Imminent and severe market correction

[explod]

Have a look at the USJIA on big charts, set to all data and monthly candles and tell me that the dow is not staring at a fall to between 4000 and 2000 by early next year.

For everything, everywhere this is looking very grim indeed and nobody knows the answers or where the end is. If they do I would like to hear it.

Howard Ruff, has a good article on Kitco,3/9, talks about the financial fall of the Roman Empire.

 

[dhukka]

Great Stuff by Nicholas Nassim Taleb. It's a pity that the reporter doesn't understand what he's on about. This clip won't give anyone much optimism but it is interesting. For anyone who hasn't already I would thoroughly recommend his books, "Fooled by Randomness" and "The Black Swan"

 

[skyQuake]

2000 or 4000 for DIJA sounds a bit extreme, thats pricing in a crapload of uncertainity... Charts tell me high 6000s but then we have to reassess from there.

 

[chops_a_must]

Great Stuff by Nicholas Nassim Taleb. It's a pity that the reporter doesn't understand what he's on about. This clip won't give anyone much optimism but it is interesting. For anyone who hasn't already I would thoroughly recommend his books, "Fooled by Randomness" and "The Black Swan"

Rejigged for you Dhukka.

Fooled By Randomness is an awesome book. Didn't realise it had anything to do with markets etc. when I picked it up.

Am yet to read The Black Swan. But Taleb is incredibly good. I've said elsewhere that he's the only one in finance I feel grasps probability and expectation conceptually and truly.

 

[Sean K]

I've said elsewhere that he's the only one in finance I feel grasps probability and expectation conceptually and truly.

Don't rate Faber?

 

[chops_a_must]

Don't rate Faber?

Never heard him talk specifically on probability etc.

 

[Ageo]

Interesting clip Dhukka, its funny how he reckons that Bernancke sp? (Reserver bank chairman i think) along with another chap is responsible for this.

More confirmation of my beliefs

I agree with the man that he reckons this is just the beggining........

 

[Green08]

How far can Libor rise?

Breakdown USA

· US Firms hold $871 billion of bonds maturing through 2009.
· Yields on overnight U.S. commercial paper claimed 171 basis points to 3.95 percent.

· Paper backed by assets rates (credit cards, auto loans) rose 229 basis points to 6.5 percent, highest since 2001.

· TED spread, was at 352 basis points. The spread was at 110 basis points a month ago.

LIBOR is used to calculate rates for $360 trillion of products ranging from credit derivatives to home loans and company debt.

http://www.whybanksfail.com/?p=173

 

[grace]

Remember reading this in The Bulletin mag when it was in print. Max Walsh seemed to have hit the nail on the head when he wrote about what would happen to global financial markets back in January 07.

Since 2002 some $4.5bn in CDOs, mainly synthetics, have been issued in Australia. Middle-market investors account for around 65% of these issues. This market segment, according to the Reserve Bank, consists of "local governments, university and charity endowment funds, and high net worth individuals, as well as smaller boutique fund managers".

"Wow! Talk about a sow's ear being turned into a silk purse! Think of the leverage involved in converting low- into high-quality debt, even more so when the CDOs are leveraged by their buyers 10 or 20 times! And think of the losses when the 25% fall in house prices we foresee wipes out the BBB tranches of the RMBSs by which the entire CDOs are collateralised."

In theory the investors in such CDOs can be protected by Credit Default Swaps that pay out any losses on BBB tranches of the CDOs.

If we have a serious downturn in the US, not a wildly improbable scenario, then BBB-rated paper would see extensive defaults.

The potential cascading effect in financial markets would make the 1987 meltdown - which was caused by the failure of portfolio insurance, the fashion du jour in 1987 financial markets - look like a tiny blip.

http://bulletin.prev01.ninemsn.com.au/article.aspx?id=177920&print=true

http://bulletin.prev01.ninemsn.com.au/article.aspx?id=139965

In fact there is probably not a professionally managed superannuation fund, or any balanced fund for that matter, that does not have a weighting of CDOs which are insured against failure by CSDs.

