Core Viewpoint - The Federal Reserve Governor Cook has issued a warning about the high valuations of multiple asset classes, indicating an increased likelihood of significant price declines [1] Risk Points - Cook identified four key areas of concern: the stock market, corporate bonds, leveraged loans, and the real estate market, all of which are prone to sharp declines when liquidity tightens [3] - The proportion of U.S. Treasury holdings by hedge funds has surged to a record high of 10.3%, raising the risk of forced liquidations leading to a chain reaction of sell-offs if market conditions change [3] Private Credit Market - The private credit market, which accounts for 11% of U.S. GDP, is emerging as a new source of risk, with UBS predicting a potential 3 percentage point increase in default rates by 2026, surpassing leveraged loans and high-yield bonds [4] - The growing interconnection between private credit and banks/insurance institutions is concerning, as U.S. banks' loans to private credit firms have surged to nearly $300 billion, posing a risk of systemic issues if any segment falters [4] Financial System Resilience - Cook reassured that the current financial system is more resilient than in 2008, with higher bank capital adequacy ratios, making a repeat of a comprehensive crisis unlikely [5] Strategy for Long-term Investors - Investors are advised to avoid high-valuation sectors, particularly those reliant on low-cost financing such as leveraged buyouts and commercial real estate [6] - Monitoring liquidity indicators is crucial, as the Federal Reserve's reverse repo tool balance has plummeted from $2.55 trillion to $219 billion, indicating a thinner market buffer [6] - Holding cash for potential opportunities is recommended, as quality assets may be mispriced due to liquidity shocks, presenting long-term investment opportunities [6]

Group 1 - The Shanghai procuratorial authorities received a total of 784 financial crime arrest cases involving 1,327 individuals and 1,384 prosecution cases involving 2,671 individuals from 2024 to the first half of 2025, indicating a slight downward trend in both case numbers and involved persons [1] - Financial crime cases are becoming increasingly complex, with trends showing more group operations and interconnected criminal chains, while illegal fundraising cases have decreased significantly, although cases disguised as health care and film investments have become more misleading [1] - There is a notable increase in securities-related crimes, particularly in financial fraud cases, while risks in loans, credit cards, and insurance fraud are becoming more prominent, alongside the rise of illegal foreign exchange cases and the use of virtual currencies in criminal activities [1] Group 2 - Recommendations from the procuratorial authorities include enhancing law enforcement and judicial collaboration, improving administrative and criminal justice mechanisms, and addressing social governance issues through industry self-regulation and judicial cooperation [2] - There is a call for improved financial risk identification, assessment, and prevention mechanisms, utilizing data and information technology to monitor key areas and respond to potential illegal financial activities disguised as financial innovations [2] - The authorities emphasize the need for better governance in financial institutions, including strict oversight of innovative products, management of financial personnel, and the establishment of a gray list for departing employees to minimize opportunities for illegal activities [2] Group 3 - The Shanghai procuratorial authorities have been innovating their approach to financial crime, integrating case handling with risk mitigation, asset recovery, and comprehensive governance, while fostering a specialized and international talent pool [3] - The focus is on a full-chain approach to combating serious financial crimes, enhancing financial crime warning education, and promoting legal awareness among the public [3]