Depression in the USA - Deflation verus Inflation

[tricha]

Strat - "Hi Tricha, In denial in regard to what?
__________________
Timing is everything "

Everyone one is in Denial ( including myself )

We have been on the gravy train for the last few years and it has stopped.

New threads popping up and going around the real issue ( description of Yogi, Poll buying ........., Making money in resources, Investment theories, Beware of investor chat )

Recession and the effect it will or will not have on the rest of the World and our portifilos.

1 - The USA is in recession.

2 - Peak oil and how high oil prices will effect it, the world requires cheap energy for growth.

3 - High interest rates effects on business profitability and consumer spending.

4 - Gold as protection.

Every which way I look at it, I can not see how with high inflation the US can keep dropping interest rates.

It has been a long time coming, But I think this would have been Gerrys year, this year is going to be very different.

Food for thought! Yeo get that grey matter thinking.

Where to from here :confused:

[STRAT]

Gosh Tricha, I feel like Ive been made a bit of an example here but as I stated on the "buying? selling ?holding? cash" thread I have sold down all my mid term plays including GDM which are a significant % of my portfolio. and have cash at hand while waiting to see how this all pans out over the next few days/weeks/months/years. Having been at this game less than two years. Im watching carefully what you long timers are saying and doing.

Out of interest. Are you still holding ADY.

Do all the more experienced players here see this as just a natural progression in the cycle of things or are we in new territory here?

[Halebop]

The market has done this hundreds of times before and will keep doing it until the end of time. This correction feels scary but then they all do. Debt/liquidity corrections tend to be a bit more emphatic than your standard sentiment blip - this is because the debts & losses remain long after the assets stop performing and cash flow is a slow (but truer) way to recover.

Patience has it's own reward and you don't have to be "right" or a "timing genius" in order to just wait and see what happens and go with whatever trend transpires. I think we are due an end to this bull run but any recession or slow growth phase will be relatively short - no more 6 quarters. The boomers are still in a cash generating sweet spot.

[STRAT]

Thanks Halebop.
Just for the record, The only time I show any signs of genius with timing is when Im forced unexpectedly to wind up a lead break in a couple of bars:D

[Crypto Crude]

Tricha,
Ive personally found that some of my contacts dont want to really talk about the 'credit crisis'... BUT, My contacts who are either heavily invested or have the big smarts are thinking about it hard... I generally found that at the last few sharetrader meetings that nobody really wanted to talk about the market in general, but I did miss the last stellar CHCH meet...
...
I have personally discussed what I have done, Ive started a few threads and added to others... ITs KIND of like being a party pooper and I dont want to be the one to bring the bad news...
As far as Im concerned, Ive said what Ive done...
and others have to make their own decisions...
When I came out with the what is SC doing thread, I got ridiculed by the likes of Mick who kind of slammed me, so I backed off...
pretty much got told to stop being a Pusssy...
....
I started the 'description of Yogi' thread because of Demand from my fellow posters for more explanation as we continue to make up our own minds, and for more entertainment as one PM explained it...
NWE sub 20c today... im closely watching and waiting for entry with cash in hand... yeaahh haaa...
keep up the good work tricha...
I also appreciate your thoughts Halebop
lata..
:cool:
.^sc

[tricha]

Gosh Tricha, I feel like Ive been made a bit of an example here but as I stated on the "buying? selling ?holding? cash" thread I have sold down all my mid term plays including GDM which are a significant % of my portfolio. and have cash at hand while waiting to see how this all pans out over the next few days/weeks/months/years. Having been at this game less than two years. Im watching carefully what you long timers are saying and doing.

Out of interest. Are you still holding ADY.

Do all the more experienced players here see this as just a natural progression in the cycle of things or are we in new territory here?

Very wise move Strat, I wish I had done the same :) , ADY for me is a 1 -2 year holding, one for the future due to the coming of peak oil.

Myself I have changed tack again, Gerry had been going on for years about an impending crash in the USA.

I always said one day he would be right.

If that day is to happen, by all indications it will be soon.

Recent events that have changed substantally in the US.

1 - UnEmployment rate on the increase.

2 - Banks due to report and all indications are bad results.

3 - Inflation is rampent, but the US is in denial and want to lower interest rates.

4 - Peak oil, The US uses nearly 30% of all oil produced in the world, they import most of it, at the given price, how do they pay for it.
They need cheap oil to drive their economy.

5 - The gold price going through the roof.

6 - Talk about a subprime crisis, now we are moving into a credit card crisis.

Next stage is called hyper-inflation :rolleyes:

Anything positive out there ?????????????????

I was thinking of buying physical gold in September, I wish I had.

Today I moved back into a pure gold play as some insurance to what could come.
Most gold companies share prices have been slow to react to the substantial increase in the Gold price.

Cheers and happy hunting

P.S Sorry Shrewd I do not follow the NZ market, I guess that's where u posted. Yeah Northwest back to bargin basement prices.

[tricha]

Tricha,
Ive personally found that some of my contacts dont want to really talk about the 'credit crisis'... BUT, My contacts who are either heavily invested or have the big smarts are thinking about it hard... I generally found that at the last few sharetrader meetings that nobody really wanted to talk about the market in general, but I did miss the last stellar CHCH meet...
:cool:
.^sc

The music is about to stop in the USA, whos got the parcel :confused::confused:

The fund managers seem to be bailing out of metals, where will that cash go, fixed interest or safety stocks like banks, with Centro on the blink, maybe banks are a bit shakey as well.

Dumped a % of my metals as well at a big loss I might add and bought gold shares, before the fund managers do.

Gerry would love this one, the gold price has gone off, but most gold companies have not .................................................. .............

Cash in the bank, yep short term ok, but inflatation and even hyper-inflation.

Remember that word Hyper-inflation

Germany had it in the past, worth reading up on, the US surely is heading down that path.

Can Asia save us, does anyone really know.:confused:

[STRAT]

Can Asia save us, does anyone really know.:confused:Hi Tricha, A very good question and in regard to my question earlier " are we in new territory here" I think Aisa is very much a wild card. Not keeping my hopes pinned on it though

[tricha]

Hi Tricha, A very good question and in regard to my question earlier " are we in new territory here" I think Aisa is very much a wild card. Not keeping my hopes pinned on it though

Oh yeah Strat, a new uncharted territory I'm afraid.

Full of unknowns and knowns = :confused:

I do not have a crystal ball. But when the CEO of GM comes out and states we are into peak oil, thats confirmation of what we already new was reality.
The likes of Bermuda who won the 2007 share competion, he has been an advocate of Peak Oil since I can remember.

A book named "1000 barrells a Second" is well worth a read into the now and the future of being in Peak Oil.

Cheers

[STRAT]

Moving away from oil a bit. China ( the worlds workshop ) I feel will be hit hard if the US implodes. The flow on effect to other nations will have major effects on Chinas ability to maintain export volumes. Talk of Demand from China and India for raw materials being the saving grace for the Aussie Oil and Mining sector may be over stated. Talk of demand from within china the same. If they cant export their domestic economy will suffer accordingly

[tricha]

Shares slump on recession fears

http://newsimg.bbc.co.uk/media/images/44357000/jpg/_44357919_ftse203b_ap.jpg London saw its biggest one day fall since August

European and US shares have fallen sharply as poor US retail sales figures and Citigroup's first quarterly loss added to fears of a US recession.
In London the FTSE 100 index of leading shares slumped by more than 3% - its biggest one-day fall since the height of the credit crunch in August.
Meanwhile France's Cac 40 index lost 2.8% while Germany's Dax slid 2.1%.
Sales in US shops fell by 0.4% in December from a year earlier, as consumers tightened their belts.
And Citigroup, the giant US banking firm, reported a $9.83bn (£5bn) net loss for the last three months of 2007, taking its total writedowns as a result of exposure to sub-prime loans to $18bn.
"The losses at Citigroup - whilst fully expected - still seem to be unsettling traders across the Atlantic, whilst at the same time the lacklustre US retail sales figures are confirming that the economy is slowing," said CMC Markets trader Jimmy Yates.
Gloomy
The FTSE 100 ended 190.1 points lower at 6,025.6 - wiping more than $45bn off the value of London's leading companies.
It has lost 7% since the beginning of the year as the US economic situation continues to unravel. Meanwhile the Paris index ended 151.8 points down at 5,251.7, while Frankfurt's Dax closed 165 points lower at 7,566.4. And on Wall Street, the gloomy data hit key markets with the Dow Jones falling 1.6%, or 208 points, at 12,570 while the tech-heavy Nasdaq shed 2,426.4.