 

[rub92me]

Rejigged for you Dhukka.

Fooled By Randomness is an awesome book. Didn't realise it had anything to do with markets etc. when I picked it up.

Am yet to read The Black Swan. But Taleb is incredibly good. I've said elsewhere that he's the only one in finance I feel grasps probability and expectation conceptually and truly.

Agree that he's a great writer and thinker. The Black Swan is less about trading and the markets, but he did give Fannie Mae as a specific example of a blowup waiting to happen in that.

 

[Kauri]

the uber bank has been forced into a $59.2 bln government bailout. The plan calls for a government capital injection of 6 bln Swiss francs $5.2 bln which will help set up a fund for as much as $60 bln of toxic assets that will be supported by the central bank.

Highland Capital Management, a Dallas based buy-side fund, has announced it will close two hedge funds with assets of more than $1.5B after losses on high yield, high risk loans and other types of debt. In a letter to investors the fund wrote that it had suffered from "unprecedented market volatility and disruption" while also stating that "the environment is one where the fundamental tools used to manage the credit strategies fund"s trading, hedging, shorting and financing are highly constrained and in some cases unavailable."

cheers
............Kauri

 

[chops_a_must]

Agree that he's a great writer and thinker. The Black Swan is less about trading and the markets, but he did give Fannie Mae as a specific example of a blowup waiting to happen in that.

Yeah, I really should read it. I was thinking of doing post-grad work in very similar areas to what Taleb discusses in parts. He puts on paper basically most of the problems that I have with economic theory, yet seem to escape those in the field, and draw derision from said people in most cases when discussing those issues.

 

[refined silver]

Remember reading this in The Bulletin mag when it was in print. Max Walsh seemed to have hit the nail on the head when he wrote about what would happen to global financial markets back in January 07

If there were $4.5b in CDOs, you can add a zero for the number of CDSs written on them. These CDSs were NEVER expected to be called upon to pay.

 

[Ageo]

Whats funny when i listen to economists on t.v is there huge amount of optimism that the market will suddenly turn around, stocks are at cheap value blah blah blah, then i notice all these economists work for a company that has been affected by the current market conditions so im assuming there trying to calm the public. There is only a few independent economists which actually to me speak the truth

 

[Aussiejeff]

Whats funny when i listen to economists on t.v is there huge amount of optimism that the market will suddenly turn around, stocks are at cheap value blah blah blah, then i notice all these economists work for a company that has been affected by the current market conditions so im assuming there trying to calm the public. There is only a few independent economists which actually to me speak the truth

It's a World Finance War and PROPOGANDA is the name of the game. It seems many media "expurts" and "anal-ysts" have been reading the "J. Goebbels Handbook Of Glib Lies 101", so expect more of the same over an extended period.

Garbage in = garbage out.

 

[Ageo]

A very interesting article from the mises

http://mises.org/story/3151

It explains good credit vs bad credit
This paragraph sums it up quite nicely

Trouble emerges however if, instead of lending fully backed-up money, a bank engages in fractional-reserve banking, the issuing of empty money, backed up by nothing

 

[basilio]

The concern about trillions of dollars of dodgy debt is real. Unfortunately it is of such concern no one wants to face it. The original elephant in the dining room.

How is the situation to be resolved? Firstly there is no way the debts can be paid. Much is based on artificially high property prices, the rest has been pissed against the wall by the bankers and is represented by the conspicuous consumption of this elite.

But then another even more urgent issue arises. In the material world we face the critical issues of peak oil and global warming. In a nutshell if our current civilization is to survive in any recognisable way we must re engineer our society to

1) live on renewable non fossil fuel based energy sources
2) (Somehow) drastically reduce current CO2 in the atmosphere to 350 ppm (parts per million) over the next 30 years to ( perhaps ) prevent runaway climate change.
3) reduce international resource use to levels that can be sustained without destroying the systems that produce them. In plain language you can't cut down more trees than are being produced;you can't take more water out the rivers and aquifers than goes in.

