GFC 2

[McLovin]

Unforeseen? There were a group of us in here, and in the wider financial community banging on about what was coming for ages.

Perhaps the exact trigger and timing was unforeseen, but not the event.

People on here were predicting in 2005-06 that the real estate bubble and CDS's and securitised dodgy loans would send the financial system to the point of meltdown? Well done if you were.

 

[MrBurns]

How low will it go ?

FB float was massive and the DOW still slumped.

Depends,

If Greece don't leave the Euro it still means big trouble as you really cant borrow your way out of debt indefinitely but it would give us a slight reprieve.

If they do leave that would be bad enough but if Spain then finds itself in too deep, and there's been a run on a few banks there lately, then there's REAL trouble, massive.

China depends on Europe to some extent and we rely on China so there's a real problem there.

Domestically there's insolvencies everywhere, people either have no money or are too scared to spend.

Overall I'd say the odds are stacked against this NOT being the beginning of GFC 2

 

[CanOz]

One thing that was worriying me more about this decline is the pace at which the flight to safety is occurring. Then today there was a HF manager on the Bloomy saying this too. Bond yields on safe havens such as germany, Canada, are dropping rapidly...money is coming out of Asain markets very quickly too. The Aussie dollar and other Asian currencies are dropping very fast.

He said he

didn't know which way things were going to go, but this is wound up like a rubber band and I expect to see an event happen in the next 5 to 30 days

I'll check the Bloomy again later today to see if I can find an article containing the interview.

CanOz

 

[MrBurns]

I expect to see an event happen in the next 5 to 30 days

An event ? That can't be good

 

[Dowdy]

An event ? That can't be good

Greece pulls out of the Euro maybe?

It's going to happen, just when

 

[MrBurns]

Greece pulls out of the Euro maybe?

It's going to happen, just when

If they do it will have massive consequences, their money will be worthless, the banks would have to shut down for a period etc

I dont think they will allow this to happen but it depends on the elections.

Whether they do or don't I think we're in for a tough time..... well it's with us now.

 

[Julia]

The difference between the GFC and now is the GFC was started by a series of largely unforeseen events. I remember at the end of 2004 reading something about the US real estate market and thinking we were in a bubble but I had no idea it would go as deep as it did or that it would cause a huge structural change in behaviour. What we know now is that the PIIGS are basically broke. Whether Greece stays or goes is much of a muchness in the grand scheme of things. It's hard to believe that it hasn't been priced in. It's the unknowns that cause GFC's not the knowns.

If it was all priced in why would the events in Europe over the last few days have resulted in such falls in markets?
You may have priced it in but imo many investors have learned nothing from the GFC and will sit like stunned fish watching their capital fall.

Unforeseen? There were a group of us in here, and in the wider financial community banging on about what was coming for ages.

Perhaps the exact trigger and timing was unforeseen, but not the event.

Agree. Opposed to that were the self interested 'advisers' urging everyone not to panic, it would all be quite OK, their focus being the loss of commissions if they'd advised their clients to go to cash from managed funds.

 

[McLovin]

If it was all priced in why would the events in Europe over the last few days have resulted in such falls in markets?

I think, all things considered, they're holding up pretty well. The prospect of the world's second most important currency failing, bank runs a real possibility in a number of mid-size European countries and the big overseas markets down ~5%, seems like a pretty good outcome.

Of course I have no idea what will happen on Monday but to me it seems like everything is already known and has been more or less priced in.

 

[Struzball]

You may have priced it in but imo many investors have learned nothing from the GFC and will sit like stunned fish watching their capital fall.

Watching capital fall and "averaging down".

 

[basilio]

Everyone can't go to cash. Just basic logic. All sellers no buyers for shares.

The super funds, pension funds and core holders of company shares are pretty constrained (IMO) on simply getting out of the market. That is why smaller investors at least have the realistic option of selling out.

Where will all this go ? God knows. I can understand the flight to cash but given the crisis in Europe there is no guarantee that banks and thus cash will survive intact.

We may end up with far more basic security. House, food, own energy, local community.

