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Joshua Brown | May. 18, 2010, 9:12 PM | 7,598 | 49   | AAA

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Here a Swan, there a Swan, everywhere a Black Swan...

Got a tip? Let us know!      
Newsletter writers, hedge fund managers, journalists, bloggers, technicians, fundamental analysts,
economists and strategists are joining the crash camp left and right.  Not the bear camp...the crash camp.
Markets
I've been running around Manhattan all day taking care of business, meeting clients etc.  After scanning  Advertisement
today's articles and blog posts, I can honestly say that I've never heard more chatter about an imminent
market crash, all at once, in my life.  It's like the May 6th Flash Crash got everyone in the mood to talk 
cataclysm all of a sudden. Europe's Greek Affair

I'm not one of those guys who takes everything as a contrarian signal.  I abhor knee-jerk contrarianism.  
Samuel Lord once said "Do not choose to be wrong for the sake of being different," and I think that's kind • How The
of apropos here. Bailout Of
Greece Caused
As avowed contrarian Dougie Kass likes to remind us, the crowd usually outsmarts the remnant when The Split Of
Europe
herd mentality takes over.  So what is the herd hearing/ seeing?
 
* First of all, the macro guys are disturbed by the Euro Zone's crisis and its ripple effect/ contagion
risk.  This isn't new but it is more pervasive.  And the possibility of a China collapse scares the hell 
• Here's Why Germany Really Can't Share
out of almost everyone.
A Currency With The Rest Of Europe

* The technicians and Dow Theorists are grossed out and have dusted off all the 1937 charts again.    
Specifically, they are looking at the highly distinct pattern of a big drop (May 6th) followed by a failed • Full-Blown Quantitatve Easing May Be
rally (euro bailout day's 4% gap open) followed by another fast sell-off.  Richard Russell's latest Needed To Save Europe
missive, in which he tells us that we won't recognize America by year's end, will make you want to  
kill yourself. • Germans Fantasize About New Rich-
Nation Currency Bloc That Doesn't Even
* Equity analysts are all pointing to year-over-year comps which will start getting harder now.  They  Include France
may feel OK about the "E" but they're shaky about the "P" - will the tax hikes and regulatory
headwinds we now face really allow for a high-teens multiple on whatever the earnings turn out to be?

* Bond guys are freaking out about sovereign stuff, obviously.  We've transferred corporate risks onto 
government balance sheets with bailouts, the Piper still awaits his payment in many cases.
Read Me
* Eddie Elfenbein posted the results of a CNBC poll yesterday in which 40% of respondents
predicted a 50% haircut for the Dow.  Seriously, almost half the respondents predicted Dow 5000 by 
Keith Jurow | 4
the end of this year.
Banks are finally capitulating, as
short-sales reduce shadow
* The hedgies are vocally bearish again as well.  Seth Klarman's got some cautious commentary out
inventory backlog.Read »
today and Jeremy Grantham's "sell everything" stuff is being quoted everywhere.  Raoul Pal put out
a newsletter this week with a 2 day-to-2 week crash prediction.
Michael Pettis | 5
We're not talking garden variety bearishness here.  We're talking about ubiquitous crash predictions.  My  The crippled euro means China
needs to devalue the yuan
comment is that I've never seen so much certainty in so many places of a coming crash.  Will it be self-
NOW.Read »
fulfilling or are we talking major contrarian signal?

Worth noting no matter what. Calculated Risk | 9

Mortgage tax breaks expired, and
This guest post previously appeared at the author's blog, The Reformed Broker > now we're facing a killer
hangover.Read »
Tags: Stock Market

The Economist | 2
Eastern Europe's past disaster
Share: Short URL http://bit.ly/9mGlWO
shows why fears of greek default
are way overblown.Read »
Twitter Facebook Buzz Digg StumbleUpon Buzz
 The Mad Hedge Fund Trader
Reddit LinkedIn Email Embed Newsletter | 9
Here's why the gold run is just
getting started and it's going
$2,300 or higher.Read »
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2911
Flag as Offensive
StockTwits Stock Camp Hosted by The CME
fred on May 18, 9:20 PM said: Group Coming June 2 in Chicago StockTwits
Global socialism has finally achieved its utopia; apathy and insolvency. The Blog 4
veneer of fiat liquidity can no longer cover the underlying rot.
Reply FT.com / Technology - Google debates face
recognition technology 3
2220
Flag as Offensive
Ty Gibson on May 18, 9:27 PM said: | More »

