Imminent and severe market correction

[grace]

That's a good one -- thanks! Same thing is going to happen here -- 50%+ drop in house prices relative to AWE over a period of 6-10 years, as credit dries up. It may have already started.

Meanwhile we have the fascinating spectacle of a major bear market to watch unfold. The end result in both is bargains for those with cash to spend and the patience to wait. And all the while, the permabulls provide endless entertainment.

Yep, agree with all of this. Can't wait for it to spread to rural properties. Some farms have gone up 300 - 400% in the last 8 years. Income is about the same, costs are now triple. Buyers are now just drying up. Can see a major correction coming there. Waiting and hoping.

 

[Whiskers]

The US congress gets back to work tonight and among issues on the adgenda include further oil speculation legislation. My best bet is some further legislation will follow which if pursued by the authorities as vigeriously as the public and many politicans want, should see the peak in oil prices for some time.

Just having a look at the maths, in round figures, world production @ 90m bpd x $140 = a $12.6trillion industry.

As no one seems to be disputing the 70% speculator factor, that's $8.8t. At 100:1 leverage thats a $12.6t industry controlled by an investment of $88billion.

That's an industry about the size of the US GDP controlled by speculative interests.

Correct me if my maths is wrong as I don't invest in this market.

Given the wide ranging effect of the price of oil, it seems to me like this is a speculative bubble that will be burst by tighter regulation, regardless of whether it is currently driving up prices... because I can't see how a case can be made to convince consumers and the polliticans that there is no potentel for speculative interests to do so.

 

[Trembling Hand]

Whiskers, spectacular misunderstanding of what a futures contract is.

Just like the muppets, pollies.

 

[motorway]

Just having a look at the maths, in round figures, world production @ 90m bpd x $140 = a $12.6trillion industry.

As no one seems to be disputing the 70% speculator factor, that's $8.8t. At 100:1 leverage thats a $12.6t industry controlled by an investment of $88billion.

That's an industry about the size of the US GDP controlled by speculative interests.

Correct me if my maths is wrong as I don't invest in this market.

http://money.cnn.com/2008/07/01/mag...hunt.fortune/index.htm?postversion=2008070406

Circling back to Masters' question - what would happen if speculators turned negative on oil futures, the way the Hunts eventually did on silver - my answer is almost nothing. Futures market speculators did turn massively negative on oil November 2005 when crude was $57 a barrel. What happened? Oil was $61 by year-end. "It's a different ballgame with oil than it was with silver," Tuccille told me in an interview. "As you said, they're not taking delivery."

The story of the Hunts cornering the silver market confirms what most academics have been saying all along about oil.

Severin Borenstein, a Berkeley economist and the director of the University of California Energy Institute, contends that in order to push oil prices 30% above fair market value, speculators would have to hoard the equivalent of 2.5 million barrels a day.

"At that rate," Borenstein writes in a new paper, "in less than a year this secret market manipulator would have built an inventory larger than the entire U.S. Strategic Petroleum Reserve."

This manipulator would have had to escape the attention of the U.S. Department of Energy and the International Energy Agency, both of which report that oil inventories are declining, not rising. "That much oil," Borenstein concludes, "would be very difficult to hide."


Where are the Hunt brothers of today stashing all their oil?

 

[Whiskers]

Thanks for that post motorway.

I will use the following extract to try to make the point that I have suggested before.

The story of the Hunts cornering the silver market confirms what most academics have been saying all along about oil.

Severin Borenstein, a Berkeley economist and the director of the University of California Energy Institute, contends that in order to push oil prices 30% above fair market value, speculators would have to hoard the equivalent of 2.5 million barrels a day.

"At that rate," Borenstein writes in a new paper, "in less than a year this secret market manipulator would have built an inventory larger than the entire U.S. Strategic Petroleum Reserve."

This manipulator would have had to escape the attention of the U.S. Department of Energy and the International Energy Agency, both of which report that oil inventories are declining, not rising. "That much oil," Borenstein concludes, "would be very difficult to hide."

I sent Masters an e-mail with my findings on the Hunts but have yet to hear back. The question I now have for him - or for anyone else who believes speculators are responsible for $140 oil - is simple:

Where are the Hunt brothers of today stashing all their oil?

The first point is that most of the anti speculator arguments are based on the assumption, I think incorrectly, that the surplus oil is being stored somewhere.

A specific point I made in an earlier post is what if some of the oil producers are double dipping, buying contracts to deliver their own oil and then not have to deliver it (to themselves), but help drive up the price for the next round.

Given the sophistication of some past scams and the lack of transparency in the market, can anyone categorically say something like this isn't or can't happen.

 

[wayneL]

Well the FTSE has officially entered a bear market... according to the media's definition that the market must be 20% down.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/08/bcnbear108.xml

This leaves me wondering just what sort of market is was to get us here.

 

[wayneL]

We also have another bank, seemingly in dire straits at the moment.

Bradford & Bingly, a favourite of BTL "investors" is apparently in danger of imminent collapse. Another Northern Wreck fiasco in the making.

So how about a clever renaming competition?