[qinshu]

US job starts are down - ours are up, infact there is talk of a Labor shortage.
US house starts are down- ours are up.
Many US companies rely heavily on a US market- we do not.
Our consumer spending and demand are up, not down as in the US.
Our trade deficit just narrowed, based on increased ore exports.
Our interest rates are increasing not decreasing.
Our growth is a lot stronger than in the US.

Our market's and economy's ties to the US are largely- not entirely, but largely, irrational.

[upside_umop]

I guess your talking of Australia?

Frankly, the US are the worlds largest deficit spenders...any decline in their spending affects the lenders/exporters from other countries, which basically means they're not as wealthy, in turn dont consume as much themselves...this has the 'flow on effect' to every other nation in the world.

To think China and India can keep the world on steady economic growth is a little bit of wishful thinking.

[The Big Ease]

fair post ginshu.
if you are in speculative investments, then time to reconsider.
otherwise, play on...
the world is not falling apart. but PE's are.

good times. now is the time to be eyeing quality companies with excellent prospects and track records of delivering. if they get knocked off, then get stuck into them. you dont get these opportunities very often.

[lakedaemonian]

fair post ginshu.
if you are in speculative investments, then time to reconsider.
otherwise, play on...
[b]the world is not falling apart. but PE's are.[b/]

good times. now is the time to be eyeing quality companies with excellent prospects and track records of delivering. if they get knocked off, then get stuck into them. you dont get these opportunities very often.

I agree, the world is clearly NOT falling apart.

But the financial markets ARE, and in my opinion, will continue to do so until the rot and financial hocus-pocus is removed.

Tangible assets and well managed, sound businesses will always have value.

My opinion is that the value of tangible assets and well managed sound businesses will reset lower in coming years.

I can't help but recall Warren Buffett referring to an airline(usually a horrible investment) In the United States in the 70's selling for LESS THAN the cost of only FOUR airliners in the company fleet.

Maybe I'm too conservative, but I've focused on debt elimination, building cash(or cash-like) reserves, slashing costs, and focusing on cashflow until the dust settles(which I think could be a fair few years yet).

When solid companies likely to still exist in 50 years time are selling at firesale prices like in the 70's I'll dive in head first, but for now, I think cash(or cash-like) is king.

The only thing I'll even consider buying in the short-term on a dip would be energy, PMs, and maybe Ebay.....the world's biggest pawn shop.

[trendy]

Guys, US is in recession....I'm seeing it here. FED is between a rock and a hard place if they cut i-rates dollar collapse will follow and feed commodity price inflation. PPI was 6.3% for 2007, I bet CPI will be shocker tomorrow (core CPT excluding energy and food!) FED are frozen with risk of price inflation.

We have classic 70's style recession with inflation.

[duncan macgregor]

I am mostly out the market and expect to remain so for the remainder of 2008. I think America will crash bringing our markets down to much lower points than they are now. I see the ASX being in negative territory for the year 2008 with a big crash or a series of minor corrections whatever, i wont be investing until the market shows a clear TA uptrend.
Its much safer sitting it on the outside in times like this. Macdunk

[Footsie]

Dear all

If you could invest in a healthcare company with a fwd p/e of 6x and EPS growth of 100%.

Is that a company to sell, just coz the market is falling? No

The market is like a giant pendulum with values swinging from over to under valued all the time.


Instead of seeing "Market crashes again, now off 14%, trading at 12 months lows" think of it like Benjamin Graham.
"Shares get cheaper, SALE SALE SALE, buy quality companies at sale prices"

Aviod specs, and companies with no E. Buy solid firms with a track record of earnings.

If you are still worried about the "market risk". Just hedge out your portfolio via an index short on the SPI.

[ratkin]

Have just transferred more funds to my broking account , i normally invest a similar amount each month , this month i will be investing more than usual.
Ramsay healthcare has been my latest buy , and am now scouting around looking for domething else .

Times like these may not be much fun , but they usually the best times to be buying. Judging by recent price action many seem to be buying high and selling low. Not the brightest strategy yet i suspect a now very common one

[lakedaemonian]

Dear all

If you could invest in a healthcare company with a fwd p/e of 6x and EPS growth of 100%.

Is that a company to sell, just coz the market is falling? No

The market is like a giant pendulum with values swinging from over to under valued all the time.


Instead of seeing "Market crashes again, now off 14%, trading at 12 months lows" think of it like Benjamin Graham.
"Shares get cheaper, SALE SALE SALE, buy quality companies at sale prices"

Aviod specs, and companies with no E. Buy solid firms with a track record of earnings.

If you are still worried about the "market risk". Just hedge out your portfolio via an index short on the SPI.


Point taken!

I believe Microsoft listed in 1986...and would have been outstanding long-term buying......irregardless of doing so before or after the sharemarket crash.

[winner69]

Whats the panic ..... RBD is up today

[STRAT]

Another box of band aids should secure that severed leg :D

WASHINGTON (Reuters) - The chairman of the U.S. Federal Reserve on Thursday threw his weight behind proposals for near-term actions to stimulate economic growth to ward off an election-year recession, but warned such a plan could do more harm than good unless put together quickly.
Fed chief Ben Bernanke told the U.S. House of Representatives Budget Committee that the U.S. central bank was not forecasting recession, but he repeated it was ready to act aggressively to prop up growth. He said a fiscal package could be effective if used in concert with interest-rate cuts.
Bernanke's comments, which lent impetus to efforts on Capitol Hill to assemble a package of stimulus steps, also reinforced a view in financial markets that a half-percentage point rate reduction will come at the end of the month.
"Fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary actions alone," Bernanke said.
Other Fed officials, speaking at other locations, said they were worried enough about the economy to back further cuts in interest rates. The central bank has already lowered benchmark rates by 1 percentage point to 4.25 percent since mid-September.
DO IT NOW
A sense of urgency has set in at the White House and among lawmakers on Capitol Hill about how to prop up an economy that some analysts say may have already fallen into recession.
The White House confirmed it was working on a stimulus plan and President George W. Bush was set to consult congressional leaders later on Thursday about measures that might be in it.
House Republican leader John Boehner of Ohio said talks were focusing on a package in the $100 billion to $150 billion range.
Bernanke said $50 billion to $150 billion would be a reasonable size and provide "measurable" benefit to the economy. But he specified it was "critically important" that any fiscal measures be designed to spur spending quickly and deliver their maximum impact within the next 12 months.
A delayed stimulus that kicks in when it is no longer needed could cause the economy to overheat and generate inflation, Bernanke warned.
The idea of a quick fiscal stimulus package has taken flight in the past two weeks as rapid-fire reports showed U.S. unemployment hit a two-year high in December, while retail sales fell and manufacturing activity stalled.
Lawmakers are considering a package that could extend tax rebates of about $250 to $600 to individuals and give businesses a bigger tax break on new investments.
OUTLOOK DIM
Bernanke repeated a bleak assessment of the economy's health that he delivered in a speech last week. "Recently, incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth have become more pronounced," Bernanke warned.
"We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.
Bernanke's somber take on the economy and a big drop in a gauge of factory activity in the Mid-Atlantic region drove down the value of the dollar and gave a lift to bond prices as traders increased bets on further interest-rate cuts.
Stock prices fell as the factory gauge and news of a big loss at brokerage Merrill Lynch deepened economic fears. In mid-afternoon, the Dow Jones industrial average was down about 200 points.
Dallas Federal Reserve Bank President Richard Fisher, a voting member of the Fed's policy-setting committee, echoed Bernanke's vow to act aggressively to help an economy hit hard by a housing market downturn and tighter credit.
Another voter, Cleveland Federal Reserve Bank President Sandra Pianalto, said residential housing markets remain "in freefall" and said policy-makers had to be "highly flexible."
A third regional Fed bank chief, Atlanta's Dennis Lockhart, said the Fed must be prepared to respond to a souring outlook. "In my view, pragmatism in the face of growing weakness in the general economy may very well require additional moves to lower the federal funds rate," he said.
Bernanke noted that financial markets around the world have been under strain since late last summer, largely because of problems in the U.S. subprime mortgage market, where foreclosures have been rising sharply.