We have been sold and have bought The Big Lie. We have believed that somehow in a closed system (one earth) man can grow exponentially and our ingenuity will solve all problems. In the last 15 years the Wall street " Rulers of Universe" convinced everyone that writing figures on bits of paper was real wealth. It certainly was when they persuaded everyone else to pay their hard earned cash for it. And all we have is expensive wallpaper.

There are some excellent analysises of this situation on the net. The best ones I have seen are by George Monbiot. He wrote a very recent article in the Guardian and gave a chilling presentation to a journalists conference back in 2004.

My thoughts. Start growing some veges, learn or relearn some basic physical skills, start creating a simpler lifestyle that isn't going to require the rivers of gold we currently need.

http://www.monbiot.com/archives/2008/10/14/this-is-what-denial-does/
http://www.monbiot.com/archives/2004/10/06/no-longer-obeying-orders/

 

[CanOz]

The concern about trillions of dollars of dodgy debt is real. Unfortunately it is of such concern no one wants to face it. The original elephant in the dining room.

How is the situation to be resolved? Firstly there is no way the debts can be paid. Much is based on artificially high property prices, the rest has been pissed against the wall by the bankers and is represented by the conspicuous consumption of this elite.

But then another even more urgent issue arises. In the material world we face the critical issues of peak oil and global warming. In a nutshell if our current civilization is to survive in any recognisable way we must re engineer our society to

1) live on renewable non fossil fuel based energy sources
2) (Somehow) drastically reduce current CO2 in the atmosphere to 350 ppm (parts per million) over the next 30 years to ( perhaps ) prevent runaway climate change.
3) reduce international resource use to levels that can be sustained without destroying the systems that produce them. In plain language you can't cut down more trees than are being produced;you can't take more water out the rivers and aquifers than goes in.

We have been sold and have bought The Big Lie. We have believed that somehow in a closed system (one earth) man can grow exponentially and our ingenuity will solve all problems. In the last 15 years the Wall street " Rulers of Universe" convinced everyone that writing figures on bits of paper was real wealth. It certainly was when they persuaded everyone else to pay their hard earned cash for it. And all we have is expensive wallpaper.

There are some excellent analysises of this situation on the net. The best ones I have seen are by George Monbiot. He wrote a very recent article in the Guardian and gave a chilling presentation to a journalists conference back in 2004.

My thoughts. Start growing some veges, learn or relearn some basic physical skills, start creating a simpler lifestyle that isn't going to require the rivers of gold we currently need.

http://www.monbiot.com/archives/2008/10/14/this-is-what-denial-does/
http://www.monbiot.com/archives/2004/10/06/no-longer-obeying-orders/

Agree with this as well. Have you seen The Crash Course, by Chris Martenson?

Here:https://www.aussiestockforums.com/forums/showthread.php?t=12227&highlight=crash

Cheers,


CanOz

 

[Aussiejeff]

From todays "Business Spectator"..

"Future markets see the RBA is cutting rates by 1.25 per cent by the end of the year, and analysts expect the cash rate to be down to 3.75 per cent by March next year"


Sheesh. How in hell are depositers supposed to maintain a capital base if this happens? This is the most likely dastardly equation...

[(Deposit) + (3.75% Interest) - (5% Inflation) - (25% Tax on interest)] = CAPITAL LOSS!!

So, will everyone pull their deposits out and rush to buy gold bullion? Some might, but dream on if you think everyone can or will. Banks will start to collapse from a lack of REAL capital to support their funny money if significant cash deposits are withdrawn due to the implied LOW interest rate return and subsequent capital loss for depositors.

This appears to be an economically dangerous short-termism policy IMO. At the end of the article, an even worse scenario for depositors is painted...

"University of Western Sydney associate professor of economics and finance Steve Keen predicts a two per cent cash rate by the end of next year, dropping to 0 per cent in 2010, the paper said


http://www.businessspectator.com.au...ld-see-hefty-RBA-rate-cuts-KGJSP?OpenDocument

PS: I wonder if this is the price we will now pay for having deposits "guaranteed" ??

 

[kransky]

nice read

http://www.financialarmageddon.com/2008/10/a-real-straight-shooter.html