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Imminent and severe market correction

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brty said:
Hi,

The media is telling us one thing, the market is saying another. Which one is usually correct??

bye

brty
Click to expand...

Not at simple as that though , ones being fed , the other climbs a wall of worry or digs a deep enough hole to hide from it .

It would also depend on whether the herd is in with the market .
 
To say this isn't an interesting piece of news would be an understatement.

"Moreover, there are plenty of shoes yet to drop. Interbank cash hoarding is on the rise despite the Fed's heroic efforts; a bottom of the housing market is nowhere in sight (and we won't know how low it will go in the mortgage market until we know the end game for residential real estate); commercial real estate losses have only started. But scariest by far is the credit default swaps market.

I happened to meet with a hedge fund yesterday (unlevered, BTW) and it comments in passing were telling. They are seeing very large volumes of mortgage paper even though, this fund has not bought a single mortgage and expect that there is even more that would be offered if buyers were stepping forward. In addition, credit default swaps traders tell them that that market is in perilous shape. A great deal of the protection was written by hedge funds, who were typically levered. When they get into trouble, their problems will redound to the investment banks, both through their exposure as CDS counterparties and as lenders to failed hedge funds.

The fact that CDS traders are discussing such a grim viewpoint with people outside their firms (let's fact it, most businesspeople don't go around saying their product is about to implode) suggests that it is a common knowledge in the dealer community. I wonder if this topic is getting short shrift for a reason. The media has been known to overlook the foibles and failings of public figures until they are on the ropes. There may be similar self-censorship operating here, since the press probably does not want to be accused of fomenting panic."
http://www.nakedcapitalism.com/2008/04/investment-bank-demand-for-fed.html
 
A bloggers gut feeling on the market at the moment.
" After seeing big gain on Tuesday 4/1, we've seen the markets barely budge. While the news has been pretty negative since then, we haven't seen a huge drop. My best guess is the Fed's backstop of opening up the discount window to investment banks is really backstopping the market as a whole right now. I have to proof for that; it's just a gut level feeling."

http://www.bonddad.blogspot.com/
 
"It's the economy stupid"

GE disappoints - pulls the rug from under the futures. As the Austrians forecast, it will be earnings that take the SM on the next leg down.

Technicals don't count for S###, the fundamentals (plus a hyper dose of sentiment...) propel the market.

NB (Don't go thinking I've gone F/A on you all, I'm still a techie... just realize TA merely tracks the market)

 
Would this be the correction you are talking about
check the DOW and the NASDAQ they are i n free fall this thing wont accept my charts but I don't have time to mess around
 
happyjack said:
Would this be the correction you are talking about
check the DOW and the NASDAQ they are i n free fall this thing wont accept my charts but I don't have time to mess around
Click to expand...

SP 500 as of 12:13 PM GMT (7:13 AM NY)

 
Ahhhh bad news is bad news again.

Europe liked it even less:

 
Time to cull the portfolio

By Robert Gottliebsen

extract from Eureka Report (My only commentary is I have little faith on the illuminary Robert Gottliebsen. Please DYOR. His portfolio in Eureka Report was disaster and now quietly he has stopped it to be published. Probably will do so when market revives after 12 months. He constantly predicted CNP at a very high price and so ANZ at $27. Now it is different tune. So once again DYOR. Do not get me wrong RG is well known in the industry but probably so is investment bankers like Goldman etc who lost lot of money now from advise of top notched experts !!! )

PORTFOLIO POINT: Sectors that rely on discretionary spending will feel the first pain of the downturn, but that pain will spread.
Myer Group chairman Bill Wavish did not pull his punches when he told Reserve Bank governor Glenn Stevens and Treasurer Wayne Swan that rising interest rates were “hollowing out” the economy, depressing consumer spending and condemning many companies to a difficult future.

Most commentators immediately dismissed Wavish's message, pointing out that Myer was highly leveraged as a result of the private equity buyout. That's rubbish. The private equity financiers secured Myer for a song and will do extraordinarily well, even if there is a downturn.

Significantly, Wavish’s call was backed by David Jones managing director Mark McInnes, and by the chairman of Brickworks, Robert Millner, who said New South Wales housing starts had sunk to levels not seen since the Great Depression of the 1930s.

Link those remarks to the sharp deterioration in consumer and business confidence data, higher petrol prices and the forecast by the National Australia Bank that the Reserve Bank will slash interest rates in 2009, and there is no doubt that large areas of Australia – particularly Sydney and to a lesser degree Melbourne – are beginning to experience a severe contraction in consumer spending.

The overall national figures will be boosted by the effects of the resources boom on Western Australia and Queensland and the looming tax cuts, but Australian consumers have been borrowing extensively to maintain their spending levels and now the costs of those borrowings have skyrocketed. What’s more, the value of the average consumer’s highly mortgaged house is either stagnant or falling. They might be feeling secure in their jobs, but their personal debts mean they will be very nervous about the downturn touching their employer's business.

To top it all off, the Australian downturn comes at the same time as a US recession, which will heighten the level of anxiety.

