In this week’s Off the Cuff with Mish & Chris podcast, Chris and Mish discuss:
The Occupy Wall Street Demonstrations
What’s the OWS movement about? Will it drive any real change?
The Increasing Fragility of the Banking System
What’s the contagion risk to the global system if (or really when) Greece defaults?
Where do you get diversification when all assets are positively correlated?
Occupy Wall Street marks an important turning point in the national consciousness. Based on his recent trip to the protests in Manhattan, Chris sees a ‘righteous anger’ that is likely to mobilize more Americans who to this point have been letting themselves get docilely sheared by Wall Street excesses. Mish thinks the real issue is jobs, even if that’s not what the demonstrators are specifically articulating.
In Europe, the big fear is the amplifying effect that derivatives will have when losses start being realized. No one knows how these incredibly large, complex, and interconnected contracts will behave – but it’s a certainty that they will be uncontrollable. The ugly truth is that the global banking system is insolvent, and since Europe is weakest at the moment, it’s likely going to be the first domino to fall – instigating the collapse of the entire system.
The amount of leverage in the system has both Chris and Mish extremely concerned. At this point, both recommend that investors get defensive right now. There is a high likelihood of a crash of the system in the near future.