 

[wayneL]

We may end up with far more basic security. House, food, own energy, local community.

Won't work. The leftists have destroyed the last vestiges of community with their statist oriented social engineering.

 

[Joules MM1]

One thing that was worriying me more about this decline is the pace at which the flight to safety is occurring. Then today there was a HF manager on the Bloomy saying this too. Bond yields on safe havens such as germany, Canada, are dropping rapidly...money is coming out of Asain markets very quickly too. The Aussie dollar and other Asian currencies are dropping very fast.

He said he

I'll check the Bloomy again later today to see if I can find an article containing the interview.

CanOz

please hurry, Can ..... so i can email the guy and tell him i've put everything on hold for the next 5 to erm :bs: 30 days ......just in case.....

lulz

 

[DB008]

Reuters - Nightmare foretold if Greece heads for euro exit

A former finance minister, Yiannos Papantoniou, saw trouble ahead nearly a year ago: "Greece would not be able to support 11 million people so there will be huge emigration flows," he told Reuters Insider television last July. "Disruptions, social disruptions will come. I would say a regime of total anarchy."

Most economists agree the austerity measures Greece is laboring under offer it little hope of recovery near term, and some argue that if it leaves the euro, it could export its way back to health on the back of a vastly devalued currency.

But, barring tourism, it does not have businesses or industries that could drive such a recovery.

"The first shortages have begun to appear," said Melina Ferousi, a businesswoman who imports paper and stationery items. "French and Spanish suppliers are still selling on credit but German ones are particularly strict and are refusing to do so."

Some German suppliers have said they could not extend credit to Greece even if they wanted to because their insurers are refusing to cover the merchandise.

Well, that doesn't sound too good if you ask me.

 

[CanOz]

please hurry, Can ..... so i can email the guy and tell him i've put everything on hold for the next 5 to erm :bs: 30 days ......just in case.....

lulz

Joules, he was talking about either a major equity market crash or bond rally, or both. His time frame was estimated by the various yields spreads they deal with.

I do agree that the pace of the flight to safety has been quicker this time, the falls on the Kospi for example were quite severe in comparison the the US markets, even the DAX.

There has been a boat load of money leave Asia in the last week.

CanOz

CanOz

 

[skating101]

Simple economics questions

If greece leaves and then defaults on its debt would this be deflationary or inflationary on the euro?

Debt monetisation - Printing money then buying the debt then cancelling it - Inflationary

Debt cancellation (default) - Existing owners of debt forgiving debt - Deflationary

Example- I (bank) receive $1000 (total amount of money in economy) from depositors. I lend $100 to my friend who spends that money on clothes. They cannot pay back the $100 debt so the options are
1. We print $100 to monetise the debt - total amount of money in economy = $1100
2. We forgive the debt - total amount of money in economy = $1000?

The situation in southern europe is extremely deflationary due to the huge amount of debt (negative money) which is having the usual deflationary effect (high unemployment low growth).
If the debt was cancelled would this have a heavily inflationary or deflationary effect on the rest of europe?
If the debt was monetised have an inflationary or deflationary effect on the rest of europe?

 

[Glen48]

I assume if 50%+ are unemployed they would only buy the bare essentials toilet paper, soap tin food, strip their assets and sell at any price for money so the shops would go down as we see with WOW JB HI FI etc,larger shopping centers would tank due to overheads maybe even corner stores or corner stores would open albeit a canvas and bamboo arrangement selling the above.

No body would be selling any thing that doesn't turn over quickly and all would be come more astute at handling money, delivery drivers would only run when they had a full load therefore it could be days before your item is available, Milk would be carton rather than cold fresh due to refrigeration costs.
A lot would start growing their own until the crime wave hit and midnight pickers arrived.
Mean while those with gold would sit back and wait.

 

[moXJO]

Meanwhile in the real world no one seems to care.
I am as busy as ever, too busy if that’s possible. There are two mega shopping centres being built near me with one part completion and it is jam packed full of shoppers. Everyone I talk to seems fine.
And on a wider scale the Asian/Indian middle class is about to come online.

