The economics behind the bull and bear case

[explod]

I don't subscribe to the theory that there is much worse to come. My logic is that even if the 'authorities' are not aware of more significant issues, they will all certainly be looking much more closely than they were in 07 and react much more promptly.

Theory: that there is much worse to come is not theory, it is based on sound fundamental judgements that have measured the unsoundness.

The boilouts are fading out, it went in the main to buy valueless sludge (Loans on assets that have gone to zero) to save the banking system. If you read the business sector of Sunday's Age the unsubstanciated jawboning of our so called national economists are a joke, but not funny, downright alarming.

Whiskers, do yourself a favour and download a free issue of "the Privateer" (I have no association just a subscriber for many years) and have a big think about the real picture in the world economy today, and it is all inextricably connected; and on the facts, which are backed up by respective governments and banks own figures we are in for a bloodbath compared to the crash of 08

In an objective look at inputs on the "Imminenet and Servere Market Correction" and "Gold Price" threads it will be seen that the actual facts have been posted for a number of years.

Theory (maybe at your peril) by all means but now its time to look at backed up facts

IMVHO of course

I will shortly post up a brief excerpt from "the Privateer" on the Imminent and servere market correction thread"

 

[prawn_86]

Re: XAO Analysis

The problem i see with your view explod, is that people have been saying things like this for over 10 years now. Infact the US senate looks set to increase the amount of debt they are 'allowed' to take on.

Yes, on a fundamental basis, pretty much everything is ****ed, but it keeps getting propped up. At some point it will bust, but can you afford to not be involved? What if it takes another 2, 5, or 10 years?

Just my view, meaning that you need to be aware of the possible downside, while still trying to take advantage of any possible upside. That being said, i am slowly beginning to liqudate a few of my holdings, mainly for personal reasons however (re-weighting)

 

[Sean K]

Re: XAO Analysis

I don't subscribe to the theory that there is much worse to come. My logic is that even if the 'authorities' are not aware of more significant issues, they will all certainly be looking much more closely than they were in 07 and react much more promptly.

I do now. I thought we could save the situation with some short term measures, put some band aides on, and then rebuild. But, it seems as if the bail out culture is going to persist. They're pooring petrol on the fire. What we might see after the next round of failures is more money printing, causing rampant inflation, and complete destruction of the USD. Might not see another bottom in the stock market for a while because of all the money flowing in. But the economy is cracked.

 

[Whiskers]

Re: XAO Analysis

Explod, yeah I'm aware of a lot of the doomsday possibilities... but in the long run I have a general belief that mankind, while ignorant and procrastinating at times a-la G W Bush, is pretty smart and will eventually find ways to overcome adversity... which leads me to Kennas.

Certainly I agree the short term stimulus isn't a permanent fix. What is needed now and what my plan 'A' depends on is fundamental change to the regulation and oversight of the financial markets, particularly in the US.

I also agree that stimulus may keep the market up for a bit longer, but those fundamental changes would need to be showing up soon for the uptrend to be sustainable.

 

[explod]

Re: XAO Analysis

The problem i see with your view explod, is that people have been saying things like this for over 10 years now. Infact the US senate looks set to increase the amount of debt they are 'allowed' to take on.

Yes, on a fundamental basis, pretty much everything is ****ed, but it keeps getting propped up. At some point it will bust, but can you afford to not be involved? What if it takes another 2, 5, or 10 years?

Just my view, meaning that you need to be aware of the possible downside, while still trying to take advantage of any possible upside. That being said, i am slowly beginning to liqudate a few of my holdings, mainly for personal reasons however (re-weighting)

Well they have, it was approved and remains only for the President to sign which he may well have done over the weekend. Pop over to the Imminent and Servere Market Correction Thread.

The G7 at the weekend was more of the same except this time there was no press conference just a nice press release of hot air, the focus on Ireland, Spain, Italy and Greece has been rightly due to a downgrade by a US Agency, the same problems are within the US but no downgrades, wonder why. Of couse this crisis takes the focas away from the central culprit in all this.

