Imminent and severe market correction

Aussiejeff · 31 January 2008

Hahahahaha!

Just heard GWB on the radio trying to reassure his panicking citizens... somefink like..

"Ya'll gotta be CONFIDENT in the economy NO MATTER HOW HARD IT GITS...."

Yeehar George! I'll take that message on board and be HAPPY now.

AJ

numbercruncher · 31 January 2008

How about the new kid on the block Stagdeflation , worth considering

It's an intriguing -- many will say overly pessimistic -- take on the already raging debate about stagflation risks facing the U.S. and other major economies. If stagflation means no, or slow, economic growth combined with inflation, stagdeflation is falling prices and growth.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a3VsZCSN4XgI&refer=home

Aussiejeff · 31 January 2008

numbercruncher said:
How about the new kid on the block Stagdeflation , worth considering

http://www.bloomberg.com/apps/news?pid=20601039&sid=a3VsZCSN4XgI&refer=home

Interesting, but I think while the USD is still plunging, costs & prices for US citz will inevitably rise....inflation is the next big bogey they won't be able to handle..without putting interest rates back up!

numbercruncher · 31 January 2008

Jan. 30 (Bloomberg) -- Standard & Poor's said it cut or may reduce ratings on $534 billion of subprime-mortgage securities and collateralized debt obligations, the most sweeping action in response to rising since home-loan defaults.

The downgrades may extend bank losses to more than $265 billion and have a ``ripple impact'' on the broader financial markets, S&P said in a statement today. The securities represent $270.1 billion, or 47 percent, of subprime mortgage bonds rated between January 2006 and June 2007. The New York-based ratings company also said it may cut 572 CDOs valued at $263.9 billion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=am2Nk1VM5YsA&refer=home

Bah whats half a trillion in the house of cards (>:

Uncle Festivus · 31 January 2008

explod said:
If everything is going up in price/ or costing more so to speak, what is stagflation

Can someone have a good take on this ?

Should it be a thread ? perhaps there is one

https://www.aussiestockforums.com/forums/showthread.php?t=6121&highlight=stagflation

Buffettology · 31 January 2008

This is actually funny, I remember this thread ages ago, where I was holding about 50% cash waiting for this imminent correction. Then I got greedy and only left about 10% cash. Thank god I ended up making a decent profit even after this correction and am now holding about 60% cash again.

I agree, stagflation looks well on its way and OH WHAT A PROBLEM it would be! Its like the ultimate problem for economists and will rout global indicies!

Some good bargains should be coming up over the next few months!

Patience now, just patience, my worst attribute!

numbercruncher · 31 January 2008

In fact, inflation could be contributing to the current slowdown.

"Domestic demand readings were weaker than we expected, not holding up well in the face of the inflation surge, driven mostly by energy costs," wrote Citigroup analyst Steven Wieting in a report this morning.

http://money.cnn.com/2008/01/30/markets/morningbuzz/index.htm?postversion=2008013016

Wow these guys are starting to catch on !

Consumers already maxed out on debt, so they drop interest rates, skyrocket Inflation giving the consumers of the worlds largest consumer nation even less to spend! yee-haa

dhukka · 2 February 2008

So whilst the market gets carried away with over-priced aquisitions of internet search engines the US economy continues to deteriorate:

U.S. Payrolls Decline 17,000; Jobless Rate at 4.9%

The U.S. economy unexpectedly lost jobs in January for the first time in more than four years, adding to the case for the Federal Reserve to lower interest rates further next month to head off a recession.

Payrolls fell by 17,000 after an 82,000 gain in December that was larger than initially reported, the Labor Department said today in Washington. The jobless rate declined to 4.9 percent from 5 percent in December.

The drop in payrolls, in the wake of tighter credit, a deeper housing slump and a stumbling stock market, is the clearest sign yet that the U.S. expansion is at risk. Payrolls are one of the indicators, along with wages, production and sales, that help determine the start of economic contractions.

Economists again proved that they might as well throw darts to come up with their forecasts.

Economists' Forecasts

None of the 80 economists surveyed by Bloomberg had predicted the decline in payrolls, which was the first since August 2003. The median forecast in the survey projected payrolls would rise by 70,000, compared with an initially reported gain of 18,000 in December. Forecasts of an increase ranged from 5,000 to 160,000.

Revisions for November and December brought total job gains for the two months to 142,000, versus a previously reported 133,000.

Service industries, which include banks, insurance companies, restaurants and retailers, added 34,000 workers last month after an increase of 143,000 jobs in December. Retail payrolls climbed by 11,200 after a decline of 12,000 in December.

Factory payrolls dropped by 28,000 after falling 20,000 a month earlier. Economists had forecast a drop of 20,000 in manufacturing employment. Builders trimmed payrolls by 27,000 in January.

Government payrolls shrank by 18,000 during January, the first decline in six months, after rising 28,000 in December.