[tricha]

18 January 2008
China insulates base metals from meltdown

SPREADING credit woes and bearish economic data have wiped tens of billions of dollars off global stock markets since the start of the year, intensifying fears that the US may already be in a recession, but analysts say base metals will withstand the pressure from a slowing global economy.

China's economy is sufficiently decoupled from the US to keep metal demand growth buoyant in the medium to longer term, according to analysts, with Goldman Sachs leaving its commodity forecasts unchanged despite forecasting a recession in the US.
"There won't be much impact on metal demand growth. China is the primary driver for metal demand, while we accept that its economy isn't completely decoupled from the US," said analyst Tom Price at Merrill Lynch.
China consumes two to four times more metal than the US and makes up between 75 per cent and 100 per cent of demand growth for many commodities, according to the bank.
Base metals haven't escaped the turmoil in financial markets this week, as poor consumer spending data and record quarterly losses for Citigroup and Merrill Lynch battered investor confidence, sending equities to multi-month lows.
The London Metal Exchange bellwether copper (http://metalsplace.com/news/?s=20) contract plunged as much as 6 per cent below the $US7000 a tonne mark.
But this proved short-lived, and buying interest in Asia helped LME copper (http://metalsplace.com/news/?s=20) bounce back to about $US7080 a tonne amid reports of fresh fund money moving into the market, taking advantage of lower prices in an asset class that is relatively insulated from credit woes and offers portfolio diversification.
"The outlook for China's economy is robust," said Citigroup analyst Alan Heap.
"And while Beijing would like to trim growth to stop the economy from overheating, there is no undue concern for metals as China will continue with its infrastructure program."
Tighter credit conditions could hurt demand for metals, but the Government's efforts so far have had limited success, say analysts.
In a bid to rein in inflation, China recently reduced import tariffs on metals and oil and levied export tariffs on agricultural commodities, which should support domestic demand growth and restocking.
Copper imports for December bolstered this view, rising 0.6 per cent from the previous month but surging 78.1 per cent year on year, on strong economic growth and restocking by Chinese firms.
"China's latest numbers were reasonably strong and confirmed our forecast of $US3.50 a pound ($US7714/tonne) for 2008," Mr Heap said.
The US itself will avoid a recession, many forecasters aside from Goldman Sachs still believe, as a result of the Federal Reserve's aggressive interest rate cuts and chairman Ben Bernanke's reiterating a commitment to make "substantive" rate cuts if needed.
There is also the view that bearish news for metal consumption in the US cannot get much worse after the steep declines during 2006 and 2007, when new housing starts fell substantially and manufacturing activity slowed.
This should limit the risk for another sharp fall in consumption, Mr Heap said.
However, not everyone plays to the same tune. MF Global analyst Edward Meir believes China cannot escape a slowdown in the US economy that remains seven times larger than that of China, generating $US9.5 trillion ($10.8trillion) in consumer spending compared with $US1trillion.
And while copper (http://metalsplace.com/news/?s=20) can largely ignore a US slowdown, aluminium (http://metalsplace.com/news/?s=21) should face more of a struggle. The US makes up 12 per cent of global copper (http://metalsplace.com/news/?s=20) demand, rising to 18 per cent for aluminium, and a substantial part ofChina's aluminium (http://metalsplace.com/news/?s=21) semi-manufactured output is destined for export.
But despite a "less than inspiring global macro backdrop", base metal supply increases would not match an expected rebound in demand during the second half of the year, when lower interest rates filtered through, setting base metals on a path of recovery, said Mr Meir. – The Australian

[tricha]

Does this feel like a snowball going down a hill and picking everthing up in its path :confused:
Does it fell like u r on a run away train and u can not get off :confused:

All I can say is do a bit of research on the great depression.

THE BIG PROBLEM FACING THIS RECESSION IS PEAK OIL, THE EFFECT EXPENSIVE ENERGY HAS ON THE WORLD ECOMONY.

We should all be thinking how we can insulate ourselves from this mass destruction and plan for the future.



Shares slump on worries over US


http://newsimg.bbc.co.uk/media/images/44320000/jpg/_44320571_stockboard_ap203b.jpg Investors remain worried about the state of the US economy

European stock markets have suffered sharp losses amid growing fears of a recession in the US.
By 0845 GMT, London's FTSE-100 index was down more than 2%, in Paris the Cac-40 fell more than 2.5% and in Frankfurt the Dax was down almost 3%.
It was a gloomy Monday in Tokyo too, as the Nikkei fell by 3.9% to its lowest close since October 2005.
The markets have taken little comfort from measures to boost the US economy proposed by President Bush on Friday.
The state of the US economy is very important to Asia's biggest companies because American consumers are some of their top customers.
In Mumbai stocks were also hit, the Sensex index fell 987 points or 5.2%, adding to an 8% fall last week.
The Hang Seng slumped 1,383.0 points, or 5.5%, to close at 23,818.9,
Australia's benchmark ASX 200 index closed down 2.9% or 166.9 points at 5,580.4, which is its lowest level for a year. It was also the 11th consecutive negative day for the index, which has not happened for more than 25 years. Markets in China, India, South Korea, Singapore, Taiwan and the Philippines also fell

[tricha]

mass destruction

demise

roman empire

:D

oh please spare me the drama.

Tricha, you are one emotional rollercoaster aren't you!

How long have you been in the stockmarket?

Since about 1985, not long before the crash of 87.

Do yourself a favour Sector, go and read a book called " 1000 Barrells a second " Do a little research on the Great Depression and The Fall of The Roman Empire.

See if that makes any sense :confused: Then come back and have another go ;)

[Kookaburra]

[quote=tricha;181866]
THE BIG PROBLEM FACING THIS RECESSION IS PEAK OIL, THE EFFECT EXPENSIVE ENERGY HAS ON THE WORLD ECOMONY.

We should all be thinking how we can insulate ourselves from this mass destruction and plan for the future.

I am inclined to agree with the latter statement but not the former. THe big problem is the US and to a lesser extent the rest of the world spending more than it has been earning for the last few years. Oil is only one part of this over-expenditure.

Yes a plan for insulation is important. Currently mine is to own yen. However I am not sure what to do in the long run. Perhaps in 6 months when the bottom appears to have arrived start getting back into food, security and energy stocks. I am sure security is going to become a big issue in a post 2008 crash world as those who have to newly learn to be poor try to collar some of the resources they might feel have been robbed from them.

