Imminent and severe market correction

[wayneL]

LOL, I thought you were a subscriber

You'll never know.

 

[Whiskers]

Originally Posted by Whiskers
GDP isn't about comparing living standards!?

Didn't say it was, you're the one who is insisting that it is by using PPP.

As I recall you raised the issue of GDP from my comment to Bushman post that decoupling is progressing.

For what it's worth, I have stated on other threads that I believe decoupling will happen. However it is still way too early. Despite the oft repeated platitudes of China rapidly modernising, China's economy is more export dependent on the US and Europe than it has ever been. I have posted the evidence previously in this thread.

2007 GDP estimates in $US

USA 13.5 trillion
China 3.1 trillion
India 1.0 trillion

Argument and debate is the lifeblood of a democracy, the more of it, the more healthy a society.

To a point. Arguement and debate are intrinsictly confrontational. When it starts to get 'barbs', it is distructional. Thats why dialogue is more productice.

You don't need an international standard. You can use US dollars, yen or any other currency , you don't need to invent one.

It's not an issue of currency... it's an issue of more equitable measurement and comparrison. While there are the currency valuation anomonoly's you mention below an existing currency will never work properly to reflect the true wealth and influence in the world.

Yes, acknowledged above that the Chinese currency is undervalued, I said 50% undervalued, ithatheekret says 43%. Also take into consideration previous statements that China may have overstated it's economic numbers by up to 40%. Even if we gross China's GDP up by 50% we get $4.5 trillion roughly a third of the US.

Two points:

1. Agree Chinas numbers may be a bit rubbery... but since we were talking decoupling from the US, other issues come into play such as the rate of growth and future potential.
2. Why just gross up Chinese GDP for one year. If you gross it up from when the US first claimed it was 'undervalued' the amplication would give a much greater number GDP.

The point being if you use the $US as the barometer, then you must also take into account that they say the Chinese currency has been undervalued for years otherwise by definition the US actually places more value on the Chinese economy than the exchange rate reflects.

As above, you'll still be able to use $US or any other currency, that's the beauty of having exchange rates.

The problem is that exchange rates are not set uniformly or equitably. Even the US is now using monetry policy allegedly sacrificing their exchange rate to recover their economy, which many claim is stuffed and fundamently flawed anyway.

Bottom line, China's economy is currently;

• too small
• too financially fragile
• too export dependent

to not be affected by a significant US slowdown.

• Too small; not if you measure the way most do.
• Too financially fragile; that sounds more applicable to the US. Argueably in stagflation from short sighted fixes to try to keep it no 1.
• Too export dependent; it seems to me that the US is hurting more in the trade war than China is or is likely too. Also you are assuming that Chinese imports will suffer in proportion to the recession. What if Americans start penny pinching and actually buy just as much Chinese cheaper products and forego more dearer local products which I think is more likely to happen.

Which brings us back to the 1/3 1/4 numbers that I mentioned I heard somewhere. I haven't done the maths yet but is it possible that some economist or agency has recalculated those GDP's to account for the US subprime crisis. I would think Investment, Consumption and Government spending, not to mention exports and imports will have different values.

 

[Kauri]

According to the World Bank, Chinese growth this year will be lower than originally forecast at 9.6% (10.8% eyed earlier) and inflation higher at 4.6% (3.8% eyed earlier). Growth looks to remain robust comparatively, however. The supra-national entity notes that weaker global growth will affect China but the trade looks to continue to support with the surplus likely similar to that seen last year. Chinese FX reserves are likely to rise to $1.987 trln.
Cheers
...........Kauri

 

[Kauri]

A washington post-abc poll shows eight out of ten Americans see the economy as either "not so good" or "poor". Six out of ten see the US economy already in recession, the other four being economists/bankers..
Cheers
.........Kauri

 

[ithatheekret]

A washington post-abc poll shows eight out of ten Americans see the economy as either "not so good" or "poor". Six out of ten see the US economy already in recession, the other four being economists/bankers..
Cheers
.........Kauri

a picture says a thousand words , but for the last four ..............

 

[Buster]

Hey Kauri,

A washington post-abc poll shows eight out of ten Americans see the economy as either "not so good" or "poor". Six out of ten see the US economy already in recession, the other four being economists/bankers..

Yeah, I'm with 'Ithatheekret' on this one.. I remember when I was there in '86.. a poll conducted by one of the major papers revealed that 4 out of 5 college students couldn't identify the 'United States' on a world globe and 3 out of 5 thought 'Mussolini' was an ancient Roman Emperor..

Speaks volumes..

Regards,

Buster

 

[dhukka]

As I recall you raised the issue of GDP from my comment to Bushman post that decoupling is progressing.

????? whatever.

To a point. Arguement and debate are intrinsictly confrontational. When it starts to get 'barbs', it is distructional. Thats why dialogue is more productice.

Another infected by the insidious political correctness disease. Read some Socrates.

It's not an issue of currency... it's an issue of more equitable measurement and comparrison. While there are the currency valuation anomonoly's you mention below an existing currency will never work properly to reflect the true wealth and influence in the world.

And a fictional one does?

