Dean Curnutt from Macro Risk Advisors kicked of the final day of the Risk Management Conference with a presentation titled – The Hundred Year Storm….Five Times in 20 Years?
These five instances in the last 20 years are – the Housing & Mortgage Credit Crisis, Long Term Capital, Enron, the European Crisis, and the Dot.com bubble. His term for these events is Risk in Plain Sight as looking back there were signs these events were coming, but the market got it wrong.
As he ran thought a history of these five market ‘events’ he stopped to say the point is that we need to be skeptical and approach these incredible situations with caution. For example Curnutt noted that at the height of the Dot-Com bubble there were 17 Super Bowl ads from Dot-Com companies. That was probably an indication things were getting a bit overdone.
Looking forward Curnutt discusses the current debt situation in the United States and the debt ceiling discussions. He notes that some market observers see much higher obligations for the US Government than the $16 trillion number that is often thrown out. When off balance sheet items are included the US government’s obligations come to more than $100 trillion.
He finishes talking about the current state of risk. Citing several factors he says this appears to be different this time. The current environment reminds him of nothing in the past and we may be in a new normal.