[tricha]

"I Got It Wrong", Says Soros

"The current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years." - George Soros

Thus legendary hedge fund trader George Soros suggested, in an article written for London's Financial Times on Tuesday, ahead of the annual World Economic Forum in Davos, Switzerland, that the world was now possibly facing the worst recession it has seen in 60 years. This has proven the hottest article on the net this week, picked up by newspapers and wire services from Sydney to Shanghai.

"I got it wrong", said Soros. "I have always felt fallible and I have always acted fallible. If I have a bit of an edge it is because I know what I know. I did make the mistake predicting a serious calamity. I got a bit carried away. I do not normally do that." - George Soros

The above quote appeared in London's Daily Telegraph. However, it actually appeared on March 23, 2001. At the time, the world was suffering from the bursting of the dotcom bubble. But Soros was making reference to his 1998 book entitled "The Crisis of Global Capitalism", which he wrote following the historic collapse of hedge fund LTCM that year and the subsequent bail-out of the world financial system by central banks. While Soros then suggested he got a bit carried away in predicting the end of the world as we know it, and that he doesn't normally do that, it seems Soros is back for another swing. The sky may not have fallen in 1998, but perhaps it will in 2008.

Hungarian-born George Soros was well known in financial circles in the mid-nineties as the world's most influential hedge fund trader and guru. His was a classic American tale of the rags-to-riches immigrant. Hedge funds were fairly scarce in the nineties, and held in some degree of awe, which is why the collapse of the biggest one - LTCM - was of such significance. That LTCM only lost US$6 billion seems almost inconsequential in the context of today's credit crisis, where in excess of US$100 billion has already been written down across the globe.

But the name Soros was soon to become a household one when he was credited in 1997 of actually causing the great Asian Currency Crisis of that year. Famously recalcitrant Malaysian president Mohamad Mahathir called the crisis a "Jewish conspiracy" in a thinly veiled attack on the hedge fund trader. Soros' only crime was to understand that the Little Tiger economies were allowing their currencies to appreciate at an unsubstantiated rate while building up huge current account deficits. So he began heavily shorting them against the US dollar. The rest is history.

After every global financial crisis, the grey-beards of the economic world gather to figure out just what regulations they should put in place to stop it happening again. As you can probably gather from today's crisis, nothing much ever eventuates. But in 1998 the grey-beards found an ally in Soros. Despite being himself an iconic manifestation of free market capitalism, Soros was keen to argue the case for the regulation of derivative instruments in the wake of LTCM. This was part of his argument in his doomsaying book, so the grey-beards were keen to hear what he had to say. As far as they were concerned, Soros had passed back from the Dark Side.

And so it is that the regulators have turned once again to the guru to address the annual World Economic Forum. Soros wrote the 60-year recession letter to the Financial Times as a precursor. Famous ex-Salomon Bros trainee and author of "Liar's Poker", Michael Lewis, last year described the meeting in Davos as such:

"It's become almost obligatory for the world's most important economic people, at the beginning of each year, to travel joylessly to the base of a Swiss ski slope and worry. And to worry not privately, with dignity, but publicly, to anyone who will listen. Davos is where people with no talent for risk-taking gather to imagine what actual risk-takers might do." ("Davos is for Wimps"; FYI; 01/02/07).

Unfortunately for Lewis, his cheeky attack on the value of the World Economic Forum at the time has come back to bite him on the backside. The grey-beards made a general statement last January that "The surging demand for derivatives is making financial markets more vulnerable to any slowdown in the global economy". On reflection (and this was just before the Shanghai Surprise which brought subprime mortgages to the attention of the world), this has proved to be one of the most glowingly prescient statements made in history. The only problem is, it was pretty much the same statement as was dusted off at Davos every year previously. But Lewis concluded:
"None of them seemed to understand that when you create a derivative you don't add to the sum total of risk in the financial world; you merely create a means for redistributing that risk. They have no evidence that financial risk is being redistributed in ways we should all worry about. They're just - worried."

Lewis was last seen consuming his fedora.

So if Soros was wrong in '98, why should we listen to him this time? Why, indeed, should he be invited back to Davos once more when he last described himself in 2001 as an "over-aged prima donna"?

The truth is that Soros' letter makes for compelling reading. He may be a prima donna, but he is a lucid one. As a stand-alone argument, it is hard to fault. But then not everyone agrees with it. A summary of the argument is appropriate at this point.

"The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years."

This statement is then followed by that appearing at the top of this article - Soros has decided this is the big one - the credit crisis to end all crises. Boom-bust cycles usually occur as a result of a failure to recognise the "reflexive" connection between the willingness to lend and the value of the collateral, says Soros. In the case of this housing crisis, easy credit generated demand that pushed up property prices, which in turn increased the amount of credit available. The boom was soon feeding itself. When people buy houses in the expectation they can refinance their mortgages at a profit, a bubble has formed. But this recent boom-bust cycle is only a part of a greater and more complex 60-year (ie post-war) cycle .

"Market fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest."

This statement is no better illustrated than by the mantra chanted each day on one CNBC business program in the US: "Free market capitalism is the best path to prosperity". But as Soros rightly points out (and the program in question tends to gloss over, or even contradicts itself on this point), every time credit expansions run into trouble financial authorities have had to intervene, and have injected liquidity or found other ways to stimulate the economy. That is exactly, of course, what is happening right now. This is the "moral hazard".

Thus fundamentalism is an "obvious misconception", notes Soros, as it has always been the intervention of the authorities which has prevented financial markets from breaking down, not the markets themselves. But since the 1980s, the point at which financial markets began to become globalised and the US began running a current account deficit, fundamentalists have dominated. "Globalisation allowed the US to suck up the savings of the rest of the world and consume more than it produced".

It was the financial markets themselves which encouraged US consumers to borrow more by introducing ever more sophisticated instruments and more generous terms, notes Soros. But rather than restraining this practice, the authorities actually "aided and abetted" by intervening whenever the global financial system was at risk (eg, 1998). Since the eighties, "regulations have been relaxed as to practically disappear", which is an observation that supports the cynicism Michael Lewis displayed over Davos.

"The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility."

This is a clear reference to the now famous collateralised debt obligation (CDO), among other exotics. So complex are these instruments, and so effectively clandestine, that the US Federal Accounting Standards Board simply capitulated and allowed for them to be valued for reporting purposes by the holders themselves - on a best guess basis. This is the now legendary method of "mark to myth".

The ratings agencies also played their part, similarly sacrificing independence, and thus integrity, as a result. Rather than evaluating credit risk from arm's length, as they had always done in the past, the ratings agencies actually became complicit in the creation of the CDOs in the first place. The whole exercise was to find away to legally turn junk into AAA, and now the creators, the issuers and the agencies have all been found out. (And yes, there's all sorts of legal action in the offing).

As Soros has suggested, "Everything that could go wrong did."

What started with simple subprime mortgages spread to CDOs, mortgage insurance, and credit default swaps. The final blow came when banks could no longer trust their counterparties and stopped lending. "The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war."

Soros states the obvious in suggesting credit expansion must now be followed by a period of contraction. However, this time there's a problem. In the past, the world has always turned to the US as the saviour, as the US Federal Reserve is the keeper of the global reserve currency. But the capacity for the Fed to save the day is now constrained by the unwillingness of the rest of the world to absorb additional dollar reserves. Indeed, the world has been trying to move away from the US dollar ever since it was felt by all and sundry that the US current account (reflecting US profligacy) was getting out of hand.

"Until recently, investors were hoping that the US Federal Reserve would do whatever it takes to avoid a recession, because that is what it did on previous occasions. Now they will have to realise that the Fed may no longer be in a position to do so."

