Imminent and severe market correction

[chops_a_must]

Financials up 2%

Buy, buy buy!!!

Screw these trader affects, bear markets now go up!

 

[wayneL]

Financials up 2%

Buy, buy buy!!!

Screw these trader affects, bear markets now go up!

Fade all news!

That's the new rule of thumb.

 

[Whiskers]

Interesting little poll result!

Slightly more bullish than me... but fwiw, I like it.

Although, just out of curiosity I voted twice just to see if I could.

Ramping!?

 

[Kauri]

Not having an ounce of fundamental economic sense to my name I have been pondering the latest from the mighty US of A...
does the fact that increased TAF with relaxed requirements of asset backing indicate that
a) the Fed is now/will be attacking with more than just rate cuts... taking out the likelihood of near term deep cuts...
b) which in turn will support the greenback to some extent but not necessarily the share market..
c) gold may not shine as brightly for a little whiles...
d) my basic reading of it is way off track...

Pondering
............Kauri

 

[explod]

Not having an ounce of fundamental economic sense to my name I have been pondering the latest from the mighty US of A...
does the fact that increased TAF with relaxed requirements of asset backing indicate that
a) the Fed is now/will be attacking with more than just rate cuts... taking out the likelihood of near term deep cuts...
b) which in turn will support the greenback to some extent but not necessarily the share market..
c) gold may not shine as brightly for a little whiles...
d) my basic reading of it is way off track...

Pondering
............Kauri

Very good questions. Proabaly all they have got left is spin and rates cuts. They will try to support the Dow at all costs. Lower interest rates relieve the Fed of debt burden and the gold price? well most Americans do not know it exists at this time so it doesn't figure.

All that is left is the Presidential election, it is political. The system will do everything in its power to spin out nice stuff and try to protect the Dow. The Fed is private enterprise and the greatest ally they have is Republican Governments.

The real crash will come in 2009.

 

[Whiskers]

I think you're pretty right with a, b and c kauri.

With the Fed earlier giving the Bush admin a shunt into gear, I think they are now contemplating standing off a bit with rate cuts, especially with the ECB and BOE causing them some angst by not coming to the cutting party.

It looks to me like the rest of the world has stood their ground refusing to cut heavy and China not being intimidated into revaluing its currency, and leaves the US little option but to get their own house in better order and let the $ rise back a bit.

It also makes sense to start letting/assisting the $ recover a bit to reduce the cost of imports and preserve disposable income and get a bit of a head start on inflationary pressures.

Gold price growth may slow, but I'm not sure that new production will meet demand anyway and can't see massive CB selling happening soon.

I think that strategy will pretty much look after the sharemarket as well insofar as it will help negate recessionary fears.

It's the recovery of the $US in the near future that I think will help not just the Aus market but the world generally... but having said that, I think the long term trend will still be a weakening of the $US.

 

[Kauri]

more grist for the mill.....

http://www.theaustralian.news.com.au/story/0,25197,23340283-643,00.html

Cheers
..........Kauri

 

[Uncle Festivus]

There is still a huge disconnect between the financial economy and the real economy (as indicated by the above poll???) so I don't think the fireworks, for the money shufflers, have even started yet. The Dow has only just cracked 12k going down, ie from the 14k peak it's not yet factored in a recession, let alone a deep and protracted one. Either that or all that pump priming money has only gone into spec investments.

My trading strategy still holds I think - Gold & Silver - buy the dips (possibly even wait for the correction)
For the pleb shares ie the rest of 'em - short the rallies - they are shot.
Trading oil, not investing in the equities?

The is an increasing possibility that demand destruction is taking place with general commodities too (most notably oil), with some estimates of a 30% 'topping' speculative premium. A number of commodities charts are showing the start of a megaphone set up, so I would expect we are entering a period of high (daily price) volatility, followed by a correction of sorts?

Because this won't be a normal recession, commodities may not be the counter trend play that some may think. As for currencies, gold should be a good play on the retracement lower?

