Imminent and severe market correction
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explod
explod
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Today's report in the London Times regarding European hedge funds.
http://business.timesonline.co.uk/t...ectors/banking_and_finance/article3256253.ece
http://business.timesonline.co.uk/t...ectors/banking_and_finance/article3256253.ece
numbercruncher
Beware of Dropbears
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http://www.businessweek.com/ap/financialnews/D8UCI5U00.htm
Interesting to note that Greenspans odds of recession have grown to over 50pc, and this is despite Fed cuts and stimulus package announced !
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Nothing like listening to an artist describe their own canvas . Was that his pastel period ? 
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Check out my post under JMS dated 19/01/08
I feel like I'm one of the few out there who is a little more optimistic with how this story will unfold.
I was right in thinking the feds would slash interest rates, 75 points was and is a good starting point. Don't be surprised if they drop another 25-50 points after meeting this week. Drastic times calls for drastic measures. Inflation etc has been thrown out the window in favor of saving the financial and property sectors. Even though cuts in the official interest rate are not going to solve all the problems they are facing, it sure as **** is going to give them a leg up. The idea behind reducing rates is to keep the housing recession and the problems in the credit markets from spilling over more broadly into the general economy. In 07, minus the property and financial sectors, the US economy, depending on the figures your looking at, grew by some 12%. So the question everyone wants the answer to is this, How do you help those struggling with their mortgage repayments, and at the same time free up cash for the borrowers/lenders, or should that be making it more affordable? The answer is to cut rates as much as you dare, and funnily enough, it looks like Bernanke and his team have finally woken up to the fact that the problems that these sectors are facing, desperately requires their intervention. We all know that cheap cash/loans has played it's part in all of this, but to suddenly move in the opposite direction will most definitely spell the greatest fall the market has ever seen. Allow those sectors to recover before tightening the belt. Now is not the right time for those kinds of changes. Cutting rates is just the starting point, it's not the be all and end all, but it's one of the most important factors that will help these guy‘s dig themselves out of the hole they‘ve found themselves in. The market needs to fundamentally change they way they approach debt, how they assess financing options, and more importantly protecting themselves against these kinds of environments, and I’m talking about both side of the fence here, the borrowers and the lenders, both public and private.
Then you have the stimulus package they are putting together. they are looking at 150b, but when all is said and done, don't be surprised if it's double that figure. As I understand it though, although they might inject the funds to where ever they decide, in march/april, it will be july/august before that injection flows through to the market, and has it's desired affect, hence the markets reaction to anns involving said package. A stimulus package which will probably not affect the economy for near 6 months means nothing to wall street right now, hence the importance of the feds new found willingness the slash interest rates.
Let's just say though, that they don't avoid a recession. Here’s food for thought. When we're watching the pennies, in times of hardship, do we as consumers target brand names, or do we look for the “bang for your buck“ items that allow you to buy more for less? If this is the case, then we need not worry so much about what the US economy is doing, because just about everything that is affordable has the "made in china" tag on it. We'll be reasonably cushioned from any US recession. The mining boom will continue, so we can be reasonably optimistic when considering our future. I know that our economy is made up of several sectors, I’m not that naive, but hey, the mining sector sure is a decent slice of the pie when looking at the big picture, and when you understand how this sector feeds some many others, you don’t need to be a rocket scientist to see we’re in a good position to ride out any storm that may develop out of the US. Predictability though, our markets will initially follow the US, as will the rest of the world, but eventually we will all realize that it's not all doom and gloom having the US performing badly. It's probably the last thing the markets need to do, to be able to stand alone and not follow the US like lambs to the slaughter : ))
If your currently holding positions in the mining sector, your looking good, do not fear the US downturn. China will continue to grow at or near double digit figures through 08/09, and let’s not forget India is only just beginning it’s growth phase, the next 5 yrs should be very interesting indeed.
Fear the market, but don’t be afraid of it, if that makes any sense. My advice to anyone holding positions with good prospects, in times like this, is to increase your position, if fundamentally there is no change in the particular stocks your holding, and simply increase your investment timeframe.
Lot's of if's and but's in there, so if it all goes pear shaped, don't bother sending me your hate mail. The markets are going to remain volatile over the next 6-12 months regardless, so it’s not going to be the place for the faint hearted.
