Imminent and severe market correction

[explod]

Who would have thought we would get a rally? Basically anyone with a brain in their head. Rallies are part and parcel of bear markets. The Fed is injecting 'great' liquidity, what does that mean exactly? As opposed to the not so great liquidity they've been injecting for 6 months? Once again, the Fed is not injecting new money, it is temporary in nature...as this rally will be.

Could not agree more, in fact they are most often created so that the smart money can unload at a better price to the mugs. That's why they are called sucker rallies.

The Fed is private enterprise at work looking after the interests of the multinational money sucking off fees.

 

[explod]

The ramper headlines on Wallstreet this morning per Bloomberg is unbelievable. The last desperate thrusts of a dying serpent;

"
Fed to Lend Up to $200 Billion, Taking Private Mortgage Debt as Collateral

Stocks in U.S. Surge on Fed's Measures to Counter Freeze in Credit Markets

Dollar Rises Most in Three Months Versus Yen as Fed Unveils Loan Measures

Trade Deficit in U.S. Expands Less Than Forecast as Dollar Boosts Exports ..."


In fact the statement of the dollar rise is wrong, but I suppose truth should not get in the way of a feel good ramper story.

 

[KIWIKARLOS]

mate this is just the first part of the great solution, The FED will have to bail out these securities I bet my @ss on it. You can't run a miltary industrial complex with a crook economy this is life or death for US hegemony and military expansion.

First they are lending using worthless paper as collateral, so what value will they give theis collateral ? real value which keeps declining week after week as the system melts down ? Or 80-85% of the Balance sheet value the value the companies reakons it is. Ill bet you it turns out to be the later.

They will end up bypassing the current laws which stipulate that these banks must decrease the value of the securities in real time as the market goes down. They are foolsihly believing that by providing this auction money "temporarily" the market for the securities will improve and they will stop loosing value. If it works it will be a false economy if it doesn't the FED will end up having to buy overpriced garbage

 

[skating101]

The Fed really are trying to delay the inevitable recession and associated bear market I suppose they really dont want the economic trouble to start while the republicans are still in charge let alone in an election year should've bought up yesterday for a sell today as planned lol

 

[Real1ty]

Hi all,

Bit of a no brainer, a rally has started. S&P up over 30 in overnight market, fed and other CB's offering great liquidity. The perma bears are about to get a fright.

Who would have thought it possible??

And no Real1ty, I'm not kidding myself at all.

bye

brty

LOL.

So you orginally predicted a "correction" but now it's a rally and you are chock full of confidence and are rubbing our noses in it.

Originally Posted by dhukka
Who would have thought we would get a rally? Basically anyone with a brain in their head. Rallies are part and parcel of bear markets.

dhukka has summed it up very well, as he usually does.

I don't see that many on here as being perma bears but moreso traders/investors with both eyes open and prepared to move in which ever direction is obvious, and for most, that direction is blatantly obvious....

 

[brty]

Hi all,

Correction, rally, call it what you like. The direction for a period of time will be up.

When you look at history, how often do you get one way traffic for months on end, with major stocks like the banks losing 40%. My answer is not very often.

If you look at the huge bear market in banks from late 89 through to November 92, there was a 60-66% price fall. However in the middle of this fall there was a huge rally/correction of over 50%, very tradeable.

Whether we continue to have a bear market is not the question. There could be trouble for years as all this works through the system.
For now though given the continuing gloom and looking for places to enter shorts by many, the bottom is more than likely in for a few months.

I will be looking at entry points from here to continue going long and I am basically long the world.
Being short the world with doom and gloom has been around for years. To my knowledge all that has happened is an opening of opportunities to go long.

Of course this time it could be different

bye

brty

 

[Awesomandy]

My question is, what's next?
Just because they have pumped in $200b, it doesn't mean people somehow magically will be able to start repaying their debts which they couldn't pay back in the past few months.
It's a bit like "here you go. Stick this money on to your balance sheet for the month." I'm not quite sure how this will help solve the underlying problem.

 

[dhukka]

mate this is just the first part of the great solution, The FED will have to bail out these securities I bet my @ss on it. You can't run a miltary industrial complex with a crook economy this is life or death for US hegemony and military expansion.

First they are lending using worthless paper as collateral, so what value will they give theis collateral ? real value which keeps declining week after week as the system melts down ? Or 80-85% of the Balance sheet value the value the companies reakons it is. Ill bet you it turns out to be the later.

