Blood on the floor.

[nell]

Over 1% green late in the day. This should give the Aussie market a upward trend today 3% fall was probably over the top and falls of PDN and OXR that I was watching were excessive in my belief. I presume short term views are outweighing the longer term views at the moment. Maybe this is a turn that will give us a little comfort in this past 2 weeks of turbulence.

[Dazza]

mmmm nar im still keen on MBL eh

i had given it a probability of hitting 70 so i had decided to wait a bit and only invested a bit of what i want.

i like their overseas growth and expansion.

i think ud see a good 3% gain in MBL

PDN had a shocker yesturday, absolultely dumbfounded.

im keen to continue to make portfolio changes today

sigh more fees!

[winner69]

quote:Originally posted by Dazza

..... im still keen on MBL eh

Don't call Macbank the Wizards of Oz for nothing ..... they can $1 into $2 easy peasy over a few months with their model ........ go for it dazza .....

[Dazza]

quote:Originally posted by winner69


quote:Originally posted by Dazza

..... im still keen on MBL eh

Don't call Macbank the Wizards of Oz for nothing ..... they can $1 into $2 easy peasy over a few months with their model ........ go for it dazza .....


i have been awaiting for the market to overreact to things.

it happened to the FX for NAB though that was only a 10% drop.

Been reading one of buffetts book from mary buffett

one of the things he says is short term pain for long term gain.

examples were GICSO that insurance company, wells fargo, and american express.

i have a keen eye on QBE, i just want the market to smash them down on just one years UK/London floods, and ill swoop in like an eagle

i had entered into MBL sub 80 thinking it was a great bargain from teh 87 SPP.

bugger it sank 10% more though, but thats how it goes.

be ready to pounce people

MBL , is a BIG investment bank, Buffet says the weak will fade away, but the strong will always be there.

and if u want investment banking in oz, MBL is the biggest...

[bullebak]

MBL sinking again... like the rest?

[winner69]

MBL will hold above $75 .... that'll be a good day

[OneUp]

"While the news pages have been fixated by the US debt market shake-out, the story that really counts was the International Monetary Fund upgrading its international economic growth forecast from 4.9 per cent to 5.2 per cent while simultaneously downgrading its forecast for US growth to 2 per cent from 2.2.

They might look like dry economic numbers, but they mean a very great deal. Indeed, armed with those numbers, you should be able to remain calm while other people are showing signs of a little panic as the figures say what the US does or doesn't do isn't nearly as important as it used to be."

[Mick100]

quote:Originally posted by OneUp

"While the news pages have been fixated by the US debt market shake-out, the story that really counts was the International Monetary Fund upgrading its international economic growth forecast from 4.9 per cent to 5.2 per cent while simultaneously downgrading its forecast for US growth to 2 per cent from 2.2.

They might look like dry economic numbers, but they mean a very great deal. Indeed, armed with those numbers, you should be able to remain calm while other people are showing signs of a little panic as the figures say what the US does or doesn't do isn't nearly as important as it used to be."


Excellent work Oneup
I hadn't seen the latest numbers but they are just what I expected them to be. The conclusion is that investors in US financial assets are panicking and so they should be. Their economy os in a bad way. As far as the rest of the workd is concerned things are looking quite good at the moment. It seems, judging by what's happened in the markets over the past week, that the rest of the world has not decoupled from the US economy yet but it will one day.
I think that day is fast approaching. Lets hope we don't get dragged down to far by this fiasco in the US sub prime lending.
.

[soulman]

We are officially in the red. 100 points up in midday and it took 2 hours to take it down to negative.

Tough times ahead.

[George]

Heading back up, other stocks the same, talk about volatile.
One that is supposed to be affected by subprime issues is LEI but that wasn't sold down with rest of market in last 2 hours, don't know if that's a pointer to it heading back to mid-40's or not.
WOW is not coming back up like others, once again, may or may not be anything in it.
George

[OneUp]

"Fed Governor Kroszner said the real economy hasn't been affected by the mortgage meltdown."

This is a textbook panic. Time to buy up fellas, if you haven't already.

[STRAT]

quote:Originally posted by OneUp

"Fed Governor Kroszner said the real economy hasn't been affected by the mortgage meltdown."

This is a textbook panic. Time to buy up fellas, if you haven't already.




Hi Oneup, Thats good news yes/maybe but realistically what else could he say? To announce the opposite could/would only make matters worse

[hero]

quote:Originally posted by STRAT


quote:Originally posted by OneUp

"Fed Governor Kroszner said the real economy hasn't been affected by the mortgage meltdown."

This is a textbook panic. Time to buy up fellas, if you haven't already.

Hi Oneup, Thats good news yes/maybe but realistically what else could he say? To announce the opposite could/would only make matters worse


What else could he say? Is he being disingenuous - to shore up confidence in what he really sees as our teetering, fragile economy - or does he genuinely believe what he said? I don't really know. I don't know the man - or the evidence at his disposal. Time will tell - but I tend to err on the side of agreement.

[OneUp]

Hero, "our" economy and the world economy are doing great.

There's a small chance that the subprime problem could be a catalyst for an unwinding of the world's biggest hire purchase scheme (Chinese lend to Americans who buy Chinese goods). Only problem with that theory is that it would hurt the Chinese more than the Americans, so the Chinese also have a vested interest in keeping the current system going.

I've placed my bets...

[OneUp]

You're right major, the sub prime problem is actually very small in the scheme of things. Makes for a good story though.

[trendy]

http://bigpicture.typepad.com/comme...ry-solved-.html

Mystery Solved: Another Fat Thumbed Trader
Thursday, August 02, 2007 | 10:48 AM
in Markets | Trading

Turns out that 200 point swing was the reversing of a bulge-bracket firm trading error. The following is from a top 5 firm (rhymes with Sheryl), who plainly explains the source of the error, and how its unwind caused the reversal.

"Error at the bell last night (clarification): This error at the bell last night really did contribute to the rally. Bottom line is that one of our competitors inadvertently sold 5346 too many of the SPX Sep 1450 calls and needed to cover them in a hurry. At the time the mkt was down 1% on the day.

In covering, it is likely the crowd front ran the order, exaggerating the move.

Once the move got going, the variance hedging phenomenon kicked in. Most dealers place MOC (Mark on Close) orders to hedge their daily delta risk.

If this theory holds, then they would have put in large sell orders yesterday MOC at around 3:40PM. Once the mkt started to run, their delta position would've changed from net long to net short and they would have needed to buy that much more SPX exposure into the bell. Our index trading desk predicts that for every 2 pt move up in the SPU, dealers needed to buy approx 500MM notional in delta.

With liquidity being lousy right now, that created the violent move."

[bullebak]

Here we go again... vertically down - in the red.

[alexri]

quote:Originally posted by bullebak

Here we go again... vertically down - in the red.


Freefall, wonder if it will rebound like yesterday? Might trade WDC or another liquid 200 stock for a point or so if I've got balls.

[bullebak]

quote:Originally posted by absolut-advance

I predict a huge bounce upwards monday and a heavy sell down today near closing...

AA


AA, I opened my wallet, but no heavy sell down... [B)]

[tommy]

Am I the only one buying shares like mad?

Or have others started to buy bargains?

I was hoping All Ords to tank below 5800 but hasn't happened... bummer.

[mamos]

AA Is this what you have bought at those prices.

I have been buying recently as was largely in cash, probably got in a bit too early, in the first half of week and last Friday.

I was watching a number of those shares that you posted actually. Bought some at those prices too.

Will need to see what DOW goes overnight to determine Monday I think.

[mamos]

Yeah I am trying to take the view what will the share price be next year come reporting time.

[tommy]

Nasty fall in da US, sxxt might hit da fan on Monday! 5800 here we come :-)

http://money.cnn.com/2007/08/03/markets/markets_530/index.htm


Another devastating decline for the Dow
Blue chip index posts third-biggest drop so far this year, falling 281 points.
By David Ellis, CNNMoney.com staff writer
August 3 2007: 6:00 PM EDT


NEW YORK (CNNMoney.com) -- Wall Street ended another rollercoaster week with the Dow industrials plummeting about 280 points Friday amid continued credit market fears, sparked by Wall Street bank Bear Stearns.

The Dow Jones industrial average (down 281.42 to 13,181.91, Charts) fell 281 points, or 2.1 percent, marking the third-biggest point drop for the 30-stock index this year.
marketwrap.gif
dow_chart4.gif
ECONOMY
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Jack Otter of 'Best Life' magazine tells how you can disaster-proof your portfolio.
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Friday's session stands in stark contrast to the past two sessions, when the blue chip barometer finished over 100 points higher.

So far this year, the Dow is up 5.8 percent.

The broader S&P 500 (down 39.14 to 1,433.06, Charts) lost nearly 2.7 percent, while the tech-fueled Nasdaq Composite index (down 64.73 to 2,511.25, Charts) tumbled 2.5 percent.

Treasury prices soared as investors sought shelter in the safe haven investments, lowering the yield on the 10-year note to 4.68 percent from the 4.77 percent level reached late Thursday. Bond prices and yields move in opposite directions.
Next victims of the credit squeeze

"A lot of this stuff is being attributed to Bear Stearns' conference call," Ryan Larson, senior equity trader at Voyager Asset Management, remarked just before market selloff gained momentum.

"There's nothing reassuring the market about subprime and that continues to underline the tone in the market - any whisper or negative news and we get a selloff."

Stocks were modestly lower for most of the session until about 2 p.m. when investment bank Bear Stearns hosted a conference call to discuss the company's health, after credit rating agency Standard & Poor's lowered the company's debt rating to "negative" from "stable" in the wake of its recent hedge fund woes,

In a conference call with Wall Street analysts, the company's chief financial officer warned that the recent turmoil in the bond market is as bad as it has been in 22 years.

Those credit worries hurt shares of financial sector players such as Goldman Sachs (down $7.78 to $179.68, Charts, Fortune 500), Morgan Stanley (down $3.26 to $60.62, Charts, Fortune 500) and Lehman Brothers (down $4.67 to $55.78, Charts, Fortune 500) before spreading to the larger market.

Among individual issues, all 30 Dow components finished the session lower.

Investors around the world have been rattled by signs of tougher conditions in credit markets, since tighter credit could raise the cost of borrowing for companies, hurting corporate earnings. This is likely to slow the buyout boom, which has helped prop up stock prices.

Credit market fears helped send global stock markets tumbling last week, with the 30-stock Dow industrials falling 585 points, posting its biggest percentage drop since March 2003.

Wall Street found little solace in Friday's monthly employment report, which revealed that U.S. employers added fewer jobs than anticipated in July. The Institute for Supply Management's service sector reading for the month also came in weaker-than-expected.

While the number of economic reports due out next week look pretty sp****, investors will have the Federal Reserve's policy meeting to look forward to on Tuesday.
Wake up time for the Fed?

The recent turmoil in the stock market has fueled speculation that the central bank may cut interest rates sooner than previously expected, but the Fed is widely expected to leave the Fed funds rate untouched at 5.25 percent, where it has remained since August 2006.

In corporate news, DaimlerChrysler (down $2.06 to $89.12, Charts) completed the sale of its Chrysler Group unit to private equity firm Cerberus Capital Management, bringing an end to the failed 9-year-old merger.

American Home Mortgage closed its doors Friday, cutting nearly 7,000 jobs, after lenders had cut off credit to the mortgage lender.

Take-Two Interactive Software (down $2.75 to $14.16, Charts) warned after the bell Thursday that it would delay its most important upcoming video game, "Grand Theft Auto IV," and that it would post a full-year loss. Shares plunged 16 percent on the Nasdaq.

On the earnings front, both consumer-products maker Procter & Gamble (down $0.42 to $62.88, Charts, Fortune 500) and the No. 1 automaker, Toyota Motor (up $0.31 to $118.90, Charts), reported better than expected profits Friday.

After several busy weeks of companies reporting quarterly results, only a handful of firms are set to report earnings next week including Cisco Systems (Charts, Fortune 500), Sprint Nextel (Charts, Fortune 500) and News Corp (Charts, Fortune 500).

Market breadth was negative. Decliners topped advancers by more than 5 to 1 on the New York Stock Exchange on volume of 2.05 billion shares. Losers beat winners on the Nasdaq by nearly the same ratio on volume of 2.53 billion shares.

Oil prices retreated as the price of U.S. light crude lost $1.75 to $75.11 a barrel on the New York Mercantile Exchange.

The dollar fell against the euro and the yen. COMEX gold for December gained $7.80 to $684.40 an ounce. Top of page
Why stocks can shake off mortgage meltdown

[skinny]

Got stopped out of NYSE holdings on Friday, I hope it doesn't but expect that the ASX will have another bad day on Monday.

Have gone short MBL - partly its insurance for long ASX holdings, partly its because the more I read the more it smells :eek:

[tommy]

Dow has taken a big hit,

Im Hoping the ASX respects the 200 day Simple moving average often referred to as the God Line.
If so we should recover and bounce as in the past.
The ASX is much closer to its 200 day MA then the Dow is....

AA

Hi AA,

I think financial institutions esp MBL will take a big hit on Monday, dragging the all ords down.

US employment figures were poor, some doubts over the fundamentals of the economy now. Volatility rules the markets at the moment, I expect stop-loss triggers to fuel the panic assuming that ASX reacts to DOW (which it normally does).

[Halebop]

http://img101.imageshack.us/img101/1716/xaogifmg2.gif

200 day MA approaching the index although thats not in itself too demanding as the ASX has pretty much been range bound since April.

With 6,000 being such a nice round number there may be a little emotion around support and resistance at this level. Even after a couple of good size falls the market is only sitting on around the half way line within the longer term (uptrend) trading range. New York had a rough Friday so it will be interesting to see if Australia shrugs it off (or at least takes a wait and see breather) on Monday. Many technical indicators are saying "not sure" right now so the market is probably on a bigger knife edge than either bulls or bears might realize.

My money is for more falls and a test of upwards trend line.

[moe]

At the end of the day, every week Australia has millions of dollars worth of Super funds that must be invested somewhere. The ASX 'market' is never going to $hit itself as there is always going to be this support on the buy side. The NZX on the other hand....

[ratkin]

I sense the mood is now changing on the forum boards. Initially the sell off was seen as a great opportunity to pick up some bargains (last week). Now however there seems to be a growing feeling that this may be something more than a slight correction.
There now appears genuine concern that we could be on the verge of something big.
This could well keep the bargain hunters away on monday , meaning there will be very few buyers around.
There could still be plenty of sellers on the other hand as people sense they can exit now and buy back cheaper and safer.

Could be ugly for a while , time to batten down the hatches maybe ready to ride out the storm. The RAT only owns shares in Kaimai , Charlies , Kingfisher , Ryman , Metcash and Great southern plantations and has no interest in selling any of these.

[tricha]

Tommy - " US employment figures were poor, some doubts over the fundamentals of the economy now. Volatility rules the markets at the moment, I expect stop-loss triggers to fuel the panic assuming that ASX reacts to DOW (which it normally does)."

Stop losses and margin calls I suspect, guess between 100 to 200 points on the ASX to complement the DOW 2 % fall on Friday.

Guess everyone is contemplating their next move.

Moved to 20 % cash on Friday from 10%.

Could be a month before the big picture becomes clear.

[winner69]

ITS A MELTDOWN

http://www.informationclearinghouse.info/article18119.htm

[spruik]

ITS A MELTDOWN

http://www.informationclearinghouse.info/article18119.htm

Scary story... really sets off fear, so it's probably time to put in our buy bids at low levels.

[JBmurc]

40k down from only weeks ago massive selling pressure atm

[JBmurc]

-----Only 135 companys out of 1600 are up on the ASX----SKy Bus----

[winner69]

Dazza will be buying more MacBank today ..... below $70

Wasn't this going to be the first stock to go over the $100 mark ... just a few months ago


Dazza ..... just delayed ......... $100 by year end = 42% gain

Easy peasy as they say

[Dazza]

im down 12k forrrrrrrrrrrrrk man forrrk just paper profits so yeah


winner69, below 70 i have stopped eh, no cash to buy

i sold agm - brought ady
sold cuy - brought aru


just no cash at the moment, but yeah mbl still bullish on it

qbe and wow needs to drop more man come on sell it pls :DD

[Damo79]

ITS A MELTDOWN

http://www.informationclearinghouse.info/article18119.htm


Scary article indeed. But is it just me, or does that last page or two sound like the rantings of a conspiracy theorist? The reserve bank and the Bush administration, all of whom are members of secret organizations trying to create a global new world order, carefully orchestrated this coming depression?? What the!?

[macduffy]

Not just you Damo79. Time for caution but take that "scary article" with large dose of salt.

[tommy]

Interestingly, Asia is getting smashed but Shanghai is UP!

http://finance.yahoo.com/intlindices?e=asia

Obviously doesn't give a stuff about the DOW. Neither should we... but panic is creating more lemmings.

[FarmerGeorge]

Tommy I also noticed Shanghai up, although I don't know how much we should really read into that: I didn't worry about it when it went down so I'm not sure I should be comforted when it goes up. Like all market wide drops this one is throwing up some good bargains along with punishing those stocks that deserve to be punished - I guess the question is knowing which is which. I'm looking at Austin Engineering (ANG) and reckon it has been seriously oversold, maybe Prairie Downs (PDZ) as well. Anyone else see cheapies around?

[JBmurc]

Any of the shares below-Brought more PPP&PENO today personal confident we've seen the worse of the sell off Watch the market FEAR turn back to GREED in the ASX

[bermuda]

Damo,
Exactly as I read it. Written pretty convincingly and then whammo, he went over the top and exposed himself as a Ranter.
My take is that George dubya has dubbed them in.
He invented a war to keep the Lockheeds going ( read USA economy ) and let Greenspan issue massive credit to keep the gold old American pipedream goingl

Well now the truth is arriving. There are thousands of " ENRONS" about to come out of the woodwork. If you havent seen the Enron video then get it. It is exactly what's going on right now.So much so that it aint funny.