And check out the revisions to last years numbers. The BLS overstated job growth by more than 30,000 a month last year.

Revisions for 2007

With today's report, the Labor Department revised the payroll numbers after reviewing more complete tax data not available earlier from state unemployment insurance programs and making adjustments to its estimates of seasonal hiring patterns.

The revision subtracted 376,000 jobs from the previous estimate for the year ended December 2007, bringing total job growth for the period to 1.137 million.

It's recession time.

wayneL · 2 February 2008

dhukka said:
So whilst the market gets carried away with over-priced aquisitions of internet search engines the US economy continues to deteriorate:

Watching the sentiment shifts, while not surprising...predictable in fact, I still find breathtaking in their silliness.

dhukka said:
Economists again proved that they might as well throw darts to come up with their forecasts.

'Cause they insist on using academic economic models, rather than real world models (e.g. Austrian theory)

dhukka said:
And check out the revisions to last years numbers. The BLS overstated job growth by more than 30,000 a month last year.

dhukka said:
It's recession time.

Indeed, as even the most rudimentary bush/real world economist expected.

Unbelievable!

dhukka · 2 February 2008

Can't wait to see Brian Westbury's reaction today. He's already been on CNBC this morning saying how good the NFP report was going to be - moron.

wayneL · 2 February 2008

dhukka said:
Can't wait to see Brian Westbury's reaction today. He's already been on CNBC this morning saying how good the NFP report was going to be - moron.

Gawd I wish I had pay TV here, if only to see the discomfort of these clowns.

wayneL · 2 February 2008

...and they're gonna buy it up anyway!

LOL

dhukka · 2 February 2008

wayneL said:
...and they're gonna buy it up anyway!

LOL

Maybe the euphoria is wearing off. Microsoft is off 5%, as it should be for wildly overpaying for an acquisition that will be dilutive for at least 2 years. Imagine how much the market would be off without the Yahoo bid.

Real1ty · 2 February 2008

dhukka said:
Maybe the euphoria is wearing off. Microsoft is off 5%, as it should be for wildly overpaying for an acquisition that will be dilutive for at least 2 years. Imagine how much the market would be off without the Yahoo bid.

I can see the market re evaluating their euphoria towards this acquisition once they sit down, remove the party hats and wake up with a massive hangover.

The party goers might even decide to take notice of some economic data once the throbbing head has subsided.

Enter PPT.

Bushman · 2 February 2008

dhukka said:
So whilst the market gets carried away with over-priced aquisitions of internet search engines the US economy continues to deteriorate.

It's recession time.

Two questions come to mind:
1. Why is it 'overpriced'? Every time a deal goes ahead these days, everyone immediately says it is 'overpriced'. Remember acquisitions are strategic as well as financial decisions and companies have longer term outlooks then a few years. Microsoft want to challenge Google in the medium (the internet) that is changing society as we know it. A search engine would be central to this bid. You cannot just say it is 'overpriced'. Yahoo would attract a significant premiem for control of its assets. However I do understand that such premiums for control are hard to value.
2. A recession is defined as two or more quarter of negative GDP growth. So yes, it is inevitable, but no, it does not have to be a disaster. The extent and depth of this recession is not known as yet. There are two contradictory trends - stress in the US and a boom in Asia. 'Recession' is an emotive word which is oft misrepresented by the mass media. I have read predictions from the next depression to a blip in the long term growth trend. I suspect that, as with everything, the truth lies somewhere in between the extremes.

Having said that, I do, off course, understand your cynicism.

bean · 2 February 2008

Time to be in cash again maybe very close.
A testing of the lows about to occur soon?
http://www.financialsense.com/editorials/swenlin/2008/0201.html

dhukka · 2 February 2008

Bushman said:
Two questions come to mind:
1. Why is it 'overpriced'? Every time a deal goes ahead these days, everyone immediately says it is 'overpriced'.

Nice try at setting up a straw man argument at the beginning of the post, however I can't let you get away with it. CNBC got so excited by this news this morning they forgot to take an ad-break for nearly an hour. All through the day they had analysts and others praising this deal as wonderful. It is the minority that think this deal is over-valued - at least at this point in time.

Bushman said:
Remember acquisitions are strategic as well as financial decisions and companies have longer term outlooks then a few years.Microsoft want to challenge Google in the medium (the internet) that is changing society as we know it. A search engine would be central to this bid. You cannot just say it is 'overpriced'. Yahoo would attract a significant premiem for control of its assets. However I do understand that such premiums for control are hard to value.

Thanks for the refresher course in M&A 101. I think we all have a grasp of the strategic and financial considerations of acquisitions.

So a company that has failed to make a significant online presence in monetizing search acquires another company that has failed to make a dent in google's dominance in this area. Two failures don't make a success.

