Question: Recently, several readers have questioned the significance of the removal of the Glass-Steagall Act in 1999, the current financial meltdowns and the similarities between now and the short period leading up to the Great Crash of 1929. In my readings a number of years ago, I came upon the testimony of Mr. Robert Kuttner, who appeared before the U.S. Committee on Financial Services on Oct. 2, 2007. Would you consider reviewing that testimony and sharing your thoughts with our readers?
| - Michael R. Scott |
Answer: Thank you for pointing me to Robert Kuttner's October 2007 testimony (which readers can access by clicking here.)
I, too, am struck by a sense of déjà vu as to where we are now and where we were when Mr. Kuttner gave his testimony in 2007. It is not unlike the déjà vu Mr. Kuttner points to between where we were in October 2007 and where we were previously in the build-up to the 1929 crash. As the old adage tells us: "Those who forget the past are doomed to repeat it." Unfortunately, we are still on that same Ferris wheel, going up and going down - but with no forward progress.
Rather than share my own thoughts on the parallels between then and now, it may be more helpful to point those interested in making money to the opportunities inherent in repeating obvious mistakes.
We know that capital will move in and out of investments, either seeking opportunity or exiting losing positions. What everyone needs to be aware of is that those movements, or "capital waves," are going to be increasingly larger and faster.
I urge all of Money Morning's subscribers to read Mr. Kuttner's testimony and to use that insight to capitalize on the waves that will result from policy decisions and economic realities that are unfolding even as I write this. Instead of being knocked down and crushed by these mounting waves, the changes that we're seeing should be recognized for exactly what they are - an incredible opportunity to profit from repeated mistakes.
There's money to be made from the current easy-money policy. There's money to be made when the wave of liquidity gets mopped up. There's money to be made in the new bubbles that are forming and money to be made when those bubbles inevitably burst. In fact, I believe that the opportunities before us are phenomenal - precisely because the road map has already been marked and the road well-traveled.
Driving forward, my view is always safer when you keep an eye on the rearview mirror. We should thank Mr. Kettner for polishing that mirror to give us another clear look backwards. It's tough to get rear-ended when you know what's coming.
The bottom line: We've already seen how this all plays out ... if you've seen the script for the original movie, you can guess the ending of the sequel.
[Editor's Note: Frankly, we've been blown away by the response we've received here at Money Morning to Shah Gilani's recent commentaries on capital-wave investing. One article in particular is not to be missed: In it, the retired hedge-fund manager and noted credit-crisis expert painted a global portrait in which he detailed where investors should go to find the biggest profit opportunities today. If you missed that Money Morning article, it's available here free of charge. If you're also interested, feel free to watch Gilani's just-released video, in which he further fleshes out his capital-wave investing strategy. That video is available for viewing, also free of charge.]
(**)Money Morning editors reserve the right to edit responses for grammar, length and clarity when posting on our website. Please include your name and hometown with your email.
News and Related Story Links:
- Money Morning Special Report:
How Capital Waves Are Creating the Biggest Profit Opportunities in Today's Markets. - Money Morning Special Report:
Capital Wave Investing: Is it Time to Profit From the Cash-Rich Technology Sector? - Money Morning Mailbag Feature:
Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery. - Money Morning Mailbag Feature:
Money Morning Mailbag: Capital Wave Investing Strategies Spotlight the World's Top Profit Plays.' - Money Morning Mailbag:
Money Morning Mailbag: How the Demise of Glass-Steagall Helped Spawn the Credit Crisis. - Money Morning Mailbag Feature:
The Truth About Inflation... - Wikipedia:
Glass-Steagall Act. - House Financial Services Committee:
Testimony of Robert Kuttner.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.