I’m not a professional, just a guy who trades occasionally, but someone who sources as much information and peoples opinions as possible, then, and only then, do I make what I consider to be an informed decision.
I feel like I'm one of the few out there who is a little more optimistic with how this story will unfold.
I was right in thinking the feds would slash interest rates, 75 points was and is a good starting point. Don't be surprised if they drop another 25-50 points after meeting this week. Drastic times calls for drastic measures. Inflation etc has been thrown out the window in favor of saving the financial and property sectors. Even though cuts in the official interest rate are not going to solve all the problems they are facing, it sure as **** is going to give them a leg up. The idea behind reducing rates is to keep the housing recession and the problems in the credit markets from spilling over more broadly into the general economy. In 07, minus the property and financial sectors, the US economy, depending on the figures your looking at, grew by some 12%. So the question everyone wants the answer to is this, How do you help those struggling with their mortgage repayments, and at the same time free up cash for the borrowers/lenders, or should that be making it more affordable? The answer is to cut rates as much as you dare, and funnily enough, it looks like Bernanke and his team have finally woken up to the fact that the problems that these sectors are facing, desperately requires their intervention. We all know that cheap cash/loans has played it's part in all of this, but to suddenly move in the opposite direction will most definitely spell the greatest fall the market has ever seen. Allow those sectors to recover before tightening the belt. Now is not the right time for those kinds of changes. Cutting rates is just the starting point, it's not the be all and end all, but it's one of the most important factors that will help these guy‘s dig themselves out of the hole they‘ve found themselves in. The market needs to fundamentally change they way they approach debt, how they assess financing options, and more importantly protecting themselves against these kinds of environments, and I’m talking about both side of the fence here, the borrowers and the lenders, both public and private.
Then you have the stimulus package they are putting together. they are looking at 150b, but when all is said and done, don't be surprised if it's double that figure. As I understand it though, although they might inject the funds to where ever they decide, in march/april, it will be july/august before that injection flows through to the market, and has it's desired affect, hence the markets reaction to anns involving said package. A stimulus package which will probably not affect the economy for near 6 months means nothing to wall street right now, hence the importance of the feds new found willingness the slash interest rates.
Let's just say though, that they don't avoid a recession. Here’s food for thought. When we're watching the pennies, in times of hardship, do we as consumers target brand names, or do we look for the “bang for your buck“ items that allow you to buy more for less? If this is the case, then we need not worry so much about what the US economy is doing, because just about everything that is affordable has the "made in china" tag on it. We'll be reasonably cushioned from any US recession. The mining boom will continue, so we can be reasonably optimistic when considering our future. I know that our economy is made up of several sectors, I’m not that naive, but hey, the mining sector sure is a decent slice of the pie when looking at the big picture, and when you understand how this sector feeds some many others, you don’t need to be a rocket scientist to see we’re in a good position to ride out any storm that may develop out of the US. Predictability though, our markets will initially follow the US, as will the rest of the world, but eventually we will all realize that it's not all doom and gloom having the US performing badly. It's probably the last thing the markets need to do, to be able to stand alone and not follow the US like lambs to the slaughter : ))
If your currently holding positions in the mining sector, your looking good, do not fear the US downturn. China will continue to grow at or near double digit figures through 08/09, and let’s not forget India is only just beginning it’s growth phase, the next 5 yrs should be very interesting indeed.
Fear the market, but don’t be afraid of it, if that makes any sense. My advice to anyone holding positions with good prospects, in times like this, is to increase your position, if fundamentally there is no change in the particular stocks your holding, and simply increase your investment timeframe.
Lot's of if's and but's in there, so if it all goes pear shaped, don't bother sending me your hate mail. The markets are going to remain volatile over the next 6-12 months regardless, so it’s not going to be the place for the faint hearted.
I’m not a professional, just a guy who trades occasionally, but someone who sources as much information and peoples opinions as possible, then, and only then, do I make what I consider to be an informed decision.
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Nothing like listening to an artist describe their own canvas . Was that his pastel period ?
Maybe entering his van Gogh period
.Is that like saying that inflation is low if you take out energy & food costs? We need to take a holistic veiw of the US and determine if the sum of the parts is going to impact on the whole, which at this point it will be, only the severity and collateral damage to the rest of the world is in doubt.