[JBmurc]

so are we investors in the ASX oil&metal miners in for major trouble ya reakon -bermuda

[Hoags]

Have we seen the end of this correction yet?
Well I hope so......

Futures still looking undecided ATM slightly up tho.

This from CNN Money.
http://money.cnn.com/2007/08/06/markets/stockswatch/index.htm

Check the commentary on the first 3 'Hot Stocks'
http://money.cnn.com/data/hotstocks/

[pago]

hi jb,i dont think so.energy/oil/ur have a future.so do metals but maybe the shine is lackluster for a while.asx100 down 1.56% today,to be expected as is the downtrend on most asx stocks.while this is logical the down in some stocks is irrational.thats the market.fear plays its part,good minor stocks sold down on low volumes,eg100k turnover.explain why good oil stocks decline,yet rmg ,an obscure mineral spec stock rises 15%.this correction is about to present some very good buys. i dont believe in the armageddon theories spun on the net,absolute rubbish.i admit its not easy picking the low/turn here.to early for my call,i see the dow downtrending/all the bad news is not out and it will continue to come out.the fed may rescue/drop interest rates.dont bet on it short term.the asx is following dow/global market sentiment,down,but i see some resistance.best to hold cash for now and look for the best buys/energy is the sector for upside imho,cheers pago

[Heavy Metal]

ITS A MELTDOWN

http://www.informationclearinghouse.info/article18119.htm

Informationclearinghouse.... a web site for conspiracy theorists with contributions from Mike Moore clone bloggers. That story sounded like it was copied word for word straight from a gold peddling website like Financialsense. I was waiting for the punchline at the bottom... THE FED IS PURE EVIL RESTORE THE GOLD STANDARD GOLD IS KING BUY GOLD BUY GOLD BUY BUY BUY GOLD

[Huang Chung]

S&P500 futures currently up 10.

MFS has to be a great buy at these levels, along with my old favourite Prairie Downs (PDZ).

Also going cheaply IMHO are NWE, AED, PEM, REX & MBL.

Disc: Hold PDZ & MBL, and wish I had the readies to buy the others.:(

[Tok3n]

I'm eyeing up PDN for the long term.

Wonder who else is :)

[Huang Chung]

It's been mentioned before, but it is amazing how S/T goes very, very quiet when the market trends down.......would make for some interesting post grad research on the phychology of investors.

[Tok3n]

It goes quiet everywhere except the NZO thread :)

[shasta]

HC/Tok3n

What i find obsurb about the market, when i look at my holdings...

ADY - the Iron Ore & Lithium hasnt gone anywhere?
GDM - the Iron Ore, Uranium & other base metals havent gone anywhere
NZO - About to produce up to 50k bopd in NZ's largest offshore Oilfield, the oil hasnt gone anywhere?
SRZ - About to spin off a highly prospective Tin project onto the ASX & its South Australian "Uranium - Warrior project" JV partner TOE is about to merge with NEL (should flow on to SRZ)
TEX - Junior Oil & Gas company, with 3/4 well finds & about to come onto production.
URA - Is this quarter due to announce deals in the Ukraine & Czech Republic.

Fundamentally NOTHING has changed to any of these companies & yet they all are a few cents down over the last couple of days.

Just stocks i consider "cheap" have gotten much "cheaper".

I'm loving this!

[STRAT]

It's been mentioned before, but it is amazing how S/T goes very, very quiet when the market trends down.......would make for some interesting post grad research on the phychology of investors.People always have less to say when they are afraid or unsure what what to do

[Huang Chung]

Shasta

I'm down about 30k today.....and I'm not going to lose any sleep over it.

I'm comfortable with the companies I hold, and am more cranky about not being to buy more stocks at these reduced prices. My only other worry is a margin call, but, should I get one, will just sell enough to keep the bank satisfied.

I get far, far more concerned at company specific issues than market corrections, because you know that the market will eventually turn around where as company specific issues may not result in a happy ending (BMO :(, SGW :(, ION :(, CRS :( etc, etc)

[Scuffer]

30K in a day HC my heart goes out to you, I would be slitting my wrists and looking for a building to throw myself from, good to hear you say that your not bothered too much and that you have faith in the fact things will get better.

[Huang Chung]

People always have less to say when they are afraid or unsure what what to do

Agree STRAT, but to my mind, that's when a forum like this should be most useful to people. Just my opinion though.

[tommy]

Good on ya HC,

Glad to see I'm not the only nut still diving into the sharemarket...

But I think we'll probably go even lower. Absolutely loving it! Topped up more stocks today.

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Axao&draw.x=0&draw.y=0

I think the ASX will bottom out at around 5800, the fact that companies that have NOTHING TO DO with the U.S. or subprime loans getting punished despite having a positive earnings outlook is absolutely rediculous (not complaining, I'm very happy). I'm currently heavily exposed to techs and of course, the good old debt collection/consolidation sector. Still got 30% cash left, waiting for more bargains...

As moe said, super funds are gonna have to continue putting their money somewhere, they can't be cashed up forever so will provide a certain level of support to the ASX.

I wonder whether the Fed will cut interest rates to give a bit of a boost to the DOW?

[Huang Chung]

30K in a day HC my heart goes out to you, I would be slitting my wrists and looking for a building to throw myself from, good to hear you say that your not bothered too much and that you have faith in the fact things will get better.

Thanks Scuffer, but seriously, I've had a tremendous run (like a lot of people I guess) and its time to give some back to the market. As Shasta said, NOTHING HAS REALLY CHANGED for a lot of my holdings....Prairie Downs don't suddenly have 30% less zinc in the ground, Toll Holdings hasn't seen 30% of its business go up in smoke......get my drift? If I were to see a full on economic meltdown, then I'd be concerned. Who knows, we might be heading for one...but at the moment, I think the wheels are still on the car, but we just might not be able to travel as fast for a while.

[Dazza]

HC

like urself, im fully 100% in shares, got hardly any cash eh

and im just drooling over the cheap shares!!!

so today i sold off my last agm to buy more ady

sold my 2nd batch of cuy to buy more aru

man just peeved eh

ive sold the junk holdings

now not many other shares to sell......

[Huang Chung]

Tommy - Glad to see I'm not the only nut still diving into the sharemarket...

But I think we'll probably go even lower. Absolutely loving it! Topped up more stocks today.

Still got 30% cash left, waiting for more bargains...

Ah, I envy you Tommy.....as I said, I'm just cranky that I'm not in a position to be a net buyer, and not just rectricted to shuffling around the deck chairs.:mad:

[clearasmud]

I'm down 55k today and its beginning to hurt.Wish I had more to invest also.

The big picture says up around 38% in 5 months since the bottem of the last correction.This correction is bigger.

I'm in selected resourse stocks market esp. oil because I believe in Jim Rodgers 20 year commodity bullmarket theory and the China story.
I'm still thinking longterm, several years ahead for the big returns.
Therefore More concerned about management and company specific issues.

ADY is still my biggest winner by a long shot.

The All ords 5 year chart is still intact so I guess we have a bit further to go.Still there is always some doubt.

Clearasmud

[Huang Chung]

I share your pain Daz.:(

[tommy]

I'm down 55k today and its beginning to hurt.
Clearasmud

Gee, that is a big hit... I hope you don't lose sleep over it mate.

[Huang Chung]

I'm also happy that the market has risen steadily (and not exponentially) over the last few years, and was at no stage grossly overvalued. The current decline is also a steady one, but typically, the snakes are somewhat steeper than the ladders.

All very orderly so far, which to me is comforting. The concern for me is if we see any big name collapses in the wake of the sub-prime mortgage problems in the States.....then I think all bets would be off.

[clearasmud]

No Tommy I'm not losing any sleep.
As I said I'm still excited by the big picture.
My stocks haven't broken thru any fundamental support and are still quite healthy except for a few losers e.g Ura.

Clearasmud

[Huang Chung]

I probably phrased my last post poorly...what I meant to imply was that, whilst we are jumping around alot day to day at the moment and generally trending downwards, we did not wake up one morning to find the Dow off 40%, with every paper in the world having the headline 'CRASH'.

Now that would be real fear. :eek:

[tricha]

This correction has a bit of substance to it. Especially if easy money disappears and interest rates keep going up.

Yes I'm down 40 K in the last couple of weeks also, but I also bailed some last week. I was very tempted to buy some cheap ? shares today, partly because of my gambling nature, but I'll wait.

Money passes from the impatient to the patient ( so Mr Buffett says )

Hey Huang Chung how do u get the colour and icons into the message ????????

[Huang Chung]

Putting Smilies in Posts


Go to "user CP", select "edit options" and go to the bottom of the page. Change your editor from basic to WYSIWYG.

Don't forget to "save changes" after editing your options!

(Apparently, you are currently limited to 4 smilies per post)

Tricha....Lizard provided the above tip on putting smilies in posts.

For colour, click on the big 'A' to get a drop down box to select your colour.

I thought the most important thing for you Tricha would be to be able to use big fonts.;)

[tricha]

Yippe i Aye Appreciate that Huang Chung, nothing like a bit of colour in our life.
This is great, far better than before. :p

.................................................. .................................................. ..

A blast from the past - "Bargains about. Don't get hooked in to picking up trash. Some things are getting smacked for good reason."

Guess Who wrote the above :rolleyes:

[tommy]

DOW opens in da green

http://money.cnn.com/2007/08/06/markets/markets_nyopen/index.htm

Stocks in a opening rally
U.S. markets push forward, led by techs, as lower oil and Bear Stearns moves help.
August 6 2007: 9:32 AM EDT

NEW YORK (CNNMoney.com) -- U.S. stocks rallied at the start of trading Monday as investors cheered a sharp drop in oil and a management change at Bear Stearns.

The Dow Jones industrial average gain 0.5 percent. The Nasdaq composite index rose 0.5 percent. The Standard & Poor's 500 index was up 0.5 percent.

[Huang Chung]

No worries Tricha.

I just hope SEC is able to get his Cartman avatar up and running again. That would be sweet.

We might trend down for a while, but as long as the big picture remains largely intact (the US consumer stays healthy thus keeping the China boom going), I think we'll be OK.

A couple of years ago, when the market was at much lower levels, I used to flick on CNBC to check the Dow every time I got up to take a leak......now I go straight back to bed. :cool:

[spruik]

DOW opens in da green

Stocks in a opening rally
U.S. markets push forward, led by techs, as lower oil and Bear Stearns moves help.

NEW YORK (CNNMoney.com) -- U.S. stocks rallied at the start of trading Monday as investors cheered a sharp drop in oil and a management change at Bear Stearns.


Arabs are also into the Great Conspiracy... ?? They no doubt have been buying up big. :cool:

Yesterday's losses all recovered. Such herd mentality, majority of people are little more intelligent than sheep. Safety in numbers so they think...

[JBmurc]

with most my holdings in the Energy&Oil sectors I'm hoping the DOW rebound will bring out the bargin hunters today (got my bargins yesterday)even though the oil price is down I'm hoping the overall sector will be up.





Aug. 6 (Bloomberg) -- U.S. stocks rallied the most in four years, led by financial companies, on speculation the government will take steps to limit losses in mortgage lending.

Citigroup Inc., American International Group Inc. and Bank of America corp. helped the Standard & Poor's 500 Index and Dow Jones Industrial Average rebound from three weeks of declines. Wells Fargo & Co. posted its biggest climb in five years after saying it will buy back $1.7 billion in shares. U.S. stocks recouped $363 billion of the $1.6 trillion wiped out since July 13.

Fannie Mae had its biggest gain in 20 years and Freddie Mac advanced the most since 2000 on expectations regulators will loosen restrictions on how much they can spend on home loans. Procter & Gamble Co. led a gauge of consumer shares to its biggest increase in five years after falling oil prices bolstered prospects for Americans to spend more.

The S&P 500 rose 34.61, or 2.4 percent, to 1467.67. The Dow rallied 286.87, or 2.2 percent, to 13,468.78. The Nasdaq Composite Index added 36.08, or 1.4 percent, to 2547.33.

[OutToLunch]

I'm down 55k today and its beginning to hurt.Wish I had more to invest also.

The big picture says up around 38% in 5 months since the bottem of the last correction.This correction is bigger.

I'm in selected resourse stocks market esp. oil because I believe in Jim Rodgers 20 year commodity bullmarket theory and the China story.
I'm still thinking longterm, several years ahead for the big returns.
Therefore More concerned about management and company specific issues.

ADY is still my biggest winner by a long shot.

The All ords 5 year chart is still intact so I guess we have a bit further to go.Still there is always some doubt.

Clearasmud

Hi clearasmud,

It all depends on what stocks you're holding, and whether or not you believe in their prospects during (and more importantly after) a major market correction. If so, then just let the chooks scatter & don't worry about it. I didn't lose as much as you yesterday, but the last 10 trading days have seen me give back just over $20k a day on average (mostly courtesy of ADY and AGS) and yes that hurts a bit! However as a ADY holder you will be cushioned by the stunning rise it had just 2 weeks ago, and the very bright prospects that this company has for the next few years. If you have communicated with Phil about ADY's future at all you will sleep easy at night.

I think this 'correction' has a long way to run yet (perhaps even into next year). Just be patient... :)

[trendy]

Don't be fooled by today's rally. More hedge funds will report meltdowns this week! Term hedge fund is oxy moron.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ak5AyYBt_meA&refer=home

Goldman's Global Alpha Fund Fell 12% in Two Weeks, 16% in '07

By Jenny Strasburg and Katherine Burton

Aug. 6 (Bloomberg) -- Goldman Sachs Group Inc.'s Global Alpha hedge fund fell almost 12 percent in the two weeks ended Aug. 3, bringing this year's decline to 16 percent after losses in stocks and bonds.

This year's drop in the $9 billion fund, managed by Mark Carhart and Raymond Iwanowski, follows the loss of about 9 percent in 2006, said two investors in the fund. Global Alpha's performance has reduced the fees paid to New York-based Goldman. The biggest U.S. securities firm booked $700 million from the fund in 2006.

The $1.7 trillion hedge-fund industry was roiled by losses in the credit and equities markets during the past two months. Two hedge funds managed by Bear Stearns Cos. collapsed and Sowood Capital Management LP, run by a former manager of Harvard University's endowment, is shutting down after a 60 percent loss.

``The fallout from June and July's credit rout is clearly resulting in some significant losses at a number of hedge funds,'' said Peter Plaut, senior analyst at Sanno Point Capital Management, a New York-based hedge fund firm. ``We are likely to see the losses result in redemptions.''

Goldman spokesman Christopher Williams declined to comment about the fund's performance.

Global Alpha lost 8 percent during the last full week of July, hurt by declines in investment-grade credit and U.S. stocks, said the investors who declined to be identified. The fund fell 9 percent in July, net of fees, they said. The fund had another 3 percent drop during the first three days of August as the Standard & Poor's 500 Index fell 1.5 percent.

[kissssik]

FED to lower, or speak of it tom and RBA to do the same...markets will rebound until mid Sept 07

[spruik]

Now for the short covering!

[fihr]

Will have money coming in mid Sep 07. Maybe too late for me to buy into the current market. What a shame. But we seem to be seeing corrections about every 3 to 4 months. Although this one has been a biggie.

[fihr]

Market seems to be bouncing up a little this morning, which is reassuring. MBL has moved up but it is so volatile that its too early to tell. Varied analysis of MBL seems to suggest that the effects of Fortress on the core Macquarie business will be very minimal.

[trendy]

Sorry but the glass is half empty.

http://www.forbes.com/fdc/welcome_mjx.shtml

The Crash Of 2007

There is a really high probability that we are in the midst of a stock market crash, the first since 2002. This is a ridiculously dangerous prediction for a commentator to make.

There can be no certainty in calling a sharp movement, particularly one as wild as a "proper crash," which, depending on your point of view, is a 20% or 25% fall in the markets from their highs. Corrections come and go, and recently they've been coming with increasing frequency. However, a correction is a burst of stock market indigestion that soon passes and is forgotten. Although 5% to 10% moves are frightening, they don't change the basic picture of the investment climate.......................

[soulman]

Bought 3 stock yesterday and offloaded it all today. The rise in the DOW overnight was a suprise but a welcomed suprise. Still suffering from MBL though.

Sold QBE at $30.15 a few days ago and now will not touch them until they report. The AUD might just cause the management a few headache. I suspect the market has already priced in a rate rise tomorrow

[spruik]

I suspect the market has already priced in a rate rise tomorrow

And today's market gives the RBA no excuse to put the rate on hold.

[kissssik]

With the market getting whacked daily I would love to know what stocks you are looking at.

[kissssik]

Cheers, KW I'll have a look.

[tommy]

http://money.cnn.com/2007/08/07/markets/stockswatch/index.htm

Stocks on edge ahead of Fed
U.S. markets may dip at open after biggest Dow advance in nearly 5 years.
August 7 2007: 6:29 AM EDT

NEW YORK (CNNMoney.com) -- U.S. stocks were set to pull back a bit at Tuesday's open, in the wake of the biggest one-day gain for the Dow Jones industrial average in nearly five years, as investors await news from the Federal Reserve on interest rates.

At 6:30 a.m. ET, Nasdaq and S&P futures were higher, but pointed to a lower open when accounting for fair value.
INVESTOR RESEARCH CENTER
ECONOMY

The Dow rose nearly 287 points Monday on strength in the financial sector and an easing of some of the credit market concerns.

Investors will keep a close eye on the Fed, which has its monetary policy meeting Tuesday. A change in interest rates is not expected when the Fed makes its announcement, set for 2:15 p.m. ET.

Investors will also watch for a preliminary reading on second-quarter productivity, due at 8:30 a.m. ET. Economists polled by Briefing.com are looking for a 2.2 percent gain.

[Huang Chung]

Dow and S&P500 futures trending down again, but not drastically at this stage.

Will be interesting to see how this and the US & Oz Reserve Bank decisions on interest rates pans out when our market opens tomorrow.

[rostov]

(No I'm not awake just for the moment, but geez it can be fun)

Fed unanimously leaves rate 5.25%

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2t5YXoR9t3E&refer=homeSX.