They will end up bypassing the current laws which stipulate that these banks must decrease the value of the securities in real time as the market goes down. They are foolsihly believing that by providing this auction money "temporarily" the market for the securities will improve and they will stop loosing value. If it works it will be a false economy if it doesn't the FED will end up having to buy overpriced garbage

Spot on kiwi. This is just one step closer to what I called yesterday the 'end game' where the Fed or some other government institution ends up buying crappy mortgage paper that noone else wants. No doubt the primary dealers have to take a haircut on the collateral.

However notice that they have extended the collateral types to privately labelled AAA/Aaa RMBS and that they will not take anything that is on review for downgrade. Now we know that private rating labels from Moody's Fitch and S&P are not worth the paper they are written on but it should be understood that the Fed is not accepting any old crappy mortgage paper. Each week, the ratings agencies have been downgrading hundreds of tranches of RMBS and CDO's, none of these are eligible.

As you say kiwi, the Fed is just postponing the inevitable. I wonder how long it will take before the euphoria wears off this time?

 

[sassa]

Spot on kiwi. This is just one step closer to what I called yesterday the 'end game' where the Fed or some other government institution ends up buying crappy mortgage paper that noone else wants. No doubt the primary dealers have to take a haircut on the collateral.

" The FED reportedly is hoping to restore the willingness of banks to lend, and thereby contain the intensifying credit contraction. According to news account the FED is also seeking to restore confidence to the mortgage-backed markets, where the buying freeze, initially limited to non-Agency mortgage-backeds, has in recent days shown signs of spreading to the ultra-important Fannie and Freddie mortgage-backed bonds.

Now, what are we to make of all this? In the first place, the imperative of containing the credit market panic before it infects the Fannie/Freddie market is crystal clear. If Fannie and Freddie cannot securitize and sell their mortgages, they cannot make any more loans. This will raise the lending freeze to the level of calamity. In the second place, the reality is that no matter how many mortgage-backeds -- Fannie/Freddie and/or non-agency, the FED accepts as collateral, and no matter what percentage of the market value, or presumed market value, of the mortgage-backeds it accepts in exchange for Treasuries, even a "market value" which is entirely fictive -- the balance sheet of the banks is NOT IMPROVED ONE IOTA. After all, the banks still own the mortgage-backeds, not the Treasuries they have "borrowed" from the FED. And the value of the mortgage-backeds MUST continue to decrease as the income stream of mortgage payments upon which the market value of the bonds rests DIMINISHES in consequence of rising defaults and foreclosures. Moreover, any RISE in market rates for long-date, high quality bonds (Treasuries, for example) in consequence of growing inflation hysteria, fed by rising oil prices ($109/bbl. and counting) and other commodity prices -- and fed as well by endless central bank references to, and hence legitimation of, inflationary fears -- translates to a DECLINE IN THE MARKET VALUE OF ALL LONG-DATED BONDS REGARDLESS OF, AND SEPARATE FROM, THEIR DEGREE OF CREDIT RISK.

There is a profound difference between REMOVING the deteriorating mortgage-backed bonds from bank balance sheets and TEMPORARILY SHIFTING THIS JUNK TO THE FED."
http://www.money-sage.com/content/fed-sleight-hand

 

[dhukka]

My question is, what's next?
Just because they have pumped in $200b, it doesn't mean people somehow magically will be able to start repaying their debts which they couldn't pay back in the past few months.
It's a bit like "here you go. Stick this money on to your balance sheet for the month." I'm not quite sure how this will help solve the underlying problem.

Good question Andy, the short answer is that it does not address the underlying problems. It does not prevent banks from taking more writedowns on worthless financial instruments, it does not mean banks will begin lending again in earnest to financial institutions that are perceived to be credit risks. It does not prevent home prices from falling. The Fed has just kicked the can down the road again.

 

[sassa]

Can or will someone explain the implications of this statement by Wang Lao,chief economist of the Bank of China,in reply to the injection of the $200b
by the Fed?
"It will make the RMB competition softer."

 

[sassa]

Part of an excellent article-

The Short Bus Rolls Again

Let's do The Fed's action today.

The ostensible reason was to "liquefy" agency and other "AAA" securities.

Really?

Let's talk about reality.

Reality is this:

You short something it is to sell it to someone else. One of the ways the primary dealers make their money is by shorting Treasuries into the market, borrowing them from The Fed and then generating carry off the money.

Over the last six months the primary dealers have borrowed an insane amount in Treasuries and are short in aggregate close to $100 billion of them!

What's worse, they're long all the other debt instruments, lots of it involuntarily! Like, for example, LBO debt and mortgage securities they can't sell into the market.
http://market-ticker.denninger.net/

 

[Real1ty]

Hi all,

Correction, rally, call it what you like. The direction for a period of time will be up.

When you look at history, how often do you get one way traffic for months on end, with major stocks like the banks losing 40%. My answer is not very often.

