The 'Great Unwinding' has begun -- scary quotes from Canada

[Newsjock]

Source: Globe and Mail

... “This cataclysmic period will bring about drastic changes to the financial sector,” said Louis Gagnon, a finance professor at Queen's University in Kingston, Ont. “I think it is fair to say that the world of finance as we know it will never be the same again. I just hope that we will learn from these mistakes and that the new paradigm that will replace the current one will be better and more durable.”

... "There is no surprise that people try to draw parallels with the stock market crash of 1929, because we haven't had episodes of such challenging uncertainty in our lifetime,” Mr. Gagnon said. “What we are watching is everything falling apart in slow motion.”

... “I am absolutely certain we have not seen the end of it, many more shoes are waiting to drop,” Mr. Gagnon said. “What worries me much more than anything else is the rumour mill – there are simply too many rumours out there. Everyone is going native, everyone is in a state of panic. I talk to a lot of people in Canada, in New York, in London and never in my career have I heard panic like this in their voices.”

Investors are liquidating whatever they can in a bid to protect their assets, said Ken McCord, chief executive officer of Webb Asset Management in Toronto.

“Fundamentals or any other methods that might be used to measure the market have been thrown out the window,” Mr. McCord said. “This is mass liquidation on a scale I've never seen before. What's going on is a great unwinding of highly leveraged accounts.”

Read more: http://www.reportonbusiness.com/servlet/story/RTGAM.20080917.wmarkets0917/BNStory/SpecialEvents2/home

[Warpy]

1. It's the evaporation of that financial castle in the air

that was built entirely of derivatives, those exotic securities that represented wealth that might be, not wealth that actually existed.

Economists whose job wasn't justifying the opulence of the super rich have been warning about them since the 1970s and starting to panic in the late 1980s. It's not like this hasn't been foreseen.

[Canuckistanian]

4. Yours is the first clear description of what's really happening

"wealth that might be, not wealth that actually existed"

SO much money is tied up in endeavours that don't support the common good, let alone benefit it.

Paper wealth. Paper prosperity.

It produces neither goods nor services useful to society.

I'm beginning to imagine a world WITHOUT stock markets, futures markets or derivatives.

It's an human experiment gone bad.

[JimDandy]

9. And swaps are one of the most magical derivatives that built the castle,

especially the credit default swaps.

To Joe Blow, "swap" sounds so chummy and yummy and good for you, until you tell Joe that it means: "I made money betting that you'd default on your loan."

[Selatius]

2. One day America discovered its castle was built on pillars of sand.

And they came tumbling down.

[greyghost]

3. AMEN

[1Hippiechick]

5. And the sand belonged to China. n/t

[dixiegrrrrl]

6. Money is doing what housing did

over priced, overvalued, debt driven, market Ponzi scheme is falling down.

'zactly the same thing.

[Monk06]

7. Never listen to anything the Globe and Snail says about business

They are always a day late and a dollar short.

The last sentence says it all

“This is mass liquidation on a scale I've never seen before. What's going on is a great unwinding of highly leveraged accounts.”

The derivative markets are a global ponzi scheme. Hedge funds began as a means of spreading risk by purchasing a diversified portfolio of securities. Some bonds, blue chip stocks, some risk venture.

Then the Hedge funds went off the risk melioration reservation and got into exotic derivatives like bundled mortgage based securities and reckless oil futures bets.

Highly leveraged accounts is Wall Speak for gambling with other peoples money and not telling them about it. The sooner the market returns to the quaint notion of fiduciary responsibility the better.

But at this point its no gain without pain.

[reggie the dog]

8. and so castles made of sand......

[Phoebe Loosinhouse]

10. Rampant, unfettered GREED with no restraining influences like ethics

or a sense of scale or even just a dose of common sense.

Remember that single Hong Kong trader who brought down the British bank by making a bad bet in the currency market? One guy!

[morningglory]

11. I am planting mustard greens today. $1 bag of good corn meal and you

are well-fed.