And from 0.33% above starting, DOW dips right down. Sentiments, I say. No short term fix for long term problems, so let's see how fast the rest of the world can de-couple their economies away from USofA, especially Australia.

[spruik]

Sorry but the glass is half empty.

http://www.forbes.com/fdc/welcome_mjx.shtml

The Crash Of 2007

There is a really high probability that we are in the midst of a stock market crash, the first since 2002. This is a ridiculously dangerous prediction for a commentator to make.

There can be no certainty in calling a sharp movement, particularly one as wild as a "proper crash," which, depending on your point of view, is a 20% or 25% fall in the markets from their highs. Corrections come and go, and recently they've been coming with increasing frequency. However, a correction is a burst of stock market indigestion that soon passes and is forgotten. Although 5% to 10% moves are frightening, they don't change the basic picture of the investment climate.......................

That link gives me a full-screen commercial, then a repeat thereof, then a movie with more commercials, then some news with a promise of some news "after the break"... what the hell. Did not read the story.

Really p!sses me off!!!

[Harry7]

Just thought I'd post this article courtesy Wiljon HC, puts a bit of balance back into things, very interesting read....

http://finance.yahoo.com/expert/article/yourlife/41148

(Sorry if you have to retype the link)

[STRAT]

Nice post Vic

[Tok3n]

interesting video

http://dealbook.blogs.nytimes.com/2007/08/06/cramers-own-bond-driven-meltdown/

[trendy]

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

China threatens 'nuclear option' of dollar sales
By Ambrose Evans-Pritchard
Last Updated: 1:48am BST 08/08/2007


The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.

"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.

Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".

Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.

[Dazza]

yeaaaaaaaah thats right :D it aint all about america these days :D

note that already the swiss and the russians have sold the dollar

sick of american bully tactics

free trade my ****

they bullied nzl's exports
and now they want to bully others

phat chance

[Huang Chung]

Dow up over 150 and S&P 500 over 20.....

So it looks like this correction was exactly that, a correction. Seems like we have to go through one of these every few months, so I hope to be in a better position to take advantage next time around.

Broke all my rules about never buying an airline stock yesterday and picked up a few shares in Regional Express (REX). Once you've stopped laughing, you might care to note that NPAT for 07 is expected to be 40% higher than 06, and passenger numbers are expected to grow by at least 20% per annum for the next 5 to 10 years. Nice figures, and they benefit from a rising $A. They also are the only operator on about 60% of their routes, as these routes are too small to support two airlines profitably. Huntley's valuation is some 30% higher than the current share price. PE is undemanding, but dividends are a bit skinny.

They also should get a boost when the drought finally breaks, and NAB Margin Lending will lend against it...YEAH!

[tommy]

Dow up over 150 and S&P 500 over 20.....


Broke all my rules about never buying an airline stock yesterday and picked up a few shares in Regional Express (REX). Once you've stopped laughing, you might care to note that NPAT for 07 is expected to be 40% higher than 06, and passenger numbers are expected to grow by at least 20% per annum for the next 5 to 10 years. Nice figures, and they benefit from a rising $A. They also are the only operator on about 60% of their routes, as these routes are too small to support two airlines profitably. Huntley's valuation is some 30% higher than the current share price. PE is undemanding, but dividends are a bit skinny.

They also should get a boost when the drought finally breaks, and NAB Margin Lending will lend against it...YEAH!

Hi HC,

Good on ya mate, I had opened a thread on REX a while ago, check this out:

http://www.sharetrader.co.nz/showthread.php?t=5024

[Huang Chung]

Hey Tommy....thought I'd be all on my lonesome with REX. Didn't recall seeing a thread at the time, but since you've got one up and running, I'll copy my post to it.

Cheers

[tommy]

Wow, Europe getting a good beating:

http://finance.yahoo.com/intlindices?e=europe


Probably because of this:

http://money.cnn.com/2007/08/09/news/international/bnp_subprime.reut/index.htm?postversion=2007080903

Subprime woes hit BNP Paribas
French bank suspends three funds, says current conditions make it impossible to value their assets.
August 9 2007: 3:58 AM EDT

PARIS (Reuters) -- French bank BNP Paribas suspended three of its funds on Thursday as problems in the U.S. subprime mortgage sector are preventing it from calculating their value.

BNP Paribas Investment Partners said in a statement that the decision affected its Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds.
Video More video
A Financial Times columnist discusses the Bear Stearns boardroom shuffle and fallout of the stuttering credit market.
Play video

It said the valuation of the funds would resume a soon as liquidity returned to the market and added that in the continued absence of liquidity, additional information on the envisaged measures would be communicated to investors within a month.

A spokeswoman for BNP could not immediately comment on the latest net asset value of the three funds.

"The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating," BNP said.

"In order to protect the interests and ensure the equal treatment of our investors, during these exceptional times, BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for these funds," the statement added.

Subprime mortgages are the riskiest property loans, often extended to people who have payment difficulties or a bad credit history.

Several major U.S. companies have announced losses from exposure to these subprime loans, sending jitters across the financial services sector. Top of page

[Huang Chung]

S&P500 futures down 14, and the Dow futures down 108. The choppiness continues. Had a look at Kitco Metals and it's all to the downside. Uranium spot drops $10 to $110.

[ratkin]

This is going to run for months , could be some big shockwaves later in the year.

Personally im keeping well clear of any financial stocks , especially those into funds management, avoiding banks and any company with large debts.

CHA MTS PBL MCU KFL KAI These are now only holdings which will be topped up whenever panic sets in. All of them have very low debt and are in buisnesses which should be relatively unaffected

[Huang Chung]

My prediction that this correction was over was obviously a tad premature....:(

Sold MBL yesterday for a small loss. As it turns out, that probably wasn't a bad move, at least in the short term.

[trendy]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEPgend5RgPk&refer=home

The quant use a trading system with the Cray XT4 supercomputer http://www.cray.com/products/xt4/index.html that was also used to analyse probability of value at risk (VAR). After running their statistical models for two months continuously on the Cray it was determined that the VAR was 0.00000000001 with a return period of over 100,000 years -that is 10 standard deviations e.g. the risk of a -12% drop in the fund in one year was impossible, let alone a 16% drop in one month.

That's why in Corporate Finance they lecture about efficient markets - as when asset value drops the market will correctly price the asset. In this case the hedge funds are correctly valued and still dropping in value as I type this.

[shane_m]

I am predicting -100 points in the first hour of trading today 10/aug

[Halebop]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEPgend5RgPk&refer=home

The quant use a trading system with the Cray XT4 supercomputer http://www.cray.com/products/xt4/index.html that was also used to analyse probability of value at risk (VAR). After running their statistical models for two months continuously on the Cray it was determined that the VAR was 0.00000000001 with a return period of over 100,000 years -that is 10 standard deviations e.g. the risk of a -12% drop in the fund in one year was impossible, let alone a 16% drop in one month.

That's why in Corporate Finance they lecture about efficient markets - as when asset value drops the market will correctly price the asset. In this case the hedge funds are correctly valued and still dropping in value as I type this.

Anyone, no matter how smart or steeped in probability models, approaching investment from a quantitative perspective only, will sooner or later have their head handed to them (and their money handed to someone else). Any model or method will always benefit from a bit of homespun common sense and a historical perspective on behaviour and outcomes.

For similar root causes this is also why a person lectures on Corporate Finance rather than acts as principal deal maker. Markets are simply not efficient, as 10% corrections, 20% crashes and 100% returns attest.

[Halebop]

..while on the topic of hedge funds lets not forget the unconscionable lie many of them are... they are supposed to generate absolute returns and the earlier and purer model was that they would outperform (with positive returns) in down years rather than up years. Yet here we have a few down blips and some notable cases are imploding.

[trendy]

Halebop you got it! The markets are not efficient and cannot be programmed into a black box. Emotion - greed and fear rule the market during these times.

[spruik]

I am predicting -100 points in the first hour of trading today 10/aug

Not 1 hour... just 5 minutes...

[trendy]

More breaking news here this evening....CFC after hours stock price has been hammered....more to come. They were/are one of the largest lenders here.

Countrywide Hit by Credit Market Woes
By JAMES R. HAGERTY
August 9, 2007 7:16 p.m.

Countrywide Financial Corp. faces "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing.

The company, the largest U.S. home mortgage lender in terms of loan volume, said reduced demand from investors is prompting it to retain more of its loans rather than selling them. The company also has been shoring up its finances. "While we believe we have adequate funding liquidity," it said in a quarterly filing with the Securities and Exchange Commission, "the situation is rapidly evolving and the impact on the company is unknown."

Payments were at least 30 days late on about 20% of "nonprime" mortgages serviced by Countrywide as of June 30, up from 14% a year earlier. Nonprime includes loans to people with weak credit records and high debt in relation to their income, as well as to people who don't document their income or assets. On prime home equity loans, the delinquency rate was 3.7%, up from 1.5% a year before. For all loans, the rate was 5%, up from 3.9%.

In a sign of the growing difficulty in selling loans, Countrywide said that it transferred $1 billion of nonprime mortgages from its "held for sale" category to "held for investment" in the first half. Countrywide marked the value of those loans down to $800 million. It also decided to retain as investments, rather than sell, $700 million of prime home equity loans, marking them down to $600 million. Countrywide has said many of those home equity loans were second-lien mortgages used by people who put little or no money down in buying a house.

[thereslifeafter87]

There must be some bargains in the junk bond market at the moment.

I'd be expecting a story sometime soon about how Warren Buffett has bought $1billion of securitised mortgages.

[soulman]

The last 3 days, I sold a few stock at B/E and some with profits as well due to the rally, namely AMP, PPT, trades OK with AMP, FXJ and AGL Energy (could have made way more).

The bad news now - I just can't wait to sell MBL yesterday and put a sell order in at $81.07 yesterday before the market opens. It got to $80.79 and then tanked. I would have loved to sell MBL at a reasonable loss yesterday than to looked at it now. I knew I have to get rid of it because if I did, more likely I will be buying at $70 later. Worse still, I bought AFG yesterday.

Anyway, if this is a correction, a correction usually last 4 to 6 weeks. I was aware that we are only in week 2 to 3 ATM and that the rally of 64, 110 and 63 the past 3 days was only a bounce. With the drop today, we are actually down for the week, can you believe it.

[ratkin]

Just arrived home to see the carnage , rather dissapointed that none of my stocks are down more than a point or two.
Unfortunatly it looks more like orderly retreat rather than panic.

Nearly bought CCP two days ago and kicked myself as it rallied more than 10% last couple of days , but hopefully this new sell off going to bring it back in range of the rat

[tommy]

Wow, serious bloodbath in Asia today following DOW's nosedive:

http://finance.yahoo.com/intlindices?e=asia

This "credit crunch" argument is getting bloody rediculous, just because you had a money glut situation which was abnormal in the first place and now that things finally going down to earth by culling excess lending, you call it a "credit crunch"? Gee, markets always have to react in the extreme...

http://www.marketwatch.com/news/story/central-banks-move-boost-market/story.aspx?guid=%7B6992F91A%2D958F%2D4E81%2D91A5%2 DF2D93754871D%7D&dist=TNMostRead

Central banks move to counter liquidity crunch
European Central Bank, Fed, Bank of Canada take steps to calm jittery market
By Simon Kennedy, MarketWatch
Last Update: 4:45 PM ET Aug 9, 2007


LONDON (MarketWatch) -- Some of the world's biggest central banks stepped in to assuage fears of a credit-market crunch Thursday, pumping billions of dollars into volatile markets in an effort to boost liquidity.

The European Central Bank loaned 49 firms a total of nearly 95 billion euros ($131 billion) -- the most it has ever provided -- after rising worries about spillover from difficulties in the U.S. subprime mortgage market left banks uneasy regarding lending to each other.
Across the Atlantic, the Federal Reserve carried out a $12 billion one-day repurchase agreement, on top of an earlier $12 billion 14-day repo.

John Silvia, chief economist at Wachovia, said the Fed's action "does suggest the Fed's thinking. They are aware of the liquidity constraints that are out there."
"Most people thought what the Fed did was correct -- giving the signal to the marketplace that they are providing liquidity and they are willing to do whatever it is to keep markets functioning fairly effectively," Silvia said.

Silvia said he detected some bond deals being completed and lower risks premiums after the Fed action.

Later Thursday, the Bank of Canada said it also provided liquidity "to support the stability of the Canadian financial system and the continued functioning of financial markets." Read full statement of Bank of Canada

'We are not quite at the panic stage yet, but this is beyond jitters.'
— Martin Slaney, GFT Global Markets

The moves were interpreted as an attempt to boost liquidity after overnight interest rates spiked.

Heino Ruland, a strategist at Steubing AG in Frankfurt, said overnight rates rose around 0.6 of a percentage point.

"The ECB move shows that interbank financing is drying up. The banks don't trust each other anymore," he said.

Robert Brusca, chief economist at FAO Economics and a former New York Federal Reserve Bank official, saw the move as an aggressive attempt to boost liquidity.

"It seems to me, based on my experience, that this is meant to be a liquidity injection and doesn't come out of the needs for monetary policy," he said.
Before it provided the loans, the ECB had said it was prepared to meet all the requests that banks made.

In total, the ECB allocated slightly more than 94.84 billion euros in a one-day quick tender at a rate of 4.0%. The tender exceeded the roughly 70 billion euros provided in the immediate aftermath of the U.S. terrorist attacks on Sept. 11, 2001.

"The liquidity providing fine-tuning operations aims to assure orderly conditions in the euro money market," the central bank said in a statement.

Credit worries saw equity markets slump across Europe, with the CAC 40 index losing as much as 3% in Paris after French bank BNP Paribas (FR:013110: news, chart, profile) suspended redemptions in three of its funds because of the credit-market crunch.
BNP said liquidity had "evaporated," making it impossible to calculate an accurate valuation for the funds. See full story.

Underscoring uncertainty about the degree of the problem, privately owned Dutch bank NIBC Holding saw its latest profit virtually wiped out by a loss of 137 million euros linked to its U.S. asset-backed securities portfolio. See full story.

Martin Slaney, head of spread betting at GFT Global Markets, said that while the central banks may be trying to improve liquidity, they may also be legitimizing fears about the credit market by injecting so much money.

"We are not quite at the panic stage yet, but this is beyond jitters. The ripples from the initial subprime stone are expanding. The question is how far will the ramifications go?" he said.

The Dow Jones Industrial Average fell 387 points to 13,270, its second-worst point drop this year, on renewed concerns in the credit market. See Market Snapshot. End of Story

[fihr]

Am now going to stick my head in the sand for a while, chanting my long term buy and hold mantra. For the next 4 weeks (except for option expiry date when I will have my telephone to my broker in one hand, and a stiff drink in the other) I will play with my babies and not look at the share market. Cheers to everyone still out there!

[tommy]

http://www.smh.com.au/news/business/costello-hoses-down-market-concerns/2007/08/10/1186530586306.html

Costello hoses down market concerns

August 10, 2007 - 12:52PM

Treasurer Peter Costello has hosed down concerns in Australia about the impact of a major sell off in global markets, particularly in the US overnight.

He said the Australian stock exchange, which has fallen almost three per cent today, was undergoing a correction off a very high base.

"After that correction the market is still up six per cent over this year," he said.

Mr Costello said he had spoken to financial market and industry regulators today.

Australian financial institutions had minimal exposure to the fallout in the US sub-prime mortgage market, which offers loans to persons with weak credit histories, he added.

Similar products in Australia are called non-conforming loans and make up just one per cent of the market and rate of delinquencies was lower than in the US.

[soulman]

Getting worst as the day goes and finally tanked at 222.5 points. The positives of the last 3 trading days basically equal to squat. 222 offset by about the same amount. All it shows is a drop of about 100 points for the week. I have the most active trading day and good positives were the disposal of shares the past few days. Hence, it did free up some cash.

Not sure what the US will do tonight. FTSE will definitely drop 1% at the open but that is just the effect from the late US blowout.

[tommy]

http://online.wsj.com/article/SB118659638858891955.html?mod=hpp_us_whats_news

Will Credit-Market Turmoil Stifle Growth?
Forecasters Scale Back Expectations for Economy, Survey Finds
By PHIL IZZO
August 9, 2007 3:53 p.m.


Most economists expect the turmoil in credit markets to have just a minor impact on growth, but they cut their economic forecasts and nearly a third expect higher borrowing costs to be a significant contributor to a slowdown.
CHARTS AND FULL RESULTS

[Economic Forecasting Survey]
See and download forecasts for growth, inflation, housing and more. Plus, grading Bernanke, taxing hedge funds and more. Survey conducted Aug. 3-7.
• Econ Blog: The Populist Economists?

The latest WSJ.com economic forecasting survey was conducted with the economy in a precarious spot amid the downturn in the housing market and a credit crunch that started in the subprime-mortgage market and has since spread to some other quarters of the credit markets. Economists were surveyed Aug. 3-7, before new turbulence emerged today, when the European Central Bank and, to a lesser degree, the Federal Reserve injected cash into the banking system.

Thirty-five of 54 economists who answered the question said they believe the turmoil in the credit markets will increase companies' borrowing costs for some time but have just a minor impact on the economy. Seventeen, or 31%, said they believe borrowing costs will rise for a sustained period and be a significant contributor to an economic slowdown. Only two said it would have no impact on the economy.

"We'll get through this," said Diane Swonk at Mesirow Financial. "But the risks are still there, and they're higher than they were a month ago."

The Fed earlier this week acknowledged that credit-market turmoil is darkening the economic outlook. "Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing," it said.

In the survey of 60 private-sector economists, most economists said they believe that the worst of the housing bust has passed. But the number of economists who hold that view has dwindled over recent months. This month, 64% said they felt that way, down from 74% who said the worst was over when asked in June, and 80% when surveyed in March.

