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Tags: jpmorgan | fed | liquidity | crisis | market | meltdown

JPMorgan: Fed Tactics, 'Liquidity Crisis' Will Fuel Next Market Meltdown

JPMorgan: Fed Tactics, 'Liquidity Crisis' Will Fuel Next Market Meltdown
(Dollar Photo Club)

By    |   Wednesday, 04 October 2017 11:26 AM EDT

JPMorgan warns savvy investors to beware that a financial house of cards will soon collapse.

Business Insider explains that while JPMorgan “isn't sure exactly when the so-called "Great Liquidity Crisis" (GLC) will strike, it figures that tensions will start to ratchet up in 2018, once the Federal Reserve starts to unwind its massive balance sheet.”

“If a reversal of unpredented monetary easing does, in fact, spur a market crash, it would be cruel twist of irony. After all, it was that same stimulus that helped rescue global markets from the abyss back in 2008, when the last crisis hit, Business Insider reported.

"The timing will largely be determined by the pace of central bank normalization, business cycle dynamics and various idiosyncratic events, and hence cannot be known accurately," Marko Kolanovic, JPMorgan's global head of quantitative and derivatives strategy, wrote in a client note, Business Insider explained.

"This is similar to the 2008 global financial crisis (GFC), when those that accurately predicted the nature of the GFC started doing so around 2006."

For his part, Nobel winner Robert Shiller warns savvy investors that only one aspect is keeping today’s high-flying stock market from crashing like it did in 1929.

The Yale University economics professor explained to CNBC that there's one vital characteristic protecting investors from losing their nest eggs: Market psychology.

"It's not just a matter of low interest rates, it's something about the American atmosphere. It's partly the Trump atmosphere,” said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.

"The market is about as highly priced as it was in 1929," said Shiller, who's been arguing valuations are extremely expensive.

"In 1929 from the peak to the bottom, it was 80 percent down. And the market really wasn't much higher than it is now in terms of my CAPE [cyclically adjusted price-to-earnings] ratio. So, you give pause when you notice that," said Shiller.

Meanwhile, uncertainty about how the United States will cope with growing tumult in the world has not dampened Warren Buffett's optimism for the country's prospects over the long term -- even 100 years into the future.

"Whenever I hear people talk pessimistically about this country, I think they're out of their mind," Buffett, the chairman of Berkshire Hathaway Inc, said last month.

Buffett said he expects the Dow Jones Industrial Average to be "over 1 million" in 100 years, up from Tuesday's close of 22,370.80. He said that's not unreasonable, given how the index was roughly 81 a century ago, Reuters reported.

Buffett said long-term investing remains the way to go.

He noted that since Forbes created its first list of the 400 richest Americans in 1982 — Buffett was worth just $250 million then — some 1,500 different people have been included.

All with one thing in common.

"You don't see any short sellers," he said, referring to people who bet stock prices will fall.

"It has been 241 years since Thomas Jefferson wrote the Declaration of Independence," he said. "Being short America has been a loser's game. I predict to you it will continue to be a loser's game."

(Newsmax wires services contributed to this report).

© 2024 Newsmax Finance. All rights reserved.

JPMorgan warns savvy investors to beware that a financial house of cards will soon collapse.
jpmorgan, fed, liquidity, crisis, market, meltdown
Wednesday, 04 October 2017 11:26 AM
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