@fred:
It seems this is more the result of capitalism than socialism. Popular Commented Tags

Tax cuts do stimulate spending, low rates do stimulate taking on debt and keep the wheel's
The 13 Housing Markets That
turning, but there's always a back end cost.
Reply Will Never Recover 436,231 Views

288
Flag as Offensive Meet Facebook's (Soon-To-
fred on May 18, 9:34 PM said: Be) Billionaires 257,658 Views

@Ty Gibson:
What capitalism? There hasn't been a major capitalist economy on the planet for the last 40 years. Well, These New Zuckerberg
China's about the closest thing we have left, and that ain't much. IMs Won't Help Facebook's
Reply Privacy Problems 228,437 Views
82
Flag as Offensive The 25 Financial Institutions
Ty Gibson on May 18, 9:36 PM said: Most Likely To Default
201,941 Views
@fred:
What's interesting about this comment is I've heard Communists use the exact same excuse about 26 Amazing Things You Didn't
the fall of Russia. Know About Facebook
Reply 191,905 Views
229
Flag as Offensive
fred on May 18, 9:51 PM said:
Sponsors
@Ty Gibson:
Call it an excuse if you want. The left wing media have done their best to undermine the ideals of
true capitalism, and they succeeded so well we've forgotten what it is. But, all those social safety
nets, like Medicare and Medicaid, Welfare, food stamps, public housing, labor unions, FDIC, etc;
those aren't capitalism. What they are is pooling of risk so that no individual is allowed to fail. It
takes a long time, but eventually that weakens the economy from the core, starting with individual
attitudes and working its way up the chain. Soon we have corporate socialism, state socialism,
every entity survives by depending on the central government. Then the government goes broke.

Hayek explained it all very well 65 years ago, at a time when repressive government was in the fore
of people's minds. Now we've followed his script to the letter and we're very likely going to come full
cycle.
Reply
215
Flag as Offensive
Ty Gibson on May 18, 10:34 PM said:

@fred:
Without "risk pooling" you and I would be digging up coal for five dollars a day for the great, great
grandchildren of the Rockefellers and the Morgans.

The problem with Greece is not entitlements, it's entitlements AND tax evasion AND
shortisightedness.

t reminds me of the days Ronnie raised our spending while slicing taxes. Dubya did the same, Sponsor Business Insider »
must be a viable strategy.
Reply

812
Flag as Offensive
Merlin12 on May 18, 10:42 PM said:

@Ty Gibson:
Ty, Reagan cut taxes and revenues went UP. Did you even know that ? You wouldn't if all your
history education came from CNN and the SEIU. For that you may be forgiven in the next life.
Reply
144
Flag as Offensive
Ty Gibson on May 18, 10:48 PM said:

@Merlin12:
Of course revenue went up, it was a natural reaction to more capital being freed up.

But was it good for the economy in the long term.

I'm a big fan of history, taxation is a contentious issue that I file under the "Everyone want to go to
heaven but nobody wants to die" category.

We want national defense, clean air, safe food, immunizations, prisons, we just don;t want to have
to pay for any of those things and whatever we don;t want to pay for looks like waste.

For the harcdore conservatives, it's the welfare system.

or the hardcore libs, it;s the military.

The problem is that nobody can see that we all want big government, we just want it big in different
places.
Reply

83
Flag as Offensive
zzzzzzzzzz on May 18, 10:56 PM said:

@fred:
Funny how the excess built up under center right to right leaning governments..............

From Germany to France to Italy to Spain to the USA, the supposedly conservative side screwed
the pooch.
Reply
141
Flag as Offensive
Mike C. on May 18, 11:35 PM said:

@fred:
Yeah technically we've left capitalism in the dust and moved to corporatism a while back.
Reply

70
Flag as Offensive
Mike C. on May 18, 11:45 PM said:

@fred:
'Capitalism' is an ever shifting definition and has been throughout history. Hell we've seen about 7 or
8 different forms of capitalism since the United States formed. There is no 'true' capitalism. Just as
there's no 'true' free-market.
Reply
60
Flag as Offensive
biasking on May 18, 11:50 PM said:

@fred:
Did the left wing media also do all the defense spending (even after the cold war) and the bankers
bail out?
Reply