Forecasts for gross domestic product, the broadest measure of economic output, were reduced slightly for this year and next. And the economists raised their forecasts for the probability of recession over the next 12 months. It climbed to 28%, up from 23% in the June survey and the highest level in several years

On average, economists expect growth at a 2.3% annual rate this quarter and 2.5% in the fourth quarter. For the year as a whole, they expect growth of 2.2% and for 2008 they put growth at 2.8%. Both annual forecasts were cut by one-tenth point from the prior survey in June.

Paul Kasriel of Northern Trust doesn't see GDP contraction through the first half of next year, but he was among those who raised their forecasts for the probability of recession over the next 12 months. "Housing's going to stay in a recession and it's starting to spread to other parts of the economy, especially the consumer sector," he said.
ABOUT THE SURVEY

The Wall Street Journal surveys a group of 60 economists throughout the year. Broad surveys on more than 10 major economic indicators are conducted semiannually, at midyear and at year-end. Between each semiannual survey, four monthly updates are conducted for the most closely watched forecasts. This is the monthly survey for August. For prior installments of the semiannual and monthly surveys, see: WSJ.com/Economists.

The credit crunch, stock-market volatility and housing bust are all related, Mr. Kasriel says, and the end result will be a hit to consumer spending, which is the main driver of the economy. Consumers are already feeling the pinch from lower home values, he says, and they'll feel additional pain if the credit turmoil causes corporate takeovers and buybacks to dry up and triggers continued losses in the stock market.

Ms. Swonk disagrees. The recent market turmoil has been a "welcome repricing," she says. "As chaotic as it's felt, it's been pretty orderly. The market is in better shape to absorb some of the shocks than it was when no risk was priced in."

For now, the economists' forecasts are largely in line with the expectations of the Federal Reserve. But Mr. Kasriel has this caveat: "Consensus and the Fed never forecast a recession. It always takes us by surprise."

Among other findings of the survey:
• When asked whether carried-interest, which makes up a sizeable portion of earnings for hedge fund and private equity mangers, should be taxed as regular income instead of capital gains, 65% of those who answered the question said, "yes." However, nearly half of total respondents choose not to answer.

• The forecast for the change in home prices for this year was lowered again, with economists on average now expecting a 1.38% decline in the Office of Federal Housing Enterprise Oversight housing price index, compared to expectations of a 1.24% drop in the May survey.

• Economists were in agreement with the general public on a top economic worry. Respondents to both the economic forecasting survey and a recent Wall Street Journal/NBC poll put health care at the top of a list of concerns. However, "jobs going overseas," second most popular choice in the Journal/NBC poll, didn't garner even a single vote among the economists.

• Grading Ben Bernanke ahead of the latest Fed meeting, economists awarded the Fed chairman an 86 average on a 100-point scale. The grade has remained relatively stable over recent surveys despite a more challenging environment and criticism over the central bank's handling of subprime. "Very good, but nobody's perfect," said Jan Hatzius at Goldman Sachs.

[tommy]

___________
http://online.wsj.com/article/SB118664884606092848.html?mod=hpp_us_whats_news


Impact of Mortgage Crisis Spreads
Dow Tumbles 2.8%
As Fallout Intensifies;
Moves by Central Banks
By GREGORY ZUCKERMAN, JAMES R. HAGERTY and DAVID GAUTHIER-VILLARS
August 10, 2007; Page A1

Fallout from the intensifying credit crisis stretched from a French bank to the largest home-mortgage lender in the U.S., triggering unusual central-bank interventions and driving the Dow Jones Industrial Average to its second-worst drop this year.
• What's Happening: Losses related to housing loans are emerging in more investment funds, leading investors to wonder who will be next.
• The Latest Fallout: After markets closed yesterday, mortgage-lender Countrywide Financial said 'unprecedented disruptions' could affect its financial condition. Earlier, BNP Paribas stopped trading in three funds, and apartment builder Tarragon raised doubts about its ability to stay in business.
• Market Impact: The news unnerved already-jittery markets, helping to push blue-chip shares down 2.8% yesterday.

The troubles demonstrated both the global reach of the crisis and its impact on a widening circle of markets and companies. The first jolt came from French bank BNP Paribas, which said early in the day that it was freezing three investment funds once worth a combined $2.17 billion because of losses related to U.S. housing loans. That prompted the U.S. and European central banks to inject cash into money markets to keep interest rates down. (See related article.)

The unease accelerated in the U.S. with news that several hedge funds were in the red and selling off assets. Apartment and condominium builder Tarragon Corp. raised doubts about its ability to remain in business amid weak demand and an inability to raise new financing. After markets closed, mortgage-lender Countrywide Financial Corp. said "unprecedented disruptions" in credit markets could affect its financial condition.

The stock market, which on Wednesday had risen sharply on hopes credit problems were being contained, swooned as hedge funds, many of which borrowed increasing amounts of money in recent years to boost returns amid placid markets, scrambled to sell holdings and cut their borrowings. The Dow Jones Industrial Average ended down 387.18 points, or 2.8%, at 13270.68. (See related article.)

After the close of trading, Renaissance Technologies Corp., a hedge-fund company with one of the best records in recent years, told investors that a key fund has lost 8.7% so far in August and is down 7.4% in 2007. Another big fund company, Highbridge Capital Management, told investors its Highbridge Statistical Opportunities Fund was down 18% as of the 8th of the month, and was down 16% for the year. The $1.8 billion publicly traded Highbridge Statistical Market Neutral Fund was down 5.2% for the month as of Wednesday.

Meanwhile, Countrywide, of Calabasas, Calif., said in a Securities and Exchange Commission filing that it was shoring up its finances and had "adequate funding liquidity." (SEC filing) But the company, the nation's largest home-mortgage lender in terms of volume, warned that "the situation is rapidly evolving and the impact on the company is unknown." Reduced demand from investors is prompting Countrywide to retain more of its loans rather than selling them.

The statement could send shivers through financial markets today. It came just a week after Bear Stearns Cos., the Wall Street trading giant, had to reassure investors that it had ample cash on hand amid concern that it faced funding problems because of deteriorating credit-market conditions and the implosion of two of its hedge funds.

On Friday, markets in Asia tumbled in early trading. (See related article.) After the Nikkei 225 index fell more than 2%, Japan's central bank injected $8.39 billion into money markets. That followed actions Thursday by the European Central Bank, which provided more than $130 billion to money markets, and the U.S. Federal Reserve, which added $24 billion in reserves to the U.S. banking system.

What started late last year as worry over a sharp rise in defaults on subprime mortgages has mushroomed into a crisis for the entire home-loan industry and investors world-wide. By March, late payments were reaching worrisome levels on Alt-A mortgages, a category between prime and subprime that includes many loans for which borrowers "state" rather than verify their incomes. Most prime loans continue to perform well, but Countrywide has reported a rapid rise in delinquent payments on certain prime home-equity loans that were used by people stretching themselves to buy homes with little or no money down.

Payments were at least 30 days late on about 20% of "nonprime" mortgages serviced by Countrywide as of June 30, up from 14% a year earlier, the company said. Nonprime includes loans to people with weak credit records and high debt in relation to their income, as well as to people who don't document their income or assets. On prime home-equity loans, the delinquency rate was 3.7%, up from 1.5% a year before. For all loans, the rate was 5%, up from 3.9%.

In a sign of the growing difficulty in selling loans, Countrywide said that it transferred $1 billion of nonprime mortgages from its "held for sale" category to "held for investment" in the first half -- meaning they will stay on the books instead of being sold. Countrywide marked the value of those loans down to $800 million. Despite its current woes, the company argues that it is well-placed to gain market share from weaker rivals.

Rattled by a constant stream of bad news, investors in recent days have been shunning nearly all mortgages except for those that can be sold to Fannie Mae and Freddie Mac, the government-sponsored investors that guarantee payments on loans that "conform" to their standards. That has prompted lenders to boost rates on prime "jumbo" loans -- those totaling $417,000 or more, too big to be guaranteed by Fannie or Freddie -- to as much as 7.25% or 8%. Usually, such loans cost only about a quarter percentage point more than "conforming" mortgages, but the gap has ballooned to as much as 0.8 point during the past week.
[Evaporation]

In financial markets, several entities thought to be insulated from the subprime meltdown now turn out to be affected, leading investors to wonder who might be next. For instance, BNP just last week had said the three funds were conducting business as usual. But Europe's sixth-largest bank by stock-market value said yesterday that it had been forced to suspend the funds on Tuesday because of a sudden and unexpected dearth of buyers and sellers.

"The market for the assets has just disappeared," said Alain Papiasse, head of BNP Paribas's asset-management-services division. "Since the start of this week, there are no prices for instruments that carry, directly or indirectly, some types of U.S. assets."

In the U.S. the latest crop of hedge funds to be hit hard by the market's turmoil includes those that focus on "market-neutral" strategies, or strategies that seek to do as well in both falling and rising markets. The strategy has been embraced by some of the biggest names in hedge funds, in part because it's popular with institutional investors who hunger for gains in any kind of market.

Many market-neutral funds have been wagering on high-quality stocks, or stocks that trade at low valuations based on various metrics, and betting against stocks that look expensive. Because this stance is seen as relatively conservative, the funds felt comfortable borrowing money to boost returns.

But as banks began getting worried about their hedge-fund clients in recent weeks, some hedge funds were asked to put up more collateral to back the loans, or anticipated these requests. The funds sold some of their holdings of high-quality stocks to raise the cash, and closed out "short" trades, or bets against companies, by buying back shares of companies seen as expensive. Others sold positions simply to become more conservative, in a rocky market.

Since market-neutral funds often are guided by similar computer models and share similar holdings, the actions magnified moves in asset prices. The last week has been the worst on record for many large hedge funds focusing on this strategy, worrying traders across Wall Street, many of whom look to these firms for signs of stability in difficult markets.
[Risk Factors]

AQR Capital Management LLC, a $38 billion fund based in Greenwich, Conn., has seen losses in recent days in investments employing market-neutral strategies, although the firm's other strategies, which represent the majority of its assets under management, are holding up, according to a person close to the matter.

Other big funds also are hurting. A Goldman Sachs Group Inc. fund, known as GS North American Equity Opportunities, saw the value of its holdings fall more than 15% between the beginning of the year and July 27, according to investors familiar with the fund. The Equity Opportunities fund lost more than 11% between July 1 and 27, according to the investors, some of whom are current and former Goldman partners.

News of that fund's problems came just a day after word that Goldman's most widely known internal fund, the $9 billion Global Alpha, has liquidated certain positions to curb its risk profile. That fund was rumored to be facing liquidation -- a notion a Goldman spokesman has called "categorically untrue." Yesterday Goldman also dismissed published report that the Equity Opportunities hedge fund is liquidating.

Those developments shook the market in part because Goldman is renowned for trading prowess. The sales at Goldman's two funds follow bigger losses at rivals such as Bear Stearns Cos., which has been forced to shut down two hedge funds in recent weeks after crippling losses on securities tied to subprime loans.

Tykhe Capital LLC -- a New York-based quantitative, or computer-driven, hedge-fund firm that manages about $1.8 billion -- has suffered losses of about 20% in its largest hedge fund so far this month, and is moving quickly to trim its investment positions, according to an investor in the firm briefed by Tykhe executives. Tykhe isn't closing down, according to the investor. Calls to Tykhe seeking comment weren't returned.

During the past several days, a number of other quantitative funds have also been hard-hit. These funds generally operate by building computer models of market behavior and then allowing computer programs to dictate trading. With the recent trouble in financial markets, many lenders, funds and brokerages were following statistical models that grossly underestimated how risky the environment had become.

[Halebop]

http://img403.imageshack.us/img403/5506/xao10auggifxn9.gif

Although I still favour a continued correction and test of the 2003 uptrend, despite today's drop the ASX is still a good 300 or so points above the trend line and the long term primary uptrend remains intact.

Media comments along the lines of "risk repricing" and "falling from a cyclical high" seems at odds with previous variants of "the market is fairly priced". Some revision seems to have crept into financial world views. What changed over the last couple of weeks I wonder? :rolleyes:

[Halebop]

"We'll get through this," said Diane Swonk at Mesirow Financial. "But the risks are still there, and they're higher than they were a month ago."

A pet bugbear of mine but the risks are not higher than they were 1 month ago. They are precisely the same. The only thing that has changed is Ms Swonk's (and a few million other investors') knowledge or perception of those risks.

[tommy]

DOW opens in da red but not as bad as expected:

http://finance.yahoo.com/indices?e=dow_jones

http://money.cnn.com/2007/08/10/markets/markets_nyopen/index.htm?postversion=2007081009

Stocks tumble at the start
U.S. markets continue descent as concern about credit crunch continues.
August 10 2007: 9:33 AM EDT

NEW YORK (CNNMoney.com) -- U.S. stocks retreated at Friday's market open as concerns about the worldwide credit crunch continued to plague investors.

But the selloff was more moderate than initially thought after the Federal Reserve said it would ensure liquidity in the banking system.

The Dow Jones industrial average still fell more than 100 points; there were fears of a 200-point drop before the open. The Nasdaq composite index lost 1.3 percent. The Standard & Poor's 500 index was 0.7 percent lower.

[tricha]

Yep, bargains on the floor.

Crazy market, I'm still at work, r u :confused: China still at work, I hope so ;)

[spruik]

Am now going to stick my head in the sand for a while, chanting my long term buy and hold mantra. For the next 4 weeks (except for option expiry date when I will have my telephone to my broker in one hand, and a stiff drink in the other) I will play with my babies and not look at the share market. Cheers to everyone still out there!

Good idea! :cool: Maybe time for a long holiday and not worry about the market.

[mamos]

My Summary of recent events Part 1:

The world's financial markets have retreated quite significantly in recent weeks. The falls have been triggered by concerns over the sub-prime loan market in the US. The effect on the default of these loans, which were largely made in the residential mortgage market, have begun to flow through to the financial markets, as a number of hedge funds have been exposed to these loans through CDO's (Collaterised Debt Obligations). The question that is facing most investors is whether the retreat is a normal healthy correction or the start of something worse such as a crash or bear market. To determine this question is difficult for a number of reasons. Firstly, the extent of defaults on these non-conforming loans is as yet undetermined. Secondly, it is unclear whether the meltdown in the sub-prime market will result in a "credit crunch" i.e. increased difficulty of obtaining credit for financial market participants.

1. Extent of defaults of sub-prime loans

I will consider the former issue first. The amount of non-conforming mortgages in the United States is US$1.03 Trillion. However, these mortgages are secured over real property and, if the borrower defaults, the mortgagee shall be able to be obtain most of the collateral they have lent to the borrower. Hedge funds have been heavily leveraged to these non-conforming loans, packaged up as CDO's. Rating agencies have awarded CDO's high credit ratings, perhaps much higher than deserved, to the benefit of their investment bank clients, who are responsible for selling the CDO's. These artificially high credit ratings have enabled hedge funds to better leverage themselves and thus magnify the possible gains available from the capital available. This explains why we have seen a meltdown of some hedge funds recently, despite the extent of the defaults of the sub-prime loans not being that drastic. If we make a reasonable estimate of losses derived from sub-prime mortgages to amount to $300b, slightly less than a third of all non-conforming loans, then this only amounts to 0.5% of the World's GDP. These losses, given the overall landscape of the world's economy, are not that substantial, despite some hedge funds collapsing because of their significant leverage to CDO's.

2. Will a credit crunch result, and if so what effect will it have?

The second issue is will a credit crunch result from the defaults in the housing sector and if so what effect will it have? To answer this question effectively, we need to first examine the role credit has played in the financial markets in recent years.

Credit has been fuelling global growth as the world's economies have been awash with money recently taking advantage of the low interest rate environment. Japanese interest rates have been close to zero, resulting in a cheap source of borrowing, and significant outflows of money from Japan seeking higher interest rates, in short term positions known as the carry trade. To complement this, the US has also experienced low interest rates, a relic of former Federal Reserve Governor, Alan Greenspan's policy to pump liquidity into the economy during signs of weakness in the economy. Furthermore, in order to fund a costly and enduring war the US Government has been pumping money into the economy. Ordinarily these circumstances would be inflationary, however, to offset this effect the US and other developed countries have had the benefit of cheap imports from China. These imports have remained cheap because of China's competitive advantage in manufacturing and the Yuan pegged to the USD at an artificial rate much lower than it would be if floating. Although this has continued to detrimentally affect the US Balance of Trade and USD exchange rate. The result of this environment is that credit has been easy to obtain and has been lent without the usual concerns over risk that are usually imposed.

A combination of events, outlined below have give rise to what I believe is a "credit crunch". These are a rising of interest rates to combat inflation, an apparent unwillingness of the new Federal Reserve Governor Ben Bernanke to be as prepared to lower interest rates and pump money into the economy on any sign of weakness as his predecessor did, and less willingness to lend money with minimal concern for risk as previously. These events maybe concerning, however, the vigor with which the financial markets have reacted to them, I believe, is overdone. A significant buffer, which in my opinion, will limit the severity of this correction, is the strong forecasts of world growth, recently upgraded to over 5% for 2008. Furthermore, in Australia particularly, the large sums of superannuation money that is waiting to be invested from the significant inflows pre 30 June should provide support to share prices on the ASX.One implication of the tighter credit environment is a less encouraging environment for private equity. Private equity has been a significant beneficiary of cheap credit, able to buy out public companies using highly leveraged positions and pay the debt off from the cash flows the business generates. Combine this with having to pay minimal tax through significant interest deductions and obtaining operational efficiencies, when the business is sold back to the market considerable gains can be made. Private equity's insatiable appetite has resulted in prices being above average. The credit crunch that has started to develop with higher interest rates will mean a slowing down of this activity, and less of a takeover prospect premium built into share prices. However, this premium, now extinguished by the market wide downturn, has meant the market in general is much closer to its historical valuations and some stocks are now trading far below their historical PE averages.

Summary

The events in the US sub-prime sector have struck fear into the financial markets. Humans dislike uncertainty, and, therefore, after a strong run in the markets over recent times, investors have taken money out of the markets. This activity characterises a normal healthy correction, where some, usually trivial event, triggers investor concerns and leads to a wave of selling by investors who lock in profits, traders have their stop losses hit and institutional investors take some risk off the table. This is considered healthy as valuations tend to return to historical levels and shares which have been oversold become bargains for the prepared investor who has adequate cash reserves available to pounce on these opportunities.

