Imminent and severe market correction

[wayneL]

For some silly reason, this tune just popped into my head with modified lyrics...

"The Yanks are turning Japanese, the Yanks are turning Japanese, I really think so, dah-dah-dah-dah-dah-dah-doh, turning Japanese, I think they're turning Japanese, I really think so, dah-dah-dah-dah-dah-dah-doh...."

I'm worried now. Will I have to pay royalties????

You're giving away your age there Jeff....

...whoops, so am I! :

 

[Bushman]

Does "Capitalism" have a "use by" date?

The question is what ideology would you replace it with? The other systems of distributing capital to buy goods and services have been grossly inefficient and have led to regular, and well documented, humanitarian disasters let alone wealth generation. They would be hugely unpopular with the 'working families' who drive the agenda in democracies the world over. There may be some dissaffection with the current erosion in personal wealth but noone would be advocating a return to big government, socialism or 'worse'. I mean where is the reward in that?

The fact is that we need the financially engineered results to generate the cash flow needed to feed consumption within an average Western lifespan. With that comes a 'bubble economy'. I can see the rate of savings increasing to deal with the bubble bursting in the medium term but I cannot see many swapping the Holden for an ox & plough and collectivisation.

The paradigm ain't broke while we are still living off the fat of the land. All that is being foregone at the moment is some of the fat in the system. It would need the depression or worse to change that .

 

[kingbrown]

ANZ Bank (ANZ) $15.95

AMID all of the ANZ Bank's horrendous debt-provisioning numbers, the scariest new info lies in CEO Mike Smith's confession the bank has no idea whether or not the balance sheet buttressing will be adequate.

Asked whether the bank had made a definitive statement that measures would obviate the need for further action, Smith replied: “`I don't think we have. On the information we have available now I think this is the best guess.”

Given National Australia Bank's counterpart John Stewart's comment on Friday that the global credit crisis was entering worst-case scenario territory, bank investors have every reason to be afraid -- very afraid.

The ANZ's fears are somewhat different to the NAB's, in that the NAB on Friday provisioned $850 million against a specific book of collateralised loan obligations.

The ANZ's malaise has little to do with the US housing crisis -- not directly at least -- but revolves around the deteriorating position of “certain commercial property clients” and its now infamous securities-lending involvement.

http://www.theaustralian.news.com.au/story/0,25197,24088324-23634,00.html

So at this stage at best our banking chiefs can only guess ?
WTF

 

[sam76]

For some silly reason, this tune just popped into my head with modified lyrics...

"The Yanks are turning Japanese, the Yanks are turning Japanese, I really think so, dah-dah-dah-dah-dah-dah-doh, turning Japanese, I think they're turning Japanese, I really think so, dah-dah-dah-dah-dah-dah-doh...."

I'm worried now. Will I have to pay royalties????

You're giving away your age there Jeff....

...whoops, so am I! :

http://jp.youtube.com/watch?v=EpCcelpvkps

Enjoy!!

 

[Uncle Festivus]

By the way how many banks have gone bust so far?

During the S&L crisis in the 80s and 90s I think over 700 went down. A little way to go to match it.

I don't have exact figures, but there may have been more failures in number terms in the S&L 'crisis', but in size of debt being written off this is easily the worst since......1929? This dwarfs the S&L, or LTCM.....Russian implosion......

For some silly reason, this tune just popped into my head with modified lyrics...

"The Yanks are turning Japanese, the Yanks are turning Japanese, I really think so, dah-dah-dah-dah-dah-dah-doh, turning Japanese, I think they're turning Japanese, I really think so, dah-dah-dah-dah-dah-dah-doh...."

I'm worried now. Will I have to pay royalties????

Deja vou?

https://www.aussiestockforums.com/forums/showpost.php?p=197924&postcount=2

https://www.aussiestockforums.com/forums/showpost.php?p=197931&postcount=4

 

[davo8]

With the Treasury printing presses working overtime, the taxpayer takes a double hit through the inflationary effects of the bail out. Inflation is a hidden tax.

