The Next Global Financial Crisis

Four more years.

Four more years.

These are words we hear spoken or chanted at the ends of Olympiads, World Cups and successful re-election campaigns. In this case it is the amount of time we have left until the next global financial crisis, according to one man.

Barrie Wilkinson is a partner at London based consulting firm Oliver Wyman. He was not a welcome sight at the marquee banker bash of the year.

When the who's who of the financial industry gathered at Davos, Switzerland this past month, Mr. Wilkinson was not included at the top level meetings and palm greasing festivities. When you say things like this, it's no wonder the top bankers in the world don't want you at their dinner table.

Barrie Wilkinson:
The fundamentals haven't been addressed at all. The things that caused the previous crisis -- loose monetary policy and trade imbalances -- they're actually bigger now than they were then.

While reading about Mr. Wilkinson, I couldn't help but to think back to another man they

for saying the same exact thing...roughly four years ago.

Meanwhile, Jamie Dimon and Louis Bacon exemplified the back to business as usual approach the industry has been attempting to undertake. Glad handing clients and pitching harder than Roger Clemens when he wasn't juicing.

It seems as though the decision makers whose decisions caused the crisis...are satisfied that they have learned from their mistakes and are ready to move on.

By changing absolutely nothing.

For those interested in a fun read and (perhaps) a great investment guide. Take a peek here for Wilkinson's extended report.

There are certainly some none-too-novel salient points, which I fear, will once again go on ignored.

So, let's hear what our WSO investors have to say about it...

Is Wilkinson full of it?

Are the bubblicious inflatings of commodity and emerging markets something to fear?

Is all well... citizen?

Comments (22)

Feb 4, 2011 - 12:18pm
LIBOR, what's your opinion? Comment below:

Read the bloomberg article the other day and couldn't find Wilkinson's article. SB for the post and the link.

looking for that pick-me-up to power through an all-nighter?
Feb 4, 2011 - 12:18pm
alexpasch, what's your opinion? Comment below:

I agree, but I have a shorter time frame. I see recession more in the 2013 time frame (Jim Rogers says another recession in that same year, and I agree with him).

All the old problems are still there and they're very big. I don't see how we make it four years. Two is more like it imo. You have to be nimble, but you'll have warning. It's doubtful the stock market will fall 30% in one day, so just play the momentum. Right now we'll probably be flat or down slightly over the next couple months; sentiment started shifting today BIG TIME with the poor jobs report.

Feb 4, 2011 - 12:53pm
Frieds, what's your opinion? Comment below:

Midas,

There is way too much shit on the world's plate to not expect there to be a new crisis looming on the horizon. I'm not sure where I think we hit the Point of No Return, but we're getting there. Slowly and surely, we're getting there. I think that Wilkinson is right, but as Alex said, the timeframe is off. The only thing certain is that once we cross the Rubicon, we will really have a problem the likes of which no one has seen.

I dunno what I fear more though, a commodities bubble or the unchecked inflation coupled with a devalued dollar.

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Feb 4, 2011 - 2:27pm
Anonymous Monkey, what's your opinion? Comment below:

Why would demand for commodities ever fall. Aren't they necessities? People aren't just going to stop buying oil...

Feb 4, 2011 - 3:55pm
2x2Matrix, what's your opinion? Comment below:
SpencerMakesBank:
Why would demand for commodities ever fall. Aren't they necessities? People aren't just going to stop buying oil...

The only necessities are food, water, and shelter. Gold and silver are commodities, too, but I don't think anybody would call them necessities. It is a minor miracle, though, that nobody has figured out a way to add water to the roster of tradeable commodities.

And if you're a HS senior, you won't be in energy IB - or any IB - for at least four years. There's plenty of time to see how things shake out.

One of those lights, slightly brighter than the rest, will be my wingtip passing over.
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Best Response
Feb 4, 2011 - 4:06pm
alexpasch, what's your opinion? Comment below:
2x2Matrix:
SpencerMakesBank:
Why would demand for commodities ever fall. Aren't they necessities? People aren't just going to stop buying oil...