60
Flag as Offensive
David (URL) on May 18, 11:54 PM said:

@Ty Gibson:
Sure, the tax cuts and low interest rate environment was a Utopia for Capitalism like we have never
seen, and hopefully will never see again. If you want to use the word "socialism" you better put the
word "corporate" before it!
Reply
42
Flag as Offensive
bystander on May 19, 12:34 AM said:

@fred:
Feels so good to take a bath in that warm ideological righteousness. You want a free market
economy? I give you Somalia. And El Salvador. You wouldn't last a week in a real free market
economy, though you do seem to have a nasty streak.
Reply

52
Flag as Offensive
Kevin (URL) on May 19, 2:38 AM said:

@Merlin12:
Yes, he cut taxes and revenues went UP because the economy did! Guess what? The deficit also
went up! In fact, a lot of the national debt we have today was under Reagan and the first Bush!
Reply
30
Flag as Offensive
 Skip T. on May 19, 3:47 AM said:

@fred:
Uh, the media has undermined the "ideals of true capitalism"? What do you think they've done to
the "ideals of true communism?"

Frankly, both systems, as ideals, have an awful lot going for them. Problems arise when they turn
out to be less than ideal, however.
Reply

00
Flag as Offensive
El Duderino (URL) on May 19, 12:12 PM said:

@fred:
Yes, we need to deregulate so we can have some more financial innovation.
Reply

82
Flag as Offensive

KarlMarx on May 18, 9:21 PM said:

Walks, talks, smells and shits like duck.....it's a duck

Reply
183
Flag as Offensive

Vadim on May 18, 9:22 PM said:

System has rotten and stopped serving the interests of the majority. The sooner
it dies, the better.
Reply
111
Flag as Offensive
zzzzzzzzzz on May 18, 10:57 PM said:

@Vadim:
when has the system EVER served the interests of the majority over the interests of the rich and
powerful?
Reply

183
Flag as Offensive

Tyler Elliott on May 18, 9:36 PM said:

This is not 'popular' to say but not only should another crash happen, but it
Needs to happen.

Due to the trillions in free stimulus money the government pumped into the banks and the market,
we've seen a 14 month rally that is not only Not leading a recovery, but is doing severe damage to
Main Street and everyday Americans. This market Needs to be at around 6000 to accurately reflect the
currect economic Reality of the nation as it currently exists. And once this market does drop to that
level, it needs to meander there and not begin rising again until there is sincere economic recovery in
other aspects of the private sector such as real estate, small businesses, and the strengthening of the
US dollar. So Lord willing, may a crash occur that takes a lot of investors' wealth with it!
Reply

36
Flag as Offensive
CU Writer on May 18, 9:52 PM said:

@Tyler Elliott:
How does destroying the wealthy, business-owning folk help the middle class again?
Reply

114
Flag as Offensive
Mike C. on May 18, 11:41 PM said:

@CU Writer:
Simple. It allows the middle class to start up their own businesses again in the vaccum left by dead
megacorporations and nobody needs CEO's making 300x the average workers pay. Trickle down
economics is a joke. It hasn't done much for anyone but those at the top. Pick a new pretend
economic theory for your next Reaganesque idol.
Reply
33
Flag as Offensive
pickanumber on May 18, 11:48 PM said:

@Tyler Elliott:
Did you pick the number 6000 as a nice round number? As someone who is sitting on cash, gold
and no debt I prefer 600. though god knows what the other implications of that maybe...
Reply

10
Flag as Offensive
Jay on May 19, 4:08 AM said:

@Mike C.:
Ridiculous. The "middle class" do not exist in some isolated bubble. If market crashes and
megacorporations fail, their money, their wealth will disappear as well. Start up their own business?
With what? For whom?
Reply
 10
Flag as Offensive
MiddleclassUSfamily on May 19, 11:49 AM said:

@Jay:
Much of the middle class has already lost their money. Small business owners close up shop on
Main Street when the Big Box stores move in. That's just one example.
Reply

10
Flag as Offensive
HerbChambers on May 19, 1:25 PM said:

@Jay:
Some wealth might "disappear" but most of it will get reallocated.

Startups won't be many after a crash but there certainly will be SOME credit available.

"For whom?" Hah! This is just laughable! Maybe the same customers the big guys took for granted
when times were good?
Reply

51
Flag as Offensive

markuspd on May 18, 9:47 PM said:

When the herds are upbeat it time to sell, when the herds are negative it too late.