The ability of the Fed to stimulate the economy will come to an end, says Soros, when the yields on US long-term bonds begin to rise despite massive cuts of the cash rate. This would reflect a collapse of the US dollar due to inflation - inflation that is already being driven by the rapid rise of global oil and food prices. "Where that point is, is impossible to determine", says Soros. (US bond yields have risen sharply these past two sessions, ever since the emergency cash rate cut. But then yields have been very volatile ever since the crisis began.)

And here comes the clincher.

Although Soros suggests a recession in the "developed world" is more or less inevitable, he notes China, India and the Middle East are in a "very strong counter-trend". Hence the whole world will not fall into recession - there will simply be "a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world." Soros is predicting the end of US hegemony.

But this is not exactly the point that Soros began to argue at the outset. He has declared that the world indeed will be plunged into recession - the worst recession in 60 years. The fall of the US is not enough, in itself, to cause such a global calamity given the strength of emerging economies. What will affect such a calamity, suggests Soros, is the potential for resulting global political tensions, including US protectionism. This may "disrupt the global economy and plunge the world into recession or worse".

Here endeth the lesson.

[tricha]

Speaking in Davos this week, Soros returned to his call of a decade ago for stringent regulation of the financial industry. The world needs a "new sheriff" for global finance. As Associated Press put it:

"It was stark and jarring message coming from one of the richest businessmen in the world - albeit one who is no stranger to controversy and politics, and has seemed to pride himself on being a maverick".

And, by his own admission, a "prima donna", and "fallible", and one prone to getting carried away. George Soros clearly likes the spotlight. But what do other commentators think of Soros' prediction?

GaveKal's Anatole Kaletsky has been arguing since last year that the governments of the world would need to come up with a "Plan B" if the financial markets did not themselves resolve the credit crisis by the end of February. This would involve any or all of (a) central banks slashing rates, (b) governments offering tax incentives, or (c) regulators fudging accounting rules to ensure banks would keep lending. Well tick (a) and (b) and maybe (c) is loosely achieved if the regulators somehow save the bond insurers.

Kaletsky thus asks, rhetorically, does all this mean the world is on the brink of a catastrophic economic crisis? Or does it mean the credit crunch is now over?

Well we know which answer George Soros would give.

Kaletsky suggests Soros is "unequivocally wrong" in suggesting this crisis is the worst the world has seen since the war. A mortgage problem and a 20% fall in stock prices "cannot remotely compare" with the crises of the 70s and 80s, says Kaletsky, when inflation and interest rates soared to 20%, stock markets plunged by 80% in real terms, major banks "fell like nine-pins" and unemployment was double or triple what it is now. But having said that, Kaletsky qualifies his accusations by suggesting Soros "offers the clearest and most persuasive 'case for the prosecution'" explaining how we got into this credit crisis mess in the first place. Kaletsky suggests Soros' letter as required reading.

But he also suggests the letter may "nonetheless prove misleading" in anticipating just what might happen next.

Kaletsky agrees that Soros' predictions of a global credit growth reversal, a slowdown in US consumption and a shift in economic power from the US to Asia "will all undoubtedly happen". However, he does not believe there is anything to suggest that these shifts will be so abrupt as to cause a serious recession, particularly the greatest recession in 60 years.

Nor does Kaletsky disagree with Soros assessment of economic "fundamentalism" and its interventionary contradictions. But he does suggest Soros is wrong to believe the credit "super-cycle" has been the only "super-boom" driving the world economy. Three more powerful trends in recent decades have been the arrival of three billion new workers and consumers into the world economy (read the Chinese, the Indians et al), the global division of labour which results from almost universal free trade (call that another factor of "globalisation"), and the reduction of transport, communication and data processing costs to virtually zero (call that the internet). Says Kaletsky:

"These secular trends and their consequences are nowhere near exhausted even if turns out that Soros is right to argue that the credit super-cycle is now over."

Soros makes the argument that financial markets are "reflexive", suggesting there is no such thing as fundamental equilibrium as markets follow boom-bust cycles, constantly overshooting in each direction. Hence the 60-year super-boom will end with a super-bust. Part of the problem, says Soros, is that authorities always intervene in busts with some form of safety-net stimulation which then only makes the next boom-bust inevitable. While Kaletsky agrees with Soros' appraisal of equilibrium, he also argues it will be exactly such intervention which will prevent a calamitous bust. For while markets might be "reflexive" they are also "rational".

This rationality means that we all naturally attempt to create wealth rather than destroy it, and if it wasn't for the occasional intervention of laissez-faire politicians overruling market forces - that is, crimping pure, free market capitalism - then we would truly descend into the sort of market mad-house Soros describes. "This is the main reason why the world economy has a natural bias towards long booms and short, shallow slow-downs", says Kaletsky.

Of course, it is Soros' argument that ultimately the US will fail in its intervention attempts because the world is now shying away from excess US dollars. Therein will follow the shift of power. Kaletsky does not dispute this, he only suggests it will not happen quite so quickly as to bring about Soros' 60-year recession.

Which suggests it's all a matter of timing. Soros was wrong in 1998. Will he be wrong again in 2008?"

[STRAT]

http://bigpicture.typepad.com/comments/2008/01/site-of-the-day.html

the solution... hehIs it the walk away article you are referring to Mosteph?

[tricha]

Quote:
Originally Posted by bermuda http://www.sharetrader.co.nz/images/buttons/viewpost.gif (http://www.sharetrader.co.nz/showthread.php?p=183159#post183159)
Tricha,
Thanks for that post and the book received yesterday.

A Thousand Barrels a Second....and production getting tighter every day.

When will the USA run out of wallpaper?

Agree Greenspan was the cause of all this.Kept on looking after his mates on Wall St instead of restricting credit. What a dipstick.


U R welcome Bermuda, as we discussed last week, a lot relates to peak\cheap oil. Slowly getting into that book of yours, "Twilight in the Desert" up to page 41
Imm I'm thinking they have run out of wall paper and all the cracks are appearing. :(

How much oil does the US import Bermuda ?

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

I'm guessing at roughly 15,000,000 barrels a day x it by $30 = ...............

Try it again at $60 a barrel = .................

Try it again at $90 a barrel = .................



They invaded Iraq to secure cheap oil, they beg the Saudi's to increase production.
It's still $90 a barrel and the effect is starting to take it's toll and it does not stop there, as we all know, the rest of the world is addicted as WELL. I personally do not think The States are the only ones infected.



Old news but relative to this

US trade deficit widens sharply

http://newsimg.bbc.co.uk/media/images/44349000/jpg/_44349559_trade2getty203b.jpg Petroleum imports hit a record

The US trade deficit expanded to its highest level in 14 months in November as imports, especially of oil, overshadowed a rise in exports.
The Commerce Department said that the trade deficit expanded by 9.3% to $63.1bn (£32bn) driven by a 16.3% jump in America's foreign oil bill.
US exports rose by 0.4% to a new record of $142.3bn, getting a boost from the weaker dollar.
Analysts said the growing deficit could weigh on US economic growth.
But they added that the trade deficit, the gap between imports and exports, should narrow in the longer term as the weaker dollar makes US exports more competitive on world markets.
The trade gap widened by more than expected, with economist forecasting a deficit of $59bn compared with $57.8bn in October. The US trade deficit with China shrank slightly to $24bn, down from a record high in October when shops were receiving shipments of toys in time for Christmas. However, the figures brought the year-to-date deficit with China to $237.5bn at the end of November, already eclipsing the annual record of $232.6bn set in 2006

[tricha]

US sees job cuts as economy cools

http://newsimg.bbc.co.uk/media/images/42590000/jpg/_42590281_dearborntruckplant203.jpg Jobs have been cut in many industries

The US has seen the first decline in employment since August 2003, providing fresh evidence that the US economy could be entering a recession.
Employers cut 17,000 jobs from their payrolls in January, Labor Department figures showed. Economists had been expecting a rise of 80,000.
The US economy has slowed sharply in recent months as a housing market slump has dented consumer spending.
US interest rates have been cut twice in nine days to boost growth.
"Serious signs"
In a speech in Kansas on Friday, President George Bush acknowledged that the US economy was going through a rough patch and urged lawmakers in Washington to pass an economic stimulus package.
"Inflation's low. Productivity's high, but there are certainly some troubling signs, serious signs that the economy is weakening and that we've got to do something about it," Mr Bush said.
US Congress and the Bush Administration have agreed an economic stimulus package which would add $150bn in tax rebates.
The measure has already been passed by the House of Representatives but is still awaiting Senate approval.
Recession mode
The job losses were across all sectors of the economy including manufacturing and professional services.
"The economy is in recession mode," said Peter Morici, an economist at the University of Maryland.
The unemployment rate fell to 4.9% from 5% in December, a two-year high, but overall the number of people in the labour force declined.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif We should expect to see more bad news on the labour market http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Nigel Gault, Global Insight


The Federal Reserve cut interest rates to 3% from 3.5% on Wednesday.
It followed an emergency unscheduled cut last week, when the Fed slashed the cost of borrowing by the largest amount in 25 years to prevent the economy from slowing further. "We should expect to see more bad news on the labour market, at least through the middle of the year, before the heavy doses of monetary and fiscal stimulus begin to kick in," said Nigel Gault, an economist at Global Insight.

[Kookaburra]

I can only see the future of the US being a recession and as I do hold to the decoupling theory as it applies to sentiment I feel strongly that world share-markets have a long way to drop yet. Of course there will be bounces on the way down, like this week, but that is the normal course of a bear market. Apart from holding a token in gold stocks I will remain fully out of the market for some time yet. Each of your postings only serves to confirm my bearish sentiment.

[tricha]

I can only see the future of the US being a recession and as I do hold to the decoupling theory as it applies to sentiment I feel strongly that world share-markets have a long way to drop yet. Of course there will be bounces on the way down, like this week, but that is the normal course of a bear market. Apart from holding a token in gold stocks I will remain fully out of the market for some time yet. Each of your postings only serves to confirm my bearish sentiment.

Probably a wise move Kookaburra :)


US economy concerns knock shares

http://newsimg.bbc.co.uk/media/images/44405000/jpg/_44405918_traders_ap203b.jpg US service sector data has triggered the latest fall in share prices

World stock markets have declined on renewed fears about the health of the US, the world's largest economy.
Wall Street opened sharply lower after data showed that activity in the key US service sector contracted for the first time in nearly five years in January.
The US data raised fears that problems in housing and financial markets have spread to the wider economy.
European shares also dropped on the news as concerns that a US slowdown, would be felt globally.
The US benchmark Dow Jones average fell 1.76%, or 222.65 points, to 12,412.51 in morning trade.
The tech-heavy Nasdaq index slid 1.27%, or 30.21 points, to 2,352.64.
The Institute of Supply Management's index of business activity in the non-manufacturing sector slid to 41.9 from a 54.4 reading in December. Economists had forecast a milder decrease to 53.0. London's FTSE was down 2.09% at 5,900.2, Germany's Dax lost 2.73% to trade at 6,809.68 and France's Cac 40 fell 2.96% to 4,826.41.

[tricha]

My personal view on this recession is the price of oil will be the key to the severity of it all.
Do you think twice now, when you fill your car up about where you are going to go.:confused: All that gas money that could has been spent on something else :(



How much oil does the US import ?????????????????

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

I'm guessing at 15,000,000 barrels a day x it by $30 = $450,000,000

Try it again at $60 a barrel = $900,000,000

Try it again at $90 a barrel = $1,350,000,000

Try it at $150 a barrel = $2,250,000,000


The big picture is quite scary.

[stevo1]

They are big scary numbers.About two and a half years ago i found that my calculator could no longer compute various calculations because it wouldnt hold enough noughts.Think the rate of inflation was 1 to 3% world wide and generally still is(various governments world wide have manipulated the way they calculate cpi) .In effect the true measure of inflation is in oil gold property and other tangabiles and the way they have increased in price reflects governments' failure with their jiggery pokery and the debasement of peoples wealth(and propensity to save)by using fiat currencies and artificially low interest rates.So my guess would have been in the past a hua of a recession(prior to the emergence of the BRIC economies it would be a certainty)what is happening at the moment is the US fed throwing a lot more US pesos on the inflation fire in an attempt to stave off recession.I think the west has largely got away with this illusion in the past because of the cheap "stuff" coming out of China,(somewhat deflationary?apparently so .Allowing more disposable income to go into sharemarkets and housing,consumption etc) cheap money,easy credit and a wiiling consumer base.,The Chinese now are starting to export inflation and with Brazil Russia India China now wanting(needing) oil iron base metals and other tangabiles to continue into their capitalist culture these may continue upwards in price.Anyway i am even starting to bore myself with this .The "price of oil " may be the key to the severity of it but may more so be a measure of past (and possibly future) inflation and the price of it could be a direct indicator of recession or/and inflation.

[tricha]

Stevo1 -"The "price of oil " may be the key to the severity of it but may more so be a measure of past (and possibly future) inflation and the price of it could be a direct indicator of recession or/and inflation."

Thats the trouble BRIC want their share and there is not enough to go around.

Is the US recession contagious :confused:


Fresh worries on Japanese economy

http://newsimg.bbc.co.uk/media/images/42785000/jpg/_42785967_japanesefactory_ap203b.jpg Worries persist that Japan will be dragged down by problems in the US

Machinery orders by Japanese firms fell in 2007 for the first time in five years, government figures have shown.
Core private-sector machine orders - seen as a key indicator of corporate investment - were down by 4% from 2006.
The decline came after orders slipped 3.2% in December from the previous month, after a 2.8% drop in November.
The figures will add on fears Japanese firms are curtailing spending amid a US economic slowdown, and the data sent the Nikkei stock index down 1.44%.
There have been persistent concerns about whether Japan's fragile economic recovery will be able to withstand a sharp slowdown in growth in the US, its main export market.
"A slowdown in exports, which had led Japan's economy for the past five years, is now inevitable," said Naoki Murakami, senior economist at Goldman Sachs.
The Bank of Japan kept interest rates steady at 0.5% at its last meeting and some analysts are now predicting that the next move could be a cut - a dramatic change of tone from just a few months ago.
The economics minister, Hiroko Ota, said the government was keeping a keen eye on economic developments, but that orders were expected to pick up over the January to March period. She added: "We need not be overly pessimistic about the current state of machinery orders." The negative data hurt shares in Japan's construction equipment makers and sent the benchmark Nikkei 225 index down 1.44%, to close at 13,017.24.

[tricha]

Bargaining with
the Bear
London, England - Melbourne, Australia
Monday, 11 February 2008
In This Issue:Bargaining with the Bear…

Liquidation underway…

Commodities hit a new all-time high...

----------------------------------
From Dan Denning at the Old Hat Factory:

--Relentless. That's what this bear market in credit is. It won't quit.

--First it was subprime loans. Then Alt-A. It will probably include securitized credit card receivables before it's over. Now, we have trouble in the European junk bond market and rumblings in the corporate bond market. And at long last, liquidation in the CDO market.

--"The European high-yield bond market remains frozen, as spreads at the widest levels in nearly five years fail to draw investors worried that prices may fall further due to the global credit turmoil," reports Natalie Harrison for Reuters. The great unwinding of leverage may be about to hit another gear.