The only necessities are food, water, and shelter. Gold and silver are commodities, too, but I don't think anybody would call them necessities. It is a minor miracle, though, that nobody has figured out a way to add water to the roster of tradeable commodities.

And if you're a HS senior, you won't be in energy IB - or any IB - for at least four years. There's plenty of time to see how things shake out.

You can buy water rights in certain places/countries. The problem with water is that it's not a commodity that is traded often, even though it's fungible. Pricing is very regional, so you can buy water rights in a specific location, but you can't buy water futures because there isn't a global market for water in the same sense that there is for oil.

Feb 4, 2011 - 2:59pm
Frieds, what's your opinion? Comment below:

Goodbread,

I think that the increase in the price of oil will hurt the employed commuters most, as it eats more out of their bottom line. Couple that with no adjustments for Cost of Living and you will see the middle class commuter get hit with a larger burden that they can't make up for with wages. It's just a further big of destruction aimed at seperating the rich and the poor by eliminating the "middle class".

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Feb 4, 2011 - 3:41pm
GoodBread, what's your opinion? Comment below:

I agree Frieds, and that's why all the sudden you see new mass transit projects popping out of the wood work anytime oil passes 100 and gas-guzzlers depreciating at warp speed. Demand destruction disproportionately affects those with lower incomes.

SpencerMakesBank, what has you worried about the future of energy ibd?

Feb 4, 2011 - 3:55pm
XPJ, what's your opinion? Comment below:

Jesus -- there are people in hs who already know they want to go into ibd? I didn't even know what that was until Soph year...

Feb 4, 2011 - 6:40pm
alexpasch, what's your opinion? Comment below:
New Yorker:
Why don't you guys buy oil futures if you're so confident the price is going to increase?

Oh boy have I bought oil futures...

(and it's not as simple as that, I have options, spreads, etc...but I do have a net long position and am betting it will go up over time...in the short-term I expect it to be range bound)

Feb 5, 2011 - 9:26pm
Bravo, what's your opinion? Comment below:
alexpasch:
New Yorker:
Why don't you guys buy oil futures if you're so confident the price is going to increase?

Oh boy have I bought oil futures...

(and it's not as simple as that, I have options, spreads, etc...but I do have a net long position and am betting it will go up over time...in the short-term I expect it to be range bound)

....smart play.

Please don't make me talk to you like an asshole...
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Feb 4, 2011 - 6:06pm
Aragorn, what's your opinion? Comment below:

It's extremely disconcerting watching those people dismiss Peter Schiff...

Anyway, Midas, I'm curious. You mentioned that the decision makers are changing absolutely nothing. What exactly should they change and why aren't they doing anything about it?

A former British investment banker, Hector Sants, came by the other day to offer a presentation to students regarding his role as the CEO of the FSA. He claims to have organized an overhaul of banking regulations in the wake of the global financial crisis, and is now overseeing the creation of a new financial regulatory structure. Essentially, he broke down the weaknesses of the old structure into two components: 1) there was no mechanism looking at risk 2) consumers were not adequately protected. However, again, he argued that those structural weaknesses have been amended. Is that really enough?

"Rage, rage against the dying of the light." - DT
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Feb 4, 2011 - 6:37pm
alexpasch, what's your opinion? Comment below:

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Eos harum quia et voluptatem. Nostrum et error et tenetur. Hic quod earum sit assumenda consequatur tempora. Reprehenderit deserunt quia unde iusto qui consequuntur tenetur.

Autem neque alias impedit est. Corrupti dolorem necessitatibus esse sunt deserunt cumque in numquam.

Feb 4, 2011 - 8:26pm
Midas Mulligan Magoo, what's your opinion? Comment below:

Deserunt consequatur unde non tenetur animi. Est eius eaque provident quia natus commodi. Saepe accusantium itaque sit nemo quod. Debitis corrupti explicabo ex sunt non exercitationem.

Excepturi at distinctio ut distinctio rem. Nihil dolores pariatur quo totam odio non tempore. Nostrum enim veritatis sint blanditiis voluptatem. Dolorum quam est necessitatibus porro eveniet ipsum praesentium.

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