Imminent and severe market correction

[numbercruncher]

We must be due to see some work from the PPT tonight ?

 

[Trembling Hand]

Although, early last year, he did say something about selling into stupidity and greed (or something to that effect). That was a reasonable article, but given his commercial arrangments, I would think that it is his job to keep raving on with the bull until the very last second.

What about this one from today,

Yes, it’s true that last year we said equities would likely outperform cash in 2008; however with 2008 now two months old, cash is looking better and better.

http://www.eurekareport.com.au
And he charges people for this. will he be giving any refunds on a defective product??

 

[josjes]

One aspect of the bear to bull transition (and I am not predicting when) is that equities should turn up before the smart funds, commentators, smart analysts charging money for forecasting market, (like Alan Kohler ?? ) etc imply they should.

Stock is a leading indicator. They will just turn up for seemingly no reason and it will catch most people off guard and most people will think it is a head fake.
Will it go down another 10%, heck I don't know. But I know that a lot of the bad news and more bad news have been priced in.

This is why I don't want to be completely out ever. I won't have to be right about the bottom--worst case I will lag not miss, also usually the move from the real bottom would likely be big and fast.

 

[ithatheekret]

We must be due to see some work from the PPT tonight ?

You know when I first saw this acronym , it had me stumped , apart from Perpetual trustees , Putnams and parts per trillion I was lost .

Now I know it refers to the working capital group , I think the parts per trillion matches well too .

 

[Kauri]

US construction spending down 1.7%,...
ISM under the majic 50.. down to 48.3 from 50.7,...
Yehaa..it's all good... lets have a 50 point rally???
Baffled
..........Kauri

 

[chops_a_must]

US construction spending down 1.7%,...
ISM under the majic 50.. down to 48.3 from 50.7,...
Yehaa..it's all good... lets have a 50 point rally???
Baffled
..........Kauri

Hey, I'm not complaining. I bought some POT the other week.

First time since my teenage years... takes me back...

 

[Whiskers]

US construction spending down 1.7%,...
ISM under the majic 50.. down to 48.3 from 50.7,...
Yehaa..it's all good... lets have a 50 point rally???
Baffled
..........Kauri

New orders 49.1, only slightly lower than 49.5 for January.

Looking foreward, looking not to bad.

 

[dhukka]

We must be due to see some work from the PPT tonight ?

Looks like you nailed it NC, a 100 point rally into the close.

 

[dhukka]

Occasionally CNBC does do some good interviews. Last night they interviewed the Oracle from Omaha and he had some interesting things to say about business and the economy. Below are some highlights;

Buffett Interview on CNBC

Warren Buffett was interviewed for three hours on CNBC today. Here is the transcript and a brief excerpt on housing prices (hat tip cord):

LIESMAN: One of the most striking things in this poll is for the first time--we've done this for four quarters now--Americans now look for a decline in their home values. What's the significance of that from an economic point of view, Mr. Buffett?

BUFFETT: Well, it has a huge effect because, you know, with 60 percent-plus of the American people being homeowners, as being a huge asset--and in many cases it's a leverage asset--it obviously is going to be on their mind big time. And I get the figures every month. We have a number of real estate brokerage operations around the country, and I get the--I get the figures from many markets on listings and sales, and I've seen something like Dade and Broward County go from 6,000 listings and 3600 sales a month to where they're now, I think, 82,000 listings and about 1500 sales a month. So unless there's some major intervention by the government in some way, or something of the sort, home prices have not stopped going down. Now, they will at some point.

QUICK: Any of the intervention plans we've seen from the government strike you as being a good idea?

BUFFETT: Well, that--I haven't seen the details on many of them, but I think it's very hard to start interfering with markets without having a whole lot of unintended consequences.

And on a recession:

QUICK: Let's move on to David from Defiance, Ohio. He asks, `How would you define a recession?' This is something we talk an awful lot about on the show, but he says, `I've been listening to a lot of discussions on CNBC, some of which can be very annoying because they tend to be so outrageously vocal and the experts believe two quarters of negative growth qualifies as a recession.' Is that the surest definition of it? Or do you think it's broader than just that?

BUFFETT: Well, it's the standard definition, but if you think about it, population grows 1 percent of year. So you could have growth of GDP of a 1/2 a percent, but GDP per capita would be going down. So the very definition, you might say, is a little bit flawed if it--if it doesn't allow for the fact that GDP per capita can go down while growth GDP's going up. Beyond that, I would say by any common sense definition, we are in a recession. And...

QUICK: You would?

BUFFETT: Yeah, we wouldn't--we haven't had two consecutive quarters of GDP growth, but I will tell you that, on balance, most people's situation, certainly their net worth has been heading south now for a considerable period of time. And if you owned a house, and you had an 80 percent mortgage on it, and so you had 20 percent equity a year ago, you might not have any equity now. And millions of people are in positions somewhat similar to that, and people would--people that own municipal bonds feel poorer today than they did a few months ago.

QUICK: Mm-hmm.

BUFFETT: So business is slowing down. We have--we have retail stores in candy and home furnishings and jewelry; across the board I'm seeing a significant slowdown and, of course...

QUICK: That's the first time I've heard you say you think we're actually in a recession right now.

BUFFETT: Yeah, well, I think, when we talked earlier, I said we might be.

QUICK: Right.

BUFFETT: But it--no, I would--I would say that--but when I say we're in a recession, it doesn't meet the technical definition. We aren't in the second quarter of--we can't be because we don't know what the fourth quarter of last year was. But I think that, from a commonsense standpoint, we're in a recession now.​

 

[dhukka]

The headline says Merrill has cut Citi's earnings forecasts, slahsed would be more appropriate IMO as they cut FY08 earnings estimates by 88%.

Merrill Lynch cuts Citigroup earnings estimates

LONDON (MarketWatch) -- Merrill Lynch analyst Guy Moszkowski took a knife to Citigroup (C) earnings estimates, forecasting the bank will earn 24 cents for the year and lose $1.66 a share during the first quarter, compared to a previous forecast for $2.74 per share in annual earnings and 55 cents a share in first-quarter earnings. Citigroup may report a $15 billion hit on its subprime/CDO exposure and another $3 billion hit from commercial real estate, leverage lending and consumer lending provisions. But he kept Citi's rating at neutral, saying it trades near proforma book value adjusted for the expected loss this quarter and recent capital raising.

 

[Whiskers]

Good to see a positive light for a change... after all adversity is the seed of opportunity.

Housing: Best time to buy in four years
Home values have declined across the country, giving homebuyers the best buys they've had since 2004.

http://money.cnn.com/2008/03/04/real_estate/markets_less_overvalued/index.htm?postversion=2008030413

Worth noteing this so called subprime crisis could turnaround into fast foreward again relatively easily. But while Bush fumbles and farts around it will probably take a change of gov to get things rolling. I can see a lot of sentiment for the below proposals sweeping the democrats into office come november.

Bush hates the idea of no. 1, but I'd reckon a lot of people, particularly subprime home buyers would support it on the basis that it was lax gov supervision and regulation of the finance markets that allowed the problem to develop, so it should shoulder more of the solution.

Housing rescue: What you need to know
There are so many plans being floated to stem the subprime crisis and avert foreclosures, it's hard to keep track. A cheat sheet on the major proposals.

1. Government fix: Uncle Sam buys mortgages
2. Wall Street's plan: Freddie, Fannie to the rescue
3. Community funds: Fix neighborhoods
4. State-issued bonds: Tax-exempt solution

http://money.cnn.com/galleries/2008/real_estate/0802/gallery.government_funded_rescues/index.html

 

[dhukka]

Good to see a positive light for a change... after all adversity is the seed of opportunity.



Worth noteing this so called subprime crisis could turnaround into fast foreward again relatively easily. But while Bush fumbles and farts around it will probably take a change of gov to get things rolling. I can see a lot of sentiment for the below proposals sweeping the democrats into office come november.

Bush hates the idea of no. 1, but I'd reckon a lot of people, particularly subprime home buyers would support it on the basis that it was lax gov supervision and regulation of the finance markets that allowed the problem to develop, so it should shoulder more of the solution.

A more accurate title for the first article would be 'Least Worst Time To Buy in 4 Years' Interesting that they site DeKaser who called a bottom in housing 6 months ago.

Worth noteing this so called subprime crisis could turnaround into fast foreward again relatively easily.

Apart from the spelling , this has to be one of the funniest things I've read in a while. The subprime market has basically disappeared, lending standards have tightened across the board. Getting a loan with nothing down and a low FICO is extremely difficult if not impossible, not to mention that Fed rate cuts have barely budged mortgage rates.

Yes I'm sure taxpayers are going to leap at the idea of using their money to bail out idiots who can't manage their finances. One issue I'm glad to be in agreement with Bush on. Of course, there is every reason to expect that some type of taxpayer bailout will happen when it becomes clear there is really no other alternative. Privatize the profits, socialize the losses.

Time for effective policy response has passed, a serious deleveraging is underway. Sure, new policies will no doubt be implemented but as usual, government was late on the scene and policy response will have limited effects.

Rapid deterioration
Housing in deepest decline since the Great Depression, economist says


Housing is in its "deepest, most rapid downswing since the Great Depression," the chief economist for the National Association of Home Builders said Wednesday, and the downward momentum on housing prices appears to be accelerating.

The NAHB's latest forecast calls for new-home sales to drop 22% this year, bringing sales 55% under the peak reached in late 2005. Housing starts are predicted to tumble 31% in 2008, putting starts 60% off their high of three years ago.

"More and more of the country is now involved in the contraction, where six months ago it was not as widespread," said David Seiders, the NAHB's chief economist, on a conference call with reporters. "Housing is in a major contraction mode and will be another major, heavy weight on the economy in the first quarter."

A home-sales measure tracked by the association that includes data on cancellations from 30 large U.S. builders that account for one-quarter of all sales shows sales down 65% from their peak in 2005, Seiders said. Government measures of home sales do not include numbers from contracts that were signed but buyers later backed out.
Vacant homes for sale in the U.S. now number about 2 million, Seiders said, an increase of 800,000 from 2005. That inventory overhang is bedeviling builders, who have been forced to cut prices and write down the value of their holdings. Read more on the builders' plight.
"Weak demand and oversupply naturally put downward pressure on prices," Seiders said.

Citing the Case-Shiller index, Seiders noted that home prices nationally have fallen nearly 10% from their peak in early 2006 and that prices were declining at a 19% annual rate in the fourth quarter. "The downward momentum was building at the end of the year," he said. Read the latest Case-Shiller numbers.

Home sales may bottom out later this year, Seiders predicted, but housing starts are not likely to rebound until 2009. Housing, which took 1.25 percentage points off GDP in the fourth quarter, looks like it will continue to be a major drag on gross domestic product at least through the end of 2008, he said.

 

[Whiskers]

A more accurate title for the first article would be 'Least Worst Time To Buy in 4 Years' .

Well doesn't that mean the same thing... except that positive language is easier to comprehend and respond positively too. I did say adversity is the seed of opportunity. Heck man even Buffet is looking out for good buys atm.

Apart from the spelling ,

Gee I love it when you start nit-picking dhukka... What was it you are doing now... something about teaching english!? From your previous paragraph... :

A more accurate title for the first article would be 'Least Worst Time To Buy in 4 Years' Interesting that they site DeKaser who called a bottom in housing 6 months ago.

I've only got one eye, been up early cos couldn't sleep, suffering from more ailments than you can poke a stick at... what's your excuse!

this has to be one of the funniest things I've read in a while. The subprime market has basically disappeared, lending standards have tightened across the board. Getting a loan with nothing down and a low FICO is extremely difficult if not impossible, not to mention that Fed rate cuts have barely budged mortgage rates.

Exactly, why do you think I said... 'so called' subprime crisis.

Yes I'm sure taxpayers are going to leap at the idea of using their money to bail out idiots who can't manage their finances.

I dare you to stand in a crowd of US home owners and say that. Anyway for the most part the problem was laxed regulation of the finance industry as you have just acknowledged and very shonky contracts and preditory marketing practices.

One issue I'm glad to be in agreement with Bush on. Of course, there is every reason to expect that some type of taxpayer bailout will happen when it becomes clear there is really no other alternative. Privatize the profits, socialize the losses.

I think it's more like privatize the losses and socialise the profits in case 1.
The government buys at-risk mortgages from lenders at steep discounts, restructures the loans to reduce payments and resells the loans in secondary markets. Investors in mortgage-backed securities take a loss, but get most of their investment back. Borrowers get refinanced mortgages

The way I see it the gov has them over a bit of a barrel here. If they refuse to voluntary refinance the mortgages en mass, either directly with the mortgagor or by selling the mortgage to a gov agency, they run the risk of driving more people out of their houses, adding more downward pressure to the housing market and continuing losses for longer. I'd reckon the huge volume of abondaned deterioting houses already should tell the mortgagees there is no future in continuing to increase rates and foreclose on property to sit idle and decay away.

As far as new home building is concerned, it doesn't matter if that stays stagnant for awhile. The recovery of the US economy will come more from restructuring those at risk mortgages and getting all the vacant housing resold or rented at reasonable, affordable rates without all those undisclosed, shonky hidden detail contracts. Then they are back to some form of normality.

 

[dhukka]

Well doesn't that mean the same thing... except that positive language is easier to comprehend and respond positively too. I did say adversity is the seed of opportunity. Heck man even Buffet is looking out for good buys atm.

Positive language in this case obscures the truth and has the postential to lead to detrimental action IMO.

Gee I love it when you start nit-picking dhukka... What was it you are doing now... something about teaching english!? From your previous paragraph... :


I've only got one eye, been up early cos couldn't sleep, suffering from more ailments than you can poke a stick at... what's your excuse!

Haha, that's a shocker of mine. I was woken by a powerpoint exploding in my bedroom at 4.30 am this morning. Still that's no excuse, there is no excuse for poor spelling.

I've only got one eye, been up early cos couldn't sleep, suffering from more ailments than you can poke a stick at

That must be a permanent state you're in. Your spelling is generally poor. All that positive thinking is obviously not working too well for you.

Exactly, why do you think I said... 'so called' subprime crisis.

Let me get this straight, the subprime crisis, housing meltdown call it whatever you like, according to you, can be turned around quite easily. Surely you are the only person on the planet that believes this at the moment?

I dare you to stand in a crowd of US home owners and say that.

Would love to, just had lunch with a US friend yesterday and he agreed that most such people are morons.

Anyway for the most part the problem was laxed regulation of the finance industry as you have just acknowledged and very shonky contracts and preditory marketing practices.

Way over-simplified, many more issues have combined to bring about the current state of affairs.

I think it's more like privatize the losses and socialise the profits in case 1.
The government buys at-risk mortgages from lenders at steep discounts, restructures the loans to reduce payments and resells the loans in secondary markets. Investors in mortgage-backed securities take a loss, but get most of their investment back. Borrowers get refinanced mortgages

So let's get this straight, the US government is going to use taxpayers money to buy distressed mortgages cheaply and then sell them at a profit. Sounds brilliant, looks like problem solved.

The way I see it the gov has them over a bit of a barrel here. If they refuse to voluntary refinance the mortgages en mass, either directly with the mortgagor or by selling the mortgage to a gov agency, they run the risk of driving more people out of their houses, adding more downward pressure to the housing market and continuing losses for longer. I'd reckon the huge volume of abondaned deterioting houses already should tell the mortgagees there is no future in continuing to increase rates and foreclose on property to sit idle and decay away.

As far as new home building is concerned, it doesn't matter if that stays stagnant for awhile. The recovery of the US economy will come more from restructuring those at risk mortgages and getting all the vacant housing resold or rented at reasonable, affordable rates without all those undisclosed, shonky hidden detail contracts. Then they are back to some form of normality.

A lot of people don't need to be forced out of their homes, there is no incentive for people to stay in their houses with negative equity. Walking away makes far more economic sense for such people.

Housing is not the stockmarket, it deos not turn on a dime, it is a slow motion event. House prices in some areas of the United Sates declined for 5 consecutive years in the last downturn between 1989 - 1994 and by any metric the current housing crisis is worse than that one. On top of that, US consumers actually had a positive savings rate back in the early 90's. They have never been more in debt than they are now. A viable recovery in US housing is still years away.

 

[Whiskers]

Geez dhukka, I'm glad they haven't got you trying to manage them a solution to the problem. You really are acting like a hypochondriac... wandering off the point, wallowing in crititism.

Listen up... you might learn something here mate.