_____________________________

The muni market keeps getting whacked, the contagion is nearly down to bedrock of the US system - just waiting to see the depth of the sh*t now, and how long it takes all the high paid doodle head suits to realise it. The negative feedback loop keeps getting bigger.

ZURICH -- Swiss wealth manager EFG International took a hit from the credit crisis, saying a US municipal bond fund it was distributing had to be liquidated, sending its shares sharply lower.
The Akos fund, which was launched in November 2004, was liquidated after a sell-off in municipal bonds last week, causing losses for investors, an EFG spokesman said. He declined to give a figure for the losses.

 

[ithatheekret]

The message looks pretty clear for myself , NFP number was bad , unemployment rate now at 4.8% . The variety of job losses was from every sector , the writing on the wall already for some I'd say . retails shed jobs , bad numbers coming in ???

I think the numbers from NFP are just the door opener for what's to come , as far as employment goes , we've seen it worse a few years ago , but what real meaningful employment has been created ??? I think we are going for a repeat program session with US employment .

The Yen looks like it a piece of tin being pulled to a magnet called 100 and Eurogal is wanting to dance with anything above 1.55 for a fling .

I had 75bp set down before June , I think we'll see that on the 18th now , the US rate look like it has no option but to flirt with 1.5% or even 1.25% .

We've just seen negative back to back payroll numbers , a semaphore of its own of a recession . A housing crisis , which historically lead to recessions .
A high oil price , nay a historical high oil period , which always precedes a recession .
Persistent inflation across the board , every single one of the categories . We now await hyperinflation , it's hitting smaller countries already , a clear entree to recession .

To top it all off we have a financial crisis , which is yet to spread to currencies of certain nations in a much different way .

Anyone seen Kudlow lately ?

 

[Uncle Festivus]

Persistent inflation across the board , every single one of the categories . We now await hyperinflation , it's hitting smaller countries already , a clear entree to recession .

To top it all off we have a financial crisis , which is yet to spread to currencies of certain nations in a much different way .

Anyone seen Kudlow lately ?

Or should that be hyper stagflation???

Some new phrases perhaps

- "The Global Margin Call" - the buck stops here - credit card carnage about to start?

- "Trickle Down Contagion" - who owns Qantas' jets?

 

[Whiskers]

Bearing in mind kauri's point about "increased TAF with relaxed requirements of asset backing"... ithatheekret and Uncle Festivus, do you not think the fallout from the credit poblems are starting to get under control, at least insofar as tighter regulations and the insurers are not likely to fold, and would you not think there is room for the Fed to only cutting 25 or 50 to help reinforce the $US.

Just on the point of insurers I saw it reported that a couple of smaller operators who had little exposure to subprime are expanding business considerably to fill the void left by the lame Ambac and MBIA. http://money.cnn.com/2008/03/07/markets/bond_insurers/index.htm?postversion=2008030708

It seems to me that a stronger $US would translate into lower domestic US oil prices in particular, that would significantly allay fears of rising costs of production across the country, particularly the farm sector, which is about to crank up employment and cropping activities.

Wouldn't it also translate into slightly slower growth in commodity prices in $US terms but more profitable operations for the like of Aus due to currency conversion?

Or do you think the speculator element in commodity prices is enough to collapse them if the $US starts to appreciate?

 

[sassa]

... do you not think the fallout from the credit poblems are starting to get under control

This is part of an article posted at Minyanville on 05/03/08-

Despite the move today in equities, credit market issues are not going away. In fact, they may be worsening. Almost 70% of the auctions in the $330 billion Auction Rate Securities (ARS) market failed this week, according to Bloomberg.

There were 521 failed auctions in the market for the floating-rate securities yesterday, amounting to a rate of 66 percent, according to data compiled by Bloomberg. These are mostly municipal related bond issues and the failures are crimping states around the country. According to the article, the yields on the debt are average more than6.5%, compared to 3.6% in early January.

Goldman Sachs (GS) , Citigroup (C) and other brokers began allowing the auctions to fail last month, their refusal to step in to provide clearing bids effectively shutting down the market. The large banks apparently controlled the market both coming and going. During the good ol' days, back in 2006, before the widespread auction failures the SEC fined Citigroup, Goldman and 13 other banks $13 million after alleging they manipulated the market by giving some clients information about rival bids in the supposedly blind auctions.

For perspective's sake, between 1984 and 2006, only 13 auctions failed, according to Bloomberg. Meanwhile, one fixed income trader told Bloomberg that the risk is not that municipalities will default, but that the market has collapsed due to subprime mortgage market losses. "It's still a liquidity issue, not a credit issue,'' the trader said. Well, perhaps not yet.
http://www.minyanville.com/articles/GS-C-bac-UBS-BJS-COST/index/a/16158

 

[Whiskers]

This is part of an article posted at Minyanville on 05/03/08-

Despite the move today in equities, credit market issues are not going away. In fact, they may be worsening. Almost 70% of the auctions in the $330 billion Auction Rate Securities (ARS) market failed this week, according to Bloomberg.

---
"It's still a liquidity issue, not a credit issue,'' the trader said. Well, perhaps not yet.
http://www.minyanville.com/articles/GS-C-bac-UBS-BJS-COST/index/a/16158

Yeah, I agree there are still liquidity problems there sassa, but it does look as though this was exaggerated by the hedge funds. How long can they cause that impact or have they pretty well finished?

What I anticipate will happen is some reallignment and reorganising of the way busines is done as people in sound positions move in to fill the void.

I guess the question is if there are enough to fill the void and how long it will take to transform, because there were obviously (corruption) problems with the way it was before.

Getting back to kauri's original point about increased TAF with relaxed requirements of asset backing... won't that sooner or later help resolve the liquidity issue?

The declines accelerated at month-end on selling by hedge funds squeezed by rising floating rates on notes they issued and declining values on long-term bonds used as collateral.

`Complete Turnaround'

The carnage caught the eye of Ross, who invests in distressed companies, and Gross, manager of the world's biggest bond fund. Gross, chief investment officer of Pacific Investment Management Co., said last week he bought municipal bonds when they were at their worst, while Ross said his purchases included California bonds with a yield of 5.5 percent.

The Bond Buyer 20 index of long-term yields fell 0.19 percentage point in the week ended March 6, after rising 0.45 percent the previous week, the most since February 1980. At 4.92 percent, the index is 0.52 percentage points above its average for 2007.
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=ayu_rz4zxnt8

 

[sassa]

Getting back to kauri's original point about increased TAF with relaxed requirements of asset backing... won't that sooner or later help resolve the liquidity issue?

Whiskers,love or hate Paul Krugman,agree or disagree?He certainly has created food for thought in this article regarding the TAF.

http://krugman.blogs.nytimes.com/2008/03/08/whats-ben-doing-very-wonkish/

 

[Uncle Festivus]

Bearing in mind kauri's point about "increased TAF with relaxed requirements of asset backing"... ithatheekret and Uncle Festivus, do you not think the fallout from the credit poblems are starting to get under control, at least insofar as tighter regulations and the insurers are not likely to fold, and would you not think there is room for the Fed to only cutting 25 or 50 to help reinforce the $US.

In a word, no.

"starting to get under control" - I can't see this at the moment? If anything, getting worse. All the rule & regulation changes in the world won't stop what's happening now as these things take on a life of their own once started ie contagion. It will only stop when the fear of lending subsides and the system starts to get money velocity back again I think.

These periods present once in a lifetime opportunities for those who have discipline and money - captains of industry of the future.

The one left of centre event might come if there is a massive short covering equity rally coinciding with a release of a large block of pump priming funds or such? But it may be confined to equities as the real economy will take several years to 'adjust' to these conditions.