The FED has personally greased the pole that will slide us all into a big tub of shit. 66
Flag as Offensive
Reply

Bill Stout on May 18, 9:52 PM said:

Greece failed because of socialist entitlements, entitlements bankrupted Greece. It's unsustainable.
Money is made through capitalism, there's not enough motivation there to keep supporting those who
choose to be a burden on society. Eventually you run out of other people's money.

The year of stock bubble was fueled by banks investing their bailout money which was not loaned out.
Yet another 'fail' by big government mentality and the corrupt politicians spending their bailout and
recovery act lottery winnings. Lottery winners almost always lose everything. Governments can't do
capitalism. Governments can't grow without crushing the hands that feed it.
Reply
111
Flag as Offensive

purple (URL) on May 18, 9:59 PM said:

This era of globalization will be over when China crashes. And it will crash.
Reply
11
Flag as Offensive

Nawt Allan Gweenspan on May 18, 10:04 PM said:

REMINDER: Bernanke is an expert on the great depression and will never enact
policies that will weaken the economy, err, cough, wheeze
Reply
20
Flag as Offensive

HerbChambers on May 18, 10:07 PM said:

A crash will have me thinking of the market as having more legitimacy than the
sham it is right now. Europe alone can cause a "crash" but it will look like a dip compared to the huge
crash that awaits us if they remove ZIRP and mark-to-myth.

So we're looking at ZIRP or near-ZIRP for the next decade?

Reply
60
Flag as Offensive
sschu on May 18, 10:46 PM said:

@HerbChambers:
ZIRP, mark-to-market, federal debt, TARP, The Fed, the Federal Government regulations, deficits,
healthcare, etal are KILLING the middle class, small business, savers and the retired.

Declining wages, no return on savings, higher small business costs, increased taxes and much
higher prices for basic commodities like food are driving core Americans to penury. And the
federales borrow $1 of $2 they spend.

All to keep Goldman Sacks afloat.

There will be blood.

sschu
Reply

42
Flag as Offensive

txchick57 on May 18, 10:07 PM said:

Crash away. We'll make it on the downside and then back on the upside.
Reply

31
Flag as Offensive
ivan the ram on May 18, 10:36 PM said:

@txchick57:
dont buy this dip------even if its 1000 pts
Reply

10
Flag as Offensive

Joe in Miami on May 18, 10:08 PM said:

Is it Friday, yet?
Reply
40
Flag as Offensive

feddestroyer on May 18, 10:35 PM said:

There are no fundamentals to support a contrarian argument. Nor is it self-

fulfilling. No matter what anyone thinks, this rotten, top-heavy structure will fall. Gravity is totally
reliable, as are the laws of mathematics.
Reply
44
Flag as Offensive

Clam on May 18, 10:49 PM said:

Obama lovers rejoice, still love your guy?

Reply

20
Flag as Offensive
Ditto Rush! on May 19, 8:54 AM said:

@Clam:
I agree that it's all Obama's fault.

You can't blame Blush. Bush was the most ineffectual president ever, and nothing which Bush did
during his eight years in office had any lasting effect whatsoever.

Moreover, it is my recollection that the stock market crash, the bursting housing bubble, the
outsourcing of American jobs, the cancerous spread of private equity companies which destroyed
productive companies by saddling them with debt to raise $$$ to speculate in the markets, the de-
industrialization of the USA, the American policy to promote the rise of China at the expense of the
American economy and American security, and TARP all occurred only after Obama took the oath
of office.

Sorry-- I gotta go-- I have to go and listen to Rush rewrite some more history....
Reply

50
Flag as Offensive

Pagtrick on May 18, 10:55 PM said:

Well I suppose there has to be a first time. This will be the first crash widely
predicted by so many. For myself I'll believe when I see it.
Reply
61
Flag as Offensive

Daniel Miller on May 18, 11:07 PM said:

Reagan also devalued the dollar in the plaza accord, a capital offense according
to the Constitution, instituted the plunge protection team, authorized S&L bailouts, etc.

Oh but he hated communists. At least OTHER communists. Much like Stalin hated Mao.

Proud anarcho-capitalist.
Reply
20
Flag as Offensive

ANothingBurger on May 18, 11:11 PM said:

So far, the VIX is at the "What Me Worry?" mode...........................