Two points:

1. Agree Chinas numbers may be a bit rubbery... but since we were talking decoupling from the US, other issues come into play such as the rate of growth and future potential.
2. Why just gross up Chinese GDP for one year. If you gross it up from when the US first claimed it was 'undervalued' the amplication would give a much greater number GDP.
   

The point being if you use the $US as the barometer, then you must also take into account that they say the Chinese currency has been undervalued for years otherwise by definition the US actually places more value on the Chinese economy than the exchange rate reflects.

Do I really need to point out why the above in bold doesn't make sense? Have a think about it.

The problem is that exchange rates are not set uniformly or equitably. Even the US is now using monetry policy allegedly sacrificing their exchange rate to recover their economy, which many claim is stuffed and fundamently flawed anyway.

No argument from me that the US is stuffed, but exchange rates give you a short term equilibrium. Short term meaning they could change tomorrow and they will.

• Too small; not if you measure the way most do.
• Too financially fragile; that sounds more applicable to the US. Argueably in stagflation from short sighted fixes to try to keep it no 1.
• Too export dependent; it seems to me that the US is hurting more in the trade war than China is or is likely too. Also you are assuming that Chinese imports will suffer in proportion to the recession.

No you're assuming I'm assuming it. I've said numerous times on this and other threads, a US recession does not imply a Chinese recession. If the US goes into a deep recession, by that I mean of the 1982 variety, it may mean China's growth slowing from 11% to 6 or 7%. Obviously that is still strong growth but it would be akin to a 'growth recession' for China to slow that much. This is not a forecast for calendar year 2008. Although I do not expect China to slow this much in 2008, if China does slow considerably it will be in late 2008 into 2009.

What if Americans start penny pinching and actually buy just as much Chinese cheaper products and forego more dearer local products which I think is more likely to happen.

This is another common fallacy. The Chinese make a lot of high end goods as well as cheap ones. What do you call a $200 pair of Nike's?

Which brings us back to the 1/3 1/4 numbers that I mentioned I heard somewhere. I haven't done the maths yet but is it possible that some economist or agency has recalculated those GDP's to account for the US subprime crisis. I would think Investment, Consumption and Government spending, not to mention exports and imports will have different values.

????

 

[Whiskers]

Another infected by the insidious political correctness disease. Read some Socrates.

Probably the most important thing about Socrates is his work in establishing the practice of philosophical dialogue.

And a fictional one does?

Think of it like a seasonal adjusted number... like in some economic numbers.

Do I really need to point out why the above in bold doesn't make sense? Have a think about it.

Try me, I'm interested in your perception.

This is another common fallacy. The Chinese make a lot of high end goods as well as cheap ones. What do you call a $200 pair of Nike's?

Sure they do, but the operative point is that China makes them cheaper than the US, so the Walmart's etc have much more scope to discount their retail prices to maintain market volume and share when consumer spending becomes tighter.

????

Me too. I'm just sorry I missed who the quote came from because it is probably a significant concept depending on the context.

 

[numbercruncher]

Maybe now the muppets in Washington will workout how people have managed to spend more than they earn

NEW YORK (Fortune) -- One of the last sources of ready cash for homeowners looking to get money from their house appears to be shutting down and the results aren't likely to be pretty for the economy.

Last week, buried deep in the ugly details of Countrywide Financial Corp.'s (CFC, Fortune 500) earnings release, was the news that its $32.4 billion portfolio of prime HELOCs - home equity lines of credit - had begun to rapidly deteriorate. The reeling Calabasas, Ca.-lender was forced to take a $704 million charge related to homeowners' inability to pay back equity they extracted from their homes.

http://money.cnn.com/2008/02/01/news/companies/Boyd_HomeEquity.fortune/index.htm

 

[Kauri]

Libor rates are up across the board on the ECB's exit from providing dollar liquidity in its regular operations, the monoline bailouts are looking shaky, and the world of private equity is still bickering over warehoused deals causing indigestion on bank balance sheets.
With the Vix still elevated enough at 24 to provide wind-shear while flying, the aforementioned negatives are just one air-pocket away from doing some damage to the recent recovery. And I have had to look up in Wiki to recollect what rain is.. since they have forecasted it for Perth
Apart from all that.. all's fine in the world...
Cheering
.............Kauri

 

[dhukka]

Probably the most important thing about Socrates is his work in establishing the practice of philosophical dialogue.



Think of it like a seasonal adjusted number... like in some economic numbers.



Try me, I'm interested in your perception.

Socrates 'method' is one of critical enquiry. Maybe you're misinterpreting the word 'argument'. I mean argument as in 'making a case' or 'trying to persuade', not a disagreement.

I understand whay PPP is trying to achieve, however I think there are huge problems with estimating PPP (base years, identifying identical products, transport costs etc, hence why 3 agencies give such differing numbers. I'm going to stick with short run equilibrium using exchange rates.

If a currency was prerceived to be 30% undervalued 5 years ago. Then let's say you gross up GDP numbers from 5 years ago by 30%. In subsequent years the currency is not grossly undervalued becasue of your gross up 5 year ago and thus the compounding effect is minimised. On the other hand if I don't adjust GDP from 5 years ago but I take into account the undervaluation over the same period and gross up GDP by the cumulative effect, say 50%, the outcome will be approximately the same.