--"Unwinding of synthetic CDOs - which reference CDS contracts - is thought to be behind some of the rapid spread-widening on credit indices on Friday," reports Sam Jones at the Financial Times.

--It gets tricky here. But the basic explanation for Friday's action is that to shut down a CDO you have to buy protection in the credit default swap market. Like any market, higher demand usually leads to higher prices. The unwinding of CDOs will mean higher prices for credit default risk, and big losses on CDOs.

--DABDA. Denial, anger, bargaining, acceptance, depression, acceptance.

--Those are the stages of grief according to Elizabeth Kubler-Ross in her book, "On Death and Dying." This bull market in financial engineering and credit is either dead or dying. But you can see that various market participants are at different stages in the grieving process.

--Ben Bernanke is somewhere between denial and bargaining. He knows there's a problem, but he would like to bargain with the Bear. "Let me cut rates to help home owners. You can have your pound of flesh from savers if you'd like. But please Bear, be reasonable."

--The Bear is not reasonable, but he is thoughtful. He wants you to believe he can be reasoned with. That way he can swipe you one paw at a time at his own leisurely pace. If you run, it makes his job harder. He wants you to sit and be still. It's easier to eat a stationary target.

--Jean Claude Trichet is also bargaining. Until recently, the European Central Bank has been a rock in the fight against inflation. It has not cut rates to "stimulate" or promote growth. But the credit Bear even has Trichet spooked. He has sat down to offer the Bear some easy-money honey.

--"Uncertainty about the prospects for economic growth is unusually high," Trichet told reporters last week. "We have had a reappraisal of risk in financial markets which triggered unusually high uncertainty, so the risks are on the downside from that standpoint."

--Trichet used the word "growth" and not "inflation" suggesting every so subtly that the bias at his bank is to cut European interest rates to ignite "growth." This prompted a bout of U.S. dollar strength last week which could continue.

--How very strange. Just last week, the U.S. Treasury had trouble auctioning $9 billion in thirty-year bonds. The market seemed to tell Uncle Sam, we do not want to lend you money for 30-years at a mediocre interest rate of 4.45%. Yet relatively speaking, the dollar could rally. Why?

--We have no idea. In a world of relative currency movements, it's a constant battle between growth and yield over which determines the market value of a currency. Sometimes investors value higher yields on government debt, believing that makes a government's money strong. Other times, high growth economies are valued.

--Our prediction is that gold and silver will to better than paper money for the next few years, both relatively and absolutely. As Bill says, all paper money eventually finds its intrinsic value.

--For more on silver, see today's essay. Psychologically, precious metals accept the Bear in credit. Indeed, they hug him as safely as one can hug an angry, furry, be-clawed 300-kilo animal. The more he mauls financial assets, the better it ought to be for real assets.

--And be prepared for more mauling of financial assets this week. "There were reports that several large German banks will need capital infusions to complete some upcoming mergers," reports Leslie Wines at the Associated Press. As you can see from the figures below compiled by BNP Paribas, the losses in the global banking sector have already been substantial.

[tricha]

And now over to Bill Bonner in London, England:

Last week, Bernanke "failed to relieve gloomy sentiment," says the International Herald Tribune. Testifying before Congress, the Fed chairman must have made things worse, because investors promptly decided to stop buying stocks; instead they began to sell them. The Dow ended down 175 points.

Oil rose $2.19 to over $95... and gold held steady.

One thing that bothers us about our dim outlook for the U.S. economy is that so many others seem to see things the same way.

Tim Bond, strategist at Barclays Capital says the "world faces a future of inflation, higher interest rates, lower house and share prices and economic volatility."

Yep, that's what we think too.

He goes on to forecast, "rising real resource prices and a degenerating ecosystem, in turn catalyzing changes to the fundamental structure of the economy."

We're not sure about that last part, but we were with him up to there.

The reason for this assessment is also the same as ours. The world is over-leveraged. People have too much debt. And there are only two ways of reducing debt - either it is actually paid down, which would mean higher savings... less spending... and less "growth" for a consumer economy. Or it could be inflated away... which would bring problems of its own - a collapse of the dollar , most likely... collapse of the bond market... and a collapse of the dollar-based world financial system. The paths are much different, but they both lead to the same place: lower living standards in America... and Britain.

Mervyn King, head man at the Bank of England, said on Wednesday that it's time to face up to a "genuine reduction in our standard of living." He went on to predict that England would most likely see a combination of lower growth... and higher inflation.

Yes, dear reader, it's our old friend stagflation... back after 25 years. And yet, he looks just the same. More than 2/3 of fund managers surveyed by Merrill Lynch say they see stagflation coming for a visit. Which worries us, because we see it too. And these are the same fund managers who were buying subprime debt and borrowing money so they could speculate on Chinese shares at 40 times earnings. Now, the managers are moving to cash. "Risk aversion hits 7-year high," says the newspaper.

Stagflation is a devilish mixture. One part slump... one part inflation... and one part who-knows-what. Of course, the feds are eager to put more inflation into the brew. If they had their druthers, the concoction would have more of a kick - with more exciting price increases and less depressing slump. And to that end, they've come up with a number of rotgut proposals. For example, there is the "stimulus package' signed into law Wednesday. You've heard about it on the news, so we won't give the details. President Bush, signing the new law, applauded the U.S. economy with such gusto - it was as if he didn't realie he had just signed a rescue measure.

"The genius of our system is that it can absorb such shocks and emerge even stronger," said the president. But if the system were so robust, why was the doctor injecting $170 billion of adrenaline? He didn't explain.

Meanwhile, the next article in the same issue of the Financial Times (yesterday's) tells us that the feds also tossed a 'lifeline... to floundering borrowers.' You wouldn't think such a resilient economy would need to give borrowers a lifeline too. With all that adrenaline in their blood, you'd think they could swim up Niagara Falls without a paddle, as they say. "Project Lifeline" is meant to replace the last project called "Hope Now Alliance," for which all hope seems to have given out. How does "Project Lifeline" work? As near as we can tell, the people who took Alan Greenspan's advice to mortgage their houses aggressively, and who now find themselves 'upside down,' with more mortgage than house, can call a toll free number and buy themselves some time.

Meanwhile the news continues to encourage us. Not because it is good, but because it is bad.

Auto loan delinquencies are at a 10-year high. "Repo lots overflow with reclaimed cars," says the USA Today.

The Wall Street Journal reports that more families are falling behind on their heating bills.

And the Guardian , in the U.K., tells us that American students are the "next victims" of the credit crunch. Poor things, they're unable to get financing to continue wasting their time in school; now they're going to have to get a job.

From subprime, to prime, to home equity, to credit cards, to car loans, to buyout financing... the whole credit structure has been hit, some parts worse than others.

Today's news, for example, also tells us that Switzerland's biggest bank has fessed up to $11 billion in subprime related losses... sending the stock to a four-year low.

*** It is always worrisome when people in positions of responsibility agree with us. It troubles us, for example, that so many people think they see a recession coming. Maybe we won't have one after all.

Or... maybe we won't have the recession they all expect.

The experts are all said to be gloomy. But what kind of gloom is it when stocks in a communist country trade at 37 times trailing earnings? When Picassos and dead animals still sell as if they were works of great art? And when the yield on a 10-year T-note is still below the going rate of consumer price inflation? We know Treasury debt is supposed to be the safest investment in the world - but most of the holders are not U.S. taxpayers. They're foreigners, for whom a U.S. Treasury obligation is a wild (and to us, reckless) speculation on the dollar.

