Imminent and severe market correction

[Aussiejeff]

Chins up. The mighty US FED will cut interest rates by another 1% within a week.... then another 1% after that , then another 1% after that, then........ *ooops*....

*RUN FER THA HILLS, PARDNERS!!!!"



AJ

 

[Kauri]

major US bond insurer MBIA was put back under review for a downgrade by Fitch Ratings less than a month after affirming the grade with a stable outlook. Fitch said the reconsideration was due to higher assumptions on MBIA"s losses on sub-prime related securities.
deadlines are approaching for the bond-insurers efforts to raise enough capital to retain triple-A ratings from the major ratings agencies. If it becomes apparent that more downgrades are inevitable, it will put an already stressed bond market under heavy pressure.

 

[Kauri]

there has been a rumour floating around today that a European bank is getting ready to reveal very large sub-prime related losses that could put the ECB under more pressure to shift from a hawkish bias if true. mmm, aye aye

 

[IFocus]

And I have had to look up in Wiki to recollect what rain is.. since they have forecasted it for Perth

I was in San Reno yesterday arvo fixing my mother in laws sprinklers ironically in the rain, Bali comes to Mandurah. Hoping for more today.

 

[sassa]

How about this for a theory??

Expect Fed to lower Dow to 8000 points.


Consumers should expect a deep recession, triggered by the "stealth methodology" of the Federal Reserve to "depress" the market even while lowering interest rates in an ostensible effort to stimulate economic growth, an economic analyst is charging.

"The Federal Reserve is directly involved in manipulating the stock market," said economic analyst Mike Bolser in a telephone interview with WND yesterday.

The New York Stock Exchange finished the day down 108.03 points, closing at 12,635.16, much as Bolser predicted, despite recent emergency Fed rate cuts of 1.25 percentage points aimed at stimulating the economy.

"Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way," Bolser said. "The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board, and dampening the otherwise harmful effects of inflation.

"A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting," he added.

"Without this recession, we would be on quick trip to hyper-inflation," Bolser, the author of an internationally followed newsletter published in conjunction with his InterventionalAnalysis.com website, said, "and the Fed wants to prevent this."

In his twice-daily subscription newsletter, Bolser has devised a quantitative methodology for utilizing Federal Reserve repurchase agreements to predict upward and downward movements of the DJIA, measured on a 30-day moving average.

"Ultimately, the government is in the business of inflating the dollar," Bolser said, "so the Fed is trying to engineer a recession, in order to cushion the pernicious effects of its own inflation."

"In my view, the government intentionally desires a deep recession not unlike that of the 1930s," he continued. "The Fed, however, dissembles, attempting to display the opposite impression with its rate cuts."

"With this strategy, the Fed hopes we won't experience the extreme 'stag-flation' we had in the late-1970s," he argues. "The Fed hopes to induce a recession to manage downward stock prices and commodity prices, including oil, gold, copper, and lumber, as well as the overall consumer demand for retail goods."

"Stag-flation" is an unusual economic situation combined when economic stagnation is combined with inflation, much as the economy is currently experiencing, such that economists fear we are entering a recession while food and energy prices continue to rise sharply

 

[numbercruncher]

That makes sense to me, prune the tree to let in new regrowth, bet the dodgy rat pack short it all the way down too

 

[explod]

How about this for a theory??

Expect Fed to lower Dow to 8000 points.


Consumers should expect a deep recession, triggered by the "stealth methodology" of the Federal Reserve to "depress" the market even while lowering interest rates in an ostensible effort to stimulate economic growth, an economic analyst is charging.

"The Federal Reserve is directly involved in manipulating the stock market," said economic analyst Mike Bolser in a telephone interview with WND yesterday.

The New York Stock Exchange finished the day down 108.03 points, closing at 12,635.16, much as Bolser predicted, despite recent emergency Fed rate cuts of 1.25 percentage points aimed at stimulating the economy.

"Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way," Bolser said. "The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board, and dampening the otherwise harmful effects of inflation.

"A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting," he added.

