Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Fingers of Global Financial Markets Instability Returns!

Stock-Markets / Liquidity Bubble Aug 15, 2007 - 06:40 PM GMT

By: Ty_Andros


Fingers of Instability – Series Introduction - FIRE!
This marks the return of the “Fingers of Instability” series begun in February of this year, as we look to see these emerging regularly over the coming weeks until they are priced into the market. First let's look at the “shortened” description of what they are from that issue of Tedbits:

This is a metaphor for the present structure of the Global financial systems as practiced by the G7 Central banks and Government Financial officials around the world. I read a missive from a prominent newsletter writer sometime in the last 6 to 12 months and he described a computer study of Sand piles. In this study they piled on grains of sand on a pile one by one. It went on to describe how the mound could grow one grain at a time, and was stable and that as it grew areas of instability emerged and that once it got to critical mass as little as 1 grain of sand could spark a complete collapse of either the whole pile, a major portion of the sandpile, or just a small part of the pile.

For greater insight into our publication, have a look at the Overview of Tedbits . It helps current and potential subscribers understand our mission in serving you. It also gives a broad description of what's unfolding globally and what you can expect from Tedbits as a regular reader.

This is an apt description of the global financial system in a fiat currency and credit world, where money and credit are being created at a breakneck pace (Average Global growth rate of 14% year over year according to the economist magazine) by every Ce ntral Bank in the world. As the worlds government authorities pile dollar after dollar, yen after yen, British pound after British pound, euro after euro, Yuan after Yuan, Ruble after Ruble, Rupee after Rupee, etc. on the global economic pile, selected “Bubble” investment areas of the world economies will grow and then collapse, as we are now seeing in US housing and sub prime lending markets. They must keep the game going in other asset classes and create “emerging bubbles” so these “STRONG HANDS” can step into the dog pile and take out the losers in that particular bubble collapse and keep the overall game going. I have also seen this referred to serial “BUBBLE BLOWING”. Many analysts wondered where the next bubble would emerge. Now we know, and this situation has now moved beyond the shores of America , and is practiced everywhere In the G7.

The next part of the Sandpile it is the money being created by the Big Institutional Banks and Brokerages (that's what they used to be called, now they are poorly disguised hedge funds, look at sources of their earnings) when they “INVENT” Derivative products that literally allow them to print money. Slicing and dicing things like commercial and residential mortgages, into instruments where the “devils” in the details. Most of these newly invented financial products are part and parcel of the holdings of every institutional and pension fund investor in the world. There are trillions of dollars in these investment vehicles/products. They know not what they hold, and have only the financial institutions mathematical models to inspire confidence in the underlying investment instrument and its creditworthiness.

These “credit ratings” used to underpin the issuance of these products come from the likes of Standard and Poor's, Moody's and Fitch and are bought and paid for by the Issuing Institution, and facilitated by enormous amounts of quantitative and probability analysis which is newly invented in the last 15 years. Many of the assumptions in these models are based on data from history, a history where bankers were not as irresponsible as the ones who currently lead the world's economies. We will see these mathematical models be tested in the securitized mortgage markets in the not to distant future and I bet you they are not as “ROBUST” and predictive as they have been presented to be. Its going to be interesting who they “pin the tail on the donkey” this time, as the players involved are also powerful investment interests pitted against one another!!! Of course it will be the little guy!!!

The next part of the sandpile is created the emerging world's central banks, and their money printing is a self defence mechanism , as they have developed fiercely competitive manufacturing and supply chains and their export industries have blossomed. When they get paid this puts a HUGE bid under their currencies as the sheer size of the money flowing into their economies when they get paid is Trillions of dollars in purchasing power from the G7. This money printing is a super charger to their economies allowing them to invest in businesses, plants, equipment, infrastructure and create jobs for their emerging middle classes. The virtuous circle of Austrian economics at work in these emerging powerhouses.