I think we are going through a transition period for business in which a lot sticking to old practices will wilt and die.
I can say I'm cautious but not bearish on the current outlook.
Asia had its gfc back in 97 and we survived that followed with a boom. Can't say I'm too worried

 

[young-gun]

Yep - I've been thinking about this overnight - trying to macro-predict the bottom (by comparison to GFC1 and the March 2009 low), so I would be grateful for any other views.

I think we're probably already headed back to that low, but the question is how much lower. That low occurred because the financial crisis tipped over into the real economy when the money freeze stopped the flow of commerce dead in its tracks.

So that's what to watch for this time around - the real economy. Even if the global economy has one of its cyclical recessions (US after 3-4 years anaemic growth, and China due for one), that should be one where there is a normal pick up out of it. It's taken for grant that Europe will be in a deep recession, so all that's left will be BRIC and the developing world.

What will the financial contagion coming out of Europe affect? The worry is that it will combine will all these cyclical recessions - the synchronising effect of globalisation - and bring on a preciitous drop in the markets.

So if you thought GFC1 was a once in a lifetime opportunity, we might all be two-up on our way to the cat's 9 lives in the next 2-3 years. Such a massive scenario you can't imagine playing out for a minimum 5 years, so plenty of time to clear debt and save pennies?

I don't have access to charts anymore, but from memory the biggest rally in history occurred from 2000 onwards(with a couple of hiccups along the way). I would expect to see the market return back to whatever it was around 98-00, and then some. timeframe? it would happen in a couple of years or less. but we all know the governments are going to do what they can to prevent it, so the low may be drawn at to as long as 4-8 years away. you can see the path xjo was taking after the gfc, it was headed right back to where it wanted to be before the meddling began.

same thing with house prices, they will test prices seen pre-the new millennium.

If you can recall the 'Pantene' commercials, this is the approach im taking to the upcoming tank of the global economy.(that is, it wont happen overnight, but it will happen)

great to see the bears coming out of the woodwork also, seems to be a large acceptance and acknowledgement of what is potentially heading our way.

perhaps greece will be the trigger, it's hard to know. whats scary i think is that, some were calling for the crash in 08/09, alot didn't see it coming. the collapse of lehmans did seem to come out of no-where. perhaps if the lehmans collapse was known to be close it could have been prevented, or softened.

Today however, everyone is well aware of everything that is wrong with the global economy, and throughout the world, governments and reserves are doing everything they can, and yet we are still unable to stop this tsunami from hitting our shores.

 

[young-gun]

Meanwhile in the real world no one seems to care.
I am as busy as ever, too busy if that’s possible. There are two mega shopping centres being built near me with one part completion and it is jam packed full of shoppers. Everyone I talk to seems fine.
And on a wider scale the Asian/Indian middle class is about to come online.

I think we are going through a transition period for business in which a lot sticking to old practices will wilt and die.
I can say I'm cautious but not bearish on the current outlook.
Asia had its gfc back in 97 and we survived that followed with a boom. Can't say I'm too worried

the broader general public are oblivious to economics, if they want to spend they will, if they don't need to they won't. the fact that we are still spending is a sign that a) people want to spend, or more importantly have a need to spend. and b) unemployment is still quite low. australia is the last country to be on its way down(with the exception of maybe canada?)

demographics lead the way. unfortunately downturns seem to take a while to present themselves. jmo

 

[StumpyPhantom]

Meanwhile in the real world no one seems to care.
I am as busy as ever, too busy if that’s possible. There are two mega shopping centres being built near me with one part completion and it is jam packed full of shoppers. Everyone I talk to seems fine.
And on a wider scale the Asian/Indian middle class is about to come online.

I think we are going through a transition period for business in which a lot sticking to old practices will wilt and die.
I can say I'm cautious but not bearish on the current outlook.
Asia had its gfc back in 97 and we survived that followed with a boom. Can't say I'm too worried

I wanna move to where YOU live, moXJO!!

Because I see and hear the opposite story where I live - people and businesses going broke, no-one buying anything but essentials, people saving as much as they can and cutting up their credit cards...