"Without this recession, we would be on quick trip to hyper-inflation," Bolser, the author of an internationally followed newsletter published in conjunction with his InterventionalAnalysis.com website, said, "and the Fed wants to prevent this."

In his twice-daily subscription newsletter, Bolser has devised a quantitative methodology for utilizing Federal Reserve repurchase agreements to predict upward and downward movements of the DJIA, measured on a 30-day moving average.

"Ultimately, the government is in the business of inflating the dollar," Bolser said, "so the Fed is trying to engineer a recession, in order to cushion the pernicious effects of its own inflation."

"In my view, the government intentionally desires a deep recession not unlike that of the 1930s," he continued. "The Fed, however, dissembles, attempting to display the opposite impression with its rate cuts."

"With this strategy, the Fed hopes we won't experience the extreme 'stag-flation' we had in the late-1970s," he argues. "The Fed hopes to induce a recession to manage downward stock prices and commodity prices, including oil, gold, copper, and lumber, as well as the overall consumer demand for retail goods."

"Stag-flation" is an unusual economic situation combined when economic stagnation is combined with inflation, much as the economy is currently experiencing, such that economists fear we are entering a recession while food and energy prices continue to rise sharply

Hunk and bloody fckn doooolar .., is not food and energy prices the substance of the whole show (economic). In maslows Law the only other is shelter) Call it what you like technically but we are going down the tubes.... What I would like to hear about are some clue to solutions

 

[Awesomandy]

My theory this time: Chinese New Year. With the eastern half of the world basically shut (or has very minimal trading) for the next few days, and the extreme volatility of current markets, I would guess that quite a few eastern funds would just stick a fair portion of their position into bonds/cash for a little while.

 

[Kauri]

US retailers are reflecting the quick pace of the US slowdown with apparel company Polo Ralph Lauren warning today that the swift change in spending patterns in the US was "almost unprecedented." Also just announced from Macy"s is a fall in same-store sales of 7.1% in January followed by news that they will consolidate their divisions, resulting in job losses over 2,500.
In the financial sector, there are more ratings downgrades with Fitch placing 260 ABS bonds on ratings watch negative.
Lots of these small, relatively speaking, job losses lately cumulatively don't look good projecting forward to next NFP
Cheers
.........Kauri

 

[ithatheekret]

My theory this time: Chinese New Year. With the eastern half of the world basically shut (or has very minimal trading) for the next few days, and the extreme volatility of current markets, I would guess that quite a few eastern funds would just stick a fair portion of their position into bonds/cash for a little while.

Except for Tokyo , ......... do they ever shut ? Tokyo and the Dow have one thing in common , both never close ......... technically speaking

I was just thinking . 77 , 87 , 97 and 2007 were all bad years really .

Who said 7 is a lucky number ? 8's aren't much better 78, 88, 98, 2008 .

The V 8 years ?

 

[Aussiejeff]

Hunk and bloody fckn doooolar .., is not food and energy prices the substance of the whole show (economic). In maslows Law the only other is shelter) Call it what you like technically but we are going down the tubes.... What I would like to hear about are some clue to solutions

.... some clue to "solutions"..?

So, you actually think that "someone" out there has the clout & where-withall to unravel this world-wide mess? Hmmm... the way I see it:

(1) WE (the world's population) have allowed this mess to be created in the first place (through basic human greed). The way I see it, the advent of hi-speed world-wide internet broadband has had the appalling effect of turning the world's finance markets into the Ultimate Casino, where Trillions of people's hard-earned $ can be gambled by lunatics (eg: the PPT) and filthy rich merchant bankers & rogue traders every day through massive bets on "hedges" and "derivatives" and "futures" and "sentiment" - all totally worthless aspirations in terms of humankinds REAL basic needs such as, "security" (both financial and personal), "shelter", "food", "sustainable environments" etc...

(2) WE (the world's population) appear to have no effective power or answers to stop what is happening with the un-controlled bankrupting of the planet. If we had a clue, we wouldn't have let this whole sorry, volatile mess develop in the first place.