The size of their domestic currencies is Dwarfed by the size of the G7's. So as they receive payment for their products and services they must STERILIZE the income or risk having their currencies SKYROCKET against those of their customers in the G7. An example of “Sterilization” is where they receive a dollar or Euro in payment for something (manufactured goods, raw materials, energy resources, services, etc.) and rather then go to the currency market to exchange it for their domestic currency they print their domestic currency, put it into their central bank reserves (rather than convert them in the currency markets) and pay the domestic businessmen out of the money they printed in the domestic currency. They then must recycle much of this back into the financial systems of their customers to prevent the deflationary effects of the customers borrowing requirements to overwhelm their customer's ability to borrow.

It is clear that words have little meaning to G7 central bankers and government financial officials bent on “NOMINAL” growth at any cost, sacrificing the futures of later generations, for the votes of today's citizens. With runaway money and credit growth the appearance of a healthy, growing economies is in the headlines, while the seeds of collapse are being sowed on a wider and wider scale. The reckless expansion of G7 credit and money is winked and nodded at by Pop ulous Politicians around the globe as the honey pot of a “growing economy” is worth any price to them, as it provides the fuels for the next “RE”election cycle and government inspired idiocy that fools their citizens into thinking there is growth. Look no further than ethanol for an example of a government inspired Di saster in the making, distorting every market that is related to it (we will revisit the “ethanol” finger of instability from the original “FINGERS OF INSTABILITY” as it is illuminating what has unfolded, and the monster it is continuing to morph into).

You have to learn to invest in the direction the wind is blowing and learn to take advantage of these fingers of instability as they emerge. Bubbles forming, driving asset prices higher as good fundamentals combine with TOO MUCH LIQUIDITY to drive the asset class to unbelievable heights, and then implode as the fundamentals no longer support the mania prices in the underlying asset class . It will happen over and over and over again, as rising asset prices, and nominal growth (growth from inflation) underpins everything in the G7 financial systems . As they no longer have policies that are conducive to and supportive of “WEALTH CREATION”. Substituting an ever growing welfare state and the relentless expansion of government while the private sectors suffer death from a thousand cuts. As relentless regulatory expansion, uncompetitive tax structures and the relentless expansion of the welfare state “EAT THEM ALIVE”.

You need to learn to make money in up, down and sideways conditions. As this experiment has a long way to go before the endgame emerges. Make money now, and do your homework, when the final explosions are on the near horizon, know where the exits are, be in liquid investments that will allow you to exit, and then initiate capital preservation and income strategies. In the wrong instruments and you will be killed, in the right ones and the opportunities are limitless.

What can you Bank on? You can bank on the G7 global money printing and credit creation continuing. Asset based banking and economic management strategies such as those that evolved under Greenspan, are now the economic models that are in place around the globe. Widely employed by the developed and emerging world alike. Around the world politicians and central bankers liked what Greenspan did so much that they now are challenging even him for supremacy in recklessness. He has left the scene and the public is quite good at blaming those left holding the bag!!! And he has passed the hot potatoes to others. But because they are putting a super charger to his previous efforts, what was an anticipated “ US collapse” because of these reckless policies are now postponed far into the future! As all these new participants send their economies on the path to wealth creation through asset appreciation rather than growing economies and industries.

Globalization is the canvass, and the Global economic and financial system is the “Sandpile”. As money moves around the globe with ease, seeking out returns. The smart holders of fiat money seek to own the “means of production”, move out of paper currencies and move into assets that can withstand the relentless debasing the sovereign currencies are undergoing at the hands of G7 Ce ntral Bankers and Politicians. The assets the smart money holds and buys just reprice in the debased currencies.

The money and credit machines are generating the constant theft of purchasing power of currencies in deposits, wherever they may be held, (savings accounts, money market accounts, Bonds, interest rate instruments of all stripes, etc.). The dollar is a good example of fiat currency over time; as one dollar now buys what 4 cents bought when the Federal Reserve was unconstitutionally mid-wifed in 1913, only now the process has accelerated. (Sound money was a central theme of the founding fathers of the United States ; they prohibited the creation of a “fiat” faith based money system, they had seen numerous failed experiments with this throughout history and new these lessons well). In 1913 US politicians forgot these lessons with the creation of a foreign owned central bank (US Federal Reserve) and changed this forever.