[mamos]

My Summary of recent events Part 2:

I am updating events given the large sell-off that occurred on Friday on the Australian and European markets, following the 3% fall in the US on Thursday.

Both the ASX and the FTSE recorded their greatest declines since the fall-out from the September 11 terrorist attacks with the ASX falling 3.7%.

In response to the significant devaluation of the world share-markets the Federal Reserve and European Central Bank have been pumping money into their economies to account for the absence of liquidity in the credit markets. This diminishment in liquidity has arisen because holders of cash are now much more risk averse and are unwilling to lend as plentifully as previously. I believe this situation can be summarized as a rebalancing or a re-pricing of risk. Previously, the abundance of cash, from situations described in the former post, meant investors were less worried about risk and more about return as they could easily obtain cheap money. Now the balancing of the risk reward equation is occurring.

What has made this rebalancing more dramatic I believe has been the increased leveraging in the credit markets. Improved technology with risk analysis software employing Monte Carlo simulations and complying with the Basel II framework has enabled financial institutions to more effectively manage their risk to achieve greater leverage and consequently maximize returns. The increased leverage accompanied by overstated credit ratings and possibly also asset valuations such as housing, has meant that the failure of those excessively leverage to these defaulting credit positions, whereas otherwise without excessive leverage they would be standing. Warren Buffet calls situations like this money returning their rightful owners i.e. those who are not over-leveraged.

The question now is how these events will affect the wider economy? Consumer spending may be detrimentally affected as consumers, just as the institutions that purchased the loans, over-extended themselves. Some consumers will be asset poor, from mortgagee sales, and deteriorating housing prices, which will affect their consumer spending. However, I do not believe this is a significant concern to the wider economy as defaults are only a small % of total lending.

The more pressing concern is the lack of liquidity in the system. Personally I think this only a short term problem while rebalancing occurs. Money has not disappeared it is just that people who hold it are less willing to lend as previously. Perhaps this will mean less private equity deals will be done, and growth may be hampered slightly from the lack of credit, but these concerns in themselves, I believe, will be insufficient to cause a recession. World growth is still strong, and although debt levels of individuals are at record levels compared to incomes, this must be considered in the context of individuals having much greater wealth through superannuation etc.

However, taking a less optimistic outcome, concerns are firstly, that consumer spending is affected greater than expected by the spreading of sub-prime mortgage defaults wider than first expected. Secondly, the liquidity that the financial markets were previously accustomed to takes longer to re-achieve, and during the absence of liquidity business activity is hampered with detrimentally affects to growth.

As a concluding note I hope the Federal Reserve and European Central Bank exercise restrain in not pumping too much liquidity in to the system. Arguably, the same actions by Alan Greenspan when markets were suffering created the excesses in liquidity over recent years and we are only feeling the effects of a rebalancing now. There is a sacrifice between short term pains, while rebalancing occurs, for long term security. The unknown question is how long will the short term pain last?

[pago]

hi mamos,excellent post.i assume this is your work/assimulation.my thoughts are very much in line with yours.the difficultly is predicting the as yet unknown.ie,1,there will be more bad news re bad debts/credit/company stress.there is more to come out.2,to what extent will the fed/reserve banks respond to alleviate the liquidity issue,and the usa fed drop interest rates.we know from thur and fri the reserve banks globally will provide loans to relieve liquidity issues,i expect this to be ongoing.will the usa fed decrease mortage interest rates is a key question.i expect the short term pain/volatility to continue.my guess on the asx for monday,30 up or down,but could be up if interday overseas markets move up.either way its not monday that counts,its the next few months,cheers pago.

[Halebop]

...Improved technology with risk analysis software employing Monte Carlo simulations and complying with the Basel II framework has enabled financial institutions to more effectively manage their risk to achieve greater leverage and consequently maximize returns...

Monte Carlo is a model. That it includes some "random" rather than assumed or derived componants does not make it any more robust than any other model. It's just a clever sounding way of saying let's chuck some random numbers in rather than screw up the assumptions ourselves. It ignores the the concept that random numbers can be just as screwed up.

Basel II is also a model. It is essentially untested in a deflationary environment. There is no evidence that it has done anything to minimize risk as we have not yet adequately field tested the boundaries of the model with a decent crash on real balance sheets. In fact, we've potentially made things worse by making a set of assumptions (the antithesis of Monte Carlo) by assuming stuff like "safe as houses". Predictably, house lending has expanded.

So far the only systemic outcome we can see is that banks were largely unwilling to take risks some hedge and bond funds were willing to accept. Unfortunately, even a hedge fund failure does not insulate markets from that risk. Ask youself - Once a hedge fund has lost 120% of it's capital - have the losses finished? Who assumes the next layer of losses? Where have these funds comes from? There is nothing new out there. I'm yet to see any model or risk management that protects the leveraged from stupidity or deflation.

[The Great Gold Guru]

Easier to buy gold than head for the hills ... walking uphill is a pain in the ar ....

[soulman]

The market is up today, and due to the US market recovering heavy losses in the morning and closed slightly down, I thought our market will recover purely because we were smashed 50 odd points in the last hour just because no one want to hold stocks through the weekend and the uncertainty of what the US market will do on their Friday trading. Hence, that's what we are up today.

Although every day is a different day. Like one analyst said, it's a hour by hour proposition.

[trendy]

The Goldman Sachs PhD team seem to have forgotten what they were taught in Quantitative Trading - 101

http://www.bloomberg.com/apps/news?pid=20601010&sid=atrLyIlkKSjg&refer=news

1: The number one rule of trading is to cut your losses.

2: The number two rule is never ever double down - the Martingale Technique is the sure way to doubling your lossses.

http://en.wikipedia.org/wiki/Martingale_%28betting_system%29

[trendy]

Believe me the credit market is unwinding fast in North America.

http://www.bloomberg.com/apps/news?pid=20601010&sid=ak56JbXPTsL4&refer=news

Coventree Fails to Sell Asset-Backed Commercial Paper (Update4)

By Sean B. Pasternak and Shannon Harrington

Aug. 13 (Bloomberg) -- Coventree Inc., the Canadian finance company that went public in November, failed to sell asset-backed commercial paper to replace maturing debt because of the credit crunch caused by U.S. subprime mortgage losses.

The shares tumbled 35 percent after the company extended maturities on C$250 million ($238 million) of commercial paper and sought emergency funding for another C$700 million of debt. Toronto-based Coventree's units have about C$16 billion of asset- backed commercial paper outstanding.

``Problems that initially seemed isolated to a few U.S. subprime mortgage lenders have led to broader concerns relating to debt capital markets generally,'' including the Canadian asset- backed commercial paper market, Coventree said in a statement today..............

http://www.bloomberg.com/apps/news?pid=20601010&sid=arcxL5CbMUAo&refer=news

KKR Says Financing Costs `Increased Significantly' (Update3)

By Elizabeth Hester and Jason Kelly


Henry Roberts Kravis, senior partner with KKR Aug. 13 (Bloomberg) -- Kohlberg Kravis Roberts & Co., the private-equity firm that plans to raise $1.25 billion in an initial public offering, said the recent jump in borrowing costs for leveraged buyouts may hurt its funds' performance.

The cost to issue high-risk, high-yield debt has ``recently increased significantly'' and the New York-based firm may need to rely on investment banks to fund transactions, KKR said in a filing with the U.S. Securities and Exchange Commission today. Blackstone Group LP, manager of the world's largest private-equity fund, also cited ``more challenging financing'' when it announced earnings today.

``More costly and restrictive financing may adversely impact the returns of our leveraged-buyout transactions and, therefore, adversely affect our results of operations and financial condition,'' KKR said in its filing....................

[trendy]

..."and another one bites the dust and another bites the dust"....

http://today.reuters.com/news/articleinvesting.aspx?type=etfNews&storyID=2007-08-13T215624Z_01_N13372475_RTRIDST_0_AEGISMORTGAGE-BANKRUPTCY-UPDATE-2.XML


http://www.bizjournals.com/atlanta/stories/2007/08/13/daily9.html

[trendy]

http://online.wsj.com/article/SB118700132664895815.html?mod=yahoo_hs&ru=yahoo

If the US keeps printing cash at the current rate this is what they will be worth shortly.

[trendy]

What stands out about this chart?

[JackSprat]

What??????

[Huang Chung]

I'm no chartist Trendy, but is that what they call a double top?

[tricha]

Maybe it's time the USA payed its dues :eek:, like Russians did a while ago, just like the Romans, every dog has his day.
We could well be in for a new world order.:confused:

Rising wages boost China shoppers

http://newsimg.bbc.co.uk/media/images/44054000/jpg/_44054424_food203ap.jpg Beijing has moved to boost the domestic economy

Chinese retail sales growth is now expanding at its highest rate in more than three years.
Fuelled by rising incomes, retail sales grew 16.4% in the year to July, up from 16% in June, and the highest annual increase since May 2004.
Stripping out inflation, which is now at a decade-high in China, underlying retail sales rose 5.6% in July.
Retail sales are growing as Beijing has tried to increase domestic consumption to offset a reliance upon exports.
'Rising confidence'
"Everything is pointing towards stronger consumption still," said Macquarie economist Paul Cavey.
China's economy grew at a rate of 11.5% in the first six months of this year. "Rising incomes and a soaring stock market are factors underlying the retail sales boom," said Ren Ruoen, an economics professor with Beijing University of Aeronautics and Astronautics. "The government's efforts at providing more social welfare may also be helping to boost consumer confidence."

[spruik]

What stands out about this chart?

Guessing... overdose of viagra??? :)

[trendy]

Huang you got it. Double top after two decades of expotential growth. Clearly not sustainable.

[Heavy Metal]

Hi Trendy, I think your chart is outdated and missing 13 months of further growth that took it way past the point that you have provided, and therfore disproving that it was a double top.

It went on to the 14000 level, way above what your chart is displaying.

If you are implying that the chart is current and that it is displaying the point where we are now, that is, at a double top, that is not correct.
The DOW has progressed well past that point.

What a spoilsport. Don't let some petty facts get in the way of a good story.

[Heavy Metal]

Similar misleading charts appear in those gold peddling websites that yearn for Armageddon, a DOW:gold ratio of 1, a return to the Gold Standard, slavery, flogging and the Confederation.

[trendy]

Chill out guys....I'm not a permabear.

However, I do live in the US and I have seen a lot of people who are living beyond their means as they have used their homes as a giant ATM. Problem is now they have to pay back at higher interest rates at the same time home values are dropping. Homes where I live have dropped in value by 20% in the last year alone. Lots of people are now negative equity.

Now add on the explosion in derivative trading multiplied by leverage of 10x and you have a recipe for disaster. A small down turn has wiped out the equity in many hedge funds and they are now selling to meet the equivelent of margin calls....let alone redemptions. Redemption requests have to be in this week for September......watch out as more forced selling is coming. This market is going to unwind.

[trendy]

Sentinel Management Group Halts Client Redemptions (Update5)

By Jenny Strasburg and Matthew Leising

http://www.bloomberg.com/apps/news?pid=20601087&sid=acx0whdtM1Vg&refer=home

Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., the Illinois-based cash-management firm that oversees $1.6 billion, froze client withdrawals after saying that credit-market turmoil made it impossible to trade without incurring losses.

Sentinel, based in the Chicago suburb of Northbrook, said it contacted the Commodity Futures Trading Commission for approval to halt redemptions ``until we can honor them in an orderly fashion,'' according to an Aug. 13 client letter posted on TheStreet.com Web site. Regulators said the firm never made such a request.

``They're not honoring withdrawal requests, and the plan is over time to get out of positions,'' Jeff Barclay, a lawyer with Chicago-based Schuyler, Roche & Zwirner who represents Sentinel clients, said in an interview today. ``Their intent is to return money to clients, which is an admirable position, but it's a breach of contract and bad for a client that needs the money tomorrow for a margin call,'' Barclay said after speaking with members of the firm's legal staff today. ..........


http://www.bloomberg.com/apps/news?pid=20601087&sid=aUmLMYnd902Y&refer=home

Wal-Mart, Home Depot See Earnings Hurt by Economy (Update4)

By Lauren Coleman-Lochner and Mark Clothier


Shoppers exit the Lakewood, Colorado, Wal-Mart store Aug. 14 (Bloomberg) -- Wal-Mart Stores Inc. and Home Depot Inc., the two largest U.S. retailers, said the housing slump, rising mortgage defaults and high energy prices will depress earnings for the year.

``U.S. consumers continue to be under difficult pressure economically,'' Wal-Mart Chief Executive Officer H. Lee Scott said on a recorded call today. ``It is no secret that many customers are running out of money toward the end of the month.'' .....

[trendy]

Investments with AAA ratings that have no value!

http://www.bloomberg.com/apps/news?pid=20601103&sid=aH0mn2YEj6nk&refer=news

Moody's, S&P Lose Credibility on CPDOs They Rated (Update1)

By John Glover and Shannon D. Harrington

Aug. 14 (Bloomberg) -- Moody's Investors Service and Standard & Poor's, the arbiters of creditworthiness, are losing their credibility in the fastest growing part of the bond market.

The New York-based ratings firms last month gave a new breed of credit derivatives triple-A ratings, indicating they were as safe as U.S. Treasuries. Now, investors are being offered as little as 70 cents on the dollar for the constant proportion debt obligations, securities that use credit-default swaps to speculate that companies with investment-grade ratings will be able to repay their debt.

``The rating doesn't tell me anything,'' said Bas Kragten, who helps manage the equivalent of about $380 billion as head of asset-backed securities at ING Investment Management in The Hague. ``The chance that a CPDO won't be triple-A tomorrow is a lot greater than it is for the government of Germany.'' .......



http://www.bloomberg.com/apps/news?pid=20601087&sid=autCbAkRhyxM&refer=home

Mitsubishi UFJ, Sumitomo Mitsui Detail Subprime-Related Losses

By Finbarr Flynn

Aug. 15 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc., Japan's largest bank by assets, said it had unrealized losses of about 5 billion yen ($42.6 million) on investments related to U.S. subprime loans as of the end of July.

The bank had a balance of 280 billion yen in subprime- backed securities, 97 percent of which had the highest triple A credit rating, it said in a statement on its website.

Sumitomo Mitsui Financial Group Inc., Japan's third- largest bank, recorded ``several billion yen'' worth of losses in the three months to June 30, after selling about 350 billion yen in U.S. mortgage-backed securities, including those backed by subprime loans. The bank had an outstanding balance of 100 billion yen in securities backed by mortgage loans at the end of June, it said in a separate statement yesterday.

[JackSprat]

Thanks for all your posts Trendy. Bit like getting news from the front!

[pago]

hi trendy,whats the thinking regarding the fed probably lowering interest rates soon?they have to,surely?cheers pago.

[shane_m]

man what a day... my positions that went negative are gone. only hold positive ones now. so many bargain out there....

[trendy]

Market is divided on FED rate cut....some are pleading for a rate cut...including CNBC Mad Money host Cramer.

But we now have a new FED chairman "Ben" his single goal is to fight inflation. The Greenspan "market put" is gone and in fact it is argued that previous rate cuts got us into this mess. Also today's wholesale price inflation WPI report was higher than forecast....

Basically, FED is between a rock and hard place. They would have to cut substantially to rescue the housing downturn and enable folks to re-mortgage at lower rates.

I think they are more likely to look at a bailout of the sub-prime holders e.g. banks etc.

[trendy]

Word is liqudity is drying up again tonight....FED liquidity tap is being opened....bailout week....FED is lending against CDOs.


http://www.marketwatch.com/news/story/recent-losses-hedge-fund-industry/story.aspx?guid=%7B84C04FFD-1C25-4A6A-846C-1585042546A3%7D

Losses spark hedge fund redemption concerns
But bigger funds have longer lockups to avoid such problems
By Alistair Barr, MarketWatch
Last Update: 7:00 PM ET Aug 14, SAN FRANCISCO (MarketWatch) -- Recent losses suffered by some hedge funds have raised concern that managers in the $1.5 trillion industry could get big redemption requests from investors this week.

Hedge funds usually lock up investor's money for three months or longer. There are also redemption-notice periods, giving managers time to raise cash to repay investors. Those range from roughly 15 to 90 days.
If investors want to get their money out of a fund by the end of the third quarter, a 45-day redemption notice period would mean that withdrawal requests need to be in by the middle of this week.........

[trendy]

Seems the Hedge Fund managers left the "quant" computers running automatically while they were on summer vacation here....One manager to the other "I thought you turned the computer off"...."no I thought you did!"

http://news.independent.co.uk/business/news/article2864241.ece

Across the industry, hedge fund managers are struggling to prevent a wave of redemption requests from investors who have become more risk-averse. Coming on top of a tightening of credit conditions from their lenders, which has forced many funds to reduce their levels of debt, significant redemptions could further dramatically shrink the industry.

AQR, a Connecticut-based hedge fund that is one of the biggest specialising in computer-based trading, was reported to have raised $1bn (£500m) to inject into its funds, after suffering heavy losses last week. The fund manages $38bn in assets. Goldman Sachs arranged a similar refinancing of one of its funds on Monday, promising that the new investors would be able to benefit as trading returned to normal.

Man Group, the London-listed hedge fund manager, revealed that its flagship computerised trading fund, AHL, had come through the turmoil to register a loss of just 2 per cent over the past week. Barclays told investors with funds at its BGI division that it was not seeing large numbers of redemption requests.

[shane_m]

now holding EMR,ESS,NZO all in green and lot of cash in bank. :)

[Viking]

Though I am roughly about 50% cash from 40%, not because I cashed up, just because lossing too much blood on the market in recent weeks~ :( :**(

Now allthemore think Tricha was very right :)

[Halebop]

Man Group, the London-listed hedge fund manager, revealed that its flagship computerised trading fund, AHL, had come through the turmoil to register a loss of just 2 per cent over the past week. Barclays told investors with funds at its BGI division that it was not seeing large numbers of redemption requests.

