the next 2 weeks; the evidence of coming crash is insurmountable. How this next default is handled will give us a clearer picture of how this all ends.
Just last week Black Rock Inc., the largest investment firm in the world, made a disturbing request of the SEC:
BlackRock Inc. is seeking government clearance to set up an internal program in which mutual funds that get hit with client redemptions could temporarily borrow money from sister funds that are flush with cash. – Bloomberg News
In a nut shell, this would allow investment companies to borrow money from one fund to make up for losses in another.
This is critical because it means it no longer matters what mutual fund you are invested in.
You take on the risk of the entire investment company. Here’s how it’s going to work:
Say you are super conservative and only invest in a U.S. treasuries fund.
Your manager can loan money to a highly leveraged speculative international bond fund. Now your investment dollars are on loan to a speculative fund instead of safe and sound in a U.S. treasury.
Black Rock is doing this because they understand what is about to happen. They know when the Greek debt collapses the derivatives market, their funds will suffer, and they will need cash quickly to stay afloat.
Your cash to be exact.
There is not a single mutual fund that is “safe” or “conservative.” They are about to all be linked. When one goes down, all will suffer because Black Rock and other banks will literally be able to rob Peter to pay Paul.
If you were wondering, we are all Peter.
Greece will default, causing a nuclear explosion in the derivatives markets.
No one is going to have the money to pay all the insurance claims of the hedge funds and banks.
They’ll pull money from anywhere they can, namely cash rich mutual funds. Others will default on their contracts and go bankrupt.
Don’t be Peter. The nuclear explosion will burn anyone and everyone who is still in the markets. Don’t let your hard earned money get vaporized in the blast.