Does "Capitalism" have a "use by" date?

So far, there had been no extra Treasury printing. The housing bill lifts the debt ceiling, so now the presses roll!

No, this is not a failure of capitalism, but it is a failure of economists, of consumerism, of regulators and of memory.

Banks make money by manufacturing and selling credit, and that reached a massive bubble peak with securitisation last year. That model for banks to make money is now dead (and good riddance).

Von Mises (Austrian economics) described credit bubbles and how they end: either very badly or with the total collapse of the currency. It's all happened many times before, and the credit bubble is just as bad in Australia as anywhere else.

Do your TA if you like, but just keep betting against banks, the finance sector and any business that relies heavily on credit. They are all in deep trouble, whether they (or the markets) know it yet or not.

 

[wayneL]

Does "Capitalism" have a "use by" date?

The question is what ideology would you replace it with? The other systems of distributing capital to buy goods and services have been grossly inefficient and have led to regular, and well documented, humanitarian disasters let alone wealth generation. They would be hugely unpopular with the 'working families' who drive the agenda in democracies the world over. There may be some dissaffection with the current erosion in personal wealth but noone would be advocating a return to big government, socialism or 'worse'. I mean where is the reward in that?

The fact is that we need the financially engineered results to generate the cash flow needed to feed consumption within an average Western lifespan. With that comes a 'bubble economy'. I can see the rate of savings increasing to deal with the bubble bursting in the medium term but I cannot see many swapping the Holden for an ox & plough and collectivisation.

The paradigm ain't broke while we are still living off the fat of the land. All that is being foregone at the moment is some of the fat in the system. It would need the depression or worse to change that .

I would add that the system we have at present in the Anglo world isn't really true capitalism; it's a sort of contrived capitalism some elements of socialism for the richest and the poorest.

It's a capitalism that robs the middle class to prop up the lower and upper classes. It's a capitalism that has forgotten about economic cycles and has attempted to banish boom and bust, by only allowing boom. It's a capitalism that refuses to regard recession as natural, cleansing, cathartic and important to clean out malinvestment. It's a capitalism that has turned moral hazard into a virtue. It is a capitalism that has embraced the most perverted forms of socialist economics while maintaining a profit motive, resulting in greed without consequence.

Except that the consequences are now emerging.

This capitalsim HAS reached is use by date and as a society we need to choose either true capitalism or socialism.

True capitalism has cycles. People win and lose, enterprise triumphs and fails, industries come and go.

We probably wouldn't like capitalism in it's purest form, therefore we will always have elements of socialism; welfare for the needy, regulation to protect the consumer, and a little social tinkering here and there. That's OK, we have to have a heart, and we can afford it, but this perverted Keynesian monster is dying and it need to be taken out to the back 40 and be put down.

The troubling thing is that "they" don't want to let it die (unsurprisingly), so instead of giving it the green injection now and letting it die peacefully and with dignity, it will die later, writhing in agony, flailing about and unconsciously kicking the crap out of anything within proximity... perhaps we are seeing the beginning of that process now.

Yep this capitalism is broken and we need a new model... fast.

 

[kransky]

i think we need to move a bit in the socialism direction on the capitalism/socialism divide.

i think if you go too far in either direction you get problems with crooks ripping off the people cos the system lets them...

somewhere in the middle for me tbh

 

[subaru69]

i think we need to move a bit in the socialism direction on the capitalism/socialism divide.

The thing that I don't understand is how a Government or its proxy agent (eg the Fed or RBA) interfering in a capitalist system is anything other than socialist.

My simple understanding of a socialist regime is one where the Government makes all the rules. If a private business cannot survive then under capitalism, free market forces should take it to where it belongs. Surely by propping up things that don't work we only have further to fall. Look at most of the Soviet businesses pre-democracy: if they worked then communism there would never have ceased.

It seems that no country has a pure capitalist system. Unless I'm getting confused with a laissez-faire system.

PS- can anyone tell I haven't done economics

 

[dhukka]

I would add that the system we have at present in the Anglo world isn't really true capitalism; it's a sort of contrived capitalism some elements of socialism for the richest and the poorest.