I submit Badloan & (Credit)Bingeing.

 

[explod]

Given the sophistication of some past scams and the lack of transparency in the market, can anyone categorically say something like this isn't or can't happen.

Of course, anything can, but I think we are clutching at straws of hope against rsising odds that things are looking very much worse than we would like to accept.

 

[Whiskers]

Of course, anything can, but I think we are clutching at straws of hope against rsising odds that things are looking very much worse than we would like to accept.

There is that element too explod.

But I'm prepared to bet that due to the apparent low level of accountability and transparency in the oil market and the potential at least to corrupt the market, that the regulatous will eventually regulate it down pretty tight to avoid another economic disaster like the subprime credit crunch.

Just to recap the domino effect, given that the markets were recovering from the credit crises and oil is becoming the thorn in the recovery and as the USD appreciates, oil depreciates, add in tighter regulation and I think you have a recipe for big investers jumping out of oil and gold to some extent and back into shares.

It remains to be seen but I'll take bets on the POO being much lower and the stock markets being much higher by years end.

 

[dhukka]

Just to recap the domino effect, given that the markets were recovering from the credit crises and oil is becoming the thorn in the recovery and as the USD appreciates, oil depreciates, add in tighter regulation and I think you have a recipe for big investers jumping out of oil and gold to some extent and back into shares.

Sorry, try again. The markets were not recovering from the credit crisis. The credit crisis continued to worsen. There was a temporary haitus and a false view that all was well with the world after the corporate welfare policies of the Fed. Just as the Fed funds rate cuts were supposed to save the day 6 months ago. The market's are slowly working out that the Fed is largely irrelevant.

 

[Wysiwyg]

This journalist has a way with words.Little me waiting for some sort of uptrend to come in but the print news gets worse.Like they`ve gone out their way to find every bit of pessimistic news circling the planet.

The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete.
No surprise that Shanghai's bourse is down 56pc since October, one of the world's most spectacular bear markets in half a century.

Come what may, globalisation has passed its high-water mark. The pendulum will now swing back from China to America. The mercantilists will have to reinvent themselves.

Don`t panic.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/07/ccview107.xml

 

[2020hindsight]

Ya know lol - I was happily in cash as of 30 June -
then I did what these idiots suggested and got back in ... because "selling off and not buying back would probably be criminal"

The only thing criminal mate, is that flaming advice lol !!.

This article from 26June refers (wish I'd never researched the matter ) - also posts 2651 to 2653.
http://www.news.com.au/business/money/story/0,25479,23922142-5013953,00.html

"So you may sell your underperforming shares and quickly get back in next year but selling off and not buying back in is probably criminal at this point," Mr Sebastian said.

It was a message reiterated by Colonial First State chief equities analyst Hans Kunnen, who urged investors to think long-term.

He also suggested it would be dangerous to sell out this week in a bid to lock in losses for tax benefits, and potentially miss the boat the following week

potentially miss the boat !!!
potentially miss the bludy boat !!!
Nobody mentioned it was the sister ship of the flaming Titanic !!!

Yet again these flaming experts are oh-so-wise ... AFTER the event

 

[explod]

potentially miss the boat !!!
potentially miss the bludy boat !!!
Nobody mentioned it was the sister ship of the flaming Titanic !!!

)

There there old pal, some of us have, against very hostile opposition, warned against the guru's and the distorted spun out press for 12 months or more.

But its ok 2020, we hang in together, its what makes ASF the best thing I know.

 

[explod]

And the signs just keep getting worse. How much longer before the very real correction gets going.

Jim Sinclair’s Commentary

“Hello, I am from the government here to help you.” Sure!

We're All Homeowners: Nationalization of Fannie, Freddie Unavoidable
Posted Jul 08, 2008 12:09pm EDT by Aaron Task in Investing, Recession, Banking

Fears about Fannie Mae and Freddie Mac retreated somewhat Tuesday after their federal regulator, OFHEO Director James Lockhart, said new accounting rule changes should make "no difference in the risks of the two firms."

On Monday, Freddie and Fannie shares plummeted after a Lehman Brothers analyst said a new FASB rule could require the two firms to write-down as much as $75 billion.

Rather than the accounting rules, what's really got investors spooked is a growing realization the government will have to nationalize Fannie and Freddie, says Kevin Depew, executive editor of Minyanville.com.

The two mortgage lenders are simply too big to fail and too critical to the housing market, Depew says. Given Fannie and Freddie own or guarantee 50% of all housing debt, according to the WSJ, continued stress on their balance sheets means higher borrowing costs for the firms, and ultimately higher mortgage rates for individuals. It also means another round of write-downs for the battered financial sector generally, which owns a lot of Fannie and Freddie-backed paper.

But nationalizing the firms, each created by an act of Congress, would mean a wipeout for equity holders, who have already seen their holdings decimated in the past year.

More…

 

[Aussiejeff]

Ya know lol - I was happily in cash as of 30 June -
then I did what these idiots suggested and got back in ... because "selling off and not buying back would probably be criminal"

The only thing criminal mate, is that flaming advice lol !!.

