Imminent and severe market correction

I think I said one time that you only find out who's been swimming naked when the tide goes out, well we've found out that Wall Street has been kind of nudist beach.

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dhukka said:

It's almost as though he feels like he has to out do himself everytime he writes something by coming up with and even gloomier outlook.

Actually I think the decline of the American Empire probably started a few decades earlier, a bit of overstatement to pin the beginning on the current crisis. That said, I agree with most of what he said although I think his moment in the sun may have to his head.

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Dear Friends,

Part of my attempt to serve is to be barraged with every opinion from every chat site and blog that presents arguments against gold.

The most popular one now starts off sounding reasonable. It states that crude will trade down between $110 and $85, making inflationary expectations fall and as a result the trade deficit will decline making the dollar rise and therefore commodities fall. This will raise consumer expectations that will then increase spending, making the dollar rise.

The following is missing:

Deflation is assumed here to mean the falling cost of living. Deflation is the failure of debt. That looks toward the OTC derivative meltdown and the ongoing collapses occurring now in financial entities that require liquidity increases through rescues that use public money. Increased liquidity results in an increased cost of living regardless of economic conditions. That is an economic axiom.
The assumption many have that Gold is not a currency speaks to their eyesight and poor memory. It stares you in the face every day if you look.
The US is the MAJOR manufacturer and exporter of OTC derivatives. Should any side of the specific performance contract fail, the failure potential of the counter party is extremely high. That is quite dollar negative.
There is a desire worldwide for central bank diversification out of the US dollar, which is unlikely to change.
Central banks have already indicated they will cease buying US agencies, which is TIC negative and therefore dollar negative.
There is no consideration of an explosion in the Federal Budget deficit that will eclipse any improvement in the US Trade deficit that is always looked at in comparison to TIC. It is certain to drop faster that the trade deficit drops, therefore making the Trade Deficit drop meaningless.
This coming and present crisis is from a lockup of the credit system that is emerging from the meltdown of OTC derivatives. Consumers hold too much debt and are on the ropes. You would first need one hell of a recovery in housing to reinstate home equity and a major unlock of the credit market before consumers see any light at the end of their bankruptcy tunnel. Consumers being gleeful in this crisis at any point are simply NOT GOING TO HAPPEN.
Consumers picking up the dollar is an interesting view because internal consumer glee means nothing to foreign exchange except as it impacts expectations of a US recovery in the middle of what the writer says will be the Great Greater Depression. That scenario defies logic.
In the same argument the writer says the US economy slows, so where does the gleeful consumer fit in? The answer to that question is they don’t
The writer feels the Trade Balance stands alone and will, by contraction, move the dollar. The trade deficit, whether or not covered by the TIC report, is what the Trade Balance is all about.
This argument has, along with the totally non-existent yet still popular “Synthetic Dollar Short,” many of you angry with me. That is ok and deserved, as you are as good as your last call, but the arguments you now base that on are totally wrong in both instances.
The Bush Administration will do what they did the last time the "D" word was used as recorded below. That was totally dollar negative long term. Should Obama win, his administration would invent social approaches to money and business that the Bush and Roosevelt administration never heard of. These approaches will without any doubt be long-term dollar negative.

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Bushman said:

This thread is starting to sound like hysterical back slapping on the Titanic. 'We spotted the iceberg first, we spotted the iceberg first. We are all doomed but at least we spotted the iceberg first.' Classic.

As for Gottleibsen and his nine passengers, I flew to Sydney and Brisbane last week and the plane was full. So if you follow his logic, that means you should all invest in Qantas and Virgin Blue. Call your brokers now.

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explod said:

Not so, there is time to avoid the iceberg and most of us following this thread have.

Having a fair idea of what is taking place provides opportunity and optimism.

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kennas said:

"If the US government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic," Yu said in e-mailed answers to Bloomberg. "If it is not the end of the world, it is the end of the current international financial system."

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kennas said:

Hooly dooly.

Not sure if Yu Yongding is worth listening to or not, but the bears would love him.

China goes the big squeeze

David Hirst
August 30, 2008

A high-ranking Chinese economist has put his nation's cards on the table in the global financial poker game by effectively telling the US to fix Freddie and Fannie … or else.

"A failure of US mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system", Yu Yongding, a former adviser to China's central bank, says.

"If the US government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic," Yu said in e-mailed answers to Bloomberg. "If it is not the end of the world, it is the end of the current international financial system."

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Retailers suffer worst month in quarter of a century

Retailers delivered their worst performance for nearly a quarter of a century last month and there is little sign of relief for them any time soon.


Some 60 per cent of UK retailers said that sales in the first half of August were lower than a year ago, while just 13 per cent said they had increased, the CBI Distributive Trades Survey revealed.

The CBI data reinforces a widely held view among retailers that it could be 2010 before consumers, who are squealing from soaring food prices, utility bills and motoring costs, return to the high street with the vigour of previous years. The survey is also the latest to contrast sharply with the Office of National Statistics' retail sales data, which showed a 0.8 per cent rise in July and have recently drawn gasps of disbelief from retailers.

The CBI said the resulting rounded balance of minus 46 per cent of retailers posting falling sales was the worst since the survey began 25 years ago, although the business organisation said it had tweaked its answering practices over those years.

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dhukka said:

Darling probably had little choice to come clean with figures like these;

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Another US Bank Failure

Integrity Bank, Alpharetta, Georgia, with $1.1 billion in total assets and $974.0 million in total deposits as of June 30, 2008, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation was named receiver.

The FDIC Board of Directors today approved the assumption of all the deposits of Integrity Bank by Regions Bank, Birmingham, Alabama. All depositors of Integrity Bank, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Regions Bank for the full amount of their deposits, and they will continue to have uninterrupted access to their deposits. Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.

The failed bank's five offices will reopen Tuesday, September 2nd, as branches of Regions Bank. However, for the time being, customers of both banks should use their existing branches until Regions Bank can fully integrate the deposit records of Integrity Bank.

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dhukka said:

This is starting to be a regular event on Friday after the market closes in the US. Is there a trend developing here?

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davo8 said:

It won't be Fannie/Freddie. That warning from the Chinese was about as strong as it gets. Lehman? WaMu? Wachovia?

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