It's a capitalism that robs the middle class to prop up the lower and upper classes. It's a capitalism that has forgotten about economic cycles and has attempted to banish boom and bust, by only allowing boom. It's a capitalism that refuses to regard recession as natural, cleansing, cathartic and important to clean out malinvestment. It's a capitalism that has turned moral hazard into a virtue. It is a capitalism that has embraced the most perverted forms of socialist economics while maintaining a profit motive, resulting in greed without consequence.

Except that the consequences are now emerging.

This capitalsim HAS reached is use by date and as a society we need to choose either true capitalism or socialism.

True capitalism has cycles. People win and lose, enterprise triumphs and fails, industries come and go.

We probably wouldn't like capitalism in it's purest form, therefore we will always have elements of socialism; welfare for the needy, regulation to protect the consumer, and a little social tinkering here and there. That's OK, we have to have a heart, and we can afford it, but this perverted Keynesian monster is dying and it need to be taken out to the back 40 and be put down.

The troubling thing is that "they" don't want to let it die (unsurprisingly), so instead of giving it the green injection now and letting it die peacefully and with dignity, it will die later, writhing in agony, flailing about and unconsciously kicking the crap out of anything within proximity... perhaps we are seeing the beginning of that process now.

Yep this capitalism is broken and we need a new model... fast.

Great post wayne and davo8 has outlined well how we came to be in the current predicament. I come back from a few days away and look what happens, the banks are imploding. Who could have forseen it? Basically anyone who was paying attention. How long until we hear problems at CBA and WBC? I would suggest it's only a matter of time.

 

[sk8er]

PS- can anyone tell I haven't done economics

No, you make more sense than the so called expert economists, usually "bought and paid for" by the media.

 

[subaru69]

Update:

1.00 AUD = 18,137,104,876.31 ZWD

The ZWD is strengthening, quick run out and get some.

New update:
17,877,661,242.37 ZWD

African currency strengthens 1.5% relative to A$, maybe we should follow their monetary and fiscal lead...:shake:

:afro::afro::sword:

 

[Bushman]

This capitalsim HAS reached is use by date and as a society we need to choose either true capitalism or socialism.

There is not a snow ball's chance in hell that the 'Anglos' will choose socialism as the dominant paradigm. Too much paint has been expended on the blank canvas titled the 'EVIL OF SOCIALISM' for that to happen.

So yes big government will continue plucking the corpse of Marx for the best bits to keep the lumpenproletariat addled to welfare money and the super rich cosy in their tax havens milking the land for all it is worth. But I have not seen anyone blame aspirational politics, ie blame themselves, for the giant doggy doo we as a 'Western' society are currently trying to skirt around.

We blame politicians, we blame bankers, we blame the media, we do NOT blame ourselves. Until the middle classes temper the 'American Dream', the 'Australian Dream', the 'Kiwi Dream' (not of the agricultural variety), then this dreary cycle will continue, this bubble cycle will continue, and one day, yes, the strain will be so great that the black hole will open and 'we' will evaporate.

Anyway may as well continue trying to make hay while sun shines...

 

[wayneL]

There is not a snow ball's chance in hell that the 'Anglos' will choose socialism as the dominant paradigm.

I hope you're right, but don't forget there is is significant chunk of the Oz population who consider Gough Whitless as "The Great Man". There is a socialist leaning gu'mint in power in Oz. Obama, (a Socialist) will apparently win in the Evil Empire. The gu'mint here in the UK is running to the left as fast as it can (before it loses in a landslide in 2 years to a left leaning Tory Party ).

Socialism is rapidly encroaching Anglo thinking and politics as the scurrilously contrived capitalist (and I use the word loosely) system we have starts to fail.

Hell indeed seems to be freezing over.

But it isn't socialism in the classic sense for the benefit of the proletariat, It's Champagne Socialism, for the benefit of the establishment, to protect the status quo. Which is how socialist systems always metamorphose into. We've just come at it from the opposite direction this time.