This article from 26June refers (wish I'd never researched the matter ) - also posts 2651 to 2653.
http://www.news.com.au/business/money/story/0,25479,23922142-5013953,00.html



potentially miss the boat !!!
potentially miss the bludy boat !!!
Nobody mentioned it was the sister ship of the flaming Titanic !!!

Yet again these flaming experts are oh-so-wise ... AFTER the event

Well, *confusion* about where the market might head is rife ATM among "so-called" market experts, economists and media gurus. The US market response overnight (pure speculatory move?) is probably yet another prime example of headless chooks running around the pen....

As far as the media goes, on Bloomberg today for instance, we have two articles side by side - one claiming "U.S. raises oil, gasoline price forecasts on strong demand and supply concerns" yet the other claims "Oil tumbles more than $5 on speculation slowing economies will curb demand".

Hahaha! Take your pick!

 

[wayneL]

And the signs just keep getting worse. How much longer before the very real correction gets going.

Oooo-ahhhh!

The start of a string of nationalizations across the Anglo economies (starting of course with Northern Wreck)?

As I type this I'm watching the news; one commentator said "it's Armageddon". Very very bearish all round. Showing building sites where all activity has stopped, empty High Street shops, banks in deep doo-doo etc.

I can hear the sound of wailing and gnashing of teeth through the walls of my terrace.

 

[2020hindsight]

But its ok 2020, we hang in together, its what makes ASF the best thing I know.

explod m8, lol - or praps that's "we'll be hung out together" ... - to dry that is !!
PS I'm a long term investor at the moment - a VERY long term investor lol - try Newtonian telscope LONG TERM lol.
Like, all I know is that the iron ore boys are building wharves just as fast as they can .. whatever..

As far as the media goes, on Bloomberg today for instance, we have two articles side by side - one claiming "U.S. raises oil, gasoline price forecasts on strong demand and supply concerns" yet the other claims "Oil tumbles more than $5 on speculation slowing economies will curb demand".
Hahaha! Take your pick

haha he says !
haha he says!
lol
And then you find out that this article (below) actually means that the price of local petrol in Wall street means that the car rally next month won't be cancelled or somepin...

Then again, if these financial experts tried driving a car, they'd be spinning all over the place - and in contradictory directions

http://compareshares.com.au/show_news.php?id=S-496449

Tumbling oil prices fuel Wall St rally
NEW YORK - Tumbling oil prices has fuelled a rally on Wall Street, etc

 

[davo8]

But I'm prepared to bet that due to the apparent low level of accountability and transparency in the oil market and the potential at least to corrupt the market, that the regulatous will eventually regulate it down pretty tight to avoid another economic disaster like the subprime credit crunch.

Just to recap the domino effect, given that the markets were recovering from the credit crises and oil is becoming the thorn in the recovery and as the USD appreciates, oil depreciates, add in tighter regulation and I think you have a recipe for big investers jumping out of oil and gold to some extent and back into shares.

It remains to be seen but I'll take bets on the POO being much lower and the stock markets being much higher by years end.

No. First off, by my reading pure speculative players are less than 30%. With the oil market in contango, there is obviously no incentive to pump oil. The main players manipulating the market (if any) are producers restricting supply. Now that the market has returned to backwardation, I expect prices to stabilise on the "real" figure, which should means a modest drop. Until the next time.

Second, this is not the cause and the credit crunch is nowhere near over. Round 2 is just getting started, with a bunch of bank failures soon. Take your pick: DOW 5,000, Gold $5,000, Inflation 20%, all on the cards. This is going to get really nasty, but slowly.

When will you finally admit you were wrong?

 

[explod]

When will you finally admit you were wrong?

That is probably a bit harsh. Like most people stubble has had faith in and believed the jawboning press who exist by and for the multinational banking interests who's task it is to drag every last cent out of the sheeple.

And for us fundamentalists it is taking awhile, but as you say is happening now, like Karl Marx (this will bring em out) his timing was a bit out. The perfect machine wont need humans, except they botched the process somewhere and made too many machines competing against each other.

 

[explod]

From the peak the Dow is now down about 3,000 or a bit oveer 20%. A little further will see it break support to see it around 10,000 Worth looking at the 10 year and it is clear that the low of 7,500 in late 2002 was when the Fed got serious about cheap money and the low-doc made em all say yeee haaaa lets party maan.

My point is the US market reflected by the Dow rose from that point on borrowed money (time) so there was no value in the rise and its peak 14,100 at all. It may be when we get back to 7,500 if the value has returned. In my view the economic situation has been made much worse because the Fed et. al. stood on their hands and instead of limiting credit and getting themselves back to productive works they took the popular easy way out, print mopre money for the purchase of more porches. So the situation today is very much worse.

Yes a 5,000 Dow by Janauary is now a real possibility. And further weakness is every possibility after that. Remember the crash of 1929 played out for years after and stayed down for 20 years following.

This is reality I am afraid, we will have another bad day today and I am sad that because we do not teach economics from 1st grade in our schools a lot of honest hardworking ordinary people are going to suffer a very great deal in the years ahead.