Now “GUSHERS” of hot money roll of the central bank presses or are created by the big banks and brokerages when they spin new products such as CDO's (collateralized debt obligations and CMO's (collateralized mortgage obligations), but there is one common element to all of these instruments and that is the are like bonds, and they are sold based on the underlying “ASSET” value, and if the asset value declines or the income streams off them cease they become ‘BOMBS' to balance sheets.

Remember Japan, it was just 16 short years ago when we witnessed an asset based economy come off the rails; it is now just barely emerging from its deflationary debacle

(During Bernanke's academic career he developed intimate knowledge of Japan and the great depression, both times where credit availability for even qualified borrowers evaporated: mean the sub prime mortgage debacle “must not” be allowed spread to other parts of the lending system). US and EU politicians are totally ignoring this recent lesson of history (as they attack the Yen and by extension the yen carry trade).

Think of what would happen if this Japanese type of deflation and a liquidity crunch were to unfold on a Global scale, that's what teeing up if the central banks don't keep the international money and credit creation trains humming. If feeble-minded protectionist politicians or weak kneed central bankers in the United States and the European Union precipitate the choking off of these money flows we all will enter a deflationary depression of unprecedented scale. A Kondratieff winter! Hopefully someone will explain this to them before it is too late. We are now in a world of inflate or die. I promise you they will inflate. So it's going to be fire hoses of HOT money right off the printing presses for as far as the eye can see.

Enough already? Ready for some fingers of instability? Also known as bubble opportunities? And potential pitfalls!!!


This week a fire emerged across the banking systems of the G7, as CMO/CDO's markets started to implode. Approximately 300 billion dollars was PRINTED during the week to rescue the banks and the prime brokers from “ARM”ageddon. The overnight lending windows froze as banks REFUSED to lend to other banks as the value of their counterparties collateral suddenly was in question. The overnight commercial paper market suffered many disruptions as well. So the authorities did as they must to keep the game going: they printed the money and said “COME and GET IT” to supply the short term liquidity requirements of the G7 financial systems. It was enormous as every G7 central bank opened the lending windows. These episodes are set to continue as the financial authorities DO NOT know where the problems are, and on whose balance sheets they reside so they must wait for them to emerge then address them one at a time.

Most people think the problems were contained by these injections, but the important event was not the injection into the overnight banking systems which HAD to be done. The important event is that the US “FEDERAL RESERVE” went to the heart of the problem on Friday and took the “MORTGAGE BACKED SECURITIES” as collateral. They took over 20 billion dollars worth of them into inventory. NEVER has any central bank taken these over the counter “DERIVATIVES” as collateral. By putting a price on them now they can mark the models to the market, and the G7 central banks have the purchasing power to dictate the bid price, therefore now the balance sheets can be defined. However to this point it is only the US Federal Reserve that has done so. The Bundesbank did a rescue as well of IKB bank, but only by guaranteeing the banks in question, they didn't take the notes.

The seeds of this unfolding debacle are trillions of dollars of Mortgage backed securities which up to this point has been completely an over the counter affair between big banks, prime brokers and their clients such as hedge funds, institutions and pension funds (the investors in these products). The blow up is happening because the quality of the mortgages in these securities varies wildly and has come into question, some are backed by “good borrowers” and others by “liar loans” and “ninja” (no income, no job or asset) loans. They are PANDORA's box investments . Open them up and you don't know what will fly out of them. So as more and more investors decide the risk is a little more than they can be comfortable with and decide to sell the market was turning into a black hole. No bidders will put a price on them, so effectively they were worth very little, maybe as low as twenty cents on the dollar or as high as 90 cents, as NO ONE will buy something if they can't understand the value of that something.

Another shoe just dropped as we go to press, banks are WITHDRAWING their credit lines to hedge funds that hold this paper, and they are revoking credit lines predicated on this type of collateral. Another negative.