(3) WE (the world's population) will therefore likely have to endure the pain of a deep, deep, depression/recession before there is any ultimate hope of a turn-around. Even then, what powers would we have to prevent the whole messy cycle from kicking off again?

Chiz,



AJ

 

[treefrog]

.... some clue to "solutions"..?

So, you actually think that "someone" out there has the clout & where-withall to unravel this world-wide mess? Hmmm... the way I see it:

(1) WE (the world's population) have allowed this mess to be created in the first place (through basic human greed). The way I see it, the advent of hi-speed world-wide internet broadband has had the appalling effect of turning the world's finance markets into the Ultimate Casino, where Trillions of people's hard-earned $ can be gambled by lunatics (eg: the PPT) and filthy rich merchant bankers & rogue traders every day through massive bets on "hedges" and "derivatives" and "futures" and "sentiment" - all totally worthless aspirations in terms of humankinds REAL basic needs such as, "security" (both financial and personal), "shelter", "food", "sustainable environments" etc...

(2) WE (the world's population) appear to have no effective power or answers to stop what is happening with the un-controlled bankrupting of the planet. If we had a clue, we wouldn't have let this whole sorry, volatile mess develop in the first place.

(3) WE (the world's population) will therefore likely have to endure the pain of a deep, deep, depression/recession before there is any ultimate hope of a turn-around. Even then, what powers would we have to prevent the whole messy cycle from kicking off again?

Chiz,



AJ

spot on AJ, spot on..........unfortunately.

 

[ithatheekret]

Hang on ...... what's with the " WE " ?

I'm innocent ask my barrister .

 

[treefrog]

WBC exchange release 5.2.08 - worth reading....

This pack provides an update of Westpac’s current position and provides
additional information and background on sectors that have subsequently
come under stress from the continuing difficulties in global capital
markets.

• High delinquencies in US sub-prime mortgages originated in 2006 causes sharp declines in the value of mortgage-backed securities.
• Problems spread to structured securities backed by sub-prime loans, including collateralised debt obligations (CDOs) and residential mortgage-backed securities (RMBS) and asset-backed commercial paper (ABCP) conduits. Structured investment vehicles (SIVs) holding US subprime
assets also affected.
• Investors exercising caution towards complex, risky or non-standard structured products.


• Investor risk aversion spills over to a key source of short-term funding - the commercial paper (CP) market - leading to a global tightening in liquidity.
• FX markets and equity markets also impacted by increased volatility, as investment positions were liquidated to meet investor redemptions.


• Prolonged dislocation in capital markets puts stress on corporates seeking re-financing, with the situation compounded by fears of US recession, slowing in the UK, Japanese and other economies across the globe.
• Contagion spreading to monoline insurers and the paper they support.
• Beginning to see some highly geared companies, and those requiring large refinancing come under scrutiny due to perceived difficulty in sourcing funds.
• Credit risk continuing to re-price higher.

simplified summary: T-bones will be on special for a while yet

 

[refined silver]

Posted On: Wednesday, February 06, 2008, 8:06:00 PM EST

The System Is Broken Author: Jim Sinclair

Dear Comrades in Golden Arms (CIGAs),

There is no question about this fact regardless of the camouflage spin. The system has been derailed by the popular and profitable OTC derivatives that are now melting down, taking institutions and people along with it.

Let me explain to you why there is so much fear and distrust between financial institutions, then you will see why the one time hand out of money and interest rates dropping to zero have no hope of doing much more than giving one month of some improved statistics and a decade of hyper-inflation.

Lets assume you have entered into an OTC derivative whereby you own (long) the Dow Jones index at 10,000. You are still in the position. Today’s action is your last straw. You decide to take your $1 billion profit.

There is no OTC derivative clearinghouse. You do not get paid every day as a winner, nor do you pay out every night when losing. No one in an OTC derivative has a margin maintenance requirements. You just hold a special performance contract upon which the financial integrity depends on the loser in the arrangement.

Lets assume you have an OTC derivative that results in owning the profit between the Dow index at 10,000 and tonight's closing of that index. Tomorrow you inform the party obligated to deliver you the Dow index at 10,000 that you wish to close the obligation. You would anticipate the other side would simply buy you out of the obligation, having hedged their obligation somewhere else.

The problem arises when the party to the arrangement required to perform simply cannot because of outrageous markdowns and the flight of capital. They have quite simply lost the ability to make good on these many obligations.

So there you are with a one billion dollar profit, marked to model, taken into your earnings statement that does no exists.

As a result both you and your counter-party have problems financially with the need to restate your financials.

I have simplified this so that it is understandable.

As a result of this problem with derivatives triggered by the meltdown of real-estate structured products, no financial institutions trust any other or their paper.

The OTC derivative merchants have turned out to be the merchants of financial death, hidden carefully from the eyes of the public.

Now everyone holding a derivative contract either with a profit or loss fears for its consequences. The loser fears the bankruptcy judge. The winner fears his winnings are phantom gains never to be realized. Every financial entity fears every other financial entity to the tune now of a notional value of over $500 trillion.

I recently did an article that demonstrated when a derivative fails, notional value becomes total value. That means the potential problem is over $500 trillion.

No reduction of interest rates, even to zero, can make those that distrust each other believers again.

No one-time gift of money to the hypnotic public will make those that distrust each other believers again.

The CDO market no longer exists. The commercial paper marker is in shambles.

The credit markets are trembling over the needful reduction in the rating of the entities that have guaranteed trillions of dollars of debt in many forms. These entities granted OTC derivatives named default derivatives that are soon to be publicly worthless.

Today it was announced rating companies are considering their methods of rating to distinguish firms that granted derivative products. That might fool the public, but not the skeptical international banking firms. Therefore this game will not make those that distrust each other believers again.

The problem has no practical solution. The methods to make the hypnotic public think the problem is now solved or will be soon will solve nothing and will, without regard for the level of business activity, bring hyper-inflation.

I have told you for months that “This is it” and it certainly is.

Gold will go to $1650 and the US dollar to .5200.

 

[refined silver]

Hang on ...... what's with the " WE " ?

I'm innocent ask my barrister .

Amen!

 

[numbercruncher]

I recently did an article that demonstrated when a derivative fails, notional value becomes total value. That means the potential problem is over $500 trillion.

Bah whats half a quadrillion , next theyll move up to quintillion onto duodecillion and novemdecillion then bust their calculators and declare the planet insolvent

Seriously they say free markets are the best, but look at this mess , its what happens when things go unregulated I guess !

 

[refined silver]

Bah whats half a quadrillion , next theyll move up to quintillion onto duodecillion and novemdecillion then bust their calculators and declare the planet insolvent

Seriously they say free markets are the best, but look at this mess , its what happens when things go unregulated I guess !

Yeah 500 trillion thats the BIS number for OTC derivatives. And its still increasing exponentially. The pack of cards is coming down and paper money is burning. Weimar Republic anyone??

 

[numbercruncher]

News from that last Bastion of Consumerism, Walmart .....

Wal-Mart (WMT, Fortune 500), the world's largest retailer, said January sales at its stores open at least a year rose just 0.5% versus its own forecast for a 2% increase for the month.

http://money.cnn.com/2008/02/07/news/economy/Jan_retailsales/index.htm

Wonder if that growth even exceeeded Inflation for the month ?

Surely they can offically call recession now !

 

[Kauri]

FRB Atlanta's Lockhart (non-voter, moderate to hawkish) says what
doesn't kill the financial sector will make it stronger.

signs of a global slowdown increase. Fuelling the pressure was the news after-hours yesterday evening from Cisco that a marked slowdown in US and European orders had emerged. The news underpins the view that the slowdown is not isolated to the US. Further pressuring stocks is the poor news from same-store sales, initiated by the poor Macy's report yesterday. The bad news has continued with Wal-Mart reporting a 0.5% rise in sales compared to expectations of a 2.0% rise. Nordstrom sales dropped sharply by 6.6% compared to analysts estimates of -0.7% and Dillard"s fell 12% against estimates of 5.3%.