A reading of proper independant economists such as the one outlined clearly substantiate these sorts of facts.

 

[Unnamed User]

Re: XAO Analysis

Theory: that there is much worse to come is not theory, it is based on sound fundamental judgements that have measured the unsoundness.

The boilouts are fading out, it went in the main to buy valueless sludge (Loans on assets that have gone to zero) to save the banking system. If you read the business sector of Sunday's Age the unsubstanciated jawboning of our so called national economists are a joke, but not funny, downright alarming.

Whiskers, do yourself a favour and download a free issue of "the Privateer" (I have no association just a subscriber for many years) and have a big think about the real picture in the world economy today, and it is all inextricably connected; and on the facts, which are backed up by respective governments and banks own figures we are in for a bloodbath compared to the crash of 08

In an objective look at inputs on the "Imminenet and Servere Market Correction" and "Gold Price" threads it will be seen that the actual facts have been posted for a number of years.

Theory (maybe at your peril) by all means but now its time to look at backed up facts

IMVHO of course

I will shortly post up a brief excerpt from "the Privateer" on the Imminent and servere market correction thread"

What about the facts that support an improving economies then?

There are good and bad facts on both sides of the argument but your post comes accross as your facts, or the facts that back up your opinion are the only facts that are vaid.

 

[nikemi]

Re: XAO Analysis

What about the facts that support an improving economies then?

There are good and bad facts on both sides of the argument but your post comes accross as your facts, or the facts that back up your opinion are the only facts that are vaid.

I guess that's why there are bulls and bears, bulls give more weight on the good facts and bears on the bad.

 

[explod]

Re: XAO Analysis

What about the facts that support an improving economies then?

There are good and bad facts on both sides of the argument but your post comes accross as your facts, or the facts that back up your opinion are the only facts that are vaid.

Well from my studies and reading proper economists, (not ex Bank Clerks) there are really no good facts.

A fact is something that is supported by real evidence. If you read the business pages you will note that the good feeling statements are not supported by verfiable facts.

I will quote from last Sunday's age on an article by Richard Webb quoting some stock experts saying that good times are not far away. The three experts are 1. Dr Shane Oliver from AMP, 2.Craige James from Comsec and 3. Austock Senior advisor Michael Heffernan. Now I have watched these blokes close for a number of years and regard them as industry rampers and they seem to be very closely alaigned to our wonderful Glen Stevens of the /federal Reserve Bank. Interesting how they gave the economy a ramping last week just prior to the first weekend of propery actions, but thats another story.

Anyway this Age story had a block of 5 reasons why you should not panic about the market.

1. "Recent falls mean shares are attractively priced" I say it could mean the market has further to fall.

2. "Soverign debt issues in Greece, Portugal and Spain are unlikely to cause contagion" Wow, the implications on the Euro are enourmous and a true measure finds that debt problems in the US are just as bad but the US rating agencies have only marked down selected targets to divert attention.

3. "The US economy is on a recovery path" Hogswash, why did the senate just approve an enourmous increase in the Government debt limit.

4. "Local profit results have been better than expected" There is little evidence to support this, and the term "better than expected", is virtually meaningless hogwash in a literal sense. We are adopting a recent US trend here now where expectations are set low then on release we can have the great one liner: "better than expected"

5. "Its not unusual to get a 10 to 15% correction in a bull market". What bull market, stocks have only recovered half of the loss from the October 08 crash.

So in all this so called strong statement is very thin on the ground and the whole article is bereft of any solid facts to support the above or a number of other assertions within the article.

 

[professor_frink]

Re: XAO Analysis

What about the facts that support an improving economies then?

There are good and bad facts on both sides of the argument but your post comes accross as your facts, or the facts that back up your opinion are the only facts that are vaid.