Now the interesting part starts as to effectively address this problem the G7 central banks must wait for bank after bank, institution after institution, hedge fund after hedge fund, pension fund after pension fund to try and exit their positions. The cockroaches must be identified as they as are flushed out by the mob of investors in PANIC liquidation mode. LOL. Some will be allowed to survive and others will be allowed to die as a lesson to others. The G7 central banks will HAVE TOO be the market maker of last resort. To not do so spells doom for the G7 financial system as the “ALWAYS” inflating value of the assets are the underpinnings of their financial systems.

Did you notice there wasn't one central bank in the emerging world which had to inject liquidity? Why? Because they have savings, and their economies are not dependent on monetary and asset inflation for growth like the G7's is. The emerging world does not depend on financial magic, inflation through currency and credit creation, and smoke and mirrors to create the illusion of growth. They are becoming wealth creating machines, courtesy of unrestrained capitalism and the Austrian economic models they employ and the money the G7 prints and sends to them provides the seeds they need to emerge into the modern economies they wish to create.

This week looks to be interesting as the selling abated somewhat after the fed took the MBS (mortgage backed securities), but you can be sure that meeting between G7 central bankers and financial authorities occurred all weekend long to discuss the next step of containment strategies. But there is one containment strategy you can bank on: “THEY WILL PRINT THE MONEY"! Otherwise this is the big Kahuna for the G7 financial systems, and I don't believe they are ready to throw in the towel! They won't throw in the towel until they are dead and buried or the markets don't let them get away with it!

In conclusion, we will be covering the unfolding drama for the next several months in the “FINGERS OF INSTABILITY” series. As the worlds government financial authorities pile dollar after dollar, yen after yen, British pound after British pound, Euro after Euro, Yuan after Yuan, Ruble after Ruble, Rupee after Rupee, etc. on the global economic pile, selected “Bubble” investment areas of the world economies will grow and then collapse, as we are now seeing in US housing and sub prime lending markets. As we watch financial authorities and public servants WORLDWIDE battle the markets as they attempt to control them. It figures to cause stock market indigestion as the credit needed to underpin them is temporarily interrupted until they get the fires under control and restore confidence to the G7 financial systems and their participants.

The next round of reflation sits directly in front of us, as they take these bombs called CMO/CDO's and dispose of them in a safer manner then allowing the markets to do so themselves. A financial bond,er bomb squad. Then what's left of the underpinnings will be repackaged after being inspected for “FOUL SMELLING” elements, which will be removed. And the institutions that created them will generate another round of fees for themselves as they resell the remains. We will also be covering emerging and present “FINGERS OF INSTABILTY” in other areas of the global economies and politics. We will be discussing this newsletter on , on Wednesdays at 3:45 central standard time. Thank you for reading Ted bits, if you enjoyed it send it to a friend, subscribe its free at

Don't miss Ty Andros LIVE on web TV . Ty appears weekly on Commodity Classics hosted by Michael Yorba at Market News First ( ). Catch Ty every Wednesday at 3:45 Ce ntral Standard Time at .

If you enjoyed this edition of Tedbits then subscribe – it's free , and we ask you to send it to a friend and visit our archives for additional insights from previous editions, lively thoughts, and our guest commentaries. Tedbits is a weekly publication that comes out on Thursdays or Fridays.

By Ty Andros
Copyright © 2007 Ty Andros

Tedbits is authored by Theodore "Ty" Andros , and is registered with TraderView, a registered CTA (Commodity Trading Advisor) and Global Asset Advisors (Introducing Broker). TraderView is a managed futures and alternative investment boutique. Mr. Andros began his commodity career in the early 1980's and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio selection and monitoring, customer relations and all aspects required in building a successful managed futures and alternative investment brokerage service. Mr. Andros attended the University of San Di ego , and the University of Miami , majoring in Marketing, Economics and Business Administration. He began his career as a broker in 1983, and has worked his way to the creation of TraderView. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis, creating investment portfolios designed to capture these unfolding opportunities as the emerge. Ty prides himself on his personal preparation for the markets as they unfold and his ability to take this information and build professionally managed portfolios. Developing a loyal clientele.

Disclaimer - This report may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness.  Opinions expressed are subject to change without notice.  This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures.  There is a substantial risk of loss associated with trading futures, foreign exchange, and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance is never a guarantee of future results.

Ty Andros Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules