Imminent and severe market correction

[dhukka]

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.

Allow me to disagree. The comprehensive household survey recently conducted by CNBC found that only 16% of US homeowners think the value of their home will go down in the coming year. 17% believe it will rise. I don't think sentiment has got nearly negative enough. I'd say more than a few US homeowners expecting their home value to remain unchanged or rise in the coming year will be disappointed.

Yes consumer sentiment surveys have dipped recently but not to doom and gloom proportions. The stock market continues to hover on hope and way out of whack earnings forecasts. We had a glimmer of real panic in late January but that quickly subsided.

Consumer spending is the most stable part of the US economy. In nominal terms, US consumer spending has never registered year over year declines, even in recessions.

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.

I agree that housing and anything associated with debt is the most urgent concern and will be the big losers during the current recession. I doubt there will be deep contractions in output.

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.

Seems you are projecting again. I'll continue to call comments as I see them.

 

[IFocus]

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.

With a US FED dropping the rate from a low base rapidly in a possible inflationary environment to me shows some one with their hands on the levers thinks there is screaming major risk.....

 

[pepperoni]

http://www.telegraph.co.uk/money/ma...1YourView&xml=/money/2008/03/03/ccview103.xml

 

[IFocus]

Michael West from todays SHM

'Watch out below!' is the best investment advice




http://business.smh.com.au/watch-out-below-is-the-best-investment-advice/20080305-1x1p.html

 

[Whiskers]

Well thank you for the change of demeanour, dhukka.

I'm sure you can prattle off all manner of macro statistics, but as I said before, sometimes one has to get down to the micro stuff and take a bit at a time to get things rolling.

The property market is quite variable across the country as is the mortgage issue. There are obviously going to be some areas/states that will bottom out and start to recover before others. Therein lays the opportunity to get those proactive schemes going as they present.

Assuming the ideas take off in a reasonably substantial way, which I expect it will especially on a democrat win in november, and the mortgages are off loaded and renegotiated to more acceptable terms, it follows that a lot of pressure is taken off the banks and insurers re future losses... and another problem or two starts to unwind and so it goes.

 

[dhukka]

Well thank you for the change of demeanour, dhukka.

I'm sure you can prattle off all manner of macro statistics, but as I said before, sometimes one has to get down to the micro stuff and take a bit at a time to get things rolling.

The property market is quite variable across the country as is the mortgage issue. There are obviously going to be some areas/states that will bottom out and start to recover before others. Therein lays the opportunity to get those proactive schemes going as they present.

Assuming the ideas take off in a reasonably substantial way, which I expect it will especially on a democrat win in november, and the mortgages are off loaded and renegotiated to more acceptable terms, it follows that a lot of pressure is taken off the banks and insurers re future losses... and another problem or two starts to unwind and so it goes.

So you're talking early 2009 before these so-called intiatives get going. I can live with that. What happens in the meantime? Let me give you a sneak preview.

Helicopter boy continues to cut rates to no avail, The stock market rides the slope of hope lower. Banks continue to take more writedowns and go begging for more capital. Analysts drastically cut earnings forecasts. House prices decline further, retail sales go negative in real terms, unemployment rises, the ISM's continue in contraction mode, consumer sentiment deteriorates further. The economy does not recover with the aid of fiscal stimulus number 1. Fiscal non-stimulus no 2 is proposed. Taxpayer bailouts of mortgage originators and households gain popular support. The monolines get bailed out ...........again. Corporate bond defaults rise, Bankruptcies rise. Commercial real estate slumps. More people walk away from their negative equity homes. This is going to be fun.

 

[explod]

With a US FED dropping the rate from a low base rapidly in a possible inflationary environment to me shows some one with their hands on the levers thinks there is screaming major risk.....

Not sure I understand your thrust but the bloke on the lever is pushing it the wrong way from my view.

As in Aus., interest rates need to go up to reign in the debt orgy.

 

[chops_a_must]

Not sure I understand your thrust but the bloke on the lever is pushing it the wrong way from my view.

As in Aus., interest rates need to go up to reign in the debt orgy.

I agree.

All the US fed is doing is punishing those who have been sensible and frugal.

There is no incentive to save, if the cash rate is below inflation.

But that maybe their point... force everyone to spend continuously.

 

[IFocus]

Not sure I understand your thrust but the bloke on the lever is pushing it the wrong way from my view.

As in Aus., interest rates need to go up to reign in the debt orgy.

Sorry Explod I was being vague I was agreeing with your point about there being major problems and they run deep so much so that the FED is willing to drop rates in a desperate attempt to provide liquidity etc while in a rising inflation environment really dangerous stuff but they think its worth the risk because the other option is possible melt down.

I think dhukka is on the money

 

[dhukka]

Here's an example of people taking some positive action. 4 thousand of them filing for bankruptcy a day in the US. Click on the link for the full story.

Filings for Bankruptcy Up 18% in February

Americans filed for bankruptcy in growing numbers in February, buckling under the combined weight of rising energy prices, a weakening housing market and sky-high personal debts.

An average of 3,960 bankruptcy petitions were filed per day nationwide last month, up 18 percent from January and up 28 percent from a year earlier, according to Automated Access to Court Electronic Records, a bankruptcy data and management company.

February was the busiest month for filings since Congress overhauled the bankruptcy law in 2005. Bankruptcy experts said the rise was particularly worrisome because those changes made filing for bankruptcy more complicated and expensive.

“This number of bankruptcies may be under-representative of the true financial distress consumers are feeling because of the steps Congress has taken,” said Jack Williams, a scholar in residence at the American Bankruptcy Institute and a professor at Georgia State University.

The latest figures show the financial pain is spreading from states like California and Florida, which exemplified the housing boom and subsequent bust, to those along the Eastern Seaboard like Maryland, Virginia and Delaware, which were among the 10 states with the largest percentage increase in filings in January and February. “You are seeing a good-size uptick everywhere,” said Mike Bickford, president of Automated Access.

Bankruptcy experts caution, however, that data from just one or two months can be misleading.

 

[Trembling Hand]

Here's an example of people taking some positive action. 4 thousand of them filing for bankruptcy a day in the US. Click on the link for the full story.

Out of 300 odd mil that is not that many?

Would equate to about 280 a day in Oz. Wonder how many we have.

 

[dhukka]

And that makes 3 downgrades of Citi in 10 days. What's the bet Citi fails to break even for the full year in 2008?

Punk Ziegel trims Citigroup Q1 EPS outlook

Punk Ziegel analyst Dick Bove on Wednesday trimmed his first quarter earnings outlook for Citigroup Inc (C) to account for the likelihood of sizable write-offs in the period. "It now appears that Citigroup may lose $1.42 per share in the quarter. This will bring down 2008 results to an estimated $0.50 per share," Bove said in his report. Bove said his target price on the stock remains $34 per share and the rating stays at a buy.

 

[dhukka]

Out of 300 odd mil that is not that many?

Would equate to about 280 a day in Oz. Wonder how many we have.

Sounds like a lot to me, especially with an economy that has a 5% unemployment rate and is the home of capitalism and the greatest country on earth..........sorry got carried away, been watching too much Kudlow & Co.

 

[insider]

Out of 300 odd mil that is not that many?

Would equate to about 280 a day in Oz. Wonder how many we have.

I read some where it was 4 a day or 28 a week

 

[ithatheekret]

I think Benny Boy has shown his hand and called . Apart from passing the reigns back to the Treasury Dept ., he has also shown that he is determined to save the home prices and reinflated them if at all possible . It can be seen in the forwarding of the Thrift Supervision plan whilst making his address .

quote : "Ultimately, though, real relief for the mortgage market requires stabilization, and then recovery, in the nation's housing sector" : unquote .

With that plan , there will be a lot of refinacing of homes , although those that do may have to go on a baked beans diet for some considerable time , if they can afford the tins of baked beans .................


There's alot of running about being done as well , running around looking for homeowners that don't exist , strawbuyers and invisible buyers that have been foreclosed on and not found . The frauds will only deepen the problems of the lenders , who will pass it on to borrowers if at all possible , just as insurers do , make everyone else pay for others mistakes , booboos and criminal activities .

 

[Whiskers]

I think your pretty right there, ithatheekret.

Arguements about the right or wrongs of it aside, my previous post about the various options and moves being attempted and contemplated by the congress suggested to me pretty clearly that settling the houseing situation was a priority. As you say the buyers aren't there yet in all areas, because the circumstances aren't right yet.

The community housing option which is already in place and can be expanded, but the ability of the local authority to borrow to buy properties poses some problems at the moment.

I just get the feeling that sooner or later a higher proportion of those vacant houses will go back to more affordable rentals. Probably gov owned in some form and a good chunk of the rest refinanced through gov intervention again.

Again, not interested in the economic correctness or otherwise... just making the obversation that assuming these observations are correct, there could well be a mini exponentional unwravelling of part of the big problem and the bottom of the share market could be in sooner than many expect.

 

[ithatheekret]

The housing situation will come about eventually , when ....... , well if we were to guesstimate that on historical grounds , we'll be waiting 10-15 years .

Say when the world can afford $100 at a wallet level , not a balance sheet level . At present only some balance sheets can afford high oil .

Nobodys saying what's really happening , probably because 98% of the market have never experienced it , myself included . But I've seen high oil before and know what it does all by itself .

The only thing that is different this time is the amount of monies that need to be stashed by Sovereign funds .

We see Chinas markets under the whip . Is it a Japanese whip , lashed to a strong surplus with China ?

The money has to do something other than stand still .

Do we see any of that money rushing into houses ?

I think that one was meant for the masses !

Lots more Mugs there to skim and lock in .

 

[Kauri]

The money has to do something other than stand still .

Do we see any of that money rushing into houses ?

I think that one was meant for the masses !

Lots more Mugs there to skim and lock in .

I hear utes are going cheep though...
Cheers
.........Kauri

 

[ithatheekret]

depends on what you call cheap ........

$50K handball stuff .



that's a lot of bathroom and kitchen .

 

[Kauri]

has something happened in Times Square???