Tags: Mobius | Crisis | Lurking | Corner

Templeton’s Mobius: New Economic Crisis Lurking ‘Around the Corner’

Friday, 18 Nov 2011 09:11 AM

The world didn't learn its lesson from the recent financial collapse and is doomed to repeat a new downturn in the near future, says Mark Mobius, head of the $50 billion emerging markets unit at Templeton Asset Management.

"There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius says, according to Forbes Magazine.

Complex financial derivatives, especially credit default swaps tied to the housing sector, threw the country into the worst recession since the Great Depression, and are still out there — all $600 trillion of them — trading without proper oversight or care, Mobius says.
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"Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes."

Mobius200.jpg
Mark Mobius
(Templeton file photo)
In Europe, banks in France and elsewhere are holding Greek debt.

Should Greece default, banks would not only take a haircut but the credit default swaps tied to the sector could come due and further damage the financial system there similar to what the Lehman Brothers collapse did to the U.S. economy in 2008.

Market talk, meanwhile, says the Standard & Poor's ratings agency is planning to downgrade a slew of financial institutions, possibly Bank of America, Citigroup and Morgan Stanly, says Baylor Lancaster, an analyst at CreditSights, according to Reuters.

Adverse financial conditions coupled with new methodology is prompting the agency to review 30 global banking institutions.

Other analysts say surprises could be on the way.

"One reason there could be surprises is that the new ratings method is very complex and it has been very difficult to simulate results," says Beate Muenstermann, a London-based research analyst for the money management arm of JPMorgan Chase, Reuters adds.

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The world didn't learn its lesson from the recent financial collapse and is doomed to repeat a new downturn in the near future, says Mark Mobius, head of the $50 billion emerging markets unit at Templeton Asset Management. There is definitely going to be another financial...
Mobius,Crisis,Lurking,Corner
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2011-11-18
Friday, 18 Nov 2011 09:11 AM
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