As for the financials. Yahoo just reported a -23% decline in quarterly profit. Acquisitions are often measured by EBITDA multiples. Yahoo's FY07 EBIDTA came in at around $1.3 billion.That means Microsoft's offer is priced at an EBITDA multiple of more than 30x. Anyone with any experience in M&A deals will tell you that is very expensive.

Bushman said:
2. A recession is defined as two or more quarter of negative GDP growth.

Actually it isn't, that is a rough rule of thumb. The National Bureau of Economic Research (NBER) is the final arbiter of recession calls. The following comes from their website;

The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. For more information, see the latest announcement on how the NBER's Business Cycle Dating Committee chooses turning points in the Economy and its latest memo, dated 07/17/03.

Bushman said:
So yes, it is inevitable, but no, it does not have to be a disaster. The extent and depth of this recession is not known as yet.

True.

Bushman said:
There are two contradictory trends - stress in the US and a boom in Asia.

Ahh the myth of decoupling, still alive and well.

Bushman said:
'Recession' is an emotive word which is oft misrepresented by the mass media.

Yes, the word recession was introduced in the 1970's because people were afraid to use the word depression. Maybe we'll soon have another word to calm those frightened by the words recession. How about a 'reduced growth phase'?

Bushman said:
I have read predictions from the next depression to a blip in the long term growth trend. I suspect that, as with everything, the truth lies somewhere in between the extremes.

I suspect you're proabably right. Then again, those extremes may not be extreme enough. Never discount the Black Swan theory.

Kauri · 2 February 2008

a chart I posted a whales back... the waves are placed randomly depth and time-wise... it is more the psychology that I was looking at... are we in the blue wave 4 stage now???
Pondering
............Kauri

ithatheekret · 2 February 2008

Looks like one of those textbook cases to me wouldn't you say Kauri ?

reece55 · 2 February 2008

dhukka said:
Nice try at setting up a straw man argument at the beginning of the post, however I can't let you get away with it. CNBC got so excited by this news this morning they forgot to take an ad-break for nearly an hour. All through the day they had analysts and others praising this deal as wonderful. It is the minority that think this deal is over-valued - at least at this point in time.

Thanks for the refresher course in M&A 101. I think we all have a grasp of the strategic and financial considerations of acquisitions.

So a company that has failed to make a significant online presence in monetizing search acquires another company that has failed to make a dent in google's dominance in this area. Two failures don't make a success.

As for the financials. Yahoo just reported a -23% decline in quarterly profit. Acquisitions are often measured by EBITDA multiples. Yahoo's FY07 EBIDTA came in at around $1.3 billion.That means Microsoft's offer is priced at an EBITDA multiple of more than 30x. Anyone with any experience in M&A deals will tell you that is very expensive.

Actually it isn't, that is a rough rule of thumb. The National Bureau of Economic Research (NBER) is the final arbiter of recession calls. The following comes from their website;

True.

Ahh the myth of decoupling, still alive and well.

Yes, the word recession was introduced in the 1970's because people were afraid to use the word depression. Maybe we'll soon have another word to calm those frightened by the words recession. How about a 'reduced growth phase'?

I suspect you're proabably right. Then again, those extremes may not be extreme enough. Never discount the Black Swan theory.

Dhukka, I think you are being too nice here...... Very expensive????

It's an outrages price for a Company that has rapidly contracting earnings. MSFT is paying some 61 times earnings for an entity that has reducing earnings and a business model that is losing more every day to Google..... I don't care what kind of synergies the deal makers spin up, it's just the dumbest thing I have seen MSFT do, certainly under Gates' guard the Company wouldn't have ventured into such a joust...

Put it to you this way, I am an investor and I can buy Google at 40x earnings, where there EPS growth is 50%+, or I can buy YHOO where earnings (now) are at 61x earnings at -20% growth..... Ummm.... even a teenager can do the math....

But don't worry everyone, clearly this signals that the market is now cheap, we should all wade in with the cash that we have cause it's all going to be ok, M&A is back on the agenda...... Hold on a second, what where the payroll numbers again?????

What I love is that now that the employment numbers are anemic, the pundits are saying "how can you trust them, they are always revised.. it will probably be revised up....". However, the same pundits when the NFP was good were saying " don't worry, the economy is ok".... HAHAHAHA.... gotta love it.

Cheers

Imminent and severe market correction

Aussiejeff

numbercruncher

Beware of Dropbears

Aussiejeff

numbercruncher

Beware of Dropbears

Uncle Festivus

Buffettology

numbercruncher

Beware of Dropbears

dhukka

wayneL

VIVA LA LIBERTAD, CARAJO!

dhukka

wayneL

VIVA LA LIBERTAD, CARAJO!

wayneL

VIVA LA LIBERTAD, CARAJO!

dhukka

Real1ty

Bushman

bean

dhukka

Kauri

E/W Learner

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ithatheekret

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