Reply
100
Flag as Offensive

citizen bagholder on May 18, 11:20 PM said:

It's not capitalism, it's socialism for the rich. Try deregulated banks playing the
casinos with govt. cash. Try trillions of dollars of guarantees for banks offered outside the public view.
And yes, some scraps for working people. It's crony capitalism for the oligarchs.
Reply
120
Flag as Offensive

Mike C. on May 18, 11:37 PM said:

I don't see how anyone LEFT the crash camp from day one. The problem started
with housing and bank insolvency and NOT ONE THING has been done to fix that problem. We borrow
money to the banks and they borrow it back to us and make a profit. They STILL haven't dealt with the
 underlying trash debt on their books. They've simply been allowed to creatively account the losses
away into a cubbyhole in the future. Sooner or later that chicken comes home to roost. The minute the
free money and stimulus goes away we take a nose dive.
Reply

10
Flag as Offensive
MotorCityMiserable on May 19, 10:03 AM said:

@Mike C.:
Amen Mike! Suspension of mark to market, government money at near zero, off balance sheet
accounting....the banks are worthless and continue to operate at our expense. Washington has
allowed this economy to run by printing money, but the presses are almost out of ink and things
have barely even stabilized. How much longer can this puppet economy last once the pols no
longer support it?
Reply

20
Flag as Offensive

Anna" on May 19, 3:59 AM said:

Here a Swan, there a Swan, everywhere a Black Swan...

You must be in Tasmania, or Westen Australia. What can you say about a country where all the
swans are black.
Reply
10
Flag as Offensive

the truth on May 19, 8:51 AM said:

the funny thing is that we sit here and argue about right leaning and left leaning
governments, when the people who actually control everything never change
Reply
50
Flag as Offensive

Rob in DC on May 19, 9:05 AM said:

Everyone is blaming their favorite bogeyman for all this -- government, the banks,
the investors, crazy consumerism, Greenspan, those demanding services but insistence on cutting
taxes, etc. In reality ,the herd -- almost everyone -- contributed to our present mess, for greed pure and
simple. The "I want it all mentality. And greed is an all consuming, overriding force, never satisfied,
unstoppable, the ruin of all if left unfettered -- which is what has happened. It is the main trigger for any
and all ill behavior (remember that the love of money is a root of every evil).

Greed drove the abandonment of any type of self-sacrifice or mutual sacrifice mentality forged by the ill
circumstances of the Great Depression and World War II. To put it simply, almost everyone got spoiled
-- and again, that is who has been causing this: almost everyone. Those who couldn't afford homes
bought them aided and abetted by the brokers, bankers and credit agencies all too willing to make a
quick profit -- take the money and run -- all helped by the government and politicians making money
cheap and blessing new "financial innovations" (read fraud); consumers never ending desires for
consumption, massive borrowing for many items they do not really need and their eyes could do
without, such as McMansions -- Everyone (a great number really) turning a blind eye to their own
behavior, in government, business, education, health care, everywhere -- purely for gain.

Now that all these forces have been unleashed, under whatever name you call it and whatever
bogeyman you blame -- capitalism, faux capitalism, corporate socialism, socialism -- all paradigms to
prooftext the need to justify not only your life, but to rationalize your own greed (not profit making --
greed - the desire for profit run amock, ruining others and eventually the system for a quick dollar, not
solid long-term investments -- like the 1920s) -- we will now experience the result. If you want to blame
someone, something or a philosophy, instead look in the mirror. And if you do not see a catastrophe,
crash, crashes, etc., in your own behavior and the budding catastrophes so plainly obvious,
foreshadowed in our recent experience of the "need" for governments bail out whichever industry or
banks to prevent a global catastrophe -- a la Bear Stearns, Lehman and Greece -- I would not want you
handling my money.

Only question is, when we experience "creative destruction" -- the current paradigms, business models
and markets and wealth being destroyed, or undergoing great change, only to rise again based on new
paradigms and ways of doing business and living -- will the "destruction" be as long and deep and
extensive as the excesses that caused it? Better hope not. One blog writer (I forget who) said the
depth of any correction is proportional to the amount of greedd, excess and fraud that caused it. Better
hope not.

This is not contrarian - this is reality. What else do you see with banks taking excessive risk, being
leveraged 40 or 100 to 1, "investors" (including municipalities, unions, etc.) gambling with your pension
funds for a quick, high but risky rate of return; when the housing market and banks are succeeding by
government dole and subsidies, not real demand? Do you see the creation of actual wealth? You have
some rose-tinted glasses, man.
Reply
00
Flag as Offensive

blutown on May 19, 11:45 AM said:

DOW just broke through May 7 low of 10,380. Next stop, 9908.
Reply

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