Make no mistake, the middle class have been unconsciously hoiked into dependency on middle class welfare, they are in love with de facto socialism. They just don't realize they are paying for it as well as the upper and lower class welfare as well.

It won't be too big a leap in getting the plebeians into accepting a system that dares not speak its own name, so long as the status quo is maintained... it is the clever and long disguised Fabian Socialist principle of "gradualism"... and folks don't even realize its happening.

No, they may not consciously "choose" socialism, but that's what they are getting and they are unconsciously complicit in its gradual induction. True capitalism of the Austrian model will need nothing short of revolution to restore now IMO.

</rant>

 

[Sean K]

I'm as bearish as anyone out there on the market, and especially humans as some of you are aware, but there are some who have an opinion that much of the drama is factored in already. How much is anyone's guess, and depends on if the system is really kaput, or can be salvaged.


1019 [Dow Jones] S&P/ASX 200 likely well supported near 4800, says Goldman Sachs JBWere. "...buying the market in the 4800-5000 level on a 12-month view will prove to be an absolute winner strategy," says broker. Highlights need to buy stocks when conditions look awful. "Make no mistake we are in very tough times and the very bad economic fall out still has plenty more to play out. But ask yourself has much of this been factored in or is the market mis-pricing the real risks out there." Index down 0.9% at 4876.3. (DWR)

 

[GreatPig]

buying the market in the 4800-5000 level on a 12-month view will prove to be an absolute winner strategy

That's the sort of thing many "experts" were saying all the way over the top and down in 1929.

Of course this time they might actually be right.

GP

 

[Sean K]

That's the sort of thing many "experts" were saying all the way over the top and down in 1929.

Of course this time they might actually be right.

GP

GP, I wish you hadn't have made that look like I said it. I'm just providing someone else's opinion. Whoever it was. Maybe best they stay anon.

Someone will be right. For the sake of my parents super, I'm hoping the ostitches, and these types of characters.

 

[aleckara]

Yep this capitalism is broken and we need a new model... fast.

I hate to admit it but it is the captialist countries who have believed in the 'free-market' (i.e reduction of tariffs, letting the market decide, profitable businesses are privatised instead of nationalised) that are in the economic difficult periods right now (and have the really bad trade deficits to boot).

Interesting to note today I read an article (on the Oil Drum somewhere) that Brazil is refusing to reduce its import tariffs even if a counteroffer was made to reduce their tariffs for brazillan ethanol. Brazil also achieved a current account surplus recently and I hate to admit it but is probably looking to maintain this. China is gaining thanks to its policies that manipulate the market and shift away wealth to it (eg low exchange rates, foreign investment caps, etc). OPEC, a cartel to manipulate oil prices to get the most out of their assets; another market manipulation. All these countries are thinking about themselves and seeing what works rather than adopting some theory when it comes to eco policy.

To me the commodity boom is another economic variable moving to accommodate this 'something for nothing' China boom. Inflation is finally moving on the back of commodity pricing which I see not as commodity price appreciation so much as cash depreciation. Which after so much wealth being sucked out of Western countries for some time is an inevitable pressure on the dollars of these countries.

I don't believe in the 'let the market rule' when not everyone is playing by the same rules. It is just selling our futures for cheaper import prices now.

 

[Bushman]

Someone will be right. For the sake of my parents super, I'm hoping the ostitches, and these types of characters.

The night is always darkest just before the dawn...

 

[nioka]

To me the commodity boom is another economic variable moving to accommodate this 'something for nothing' China boom. Inflation is finally moving on the back of commodity pricing which I see not as commodity price appreciation so much as cash depreciation. Which after so much wealth being sucked out of Western countries for some time is an inevitable pressure on the dollars of these countries.

I don't believe in the 'let the market rule' when not everyone is playing by the same rules. It is just selling our futures for cheaper import prices now.

You can say that again and again and again.

It is almost too late for the pollies to correct the situation. This has been said by many people over the years and the pollies don't seem to get the message. Short term gain for long term pain. It should be the other way around.