Sure they do, but the operative point is that China makes them cheaper than the US, so the Walmart's etc have much more scope to discount their retail prices to maintain market volume and share when consumer spending becomes tighter.

Are you claiming that cash strapped American consumers are going to reduce spend on American made products and substitute with more cheaper Chinese goods and therefore the total spend on Chinese goods will remain about the same?

 

[dhukka]

So say's Jim Rogers...........

"Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."

http://money.cnn.com/2008/01/30/news/international/okeefe_rogers.fortune/index.htm

Back to my research on Kondratieff!

http://www.kwaves.com/kond_overview.htm

This is one area where I think Jim Rogers has it wrong. The US money supply has barely moved in 2 years. Noone is printing huge amounts of money. Temporary repos used for liquiditiy purposes are just that, temporary, they are not permanent injections of new money or increases in the money supply.

 

[Uncle Festivus]

This is one area where I think Jim Rogers has it wrong. The US money supply has barely moved in 2 years. Noone is printing huge amounts of money. Temporary repos used for liquiditiy purposes are just that, temporary, they are not permanent injections of new money or increases in the money supply.

Maybe, but when will we know if these 'temporary' repo's become permanent 'grants', or if they get paid back at all? Bernanke is on record that he would deluge with fiat to prime the system - who really knows what's going on behind the scenes, as they aproach the abyss (Gordon Browns supposed comments).

 

[dhukka]

Maybe, but when will we know if these 'temporary' repo's become permanent 'grants', or if they get paid back at all? Bernanke is on record that he would deluge with fiat to prime the system - who really knows what's going on behind the scenes, as they aproach the abyss (Gordon Browns supposed comments).

Uncle, you can read what the Fed does with it's temporary repos here every week.

Also have a read of John Hussman's piece on this topic, written about 6 weeks ago.

 

[numbercruncher]

ISM Services Index Fell to 41.9 in January From 54.4

By Shobhana Chandra

Feb. 5 (Bloomberg) -- U.S. service industries unexpectedly contracted in January as the housing slump deepened and consumer spending cooled.

The Institute for Supply Management's non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, from 54.4 the prior month, the Tempe, Arizona-based ISM said. A reading of 50 is the dividing line between growth and contraction. The group also issued a new composite measure.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8HCjIXeA018&refer=home

More blood letting

 

[Kauri]

More blood letting

Still a little bit of blood.

Overnight news had a story about a gap of GBP12.5 bln in the finances of RBS and whether it has adequate capital. The inflation fighting ECB finds itself in a tough position this morning as the Eurozone Services PMI's plunged to levels not seen in years and perhaps in history. And the early release of the ISM Services showed that the index tumbled more than a dozen index points to 41.9 in January from 54.4 in December.

Are the pigeons coming home..
Cheers
...........Kauri

 

[numbercruncher]

What cracks me up is reading this word all the time

Feb. 5 (Bloomberg) -- U.S. service industries unexpectedly contracted in January as the housing slump deepened and consumer spending cooled.

Seriously, no one expected it to rise did they, or even remain unchanged ?

Why is everything so unexpected in the current climate, didnt our survival as a species depend on expecting the unexpected, seems now people dont even expect the most likely, have we evolved into lesser beings ?

/rant off

 

[dhukka]

What cracks me up is reading this word all the time



Seriously, no one expected it to rise did they, or even remain unchanged ?

Why is everything so unexpected in the current climate, didnt our survival as a species depend on expecting the unexpected, seems now people dont even expect the most likely, have we evolved into lesser beings ?

/rant off

I think the depth of the plunge was unexpected. Of more interest is that the the bright spots in the economy that the permabulls cling to are now falling apart. A couple of weeks ago it was the job market is fine because intial jobless claims are low, that was blown out of the water last week.

We've had others such as falling residential construction has been partly offset by non-residential. As we now know, non-residential is following residential into the toilet.

The emerging markets decoupling thesis is all but dead.

The ISM maufacturing index had already shown contraction so the permabulls pointed out that manufacturing is only a small fraction of the economy and that the services sector was much more important. After today that argument has been shattered.

All they are left with is their exports are booming argument - how long till that one dies? Then the excuses will be dolled out. The media is too pessimistic, they talked consumers into a recession, it's all psychological.

China! China! China!

 

[Wysiwyg]

Don`t y`all reckon that Microsoft takeover scene was a good cover.A drop lurking in the shadow.I wish i was trading that American index for real.

 

[Uncle Festivus]

Time for another "Famous last words" bit -

Lacker stressed that a recession was not his central forecast. Instead, he projected "sluggish growth for at least half a year before a gradual firming begins."
However, "I can also see the possibility of a mild recession, similar to the last two we have experienced -- in other words, shallow and with a slow recovery," Lacker said.
"What I don't expect is a more severe recession, like those we saw in 1982 or 1974," Lacker said.

-Jeffrey Lacker, president of the Federal Reserve Bank of Richmond

And he's a part of the junta that is supposedly in charge of pulling the world back from the abyss?