Ah yes, China again, the great saviour of the world as we know it. China is a basket case waiting to implode because of corruption, poor corporate standards (banks are a mess, wait for the big write offs, if they dare make it public), zero environmental regard, and low qaulity of life (or death if you don't agree with the nouveau capitalists). It's concerning that Australia has all their eggs in the one basket (case?). Make hay while the sun shines in the meantime I spose
.
numbercruncher
Beware of Dropbears
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Nothing like listening to an artist describe their own canvas . Was that his pastel period ?
LOL and how could you possibly trust a creature that bleeds for so long and doesnt die
Kauri
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cming through Rooters now...
Cheerless
..............Kauri
Cheerless
..............Kauri
wayneL
VIVA LA LIBERTAD, CARAJO!
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Blanchflower has always been a dove, even all through last year. Not a statement that would surprise anyone here.
Kauri
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agree on that... but it does seem to have surprised someone?? briefly anyways..??
Cheers
..........Kauri
P.S..
wonder what Blanchflower"s comments would have done if they were from someone else on the
MPC. Even so GBP has dipped lower on the ultra negative comments about the state
of the world economy falling sharply from above 1.9860 to last trade on the days
low of 1.9805.
Attachments
wayneL
VIVA LA LIBERTAD, CARAJO!
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The biggest surprise is how dumb "they" think we are (probably true generally)
Paraphrasing Crash Gordon on TV today: "Low inflation is remarkable considering how fast prices are rising" Interviewer didn't even pick it up.
Paraphrasing Crash Gordon on TV today: "Low inflation is remarkable considering how fast prices are rising"
Interviewer didn't even pick it up. - Joined
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If it wasn't Gordo , you think you were watching the Goodies . I wish I had that burnt on a dvd . I'd send him a replay each year
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Maybe entering his van Gogh period
Is that like saying that inflation is low if you take out energy & food costs? We need to take a holistic veiw of the US and determine if the sum of the parts is going to impact on the whole, which at this point it will be, only the severity and collateral damage to the rest of the world is in doubt.
Ah yes, China again, the great saviour of the world as we know it. China is a basket case waiting to implode because of corruption, poor corporate standards (banks are a mess, wait for the big write offs, if they dare make it public), zero environmental regard, and low qaulity of life (or death if you don't agree with the nouveau capitalists). It's concerning that Australia has all their eggs in the one basket (case?). Make hay while the sun shines in the meantime I spose
LOL, you just proved my point. And yes, inflation would be low if you take out energy and food, that's a no brainer. But that wasn't my point was it Uncle, nice way to twist my words to support your argument though. The property sector starts taking a dive, which in turn affects the financials, full stop. The rest of the US economy is in good shape. So if rate cuts and stimulus packages can soften the blow for the financials and at the same time help those struggling to pay their mortgages, there's no evidence to suggest the rest of the US economy is in such a bad shape. But please, enlighten me with more bear news, I'm sure you've got a ****load stashed away for days like this : )
Hmmm, so your not buying into the china story either. What about india? Have they not entered a growth phase? I'd like to assume we're all familiar with china's policies, dito for india, but to suggest that this growth is going to come to a sudden stop is just pure scare mongering. Where else would you like us to put our eggs? Please let us all know where these other markets are that will provide us with capital growth. I'm listening, but please, don't state the obvious, be creative with your response.
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Woops, pushed the wrong button there perhaps
."The rest of the US economy is in good shape".
In fact, we shall see how good a shape it's in this week, with a lot of data to be released - Fed interest rate decision, Dec GDP, etc
Some may like to read this.
Beware market rally . . . it could be a false dawn
By Tony Jackson
Published: January 27 2008 23:38 | Last updated: January 27 2008 23:43
Those of an essentially cautious disposition, such as myself, have two recurring problems with markets. We tend to call the top too early and the bottom too late.
This is of pressing relevance at the moment. Several of the more thoughtful equity strategists think that, after the near-20 per cent fall in world markets, it is time for a bear rally. But how do you distinguish between that and the real thing – the bull market itself?
There are indeed some bulls who argue the bottom has been reached. The US Federal Reserve, they say, will cut rates by as much as it takes. The specific problem of the monoline insurers will be fixed by banks under government prompting. And, above all, the US recession will never happen.