While you believe the problem is overwhelming and out of control, it always will be in your minds eye. For those of us that know, the way to go is to break the problem down into little bits that are more manageable and start to do one thing at a time, praise good work and one eventually gets the problem solved. If you don't think positive you'll never act positively.

Now ignoring your super macro hysteria, three of the four options mooted in the article already have instruments in place that can be modified and or expanded to help releive the cash flow stress mortgagors find themselves in and eventually get consumer spending in the US back to something like normal. That has got to be a key necessity to avoid or quickly recover from a recession.

Since you mention moron... don't you think it's moronic to dwell in visions of doom and gloom and critism and not even acknowledge some merit in, let alone praise the implimentation of schemes to help relieve the problem.

Btw, since you are so hypercritical...

1. Have a look at your spelling again, and
2. I really do have one prosthetic eye and loosing sight in the other etc... I meant that in jest earlier, but since you seem unable to resist taking 'moronic' swipes at people... I still do my best to deal in reality, to turn adversity into opportunity by working with the best in people. I reckon even when I'm totally blind and bed-ridden, I'd still have a better outlook on life and contribute more to a positive society by finding solutions to problems than you... mate.

 

[explod]

Geez dhukka, I'm glad they haven't got you trying to manage them a solution to the problem. You really are acting like a hypochondriac... wandering off the point, wallowing in crititism.

Listen up... you might learn something here mate.

While you believe the problem is overwhelming and out of control, it always will be in your minds eye. For those of us that know, the way to go is to break the problem down into little bits that are more manageable and start to do one thing at a time, praise good work and one eventually gets the problem solved. If you don't think positive you'll never act positively.

Now ignoring your super macro hysteria, three of the four options mooted in the article already have instruments in place that can be modified and or expanded to help releive the cash flow stress mortgagors find themselves in and eventually get consumer spending in the US back to something like normal. That has got to be a key necessity to avoid or quickly recover from a recession.

Since you mention moron... don't you think it's moronic to dwell in visions of doom and gloom and critism and not even acknowledge some merit in, let alone praise the implimentation of schemes to help relieve the problem.

Btw, since you are so hypercritical...

1. Have a look at your spelling again, and
2. I really do have one prosthetic eye and loosing sight in the other etc... I meant that in jest earlier, but since you seem unable to resist taking 'moronic' swipes at people... I still do my best to deal in reality, to turn adversity into opportunity by working with the best in people. I reckon even when I'm totally blind and bed-ridden, I'd still have a better outlook on life and contribute more to a positive society by finding solutions to problems than you... mate.

With respect I do think that you should examine the problems in the US a little closer as the implications are huge. Just to take a look at one angle; the sub-prime aspect, the bad loans have been wrapped and sold around the traps and one of the big owners of the subprime (nearly worthless) loans are the US pension funds. Not only is a large part of middle America going to lose their abodes but the pensions as well.

GWB is good at the speeches, and the aid of lower interest rates is just to help bank liquidity (which has not worked) so I would be pleased to hear of your take on how they will sort it all out.

I was warned of the looming problems some years ago and rather than take the word of others I purchased all the books I could on the looming economic outlook. Full and intensive research is rewarded. Off the cuff from the daily news is financial suicide.

Having said that there are some very wise and experienced mentors on this website who are worth identifying; a work through their threads will reward.

 

[TheAbyss]

Cmon guys. You both are passionate about what you do and do it very well. I would not like to see one of you pack your bat and ball and start sulking.

If we ran a spelling and and grammar checker on this site it would implode. Lets not be to harsh and try and take some positives from the thread. Sure the positive may well be that there is no good news at the moment but respect the input.

 

[explod]

Cmon guys. You both are passionate about what you do and do it very well. I would not like to see one of you pack your bat and ball and start sulking.

If we ran a spelling and and grammar checker on this site it would implode. Lets not be to harsh and try and take some positives from the thread. Sure the positive may well be that there is no good news at the moment but respect the input.

The take on the news is in the eye of the beholder.

I believe it is dreadful what is happening to ordinary people because of the financial mess and I do not like the idea that I am profiting from it either.

However because of the mess I am invested in physical gold, gold, oil and food stocks. That is a positive and in those areas the outlook is bright. No doom and gloom.