So the HEDGE fund, ie a Hedge against falling markets, lost "just" 2% during a period of falling markets? I guess investors should be grateful? :eek:

[Huang Chung]

It's days like today that I feel like Major Kong riding the H-Bomb all the way down in Dr. Strangelove.

YEEEEEEEEEEEEEEE HAAAAAAAAAAAAAAAA :eek::eek::eek:

[tommy]

Gee, so much blood in this market at the moment...

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Axao&draw.x=0&draw.y=0

Are we at the tail end of the correction or does is have further to go?

Will this continue into the reporting season? I am sooooo tempted to top up.... cheap stocks everywhere, but at the same time, I hate catching a falling knife!

[Huang Chung]

A whif of capitualation perhaps??

[Huang Chung]

The ASX today has shot through the 200 Day Moving Average - this major technical support level has been broken after bouncing off it several times during the last week or so.

Now that we have techically had a 10% correction, watch the panic set in if it falls further towards "crash" levels.

Well, if it does, IMHO, fear will be the cause, because the fundamental reasons are way overblown.

[ratkin]

p/e ratio of market still far too high , another 20% drop should see some fair pricing

[winner69]

Mike - PE usually goes down below 10 in a real correction .... thats nearly 50% to go

[Viking]

Be afraid~
Be very afraid~

:D sorry, I may be in the state of capitulating mode~

[winner69]

A 20% correction would see it at 5175 which is still above where it started the year! It would also be fairly consistent with its long term trend line over the last 4 years.

A 10 year chart would suggest 4500 odd .... just as it overshot on the downside in 02/05 prob overshot on the upside the last year or so

[soulman]

Wow, so much fear, including people in this forum. A good reason to be fearful though. Shares are being pummelled and good profit result are being ignored. I am bleeding badly. Just not sure who here is making a killing from this massacre. Any shorters here?? JBmurc?

Not sure where this will go but as far as I know, we are dropping way more than Wall Street. Wall Street down 1.7% and we get kick 3%. Doesn't sound fair to me. Anyway, we are dropping because of the US anyway. Hence now, when the US sneeze, we catch some serious pneunomia.

[ratkin]

Part of the reason our markets are being hammered could be currency related, foreign money will be taking their holdings away before our currency goes back to its historical level of being on par with a nicaraguan peso.

Was i alone in enjoying our high dollar ? Being british im still in the habit of converting my money into pounds , felt quite well off with our currency rise , plus morgage all paid and great term deposit rates . Now we will no doubt head back to third world status

[Huang Chung]

Wow, so much fear, including people in this forum. A good reason to be fearful though. Shares are being pummelled and good profit result are being ignored. I am bleeding badly. Just not sure who here is making a killing from this massacre. Any shorters here?? JBmurc?

Not sure where this will go but as far as I know, we are dropping way more than Wall Street. Wall Street down 1.7% and we get kick 3%. Doesn't sound fair to me. Anyway, we are dropping because of the US anyway. Hence now, when the US sneeze, we catch some serious pneunomia.

It all depends where this so called credit crunch leads. At this stage, the doom and gloom scenario is winning hands down...i.e. speculation on what might happen. Way overdone to my way of thinking, but it's hard to fend off the lemmings when they're in a full blown charge towards the edge of the cliff. :(

[pago]

soulman,think ratkin and viking are taking the pi&s.asx all ord 3% down today,its starting to look overdone.im cherry picking in a small way.the dow/usa ,hedgefund selling,fear,momentum could take the asx lower.too difficult to pick the turnaround yet,could be soon if the fed rescues or months if the situation is managed.either way i dont believe its armageddon,do you?.at worst wait until november 07 for a turnaround,cheers pago.

[tricha]

It all depends where this so called credit crunch leads. At this stage, the doom and gloom scenario is winning hands down...i.e. speculation on what might happen. Way overdone to my way of thinking, but it's hard to fend off the lemmings when they're in a full blown charge towards the edge of the cliff. :(

Yep, lemmings leaping of cliffs in their thousands ;)

Full year accounts just around the corner, there are some bargins to be had right now before all the good news comes out:p

[pago]

trish,its near buy time.wait alittle,cheers pago

[fihr]

Hope its still buy time in 4 weeks when I have $$. But might keep some more $$ in reserve for some time.

RAMS did badly today due to tightening credit. What sort of effect will it have in Australia if all the non-bank lenders put rates up due to more expensive credit? Will we see lots of defaults from our already struggling stretched mortgage holders? If that leaks into the housing market, and pulls that down, will we see less consumer confidence, then less consumer spending, then an end to our current growth rate, with flow on in the share market? Or is that too small a part of our market, and China will rescue our resource sector? This makes me nervous.

[Huang Chung]

What sort of effect will it have in Australia if all the non-bank lenders put rates up due to more expensive credit? Will we see lots of defaults from our already struggling stretched mortgage holders? If that leaks into the housing market, and pulls that down, will we see less consumer confidence, then less consumer spending, then an end to our current growth rate, with flow on in the share market? Or is that too small a part of our market, and China will rescue our resource sector? This makes me nervous.

Undoubtedly, there will be some impacts, but the sheer panic we are currently seeing in some sectors is something else. Look how many mining stocks lost around 10% of their value JUST TODAY!

[Halebop]

http://img142.imageshack.us/img142/7637/xaogifxn7.gif

200 Day moving average has been crossed for the first time in around 5 years. The overall result is still above the trend channel but the 200 day moving average is a pretty good indicator of a potential sea change. On the assumption of further falls 5650 and 5480 look like potential support areas. I favour around 5,300 which would put us only half way through the correction. The way things tend to work we could have 1 or 2 rises before it falls to those sorts of levels. If the Baby Boomer's investment world really was over, the circa 1982 implied trend line sits at around 4,000.

[tommy]

http://money.cnn.com/2007/08/14/news/international/pluggedin_gumbel_contagion.fortune/index.htm

Credit contagion
Is the worst over? Fortune's Peter Gumbel offers a 10-point guide to understanding two harrowing weeks - and what's likely to happen next.
FORTUNE Magazine
By Peter Gumbel, Fortune
August 14 2007: 10:36 AM EDT

PARIS (Fortune) -- Relax! There's really no need to panic! That's the soothing message being put out this week by key players in financial markets after two harrowing weeks in which credit markets in Europe all but dried up, prompting massive injections of funds into the system by the European Central Bank, the U.S. Federal Reserve and the Bank of Japan.

Overnight borrowing rates have come back down after spiking wildly and stock and bond markets have been bouncing back around the world. The European Central Bank, which continued to inject funds into the market on Tuesday, albeit less than one-tenth the amount at the peak of the crisis last week, says that money-market conditions are "normalizing." And Tuen Draaisma, Morgan Stanley's chief European equity strategist, for one, recommended in a note to clients that they should go "overweight" in equities because "we may already be at the point of maximum bearishness and uncertainty, which by definition is the right moment to buy."

So is the worst over? Even the most die-hard optimists concede that it'll take a lot more than a few days of calm to restore confidence among financial institutions and retail investors. "The market is concerned pretty much across the board," says Gerry Rawcliffe, a managing director in the banking group at Fitch Ratings in London.

Here's a 10-point guide to what we know and don't know about the troubles, and what the repercussions are likely to be:

Why did America's subprime mortgage woes have such a big impact on world financial markets?

Because these mortgages were lumped together in packages and sold as asset-backed securities all over the world, particularly in Europe. Often the initial securities were themselves put into new packages, leveraged up and resold as so-called collateralized debt obligations (CDOs). They are a sort of derivative play on the underlying mortgages, just as futures and options are a play on stocks and commodities. Big banks have whole securitization departments who create these instruments. They do so to profit from the difference between the long-term returns these investment vehicles produce and their more plain vanilla short-term borrowing, and to earn fees.

Who bought them?

Everyone, and that's the problem. The CDO market has exploded in recent years: More than $100 billion worth of structured cash CDOs were issued in the fourth quarter of last year alone, according to CreditFlux Data+, a London firm that tracks them (and that doesn't include the even more arcane "synthetic" CDOs). Banks, institutional investors and hedge funds have been the main customers, but some retail investors have also bought into them through the asset-backed securities, or ABS, funds that some of the biggest European banks sell to the public. Everyone who bought these securities was given the same pitch, namely that they were a relatively safe bet, since much of the paper had AAA ratings, but offered higher returns than regular corporate bonds.

So what went wrong?

The number of delinquencies in the U.S. subprime mortgage market has been rising and is now substantially larger than anyone expected - about 14 percent of the total, up from about 10 percent in 2004 and 2005. That means there's a strong likelihood that some of the securities holders, especially those where the underlying mortgages were taken out in the past couple of years, are sitting on losses.

Those troubles have been massively compounded by the aggressive use of leverage in CDO packages. When U.S. blue chip financial players like Bear Stearns and then a variety of European banks began reporting problems, panic quickly gripped the markets. That turned into a vicious circle: These debt instruments have now become impossible to price because nobody wants to buy them any longer. And since they can't be priced, the size of the losses aren't clear, which in turn has given rise to more rumors about financial players in trouble. Banks in continental Europe especially simply stopped lending to one another, which is why the liquidity dried up in the credit markets as a whole and the European Central Bank had to jump in.

How big is the problem, really?

Nobody is quite sure. Patrick Artus, an economist at Natixis in Paris, reckons the total damage inflicted by subprime woes is a relatively manageable $45 billion, which is the difference between the expected rate of mortgage delinquencies and the current much higher rate. Another French bank that is an important player in the derivatives market, Sociéte Générale, reckons that even if things really turn sour, the worst will be losses of about $100 billion. That may sound like a lot, but it's the equivalent of about 1 percent of the total market capitalization of the S&P 500.

Such calculations highlight the real issue here, that the panic has been due more to a collapse of confidence than to any financial cataclysm. "We're still primarily looking at a liquidity crisis rather than a credit or a solvency crisis," says Fitch's Rawcliffe.

Is it really over?

No. The market "remains very, very fragile," says a top executive at one of the leading European banks. Some confidence has been restored into the international banking system and its overnight lending patterns by the big injections of central-bank funds, but nobody has yet dared to start buying that subprime paper in any sizeable quantities. And because there's so little transparency about who is sitting on what size losses, the rumors continue to swirl.

Nouriel Roubini, an economics professor at New York University's Stern School of Business, who has long warned about the risk of financial contagion, reckons some other parts of the U.S. housing market including home equity loans and second mortgages are starting to display what he calls the same "toxic characteristics" as the subprime sector. More optimistically, Neil McLeish, the chief European credit strategist at Morgan Stanley, says that, "we have passed the absolute peak of that anxiety and uncertainty." But even he believes that credit market conditions will be more difficult in the coming months and, "there is still some risk of additional volatility" at least for the next month or so.

Who are the biggest casualties?

Banks and financial market players across the world are starting to come clean about their exposure and losses, partly in order to help restore confidence in the market. The losses incurred by Wall Street titans Bear Stearns (Charts, Fortune 500) and Goldman Sachs (Charts, Fortune 500), which this week announced it is putting $2 billion into one of its hedge funds, have received the most publicity. Outside the United States, firms such as insurer AXA (Charts) and BNP Paribas in France have frozen or shut problem funds, while a range of banks including NIBC of the Netherlands and Commerzbank in Germany have detailed their exposure and expected losses.

The biggest international victim to date is a mid-sized German bank called IKB Deutsche Industriebank that its peers, including a government-owned bank, stepped in to rescue earlier this month, taking over $11 billion of credit lines and putting up a $4.7 billion funding package. IKB had been an aggressive player in the CDO market, through two off-balance sheet firms that it used to pump up its commission income and advisory fees. In the end, its exposure to dodgy securities through these two firms far exceeded the bank's liquidity and equity capital.

Is anyone safe?

Not completely, but barring some huge problem nobody yet knows about, major banks seem in the best position to weather this storm because they have the strongest balance sheets and are able to refinance their operations most easily thanks to the extra liquidity that central banks have put into the market in the past week. "Being a bank and having access to the central bank (credit) windows is key at the moment," says the top European banker.

Hedge funds are another story, as the Goldman Sachs-run one that was bailed out this week shows, although some of these funds foresaw the troubles and have been aggressively shorting the subprime sector and any securities relating to it.

Why didn't central banks cut interest rates in response?

Some critics of the European Central Bank, especially in France, are saying that its interest rate policy, which has consisted of regular rate hikes to counteract inflation, has partly fueled this crisis. "One can ask if the ECB isn't becoming a prisoner of its rate-increase strategy," Thierry Breton, the former French finance minister said this week. But bank economists are generally more supportive and say that the ECB acted smartly with its three consecutive days of huge money-market interventions - the biggest of which was a whopping $130 billion injection last Thursday. "It's a demonstration of the financial system operating as it should," said James Nixon, a London-based economist at France's Société Générale, who says that the troubles primarily affect the financial sector rather than the wider economy.

While the Fed did cut rates in 1998 during the last derivatives meltdown, involving Long Term Capital Management, central banks may not need to this time if markets continue to calm down. Indeed, the big question now is whether the ECB and the Bank of Japan will go ahead and raise rates in the next month, as they had signaled before the crisis. Roubini isn't sure, and thinks that the Fed may well move to reduce U.S. rates quite soon. "The likelihood of a cut in rates is now much higher," he says.

What does this mean for the world economy?

So far, not all that much - but keep your fingers crossed. Growth in Europe and Asia remains buoyant, even if the U.S. outlook is unclear. Some borrowing by companies and individuals is bound to get more expensive as markets adjust and restore a risk premium. But "it's not obvious that the repricing will lead to an economic slowdown," says Société Générale's Nixon, although there's a possibility that Britain's economy, which has thrived because of its heavy dependence on financial services, may be vulnerable. Roubini thinks the United States will bear the brunt of what he sees as an inevitable slowdown of consumer spending related to the housing woes, and reckons that this could ultimately spill over to the global economy if it's sufficiently severe. "The effect on the real economy in the rest of the world depends on whether there's a hard landing in the U.S." he says.

Will there be any regulatory fall out?

This is almost inevitable, especially in Europe where it's now clear that many of the purchasers of these securities didn't fully appreciate the risks they were taking. Look for the first moves to come in Germany, where bank bail-outs are exceedingly rare. The last time a bank got into serious trouble there was in 1974, when the Herstatt Bank collapsed after some disastrous forays into foreign-exchange trading that bear some similarity to IKB's woes. Regulators quickly followed up with an overhaul of the national banking system. It's not clear that IKB's rescue will have the same dramatic repercussions, but it's already prompting tough questions about how a mid-sized bank could end up with such an enormous exposure to risky assets via an off-balance-sheet firm.

"I suspect that at the end of this, regulators will ask themselves if this very rapid expansion (of transactions involving asset-backed securities) has been a good thing for banks, or if the risk comes back to haunt you," says Fitch's Rawcliffe. Watch also for credit agencies to come under pressure to do a better job at assessing the market risk of exotic financial instruments. Top of page

[ratkin]

Undoubtedly, there will be some impacts, but the sheer panic we are currently seeing in some sectors is something else. Look how many mining stocks lost around 10% of their value JUST TODAY!

Remember though that many mining stocks had reached bubble status, 10% hardly covers it.
This last year i have had more stocks double , triple or even quadruple in price than in all the rest of my investment life put together, now that cant be normal. Nickle and uranium etc , went far too far on the upside , maybe they will overshoot on the downside.

[Huang Chung]

Remember though that many mining stocks had reached bubble status, 10% hardly covers it.
This last year i have had more stocks double , triple or even quadruple in price than in all the rest of my investment life put together, now that cant be normal. Nickle and uranium etc , went far too far on the upside , maybe they will overshoot on the downside.

Fair point Ratkin. With the exception of Ni though, metal prices are off their highs, but not drastically so.

Dow down over 1% again, so there should be more blood letting on the open today. Would not be surprised to see our market settle a bit though, assuming the US futures don't point to another nasty session over there tonight.

Then again, who the bluddy hell would know.....

[FarmerGeorge]

Thanks for the post tommy, really interesting read. It's easy to paper over the difference between a 'liquidity' and a 'credit' problem. I think it is important that the article makes this distinction.

[OneUp]

Warren Buffett is buying. That should tell y'all something.

[spruik]

Warren Buffett is buying. That should tell y'all something.

Me too.

Message must be at least 10 characters, so I added this sentence...

[ratkin]

Interesting that Buffet was buying dow jones , the outfit murdoch went for

[OneUp]

Berkshire Hathaway discloses holdings in BAC, increases positions in JNJ, SNY, UNH, USB, WFC & WLP.

[soulman]

Out of cash and my nerves has deteriorated. Time to head to meditation school. Good luck to those buyers that are just entering because I think now it's a good time. I wished I waited until now but even that, you can't say the bloodbath will cease soon.

[trendy]

Great day aye! Asia looks really bad at the moment. Korea is odwn over 7%, Japan 2% ...I'll see what the morning brings. ....did some selective buying today and picked up a Canadian Energy Trust they have huge dividend yields (relates to tax structure)....hopefully hurricane season will hold oil up and the selected oil trusts...still the market bottom looks to be around 12k on the DOW.

Night guys time to go to bed.

[spruik]

This has to be serious panic selling. Still hoping for the madness to stop.

[ratkin]

This is good , selloff accelerating , better get it over and done with quickly. Guess friday will be the big day , could be usual rush to escape before the weekend

[thereslifeafter87]

Warren Buffett is buying. That should tell y'all something.

Do you have a link to an article?

[OneUp]

http://www.nasdaq.com/briefing/stock_summary.stm

[Damo79]

Quick question. Does anyone who uses comsec know how to pull up the charts for indices, ie. all ords, asx200. There page layout seems to have changed. Not that they're nice charts to look at right now :/

Edit: Ah, found them..

[skinny]

Great day aye! Asia looks really bad at the moment. Korea is odwn over 7%, Japan 2% ...I'll see what the morning brings. ....did some selective buying today and picked up a Canadian Energy Trust they have huge dividend yields (relates to tax structure)....hopefully hurricane season will hold oil up and the selected oil trusts...still the market bottom looks to be around 12k on the DOW.

