David Stockman: Here We Go Again——August 2007 Redux

Nearly everywhere on the planet the giant financial bubbles created by the central banks during the last two decades are fracturing. The latest examples are the crashing bank stocks in Italy and elsewhere in Europe and the sudden trading suspensions by three UK commercial property funds.

David Stockman: Here We Go Again——August 2007 Redux 59e5654e5ff2e1a74e66cad2a7832ae0

David Stockman: Here We Go Again——August 2007 Redux 59e5654e5ff2e1a74e66cad2a7832ae0

If this is beginning to sound like August 2007 that’s because it is. And the denials from the casino operators are coming in just as thick and fast.

Back then, the perma-bulls were out in full force peddling what can be called the “one-off” bromide. That is, evidence of a brewing storm was spun as just a few isolated mistakes that had no bearing on the broad market trends because the “goldilocks” economy was purportedly rock solid.

Thus, the unexpected collapse of Countrywide Financial was blamed on the empire building excesses of the Orange Man (Angelo Mozillo) and the collapse of the Bear Stearns mortgage funds was purportedly owing to a lapse in supervision.

So it boiled down to an injunction of “nothing to see here”. Just move along and keep buying.

In fact, after reaching a peak of 1550 on July 18, 2007, the S&P 500 stumbled by about 9% during the August crisis, but the dip-buyers kept coming back in force on the one-off assurances of the sell-side “experts”. By October 9 the index was back up to the pre-crisis peak at 1565 and then drifted lower in sideways fashion until September 2008.

The bromides were false, of course. Upon the Lehman event the fractures exploded, and the hammer dropped on the stock market in violent fashion.

During the next 160 days, the S&P 500 plunged by a further 50%. Altogether, more than $10 trillion of market cap was ionized.

http://davidstockmanscontracorner.com/here-we-go-again-august-2007-redux/

David Stockman: Here We Go Again——August 2007 Redux

David Stockman: Here We Go Again——August 2007 Redux

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