All investors now need to look at their share portfolios to assess the vulnerability of their stocks, bearing in mind that as well as being hit by the consumer spending downturn, many companies will be affected by the higher interest rates. I will run through my thinking on a few stocks, but it’s an exercise that should be undertaken by all investors and their advisers.
 

Spot on wayne, the fundamentals eventually assert themselves. The earnings bogey has been looming for months for those who bothered to take notice. The claim that the stockmarket has already discounted the bad news is nonsense. There has been and still is a fairytale belief that everything will be fine come the second half of 2008, the recession will be short, Fed rate cuts will start to work and corporate earnings will again begin to rise. If only reality were that simple.
 
It seems another US airliner has succumbed to the credit crisis;

 
wayneL said:
Ahhhh bad news is bad news again.

Europe liked it even less:

Click to expand...

OWWWWW........... Looks like the end of our little bounce me thinks......

I just don't understand why the market is surprised that GE has lowered its forecast.... its basically got a stake in everything, it makes sense they would have lower earnings going forward if the US is going in recession....

Cheers
 

Don't forget GE is a major player in the financial world, a major dealer in credit and earnings smooting derivatives. So far there has been very little from non-financial firms owning up to their OTC derivs meltdown. Many more will come. And the losses will get much bigger. Everything is still marked to fantasy model. SInce there is no mkt for most of these OTC derivs that have gone bad, the true value is zero. Everyone is desperate to stop true price discovery by a liquidation.

http://www.bloomberg.com/apps/news?pid=20601087&sid=akzHhrEzO6hU&refer=home

The largest US minicipal bankrupcy ever looms - because of OTC derivs

http://www.bloomberg.com/apps/news?pid=20601039&sid=ahSJgzIBbboA&refer=home

Mizunho admits $4.4b loss on OTC derivs, the first Japanese player to finally fess up to losses

http://www.theaustralian.news.com.au/story/0,25197,23525279-20142,00.html

About $250b in losses from from subprime have been announced, most analysts estimate total losses $1-2trillion, meaning about 75% of losses still announced.

According to Soros, the next OTC deriv domimo is credit default swaps (CDS), which at around $44trillion in notional value are waaaay bigger than the CDOs.

http://www.theaustralian.news.com.au/story/0,25197,23519654-643,00.html

And the IMF are saying the world economy is trapped between "fire and ice". Starting to sound like biblical language and proportions...

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/11/cnimf111.xml
 
There are two sides to a bank's balance sheet - the left side and the right side.

The problem is that, on the left side, there is nothing right,
and on the right side, there is nothing left!
 
Sassa said
"There are two sides to a bank's balance sheet - the left side and the right side.

The problem is that, on the left side, there is nothing right,
and on the right side, there is nothing left!"

That Sassa is a qreat quote I shall put it in my little book

Happyjack

the meek may very well inherit the earth, but it is always going to be run by Accountants,
 
"Look, there's no way to sugarcoat the import price figures that were released today. They stunk to high heaven. Some details:

* Overall import prices surged 2.8% in March, well above the 2% rise that was expected. If you strip out petroleum, you still get a very large 1.1% rise. Strip out all fuels? Prices were up 0.9%, the biggest since this data category started being reported in 2001.

* The year-over-year rate of import inflation is up to a whopping 14.8%. That is up from 13.4% a month earlier and the highest rate in U.S. history (data goes back to 1982; chart above).

* Another key reading buried in the figures: Chinese import prices were up 0.7%. That continues a multi-month string of increases after persistent declines. In other words, emerging markets and countries like China have gone from exporting deflation to exporting inflation. The Wall Street Journal had a good story to this effect yesterday.

We keep hearing from the Ivory Tower economics crowd that inflation is a lagging indicator, that we shouldn't care about the increases, blah, blah, blah. Yet almost every month, the dollar loses more value, commodity prices climb, and import price inflation surges. Eventually, the Fed may be forced to pick its poison -- keep targeting growth by cutting rates and flooding the system with money or putting its foot down and targeting inflation. Alternatively, the dollar will need to bottom out and turn around -- something we haven't seen happen yet (the Dollar Index is down another 32 bps as I write)

UPDATE: Wall Street has been talking about an improved tone to the market lately. But consumers apparently aren't seeing it in their everyday lives. The University of Michigan's consumer confidence index dropped even further in April -- to 63.2 from 69.5 a month earlier. That's the worst reading going all the way back to March 1982.

Moreover, inflation expectations are rising. Consumers expect inflation to come in at 4.8% over the next year, the highest reading since October 1990 (a tie at 4.8%). Consumers haven't expected a higher inflation rate since July 1982. More proof of stagflation? Sure looks like it."
http://www.interestrateroundup.blogspot.com/
 

My main arguement why this downturn will not be as severe as some expect.

The residue will carry over for another day.
 
Whiskers said:
My main arguement why this downturn will not be as severe as some expect.

The residue will carry over for another day.
Click to expand...

ROFLOL. That's a classic Whiskers - one to be trotted out in the near future

A question. With oil @ $110, if the US starts to recover, would not that imply a higher price due to the increasing demand?. If oil @ $110 is hurting them now, what then? Classic demand destruction.
 
More poisons hatching from the mud - from The Times:

 
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