One needs to take a critical look at what is going on and take action accordingly. When some of us point out how bad some things are it is to indicate caution and to show the way to alternate directions.

And yes, little in-fights are a negative that takes us to the level of the lowest denominator. Or a chain is only as strong as the weakest link.

Cheers and be happy. Oxiana has just become a good buy again, look at the chart, just love this swing trading caper.

 

[dhukka]

Geez dhukka, I'm glad they haven't got you trying to manage them a solution to the problem. You really are acting like a hypochondriac... wandering off the point, wallowing in crititism.

Listen up... you might learn something here mate.

While you believe the problem is overwhelming and out of control, it always will be in your minds eye.

The classic straw man argument to any negative or critical points. Make it out like those who offer criticsm see the end of the world. I see this entire deleverging process in housing, credit markets, stock markets and probably soon to be, commodities as a huge opportunity. I am becoming more optimistic about investing the more negative things get. I didn't buy a single stock last year but began buying on January 22nd this year. How's that for positive action?

For those of us that know, the way to go is to break the problem down into little bits that are more manageable and start to do one thing at a time, praise good work and one eventually gets the problem solved.

Hilarious stuff, absolutely priceless.

If you don't think positive you'll never act positively.

If I want any more of these nuggets of wisdom I'll get myself a refrigerator magnet.

Now ignoring your super macro hysteria,

Point out the hysterical parts.

three of the four options mooted in the article already have instruments in place that can be modified and or expanded to help releive the cash flow stress mortgagors find themselves in and eventually get consumer spending in the US back to something like normal. That has got to be a key necessity to avoid or quickly recover from a recession. .

Who cares about cashflow stressed mortgagors that that built their business model on ponzi financing? Let them reap the rewards of their flawed business models. Let cashflow stressed morons who borrowed more than they could pay back file for chapter 11 or walk away from their homes. In short, let the market do its job.

Since you mention moron... don't you think it's moronic to dwell in visions of doom and gloom and critism and not even acknowledge some merit in, let alone praise the implimentation of schemes to help relieve the problem.

I don't think it's moronic to point out negatives, especially if you can back up your arguments. I'll praise schemes that I think are worthy of praise. Contrary to popular belief I think Bernanke's unusually candid admissions of possible bank failures and more writeoffs to come are admirable despite what nervous trigger fingers on Wall Street think.

Btw, since you are so hypercritical...

1. Have a look at your spelling again, and
2. I really do have one prosthetic eye and loosing sight in the other etc... I meant that in jest earlier, but since you seem unable to resist taking 'moronic' swipes at people... I still do my best to deal in reality, to turn adversity into opportunity by working with the best in people. I reckon even when I'm totally blind and bed-ridden, I'd still have a better outlook on life and contribute more to a positive society by finding solutions to problems than you... mate.

Boo f**king hoo, I find self-pity pathetic. As above, I am salivating at the the prospect of turning adversity into opportunity in the coming months and years.

 

[Whiskers]

Cmon guys. You both are passionate about what you do and do it very well. I would not like to see one of you pack your bat and ball and start sulking.

If we ran a spelling and and grammar checker on this site it would implode. Lets not be to harsh and try and take some positives from the thread. Sure the positive may well be that there is no good news at the moment but respect the input.

Don't worry about me Abyss, I won't be going anywhere. I'll continue to call the positive iniatives as they come to keep a bit of balance and perspective on the topic.

Explod, I see your point. I've known the US economy is fundamentally flawed for years and all the other problems they have ahead of them. I mentioned the retirement savings issue somewhere not long ago along with a looming health care crisis.

The simple point of my original post (before dhukka got his t!ts in a tangle again) was that consumer sentiment is an important and powerful effect on the economy and I believe it is a positive step in the right direction that at least in some quarters people are starting to get over the gloom and doom to see oportunities to make some positive steps to get over the housing affordability problem.

It's obviously not going to fix all the problems, but I challenge anyone to deny that the housing affordability issue is not an urgent and important place to get fixed for the US economy to have any hope of turning around. I'm open to suggestions of a better place to start.

Dhukka, Just grow up man.

Other people dissagree with me at times, and I with them, but you really have trouble handling your emotions and responding with decorum.