Night guys time to go to bed.


Hah! I have been buying Canroys too. Mostly Baytex and Harvest. And you?

[shane_m]

*(^$_$^@!!! oh mate more than -200 points, I am going to the pub this afternoon...

[OneUp]

Funny how on a day the market is crashing no one will admit they're buying.

[STRAT]

Funny how on a day the market is crashing no one will admit they're buying.I am. Most of my watch list has plummeted on relatively small volume. Looks like irrational fear more than anything else to me :eek:

[tommy]

US premarket not looking too good, might be another bad night:

http://money.cnn.com/data/premarket/index.html

This is painful man, I'm bleeding badly...

[ratkin]

Looks like we may of seen the bottom for a while , that 200 point sell off was pure panic , market has no regained its composure.

Problem is if the DOW goes again then it could all be repeated again tmorrow.

[pago]

hi,at one point asx dropped 5% today.its recovered some,all ords 2.5% down approx now.waiting to see if theres a late sell down in anticpation of another fall on the dow tonight.im still cheery picking,cheers pago.

[fihr]

Feeling happy again now, after swallowing the bitter pill. My "paper" loss is unbelievable! Time to play the waiting game again. But the silver lining is for those Australians who've already realised big capital gains this financial year, there are now some good loss making opportunities to reduce the tax bill, before buying back in and making the money back again. That's what I'm planning on doing with my disastrous put positions this month (especially the one on MBL - oops!). Time to assess those opportunities. I want good divs and good 12 mth prospective sp gains. I think now we can find both. Might not be able to write puts again for a little while though. A shame, but knew the day would come.

[tommy]

Gee, Korea closed down trades temporarily...

http://www.cnbc.com/id/20287134

Asian Markets Get Hammered; Tokyo Sinks 3.5%, Seoul Sheds 7%



The bloodshed continues into the afternoon session in Asia, with Japan's Nikkei Average slipping below the key 16,000 level and South Korea's KOSPI shedding as much as 7% as investors continued to dump risky assets amid growing fears about a global credit squeeze.

The Korea Exchange suspended trade in the tech heavy KOSDAQ for 20 minutes after the index fell a whopping 10%. Earlier in the session, the Korea Exchange had temporarily suspended program selling orders. Program trades are automatically done by computers according to predetermined criteria, including the difference between future prices and underlying shares.

The KOSPI was hit hard, skidding over 7% as the market played catch-up to the region's tumble after a holiday on Wednesday. Financials such as Kookmin Bank and exporters such as LG. Philips LCD and Samsung Electronics were taking a beating.

South Korea said it would take all possible measures to stabilize domestic financial markets amid fears that problems with the U.S. subprime mortgage sector were spreading. Vice Finance Minister Kim Seok-dong also said during a weekly briefing his ministry would collaborate with the central bank to inject funds into money markets through repurchase agreements on any signs of a squeeze in short-term capital markets. Year-to-date, the KOSPI is still up 17%.

Tokyo's broad TOPIX index fell 4%, with financial shares such as Mizuho Financial Group and Sumitomo Mitsui Financial taking a beating, while the stronger yen hammered exporters such as Toshiba and Toyota Motor. The Nikkei 225 average [NIKKEI 16158.33 -317.28 (-1.93%) ] was down 3.4%, slipping below the key 16,000 level. The Bank of Japan injected 400 billion yen (US$3.4 billion) into money markets. This is the third time since last Friday that the BOJ has acted in a bid to curb rises in a key overnight interest rates.

Australia's S&P/ASX 200 Index dropped as much as 5% -- the biggest one-day percentage fall in over seven years -- as financial shares such as Macquarie Bank skidded on growing concern about credit markets. The index, which has wiped out all its gains for the year, has recovered some losses and is trading about 2.5% lower.

Hong Kong's Hang Seng Index dropped below the key 21,000 level, shedding over 3% in an across-the-board selloff.

Singapore's Straits Times Index fell as much as 4.94%, the biggest single-day decline in almost six years, to a five-month low of 3,111.49. But the STI recovered slightly, down 4.59% before taking a lunch break. The STI has lost about 15% since hitting a record high of 3,688.58 points on July 16, but is still up 4.9% since the start of the year. Banks led the losses with DBS Group down 5%. United Overseas Bank and Oversea-Chinese Banking Corp. both slid 4.8%.

Chinese shares were down over 2%, correcting steep gains over past month.

[ScrappyO]

As bad as it has been this last couple of weeks.....I would have to say it is rather exciting in a way.
On paper my losses are about 14% of my portfolio.Have some cash...just waiting for the right stock..

[soulman]

This is the come back of the decade. The Australian fund manager have woken up and said: Enough is enough!!. Wall Street might get hammered tonight but surely all the short covering will be in action tonight to close out their profits.

I was not buying in the market today, purely because all my funds are being used up and bleeding painfully.

[spruik]

Funny how on a day the market is crashing no one will admit they're buying.

I did. ADY (20c), ANZ (26.00) and CIY. Sold ANZ 30 minutes later at 70c gain.

[Lizard]

Yes, I am relieved to see that the time spent finding a good share to buy at the right price has probably been slashed by about 90% today... it was starting to take days or weeks rather than hours!

I'm not buying yet - but I'm at the conservative end of the scale where losses can't easily be replaced with new cash. On the positive side today, ESS and IMD both turned in 80%+ NPAT gain for the year. Though they both kindly gave me far more than 80% return over 12 months.

[soulman]

I think spruik have the right idea. Waiting and waiting for today to happen.

All the traders and investors out there that hold their cash until today should be congratulated for being patient and sitting quietly on the sideline. Although this might not be the bottom, it still represent a great starting entry.

Sometimes, it's better to be patient and see the carnage unfolds. Sometimes you just don't see this kind of things happen (massive panic selling) and I have seen it now.

Remember, NOT LOSING MONEY is just as important than making money.

[ruethewhirl]

If anyone wants a laff, check out the chart of HST - Hastie - UP 5% on the day!!!

Now guess where I sold today...

Actually, it's not as bad as all that, I got out at 3.50 - my purchase price!

[spruik]

I think spruik have the right idea. Waiting and waiting for today to happen.

All the traders and investors out there that hold their cash until today should be congratulated for being patient and sitting quietly on the sideline. Although this might not be the bottom, it still represent a great starting entry.

Sometimes, it's better to be patient and see the carnage unfolds. Sometimes you just don't see this kind of things happen (massive panic selling) and I have seen it now.

Remember, NOT LOSING MONEY is just as important than making money.

I'm not that perfect, have a habit of buying back in too early after selling it higher up the ladder. But I am ready if tomorrow is another disaster. Many retirees relying on superannuation or marketable investments must be seriously worried (yet I could be classified as such).

[Halebop]

The market recovered well from the horrendous early falls but still closed down by a solid chunk...

http://img169.imageshack.us/img169/3501/xaogifjs1.gif

There is nothing in there that would leave me to think it could be over yet. Now a good way below the 200 dma and a four year old trend line has been breached. Sure the trend might just be flattening out a little but swing trade gains aside, a relatively high risk tactic to step into the breach today...

[skinny]

Yeah well I could not help going over the top!

Its wishful thinking, but I wonder whether we had a cathartic moment on the ASX today?
The massive sell off due to the futures trading halt and strong subsequent recovery could be seen as quite a positive. Those who sold at the bottom will be severly kicking themselves tonight and hopefully will be less willing to throw in the towel next time. Those that picked the bottom have clean fingers so far!

[Awamoa]

More blood being spilt.FTSE down 163 already tonight.

[biker]

Ahhhhhh. Love that smell of napalm in the morning.

[tommy]

More blood being spilt.FTSE down 163 already tonight.

Yeah, look at Europe all bleeding... the entire world needs a transfusion badly!

http://finance.yahoo.com/intlindices?e=europe

Worse to come according to DOW futures, might have to get ready for another nosedive tomorrow:

http://money.cnn.com/2007/08/16/markets/stockswatch/index.htm

Another pounding for stocks
U.S. futures point to lower open as credit fears keep battering sentiment; global markets plunge.
August 16 2007: 4:44 AM EDT


LONDON (CNNMoney.com) -- U.S. stocks are likely to take another pounding Thursday, even as Treasury Secretary Henry Paulson attempted to alleviate fears about the economic fallout from the turmoil.

At 4:31 a.m. ET, Nasdaq and S&P futures were lower, with a comparison to fair value pointing to a negative start for Wall Street.

Paulson told the Wall Street Journal that the turmoil in financial markets will slow U.S. economic growth but should not spark a recession.

In a report published Thursday, he told the newspaper that some funds or businesses may go under as a result of the turmoil, but that he expects the U.S. economy to keep growing.

Stocks have been on a downward spiral with no signs of the credit situation improving. The blue-chip Dow Jones industrial average, which tracks 30 big U.S. companies, fell to a four-month low Wednesday.

Investors rushed to safe-haven investments like Treasurys on Wednesday, leading the Fed to pump another $7 billion into the banking system.

Taking a cue from Wall Street, overseas stocks plunged overnight. Stocks in Asia plunged, and major European markets fell sharply after the open.

In major corporate news, biotech Amgen (Charts, Fortune 500) said late Wednesday that it will cut 14 percent of its staff and warned that 2007 earnings won't meet forecasts.

[ananda77]

...very high volatility accompanied the first successful 5650 test today with the All Ordinaries closing at 5712; the high volume suggests a huge shake-out of the panicky hands -one or two more tests may follow

...at the same time the Dow continues to test 12800 and if again closing above this level overnight, we will most likely see a very good day tomorrow with the All Ordinaries retracing to the 50%-level

some info for the bored:

Financial Meltdown: A "Slow Motion Train Wreck"

by Stephen Lendman

http://www.globalresearch.ca/index.php?context=va&aid=6551

...and one to potentially keep nerves calm in the event of future crashes:

http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100135590/

Kind Regards

[FTG]

It is times like these and the tide is rapidly going out that we learn "who isn't wearing togs". The severity & speed of the current decline is clearly amplified by the amount of leverage (e.g. CFD's), right down to retail traders, in the market.

On one hand there are some extremely juicy looking prices on the offer. On the other hand rationality is not prevailing at the moment. There are a lot of headless chooks running around. From a technical perspective prices can still fall a lot further. Despite all the fundamental indicators pointing to the fact that companies are undervalued.
Hence if one jumps prematurely (as I'm sure lots have already over the last few days) one can not only burn their fingers, they can lose them!
I would suggest that capital preservation should be a primary objective. Buying at the moment is not for the fainthearted. Certainly not for the "average" share investor.
This is a classic battle between Fear & Greed. If you can't really afford to lose money then DON'T buy tomorrow. Let the dust settle, however frustrating that may seem.

[ananda77]

FTG:

...nothing wrong with what you say, problem is, with this kind of thinking, making a buy or sell decision becomes a theoretical game

...buy at a major support line -no matter what- if you think, it's too late...and keep in mind:

markets are subject to change

Kind Regards

[FTG]

Absolutely ananda77.

I guess my heart just goes out a little to those here who have been taking a bit of a bruising over the last few days. Rightly or wrongly my sense is that there are a few here on ST licking some serious "wounds". I would also venture to say quite a few of those folk are facing quite a dilemma. Do I buy for a potential big rebound? Or do I hang it tough for a while?

A bit like a punter who has lost a few hundred on Roulette but still has their last $100 in their pocket. Black or Red, Black or Red, Black or Red? When perhaps all they should do is call it a night!

[Footsie]

One thing for sure folks

just as the sun will rise, the market will recover.


At the end of the day, trust your instinct and buy value......

a growth stock on a fwd p.e of 10 with div yield of 5% IS VALUE

and i can name a few!!

sure u might have to stomach being down 10% if u get the timing wrong.... but in 2 years time u'll be sitting pretty.

[FTG]

One period that always sticks in mind was October 1987. What an exciting, yet harrowing time it was.

On Friday 16th October (US time) the Dow dropped 154 points. At that time it was the biggest points drop for a day in the history of the Dow! Of course in those days there wasn't blog sites but believe me there was lots of "chat" in the market. What will Monday 19th October be like!? How big will the rebound be!?

Of course the rest is history, but a lot of "smart" people learnt a few lessons that Black Monday.

[OneUp]

FTG

Black Monday.

Yep the Dow tanked that day. But within 3 months the index was hitting new highs.

[trendy]

Hah! I have been buying Canroys too. Mostly Baytex and Harvest. And you?

Skinny got into Harvest at a 16% yield....looking at ERF and few others. These are for my income investment basket....


As for market today it woud have hammered the quant funds again and any leveraged fund forbvthat matter. HF redemption requests had to be in by yesterday for September. Next two weeks will see more forced liquidations for redmemptions and margin calls.

Have to wait for the smoke to clear too see what is left to buy.

[ruethewhirl]

DOW broke even - all together now - PHEW!!!!

Tomorrow, somebody, maybe, anybody....?

a rally???

[Huang Chung]

Possibly, unless your a miner. Metals down, particularly copper.

[trendy]

Be careful...the DOW close at near even doesn't show the intra-day picture...when it was down 340...rumor is Chinese investor was buying stock in Bear Stearns.

Wholesale lay offs on Wall Street coming.....and another Hedge Fund is going to fold....as big as LTCMin 1998.

http://www.reuters.com/article/mergersNews/idUSN1645973920070816

Bear Stearns cuts 240 subprime jobs
Thu Aug 16, 2007 4:40PM EDT

NEW YORK (Reuters) - Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research) said on Thursday it will cut about 240 subprime lending jobs as a global credit squeeze and a subprime lending crisis rattles markets.

The New York investment bank employs about 15,100 people worldwide and said the cuts would not affect Wall Street jobs.

[JackSprat]

Makes one want to take a deep breath and go plunging in again. We all want to know the right time to do so but with all the facts coming about the US economy I'm certainly not going to just yet. Thanks for the posts Trendy.

[trendy]

Jobs in the whole "housing value chain" are vanishing at light speed. Another 5,000 direct jobs gone. More to come....

http://www.reuters.com/article/bondsNews/idUSN1638277520070816

http://www.bizjournals.com/austin/stories/2007/08/13/daily33.html

By Jonathan Stempel

NEW YORK (Reuters) - First Magnus Financial Corp., one of the largest independent U.S. mortgage lenders, said on Thursday it has stopped funding home loans and taking mortgage loan applications because investors are not buying its loans.

First Magnus said it halted lending "in light of the collapse of the secondary mortgage market," according to a statement on its Web site. "We explored all options before taking this action but were left with no viable alternative."

The company, based in Tucson, Arizona, said it stopped lending on Wednesday and that the decision covered future mortgage loans as well as mortgage loans previously originated but not yet funded.

First Magnus was the 16th-largest U.S. mortgage lender from January to June, originating $17.1 billion of home loans, according to Inside Mortgage Finance newsletter.

The company did not return a call seeking comment.

Dozens of mortgage lenders have quit the industry this year as defaults rose, housing prices stagnated, borrowing costs increased, and capital market conditions tightened.

Among these was American Home Mortgage Investment Corp (AHMIQ.PK: Quote, Profile, Research), which was the 10th-largest lender before filing for bankruptcy protection on August 6. It is now liquidating.

The largest privately-held mortgage lender is Residential Capital LLC, a former General Motors Corp (GM.N: Quote, Profile, Research) unit now controlled by a group led by private equity firm Cerberus Capital Management. It made $58.2 billion of loans in the first half, ranking seventh, according to Inside Mortgage Finance.

Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the largest U.S. mortgage lender, said on Thursday it tapped an entire $11.5 billion credit line to ease a credit shortage.

Founded in 1996, First Magnus said earlier this year that it operated in all 50 U.S. states, had more than 300 offices, and employed more than 5,000 people.

http://www.firstmagnus.com/

[trendy]

American liquidity contagion spreading.....cough.. cough...

http://news.bbc.co.uk/1/hi/business/6949218.stm

http://www.bloomberg.com/apps/news?pid=20601087&sid=afRK0oEFn10w&refer=home

[Huang Chung]

BREAKING NEWS - FED CUTS DISCOUNT RATE!

S&P500 futures up 25 points.....I wonder if it will hold.

[Huang Chung]

US just about to open and DOW futures are up 221 points and S&P500 futures 32 points. :)

[Huang Chung]

Quote from Bob Pissani on the floor of the NYSE:

'The traders down here think that Bernanke is a rock star'

Hopefully, the rally will hold, and give us some breathing space to assess the situation over the weekend.

[Huang Chung]

Spot metal prices are rebounding on the news of the cut.

[FTG]

Yep, but as everyone starts to realise that it's the discount rate NOT the Fed funds rate its all starting to come back now.
The size of the rollercoaster highs & lows (intraday) across all markets are enough to get even seasoned traders grabing the sick bags!

[OneUp]

Aug. 17 (Bloomberg) -- The Federal Reserve lowered the interest rate it makes to banks and acknowledged for the first time today that an extraordinary policy shift is needed to contain the subprime-mortgage collapse that began roiling the world's financial markets two months ago.

The Fed, in a surprise announcement in Washington, lowered the so-called discount rate by 0.5 percentage point, to 5.75 percent. Policy makers dropped language indicating their bias toward fighting inflation, and instead highlighted a rising threat to economic growth.

``This telegraphs their intention to cut rates at the next meeting,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``This discount rate cut calms the market and helps financing.''

This is the first reduction in borrowing costs between scheduled meetings since 2001, and Ben S. Bernanke's first as Fed chairman. Officials kept the benchmark federal funds rate target for overnight loans between banks at 5.25 percent. Policy makers next meet to set the rate on Sept. 18. Futures indicate traders anticipate at least a quarter percentage point cut.

The Fed said while recent reports indicate economic growth continues at a ``moderate pace,'' risks to the expansion have risen ``appreciably.'' The statement is a marked change from just 10 days ago, when officials kept rates unchanged and reiterated that inflation was their ``predominant'' concern.