My bias is to prepare for all outcomes (increasingly bearish?), or at least be aware of them & be ready to adjust as appropriate. I've actually gone long a few stocks recently eg CBA & WPL, but just as fast gone short again. So trade the momentum now?

My 2c worth?

 

[chops_a_must]

Not having an ounce of fundamental economic sense to my name I have been pondering the latest from the mighty US of A...
does the fact that increased TAF with relaxed requirements of asset backing indicate that
a) the Fed is now/will be attacking with more than just rate cuts... taking out the likelihood of near term deep cuts...
b) which in turn will support the greenback to some extent but not necessarily the share market..
c) gold may not shine as brightly for a little whiles...
d) my basic reading of it is way off track...

Pondering
............Kauri

It's all the same as far as I can see. Increasing liquidity, printing money. Same ****, different bucket.

Whiskers... I'm pretty staggered by what you are saying... how anyone can think that this is just a small hiccup and things will go on like "normal" is beyond me.

 

[Kauri]

I hear that Trichet, after a meeting with his G10 cohorts, has a press call later today... wonder if it will be similar to the last time this happened last year and they had a co-ordinated cash pump ...
It almost seems certain that more hedge funds are poised to default and go belly up... but a lot of talk suggests a major financial insto will get broken in this round of credit pressure... interesting times..

... it seems it pays to be prepared for anything...

Cheers
...........Kauri

 

[Whiskers]

Whiskers... I'm pretty staggered by what you are saying... how anyone can think that this is just a small hiccup and things will go on like "normal" is beyond me.

Chops, are you smoking that weed again!

I don't recall using 'small hickup' anywhere. On the contrary I was out there noticing the problems last year too... but I am also acknowledging that the landscape will not return to the same as before, and noticing signs of a changing of the guard, so to speak. Change of strategy and new operators poised to take advantage of the situation and in time forge a new dynamic of the world economy.

Correst me if I'm wrong, but the last time I used the word "normal" was in reference to the next 'normal' Fed meeting.

It's all the same as far as I can see. Increasing liquidity, printing money. Same ****, different bucket.

Just as a matter of interest, are you saying that liquidity should not be increased and or that there should never be new money printed?

 

[explod]

Chops, are you smoking that weed again!

I don't recall using 'small hickup' anywhere. On the contrary I was out there noticing the problems last year too... but I am also acknowledging that the landscape will not return to the same as before, and noticing signs of a changing of the guard, so to speak. Change of strategy and new operators poised to take advantage of the situation and in time forge a new dynamic of the world economy.

Correst me if I'm wrong, but the last time I used the word "normal" was in reference to the next 'normal' Fed meeting.



Just as a matter of interest, are you saying that liquidity should not be increased and or that there should never be new money printed?

I think what Chops is saying in no uncertain terms is that the Septic Tank Powers that be have stuffed it big time and they all and sundry are heading for the exits and the sinking ships.

As with the great Rome and Germany of the 1920's the US are gone.

The Fed as we see it is not normal and could not have a normal honest go at it in a fit. GWB would not stand for it, he wants Republicans back in the White House. He even vetoed a move by Congess to stop the torture of prisoners just this weekend. The good old us-o-a is a crooked as a taxi trip from Flinders Street Station to the Casino on Satdy night.

Economic sensiblities, spare us.........

 

[IFocus]

Todays Australian

Australia faces recession: analyst

Based on profit figures back to 1970, earnings are 44 per cent above their long-term trend.

In the three recessions since then, real earnings per share fell by between 36 and 65 per cent from peak to trough

The view that Australia will be saved by China and the resources boom underestimates the magnitude of the forces ranged against us.

China’s growth may continue to require large flows of commodities, but commodity markets at present are being driven by speculative money that can flee as quickly as it came.

Full article

http://blogs.theaustralian.news.com...n/comments/australia_faces_recession_analyst/