"There is definitely going to be another financial crisis around the corner,"
says hedge fund legend Mark Mobius, "because we haven't solved any of the
things
that caused the previous crisis."
We're raising our alert status for the next financial crisis this morning. We
already raised it last week after spreads on U.S. credit default swaps started
blowing out. Today, we raise it again after seeing the remarks of Mr. Mobius,
chief of the $50 billion emerging markets desk at Templeton Asset Management.
Speaking in Tokyo, he pointed to derivatives — the financial hairball of
futures, options, and swaps in which nearly all the world's major banks are
tangled up.
Estimates on the amount of derivatives out there worldwide vary. An oft-heard
estimate is $600 trillion. That squares with Mobius' guess of 10 times the
world's annual GDP. "Are the derivatives regulated?" asks Mobius. "No. Are you
still getting growth in derivatives? Yes."
In other words, something along the lines of securitized mortgages is lurking
out there, ready to trigger another crisis as in 2007-08.
What could it be? We'll offer up a good guess this morning — one the market is
discounting.
