VIOLENT SELLOFF

Gold/XAU Ratio 4.64



" we have a hunch none of this came as a shock to Jeremy Grantham, who runs GMO, which manages very big bucks for institutions and affluent individuals. For in his latest quarterly letter, dated July, Jeremy pretty much advised investors to expect the worst.

He pointed out that the mushrooming growth of leveraged loans, some $545 billion globally in the first half and up a notable 60% over the corresponding '06 total, was very much reminiscent of the equivalent gain in price of the Internet and tech stocks in the opening six months of 1999.

He suggested, too, that there's an uncomfortably close affinity between all the fuss and media attention paid to the online and tech heroes then and the current hoopla over the new LBO masters of the universe. More than likely, he implied, this new gilded age will end as ignominiously as did its predecessor six years ago.

Jeremy confided that he has been trying to come up with a straightforward formulation to capture "how serious the situation is for the overstretched, overleveraged financial system." The simple statement he hit on was that, in five years, he expected that at least one major bank will go belly up and that as many as half of the hedge funds and a substantial percentage of the private-equity funds now throwing their money and weight around "will have ceased to exist."

Jeremy, who has seen it all in his 40 years in the investing business, freely acknowledged he has "often been too bearish about the U.S. equity markets in the last 12 years" (although to his credit and clients' satisfaction he has been a big bull on emerging equity markets). But, he asserted, "I think it fair to say that my language has almost never been this dire. The feeling I have today is that of watching a very slow- motion train wreck." BARRONS QUOTE THIS WEEK

Hedge Fund Failures is Fire in the Projection Room
Interest-Rates / Financial Crash
Aug 02, 2007 - 12:29 AM
By: Tim_Iacono
Earlier today, it was revealed that another hedge fund from Bear Stearns is in deep doo-doo. According to the report, they have "blocked investors from pulling money out of a third fund as losses in the credit markets expand beyond securities related to subprime mortgages" . Unlike the two Bear Stearns funds that went belly-up last month, this $850 million asset-backed fund had no leverage and virtually no exposure to subprime mortgages.

Call it systemic risk, call it what you want - whatever it is, it is spreading