`Restrain' Growth

``Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth,'' the Federal Open Market Committee said today. ``The committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects.''

Stocks rose. The Standard & Poor's 500 index gained 0.8 percent to 1,422.35 as of 10:50 a.m. in New York.

FOMC members convened in a conference call at 6 p.m. Washington time yesterday, Fed spokeswoman Michelle Smith said. The Fed's Board of Governors then accepted requests by the New York and San Francisco banks to cut the discount rate.

Today's action also includes an extension in so-called discount window borrowing, allowing 30-day financing that's renewable, instead of a standard overnight loan. The Fed's board sets the discount rate while the FOMC, which includes the governors and heads of five of the 12 district banks, determines the federal funds target rate.

Cash Injections

The Fed loosened terms on discount-window borrowing after its injections of cash into the federal-funds market in the past week failed to ease companies' access to capital. The amount of commercial paper outstanding, a key financing tool, had fallen the most since the 2001 terror attacks.

Lowering the discount rate ``will basically do more to unclog the credit channels than a fed funds rate cut would have,'' said Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York, who used to work at the Fed. ``It was exactly the right thing to do.''

The central bank will ``continue to accept a broad range of collateral,'' including home mortgages and ``related assets,'' it said.

Fed policy makers next meet on Sept. 18, when economists said they are likely to reduce the benchmark rate by at least a quarter percentage point from 5.25 percent. Officials have kept the rate unchanged since last raising it in June 2006.

Housing Recession

The Fed's action reflects alarm that more restrictive lending conditions and volatility in financial markets will deepen the housing recession, weaken employment and erode economic growth. As recently as the Aug. 7 meeting, the FOMC said inflation was still the biggest danger to the economy.

The Fed noted then that ``financial markets have been volatile,'' though the economy was still expected to continue to expand at a ``moderate'' pace. Today's FOMC statement, approved unanimously by 10 Fed governors and presidents, didn't mention inflation.

Figures released by the Fed yesterday showed that discount lending failed to rise much over the past week after the central bank issued a statement on Aug. 10 saying that ``as always, the discount window is available as a source of funding.'' Total loans outstanding totaled $264 million on Aug. 15, compared with $255 million on Aug. 8.

Today's decision shows policy makers understand ``the various different tools the central bank has at its disposal,'' said Neal Soss, chief economist at Credit Suisse in New York, who worked as an assistant to former Fed Chairman Paul Volcker. ``This is a masterful move because it doesn't actually feed some of the concerns about moral hazard'' of bailing out investors, he said.

Biggest Challenge

The subprime rout is the biggest challenge for Bernanke, 53, since he took office in February 2006. Under predecessor Alan Greenspan, the Fed in 1998 cut interest rates three times as currency crises in emerging markets roiled Wall Street.

In the past week, the Fed and central banks in Europe, Japan, Canada and Australia have been compelled to add money to the banking system. The collapse in demand for securities backed by subprime mortgages has forced at least 90 lenders out of business.

The European Central Bank began adding liquidity on Aug. 9 after BNP Paribas SA, France's biggest bank, was forced to halt withdrawals from three of its investment funds. The Fed followed, along with counterparts from Sydney to Oslo.

Mortgage defaults by Americans with poor credit histories prompted the collapse in June of two hedge funds managed by Bear Stearns Cos. and triggered a worldwide rout in the debt markets. Companies such as London-based Cadbury Schweppes Plc have delayed asset sales, and banks including JPMorgan Chase & Co. and Deutsche Bank AG have been left on the hook for as much as $300 billion of debt they've agreed to provide.

Yesterday, Countrywide Financial Corp., the biggest U.S. mortgage lender, had to tap an entire $11.5 billion bank line to obtain funds.

Economists and policy makers anticipate a slower expansion in the second half. For the year, Fed governors and presidents expect growth, on average, of about 2.25 percent to 2.5 percent, Bernanke told Congress last month. The projections are about a quarter-point below the last round in February, mainly on weakness in homebuilding.

[Halebop]

So the cure for the junkie was more heroin? :rolleyes:

[Halebop]

Thinking about it I'm not even sure the link between falling interest rates and saving the investment community will work. The current equation is something along the lines of "Will I lose capital earning that interest?" ...+10% interest - 30% capital isn't particularly attractive. So while I am focussed more sharply on risk rather than income, lowering my rate of return doesn't read like a credible solution, particularly if inflation consequently gets out of control and real returns on assets fall anyway.

I suspect for falling interest rates to be of any lasting benefit right now the economic data must be so bad they already consider themselves to be in or on the brink of recession. ..and if so asset values aren't going anywhere but down in any case.

[winner69]

I suspect for falling interest rates to be of any lasting benefit right now the economic data must be so bad they already consider themselves to be in or on the brink of recession. ..and if so asset values aren't going anywhere but down in any case.

Oh no .... you have bought up that word recession

Stocks markets historically fall quite a lot during a recession (I read somewhere up to 40%) .....

.......... and the latest market collapse sees the DOW only 7% off its recent high

[Dazza]

anyone know where i can find like asx200 or asx100 info

where i can find the companies that has dropped the most since beg of august?

been trying to find it eh.. but havent had any luck

i can find data on per day drops etc

[ananda77]

...think for the time being we've seen the worst of the correction and now it's going to be back to business -NO CRASH-

...never mind inflation, as long as the US economy is ticking over, maybe becoming a bit stronger. there will be no crash

...mind you, the most important thing for now and the not so distant future (12months??) is 'Consumer Spending' and 'Employment Figures' -the real test lies still ahead of us-

Kind Regards

[Dazza]

Good to see my portfolio highly which is heavily weighted in the resources/spec industry, go up 13% compared with the ALL ORDS up 4.5%

makes up for the heavily % losses compared to the ALL ORDS when its on a down day :D

all this means is that if a crash comes..... i definately wont be beating the market lol

[fihr]

Mine went up by about 17%. Am likewise heavily weighted in resources/spec. I guess volatility is the price paid for higher returns in the long run. Nerve racking in a correction all the same. Will be reweighting over the next 12 months anyway due to other financial plans.

[Halebop]

Todays rebound will be gratifying for those with heavy long exposures. To date we have lower highs and lower lows, not an obvious recipe for success. Even with todays rebound the index is still below the 200 day moving average.

Fihir volatility and out-performance do not have to go hand in hand. Over time resources under-perform the overall market yet contribute higher levels of volatility. A worst of both worlds performance. Like all cyclicals, they need to be timed to optimize returns.

5650 has proved to be a worthy support line, particularly on Friday where it bounced off around that level on two occasions. 6,000 is likely to provide some resistance. I've not yet seen anything to tell me this correction is over.

http://img219.imageshack.us/img219/7514/xaogifan6.gif

[Phaedrus]

It's not a linear chart MoSteph. If it were, the space between 49 and 50 would be the same as the space between 63 and 64. The Y scale here is clearly logarithmic.

[ananda77]

...the market finished very strong today and did not waiver a lot as it usually does at the close when uncertainty has the upper hand -a sign of confidence-

...however, 6200 for the All Ord needs to be taken out (13700 for the Dow) for new Highs to eventuate...and before that happens, am quite sure we'll see 5700/5750/5800 for another test of our beloved prime support level in the not too distant future

...may we all be successful

Kind Regards

[skinny]

With todays action I am now ever so slightly ahead *in NZD terms* of where I was before the outbreak of the 'credit crunch' concerns. Main reason is that the Canadian dollar has appreciated like stink against the NZD, and the AUD has played a useful supporting role. Still, if I had of cashed out a few weeks back I'd be way ahead of where I am now! Like HB I'm not at all confident the turmoil is over and we will see a return to the old trend line. But one thing this episode has reinforced for me is that:

1) It pays to keep a healthy fraction of the portfolio in cash (currently I'm 40%).

2) When the s*it hits the fan you cant go past G7 currencies for insurance.

[Halebop]

Halebop - thanks for the chart. Couple of thoughts:

1. Your chart is linear, which is generally considered less foretelling than log charts. Is there any reason for this? On the log version it only break the trend intraday.

2. I can't help being doubtful of resistance levels on indexes, as market participants generally operate on a micro, or company specific, level.

Maybe this is just a reverse bubble, where it explodes up…

Hi MoSteph,

As P points out, the chart is log. That it appears otherwise is due to the time frame and that half of it is taken up by the ASX rising and falling within the same range. As an aside I think P has a good eye because I knew it was log but struggled to see it all the same.

On the resistance level question - 5 of the 6 orange lines I have drawn have subsequently seen action on either the resistance or support front. While I understand the logic of your argument I can reverse it as well and say the indices are supported and resisted by the net of competing micro views on specific companies. In any case trend analysis doesn't pretend to understand the underlying reason, merely to recognise that a trend exists. The market is a wee bit complex for root cause analysis! I can't prove it now but in each case the lines were drawn before each fall ...just as the resistance line at the top was drawn before it was proved - hence it is out of place by a handful of pixels but I chose not to move it not because it was "wrong", but to demonstrate how close to right it was so far in advance. The only one not yet tested was the one around 5,500 but at least I posted both that and the 5,650 one here before the market approached.

[ananda77]

...The US enters the last stages of the 2008 presidential election:

How Far Will the Crash Go and What Do we Do Now?
The “Crash of 2007-8” is underway

by Richard C. Cook

...But there are signs that the “soft landing” is working, such as a modest increase in U.S. exports. Reflecting the weak dollar, China is now charging more for its own exports, which will stimulate our industry here at home. And the Fed’s discount rate cut last Friday sparked a modest stock market rally....

...But there’s a bigger picture. The strategy of the Fed is likely to allow the recession to proceed but it does want to get the economy moving again before the downturn goes too far. In fact they probably plan to do it in time for the 2008 presidential election....

the full story: http://www.globalresearch.ca/index.php?context=va&aid=6575

Kind Regards

[Halebop]

I read some comments about the market settling down - even today I didn't see it. The difference between low and high points on the ASX today was around 160 points, not exactly the picture of an orderly market. The market also tried to test 6,000 but ran out of steam about 20 points short.

I'm reminded of those stories about small electoral rolls and extraneous events like sports games that statistically "predict" the outcome of general elections. I wonder if a movement from here decides the outcome...?

[OneUp]

LONDON (Dow Jones) -- China's central bank on Tuesday hiked its interest rates for the fourth time in a year, saying the move is aimed at stabilizing inflation expectations and further controlling credit.

The People's Bank of China is raising its deposit rate to 3.6% and its lending rate to 7.02%. The increases amount to 0.27 and 0.18 of a percentage point, respectively.

The move comes as the mainland's economy, according to official statistics, rose at a 11.9% clip during the second quarter. Inflation climbed to 5.6% in July.

China's trade surplus surged 85% during the first half of the year.

In currency trading, the euro seemed to be the main beneficiary of the move, rising as high as 155.12 yen from 153.71 yen about an hour ahead of the rate hike. The euro also rose against the U.S. dollar.

Like the U.S., Europe has a trade deficit with the Chinese and of late the euro has been hurt as banks on the Continent have suffered losses on the back of the U.S. subprime crisis.

[ananda77]

...at last Dow breaks July's low and finishes up 145 points at 13236. Futures pointing higher testing last week's high of 13338 in a first attempt. 13700 -here we come-

Kind Regards

[pago]

hi i think we will see some down days,i could present complex lengthy arguments,i wont, its simple.wall street etc will increase pressure on fed to drop rates.expect more bad news ,dow drops etc etc,to press fed to drop rates in sept.and they will,cheers pago.

[ananda77]

pago:

...although disagree with your notion of ANYONE being able to press the FED...

the WHY: http://video.google.com/videoplay?docid=7757684583209015812 (especially part2 is very much in tune with the current situation)

...agree, there will be some down days...maybe worse!! technically, a turn down is definitely in the cards now...

http://www.financialnews-us.com/?page=ushome&contentid=2448565379

Kind Regards

[ananda77]

...these are going to be the REALBADNEWS going forward...

CONSUMER CONFIDENCE TAKES PLUNGE

http://today.reuters.com/news/articlenews.aspx?type=businessNews&storyid=2007-08-28T185650Z_01_N27451770_RTRUKOC_0_US-USA-ECONOMY.xml&src=nl_dai

Kind Regards

[SEC]

Two weeks ago in the depths of a 15% correction I would never ever have thought I would be ahead for the month......

[tricha]

Indian growth tops expectations

http://newsimg.bbc.co.uk/media/images/44088000/jpg/_44088651_mumbai_afp_203b.jpg India is the world's second fastest growing major economy

India's economy is growing faster than expected, according to official data, on the back of steady farm growth and strong manufacturing and services.
Gross Domestic Product (GDP) grew 9.3% in the April to June quarter from its level a year earlier.
The figure, from the Ministry of Statistics, had been expected to fall to 8.9% from the 9.1% recorded in the quarter between January and March.
The central bank expects growth of 8.5% for the whole of this year.
Growth picture
"It is slightly higher than expected partly because of higher farm growth and services. Every sector is growing," said Saumitra Chaudhuri, economic adviser at ICRA in Delhi.
Some analysts see the faster growth creating a risk of another rise in interest rates, but Friday's inflation figures appear to make that less likely. Wholesale price inflation was 3.94% in the 12 months to 18 August, which is the first time that the weekly figure has fallen below 4% since April 2006. Behind China, India is the world's second fastest growing major economy.

[soulman]

SEC, you still holding AFG and are you buying more? Going ex-dividend on Monday next week. I am going to sit out of buying more AFG and MBL because they are the scary stock this point in time.

I know your portfolio of WOR, TSE and commodity stock are doing great. Is there any stock giving you problem other than AFG.

Today's rise was unexpected. The buying picked up after midday and continued on until closed. A great week for me this week and a good month as well. MBL and AFG are holding me down badly though.

[SEC]

SEC, you still holding AFG and are you buying more? Going ex-dividend on Monday next week. I am going to sit out of buying more AFG and MBL because they are the scary stock this point in time.

I know your portfolio of WOR, TSE and commodity stock are doing great. Is there any stock giving you problem other than AFG.

Today's rise was unexpected. The buying picked up after midday and continued on until closed. A great week for me this week and a good month as well. MBL and AFG are holding me down badly though.

Yeah I still hold AFG but will not buy more until uptrend resumes. Another problem stock is BNB which I topped up on a month ago - too early as it turned out. My zinc holdings aren't doing too flash either. Counterbalanced by stellar performances by WOR (my largest holding), TSE and CSM, profitable top-ups in some of my resource holdings and profitable trades in a couple of blue chips bought two weeks ago. My sleeper trade was TPI, harshly dealt by the market during the correction then caned again when it only hit profit expectations instead of exceeding them. Reminds me of what happened to WOR a year ago when its price was half what it is now. TPI is too cheap now for an acquisitive company in a 'defensive' industry - will correct in the next few weeks.

SEC

[spruik]

Two weeks ago in the depths of a 15% correction I would never ever have thought I would be ahead for the month......

All the doomsday preachings resulted in me being ahead over $100K for the past few weeks.

There is no better time to buy when the rest is living in fear.

[ananda77]

...with the opening of the discount window, the FED violated one of the central tenets of banking regulation:

that banks with federally insured deposits should never be over-exposed to brokerage subsidiaries; indeed, for decades financial institutions were legally required to keep the two units completely separate.

...with markets in recovery mode, it ALMOST feels like 'business as usual', but is it??

...If the Federal Reserve is waiving a fundamental principle in banking regulation, the credit crunch must still be sapping the strength of America's biggest banks. Fortune's Peter Eavis documents an unusual Fed move

read: Peter Eavis, Fortune writer,

"Fed Bends Rules To Help Two Big Banks"
http://www.globalresearch.ca/index.php?context=va&aid=6642

[ananda77]

...creating inflation: the bubble that follows the bursting housing and asset bubbles

"On Market Predictions in the Current Chaotic Environment"

by Richard C. Cook
http://www.globalresearch.ca/index.php?context=va&aid=6639

...and although the so called 'Bin Laden Type puts', assuming a huge market move in the near future based on assumptions, that only another 9/11 terror act would make these options valuable, Brian Overby, director of TradeKing offers a more rational explanation:

"This could be someone trying to create a box spread, which is a position composed of a long call and short put at one strike, and a short call and long put at a different strike. The position is largely immune to changes in the price of the underlying stock, and in most cases, is a simple interest rate trade."
So the upshot is there is an explanation for this very unusual configuration of open interest in the S&P 500 Index's September options, but it also shows jitters remain in this market.

"Dispelling the 'Bin Laden' Options Trades"

Global Research, August 31, 2007
thestreet.com
http://www.globalresearch.ca/index.php?context=va&aid=6660

...talk about careful trading

Kind Regards

[tricha]

Want To See Something Spooky?


Have a look at the following chart:

http://www.fnarena.com/images/provider/dynamic/29-87-07.jpg


Okay, this is one for the tea leaf readers.

http://ad.au.doubleclick.net/ad/fnarena.com/HomePage;tile=2;sz=300x250;ord=833277351? (http://ad.au.doubleclick.net/jump/fnarena.com/HomePage;tile=2;sz=300x250;ord=833277351?)

The crash of '29 occurred just after the full moon preceding the solar eclipse of November 1 that year. The crash of '87 occurred after the lunar eclipse of October 7 that year. Last night we had a lunar eclipse, and on September 11 (another notable date in history) we will have a solar eclipse.

According to one celestial watcher, Peter Eliades, whose observations are currently doing the rounds on the web, research done by Steve Puetz and Chris Carolan back in 1995 (Carolan won an award) with regard to the unusual correlation between full moons and solar eclipses, and stock market crashes, there will be a stock market crash some time between July 24 and August 2. He was writing ahead of time, so he was spot on. Although you couldn't really call the correction a "crash".

However another star-gazer, J. Adams, has interpreted the Puetz/Carolan findings to suggest that the "panic climax" will actually occur going into new moon following last night's full moon which is the September 11 solar eclipse.


For what it's worth.

[Huang Chung]

I think Yogi is our resident expert on all things cellestial. :D