Well, maybe. Some would argue that cutting the price of credit fails to address the central problem of credit contraction. As for the banks clubbing together to save the monolines, good luck. More likely, the plan will die a quiet death like its predecessor, the SIV superfund.
As to there being no US recession, why then did the Fed stage a massive unscheduled rate cut last week? The bulls claim it was tricked by the fall in European markets caused by the Société Générale fiasco. But if the Fed can be stampeded by a bad day in Europe, I am not sure that leaves us any better off.
Recession apart, it seems clear that the bank crisis is still deepening in unpredictable ways. The two are of course linked since the real fear in the markets is of a slump in corporate earnings triggered by recession, triggered in turn by the bank crisis. One way or another, though, the message is clear: things are getting worse.
But that need not mean the markets have further to fall. In Lewis Carroll’s Through the Looking-Glass, the White Queen screams violently because she is about to jab herself with a pin. Then, when she does indeed jab herself, she explains placidly that, since she has done her screaming already, there is no need for more.
This brings me back to the initial conundrum. Supposing a rally does start from here, how do we tell if it is real or not?
Let us look back for clues at the last bear/bull phase in equities. World markets peaked in March 2000, then halved in the space of 18 months. The turnround, when it came, was swift and devastating. In 15 months, the world index had doubled again.
Since I was one of the many who were slow to grasp that turnround, I am the more wary of repeating the mistake. So let us examine the comparison more closely.
One striking thing about the most recent bull phase is that it left most developed world markets almost exactly where they were back in 2000. When the S&P 500 and FTSE All-Share peaked last year, they were 2 per cent and 7 per cent respectively above their previous highs.
But in that time there had been an enormous upsurge in corporate earnings – up about 70 per cent in the US and more than doubled in the UK. In other words, between the two peaks price-earnings multiples almost halved. Is that not a bullish signal?
Not if you believe an earnings recession is upon us. The essential difference between the two peaks is that, in the first, expectations soared well ahead of earnings. This time, it is earnings that have soared. Last time, the bull market kicked in when earnings finally arrived. What will come to the rescue this time?
Another striking difference is that the peak of the last market was also that of the dotcom boom. Worthless stocks were frantically overvalued. But a number of solid stocks were remarkably cheap.
This was the product of hugely exaggerated notions of the power of the internet, which was supposed to doom bricks-and-mortar businesses to extinction. As a result, while supposed growth stocks crashed, the likes of brewers, tobacco stocks and even the banks soared.
No such anomaly exists today. By the end of the last bull run, nothing was cheap any more. And when we recall that the previous bear phase still cut market values in half, it seems odd to suppose that a mere 20 per cent drop will do the job this time.
It may be that I am wrong about all this. Maybe the markets have priced in all the bad news. It is remarkable, certainly, that SocGen’s shares fell a mere 4 per cent on an unexpected €4.9bn ($7.18bn) trading loss.
But SocGen also reminds us how many unknowns might still be out there. The market may rally but I for one will not trust it
Beware market rally . . . it could be a false dawn
By Tony Jackson
Published: January 27 2008 23:38 | Last updated: January 27 2008 23:43
Those of an essentially cautious disposition, such as myself, have two recurring problems with markets. We tend to call the top too early and the bottom too late.
This is of pressing relevance at the moment. Several of the more thoughtful equity strategists think that, after the near-20 per cent fall in world markets, it is time for a bear rally. But how do you distinguish between that and the real thing – the bull market itself?
There are indeed some bulls who argue the bottom has been reached. The US Federal Reserve, they say, will cut rates by as much as it takes. The specific problem of the monoline insurers will be fixed by banks under government prompting. And, above all, the US recession will never happen.
Well, maybe. Some would argue that cutting the price of credit fails to address the central problem of credit contraction. As for the banks clubbing together to save the monolines, good luck. More likely, the plan will die a quiet death like its predecessor, the SIV superfund.
As to there being no US recession, why then did the Fed stage a massive unscheduled rate cut last week? The bulls claim it was tricked by the fall in European markets caused by the Société Générale fiasco. But if the Fed can be stampeded by a bad day in Europe, I am not sure that leaves us any better off.
Recession apart, it seems clear that the bank crisis is still deepening in unpredictable ways. The two are of course linked since the real fear in the markets is of a slump in corporate earnings triggered by recession, triggered in turn by the bank crisis. One way or another, though, the message is clear: things are getting worse.