If you look at the huge bear market in banks from late 89 through to November 92, there was a 60-66% price fall. However in the middle of this fall there was a huge rally/correction of over 50%, very tradeable.

Whether we continue to have a bear market is not the question. There could be trouble for years as all this works through the system.
For now though given the continuing gloom and looking for places to enter shorts by many, the bottom is more than likely in for a few months.

I will be looking at entry points from here to continue going long and I am basically long the world.
Being short the world with doom and gloom has been around for years. To my knowledge all that has happened is an opening of opportunities to go long.

Of course this time it could be different

bye

brty

Correction, rally, call it what you like.

You stated that we would have a "large correction"

The direction for a period of time will be up.

How long is that period of time?

A day, 2 , a week, it's a far cry from a large correction.
We all acknowledged a bounce/rally was likely.

I will be looking at entry points from here to continue going long and I am basically long the world.

Good luck with that.

Being short the world with doom and gloom has been around for years. To my knowledge all that has happened is an opening of opportunities to go long.

That's funny as i thought with the excellent returns over the last few years people were making money being long, not short

 

[Gundini]

Hi all,

I will be looking at entry points from here to continue going long and I am basically long the world.

bye

brty

Hmmm... Long on the world eh? You might be waiting for a while...

 

[ithatheekret]

What's to argue ?

The local bourses have tested their lows , we've just plowed the paddocks .

The multples on the banks are very attractive , that can't be argued , but there will be patches of softness . The economy here is growing albiet at a held back pace , due to infrastructure bottle necks and tightening in the market . The RBA has injected a touch of stimulus to bolster the financials stuff ups , but we are in good shape . Banks will get hot and cold , we can point the bone at the US and Europe for that , but we are now approaching the good times . I don't mean a mega bull market , but cheap stocks that are heavily undervalued ......... and we are still in a bear market , so expect sideways action for sometime .

Gold is still going to rise further along with oil and the best two grwoth sectors on the planet , inflation and M3 supply .

We are in a unique situation , that has only occurred in the last two hundred years to my knowledge . First in 1938 where tighten and consumer spending and declined together and now , housing is a key factor , oil adds some spice , but credit tightening and high inflation all pushing over cost spikes and asset devaluations all at once offers excellent oppurtunities .

We've just had a low test could get there again though , as alot of shares were going CD XD for the last few weeks . But this is healthy to me , and where you make good money for investing and trading . I'd still like to see the boards touch below 5000 , but am prepared to do without it , it's ( the market ) has gone by the textbook lately and squeezed all the BS buyers out ( pumpers ) , cheers for margin calls , money talks BS walks or gets liquidated . If they owned the stocks freehold they could have written puts ........ w...a...n...k...e...r...s haha

 

[Real1ty]

What's to argue ?

The local bourses have tested their lows , we've just plowed the paddocks .

but we are now approaching the good times . I don't mean a mega bull market , but cheap stocks that are heavily undervalued ......... and we are still in a bear market , so expect sideways action for sometime .

The local bourses have tested their lows

The bourses have tested their lows, but that's not to say they won't test, or break them again

but we are now approaching the good times . I don't mean a mega bull market , but cheap stocks that are heavily undervalued ......... and we are still in a bear market , so expect sideways action for sometime

Can you explain what you mean please?

We are now approaching good times but you expect sideways movement for sometime?

 

[explod]

The ramper headlines on Wallstreet this morning per Bloomberg is unbelievable. The last desperate thrusts of a dying serpent;

"
Fed to Lend Up to $200 Billion, Taking Private Mortgage Debt as Collateral

Stocks in U.S. Surge on Fed's Measures to Counter Freeze in Credit Markets

Dollar Rises Most in Three Months Versus Yen as Fed Unveils Loan Measures

Trade Deficit in U.S. Expands Less Than Forecast as Dollar Boosts Exports ..."


In fact the statement of the dollar rise is wrong, but I suppose truth should not get in the way of a feel good ramper story.

And all of the $US index gain of last night reversed in the last few minutes. What will they come up with this morning US time.

 

[Kauri]

Looks like the Doxepin and Elavil aren't helping the Fed...
Cheers
........Kauri

 

[wayneL]

Looks like the Doxepin and Elavil aren't helping the Fed...
Cheers
........Kauri

Buyers Remorse?

 

[Kauri]

Buyers Remorse?

Panic attacks....
Icey bank under pressure... Dutch Hedgie labouring... US banks reporting when??? and BB realises he hasn't got a lotta A1 jet-fuel left....

whenever I feel a bit of remorse I just look to my platform...
Cheers
..........Kauri