Perhaps you'd like to counter explod's points with some facts of your own instead of just criticising. I'm sure there are quite a few people(myself included) that would enjoy seeing the bearish case countered with some logical arguments from the bulls

 

[Unnamed User]

Re: XAO Analysis

Well from my studies and reading proper economists, (not ex Bank Clerks) there are really no good facts.

A fact is something that is supported by real evidence. If you read the business pages you will note that the good feeling statements are not supported by verfiable facts.

I will quote from last Sunday's age on an article by Richard Webb quoting some stock experts saying that good times are not far away. The three experts are 1. Dr Shane Oliver from AMP, 2.Craige James from Comsec and 3. Austock Senior advisor Michael Heffernan. Now I have watched these blokes close for a number of years and regard them as industry rampers and they seem to be very closely alaigned to our wonderful Glen Stevens of the /federal Reserve Bank. Interesting how they gave the economy a ramping last week just prior to the first weekend of propery actions, but thats another story.

Anyway this Age story had a block of 5 reasons why you should not panic about the market.

1. "Recent falls mean shares are attractively priced" I say it could mean the market has further to fall.

2. "Soverign debt issues in Greece, Portugal and Spain are unlikely to cause contagion" Wow, the implications on the Euro are enourmous and a true measure finds that debt problems in the US are just as bad but the US rating agencies have only marked down selected targets to divert attention.

3. "The US economy is on a recovery path" Hogswash, why did the senate just approve an enourmous increase in the Government debt limit.

4. "Local profit results have been better than expected" There is little evidence to support this, and the term "better than expected", is virtually meaningless hogwash in a literal sense. We are adopting a recent US trend here now where expectations are set low then on release we can have the great one liner: "better than expected"

5. "Its not unusual to get a 10 to 15% correction in a bull market". What bull market, stocks have only recovered half of the loss from the October 08 crash.

So in all this so called strong statement is very thin on the ground and the whole article is bereft of any solid facts to support the above or a number of other assertions within the article.

Not one of those examples is a fact, they are opinions. I pointed out to you that there are facts to support improving economies so i'm not sure the relevance of those examples unless your point was that there are no facts so opinions based on little are being substituted.

facts are China GDP, Recent US GDP, 6 straight months of growth in the ISM report with January PMI at 58.4 percent, its highest reading since August 2004 and the job market, (but that one is a lot more subjective) as a few examples.

 

[Unnamed User]

Re: XAO Analysis

Perhaps you'd like to counter explod's points with some facts of your own instead of just criticising. I'm sure there are quite a few people(myself included) that would enjoy seeing the bearish case countered with some logical arguments from the bulls

I am neither a Bull or a Bear as i find a clear direction very difficult to predict but probably have a leaning to improved conditions but acknowledge there are good arguments and facts on both sides of the equation.

My aim wasn't to criticize but to show that there are facts to both sides of the argument. That point wasn't being made in his post.

 

[explod]

Re: XAO Analysis

Not one of those examples is a fact, they are opinions. I pointed out to you that there are facts to support improving economies so i'm not sure the relevance of those examples unless your point was that there are no facts so opinions based on little are being substituted.

facts are China GDP, Recent US GDP, 6 straight months of growth in the ISM report with January PMI at 58.4 percent, its highest reading since August 2004 and the job market, (but that one is a lot more subjective) as a few examples.

US GDP is 75% consumption, this is unproductive GDP (only one third of adults in the US work productively), It can be shown that the substance of released figures are rubbery to the extreme. Not time tonight but I will detail my take more succinctly when time permits tomorrow.

 

[Trembling Hand]

Re: XAO Analysis

US GDP is 75% consumption, this is unproductive GDP (only one third of adults in the US work productively),

Unproductive? Will look forward to the reasoning on that one.

 

[Miro]

Re: XAO Analysis

Unproductive? Will look forward to the reasoning on that one.