But that need not mean the markets have further to fall. In Lewis Carroll’s Through the Looking-Glass, the White Queen screams violently because she is about to jab herself with a pin. Then, when she does indeed jab herself, she explains placidly that, since she has done her screaming already, there is no need for more.
This brings me back to the initial conundrum. Supposing a rally does start from here, how do we tell if it is real or not?
Let us look back for clues at the last bear/bull phase in equities. World markets peaked in March 2000, then halved in the space of 18 months. The turnround, when it came, was swift and devastating. In 15 months, the world index had doubled again.
Since I was one of the many who were slow to grasp that turnround, I am the more wary of repeating the mistake. So let us examine the comparison more closely.
One striking thing about the most recent bull phase is that it left most developed world markets almost exactly where they were back in 2000. When the S&P 500 and FTSE All-Share peaked last year, they were 2 per cent and 7 per cent respectively above their previous highs.
But in that time there had been an enormous upsurge in corporate earnings – up about 70 per cent in the US and more than doubled in the UK. In other words, between the two peaks price-earnings multiples almost halved. Is that not a bullish signal?
Not if you believe an earnings recession is upon us. The essential difference between the two peaks is that, in the first, expectations soared well ahead of earnings. This time, it is earnings that have soared. Last time, the bull market kicked in when earnings finally arrived. What will come to the rescue this time?
Another striking difference is that the peak of the last market was also that of the dotcom boom. Worthless stocks were frantically overvalued. But a number of solid stocks were remarkably cheap.
This was the product of hugely exaggerated notions of the power of the internet, which was supposed to doom bricks-and-mortar businesses to extinction. As a result, while supposed growth stocks crashed, the likes of brewers, tobacco stocks and even the banks soared.
No such anomaly exists today. By the end of the last bull run, nothing was cheap any more. And when we recall that the previous bear phase still cut market values in half, it seems odd to suppose that a mere 20 per cent drop will do the job this time.
It may be that I am wrong about all this. Maybe the markets have priced in all the bad news. It is remarkable, certainly, that SocGen’s shares fell a mere 4 per cent on an unexpected €4.9bn ($7.18bn) trading loss.
But SocGen also reminds us how many unknowns might still be out there. The market may rally but I for one will not trust it
Sounds like a nice idea except that it's too late and interest rate cuts can't prevent a spillover anyway. The damage has been done and it is spreading. In fact it is more difficult to find an area of the economy where effects have not spilled over.
Interesting, which figures would they be?
Cutting rates may help some people at the margin. However thousands are in houses that are falling in value. They had no money down and now their mortgage is worth more than actual value of the house. These people have no incentive to keep paying a mortgage, it makes more economic sense for them just to walk away.
Secondly, cutting rates won't help those lending institutions who cannot lend because their balance sheets are so impaired. Liquidity can only do so much, the problem with the current credit crunch is that it is also a solvency crisis. Banks ability to lend has been seriously curtailed. Again, cutting rates can help at the margin but it can't help the likes of Countrywide Financial, MBIA or AMBAC and there will be many more like these in the coming year.
Again not necessarily if your problem is one of solvency.
A very simplistic argument that doesn't hold much water. Firstly, China also produces high end goods. Yes they do manufacture cheap goods. Wal-Mart is just hanging in there at the moment, take out gas and their sales are barely moving. How's Target doing? Low end retailers in the US are already feeling the pinch.
The same tired old Chindia argument. China itself doesn't even believe it will get out of a US slowdown unscathed. The decoupling theory of 2007 will be replaced by the recoupling reality in 2008.
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numbercruncher
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Yes the decoupling theory pretty much lays in tatters ..... you only have to look at all Equity markets to see that!
This is the great stress test for Globilisation, and I cant help but think its working as intended, Socialising the losses across virtually the whole globe
http://blogs.ft.com/davosblog/2008/01/decoupling-or-g.html
This is the great stress test for Globilisation, and I cant help but think its working as intended, Socialising the losses across virtually the whole globe
http://blogs.ft.com/davosblog/2008/01/decoupling-or-g.html
But of course you can't recouple something that was never decoupled in the first place
Exactly, the recoupling will occur in the minds of the decoupling cheerleaders.
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