There's no wealth created by consuming imported products. US has been losing productive manufacturing jobs for decades.

The consumers don't even create any wealth by consuming US made products if the process doesn't lead to increase in productivity. A new car bought on debt destroys capital, it doesn't help the economy. The capital could have been spent productively on building a factory to produce goods for export.

(sorry for the offtopic)

 

[zzaaxxss3401]

Re: XAO Analysis

Agree Trembling Hand. If people are working (productively or otherwise) then aren't they still getting paid and paying taxes which adds to the Government's tax revenue to pay for the running (and debt) of the country?

 

[Beej]

Re: XAO Analysis

Unproductive? Will look forward to the reasoning on that one.

Me too There seem to be some interesting definitions/views on what productivity is in the bear-ish camp!

 

[Trembling Hand]

Re: XAO Analysis

There's no wealth created by consuming imported products. US has been losing productive manufacturing jobs for decades.

The consumers don't even create any wealth by consuming US made products if the process doesn't lead to increase in productivity. A new car bought on debt destroys capital, it doesn't help the economy. The capital could have been spent productively on building a factory to produce goods for export.

Some of these replies are so far removed from reality I think I must live in a parrell universe.

There is plenty of wealth created "by consuming imported products." As an ex importer who use to bring in products and add to them, even if it was sometimes just distribution, and then sell them for 3 times their import cost I have seen plenty of families (employees and customer & their customer) benefit locally from that.

Then of course there is just the whole premise that consumption is a negative. If the farmer makes milk, that the truck driver takes to the factory, that the factory sells to the retailer, that then makes a latte' from it, who sells it to the customer who consumes it????

Where is the negative in that?? production comes from consumption. Just because its not a Ford falcon sold to an export market you dudes think its the end of the financial world coming.

 

[Miro]

Re: XAO Analysis

Some of these replies are so far removed from reality I think I must live in a parrell universe.

There is plenty of wealth created "by consuming imported products." As an ex importer who use to bring in products and add to them, even if it was sometimes just distribution, and then sell them for 3 times their import cost I have seen plenty of families (employees and customer & their customer) benefit locally from that.

Then of course there is just the whole premise that consumption is a negative. If the farmer makes milk, that the truck driver takes to the factory, that the factory sells to the retailer, that then makes a latte' from it, who sells it to the customer who consumes it????

Where is the negative in that?? production comes from consumption. Just because its not a Ford falcon sold to an export market you dudes think its the end of the financial world coming.

All I'm saying is that when you sacrifice your current consumption you'll be better off in the future. What's happening in the States in unsustainable.

 

[Aussiejeff]

Re: XAO Analysis

Unproductive? Will look forward to the reasoning on that one.

GDP = Gross Domestic Product

Hmmm. I THINK explod means that AS FAR AS US MANUFACTURING & PRODUCERS ARE CONCERNED it is probably less "productive" for them if US citizens continue to increasingly spend money on importing goods rather than buying the local product?

Of course, as far as the foreign exporters are concerned, that very situation is MORE productive for them. Depends on which side of the fence you are sitting!

As far as TOTAL WORLD GDP goes, then it would still be seen as more productive on a global basis.

That makes reasonable sense?

 

[Trembling Hand]

Re: XAO Analysis

GDP = Gross Domestic Product

Hmmm. I THINK explod means that AS FAR AS US MANUFACTURING & PRODUCERS ARE CONCERNED it is probably less "productive" for them if US citizens continue to increasingly spend money on importing goods rather than buying the local product?

That makes reasonable sense?

Nah that doesn't wash. Explod is using GDP and Consumption in some mixed up way. He is by saying that their economy is one that consumes 75% of their product therefore is non productive work.

That needs addressing because it makes no sense. Just because they consume big macs, drive huge SUVs and spend a lot on advertising and entertainment does not make the economy a failure. In fact, in terms of living standards, it would seem to be a success would it not?