Are investors really risk averse - with the Dow selling near an all-time high and selling at 18 times earnings? Are they really running scared with house prices down scarcely 10% after a 70% run-up? Are they desperately worried when the price of gold is still only about 40% - in real terms - of its previous high set 26 years ago?

To return to the housing news, the SF Gate reports that it takes an annual income of $196,000 to be able to afford, comfortably, the average house in San Francisco. In Marin County, you need to earn $218,000. How many people actually earn that kind of money?

The story is the same throughout much of the nation. Housing prices in California are down 15% to 20%... but the average house is "still unaffordable" for the average house buyer.

And when Bernanke delivered the bad news to Congress yesterday, the news he gave out was not as bad as you might expect. He said the economy would be softer than expected, but that it would recover before the end of the year. That is the message that practically all the experts are peddling: look for a slump in the first part of the year, recovery later on.

Yesterday, we noted that homeowners typically believe that the downturn in housing prices may last one or two years. They still believe that "house prices always go up in the long run." Stock buyers seem to think the same thing. Many are talking about a bottom already. Some think the bottom has already come and gone - in January. They believe we're now in a new phase of what is, for them, an eternal bull market.

Mr. Market always has a trick up his sleeve. What if his big surprise is that this downturn doesn't go away after six months? What if house prices grind downward for five years... or more? What if we have begun a major bear market on Wall Street, with the Dow falling, in real terms, for the next 15 years? And what if Warren Buffett is wrong? What if America has topped out? What if, after 232 years of coming up in the world... it will go down for the next 232? What if it is now smart to short the United States - its currency, its stocks, its labor and even its military?

The U.S. enjoyed an extraordinary run of good luck. It had rich farmland... with huge oil deposits under it. It had energetic labor and low taxes. It had innovators, risk takers... and a government that left them alone. It had thrifty, hard-working people who asked for nothing but the chance to work. This combination of hard work and good luck put America on top of the world. But that's the trouble with being on top of the world; there's no where to go but down. Now, the U.S. is a net importer of food... and fuel. Its government seeks to control not only the lives of its citizens, but the fates of other peoples half way around the globe. Its citizens work harder than ever... but they are now competing with people who work even harder than they do... people who are willing to work for one tenth the compensation and then save half of what they earn. These same U.S. citizens are bending under the heaviest burden of private and public debt the world has ever seen, while their government encourages them to spend more.

Here's a surprise for you, dear reader. What if this great economy didn't "emerge even stronger"... but instead was crippled, and never recovered? :rolleyes:

[JBmurc]

Are we heading for a bear market?

The recent falls we have witnessed in our market have been the biggest since October 1987. This has left many investors wondering if the share market is the best place for their money.
Should we buy, sell, or run for the hills? If history is any guide, a buying opportunity may actually be upon us. Since 1991 the market has fallen by over 20% five times. On four of those occasions, the following year provided strong returns for investors. The fifth fall greater than 20% was in January this year.


So when would you rather buy into some quality new positions? Now or when stock prices have already traded to new all time highs?

Here at wise-owl.com, our research analysts are always searching the market for investment opportunities and our bottom up stock picking approach ensures that regardless of overall market conditions, we can find exciting stocks for our members.

The Recent market downturn has created one of the best stock market sales seen in years and many high quality stocks are selling at bargain prices!
Much of the recent market downturn has been generated by panic and emotional selling rather than any strong facts. In reality, the biggest threat facing most investors at the current time is their own fear!

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.”
Warren Buffett

Make sure you don't miss out on this rare investment opportunity! Register your details here for your complimentary trial and learn which stocks you should be buying!



Take a look at the global economy.

The latest data shows that China and India are growing by 11.2% and 8.9%, respectively. The World Bank predicts China will grow by 9.6% this year.
The world economy is still in expansion phase with above average growth.
Australia’s resources are still in high demand.
Unemployment is at a record low of 4.4% in Australia with companies still hiring.
Consumer confidence is high.
Businesses are flush with cash after years of record profits.
When inflation is taken into account, global commodity prices are coming off 200 year lows.

Despite the subprime mortgage mess and slowing US growth, our most important export partner, China, is continuing to expand with the recent GDP data showing 11.2% annualised growth over the December quarter. A slowing US economy will no doubt affect China but not as much as some people might think. In fact, a minor slowdown in China would be a welcome change for policymakers as it would cool down inflationary pressures. Having taken into account the trade effects of a US and European slow down, the World Bank estimates that China should still grow at a healthy 9.6% clip this year.

The scale of industrialisation and urbanisation in China is unprecedented. This will keep our mining sector ticking along and gives credibility to the “stronger for longer” case. One just needs to travel to Perth to see the impact the mining boom is continuing to have. The growth in China and India should provide Australia with an element of insulation from a US slowdown. Most of China and India’s need for our commodities is for domestic use, a fraction of which is used for the production of US exports.

The last commodities boom, which started in the 1970s, lasted for 15 years and was a result of the industrialisation of Japan which had just 2% of the world’s population. The current boom is being led by the industrialisation and economic growth of China and India. Combined, these two countries have 36% of the world’s population. With more than a third of the world’s population enjoying elevated economic growth, the commodities boom will continue for many years to come.

Combine this with real commodity prices close to inflation adjusted 200 year lows, and you have a very bullish long term macroeconomic picture on your hands.

The worst may already be over
Market falls of more than 20% are often an indication the market is close to rock bottom. Recent history suggests that when a market falls, the bulk of the sell-off occurs early as people try to realise any gains they still have. Since 1991 there have been four 20%+ falls and every one of them was a precursor to strong gains. The January 22 market fall was the fifth time this has occurred, and hindsight may soon show us it was indeed yet another good buying opportunity.

Make sure you don't miss out on this rare investment opportunity! Register your details here for your complimentary wise-owl.com trial and learn how you can make profitable investment decisions today!


Wise-owl.com is Australia's leading independent investment research house providing expert advice on the stock market.


Happy Investing!

The wise-owl.com team

Tel: 1300 306 308
Email: info@wise-owl.com
Web: www.wise-owl.com

[tricha]

US foreclosures up 57% in January

http://newsimg.bbc.co.uk/media/images/44452000/jpg/_44452323_sign_getty_203b.jpg The number of homes receiving a notice was up in 30 states

The number of homes facing foreclosure in the US rose 57% in January compared with the same month of 2007.
Exactly 233,001 homes received at least one notice about overdue payments last month, compared with 148,425 in January 2007, US property site RealtyTrac said.
There was a 90% increase in the number of houses being repossessed by banks compared with January 2007.
The figures come despite attempts by lenders to modify loan terms and work
out long-term repayment plans.
"The loan workout modification programmes aren't having a significant material effect on keeping properties from going back to the banks," said Rick Sharga from RealtyTrac.
Prices falling
Lenders were increasingly forced to take possession of homes instead of auctioning them, suggesting that the owners had very little equity in their houses.
There was further bad news from figures showing that US house prices fell for the second quarter in a row.
House prices fell 1.3% in the last three months of 2007, compared with the previous three months, according to the Office of Federal Housing Enterprise Oversight.
They fell 0.3% compared with the last three months of 2006.
The figures came as the chief economist of the mortgage finance company Freddie Mac warned of falling house prices and rising foreclosures for the next two years. "2008 is not going to be a pretty year," Frank Nothaft said. "We'll see some improvement in 2009, but not for house prices."

[mark100]

57% might seem a big number but I was actually suprised by the number of 233,000. That doesn't seem that much in a market the size of the US

[stevo1]

Bloomberg reported recently the problems banks are having forclosing.If the householder challenges the bank for documentation for the loan often because the loans have been bundled in the sub prime mess they have lost track of the documentation on who owns the loan.Therefore if the householder challenges the courts are tossing out the banks right to forclose if they dont challenge the bank forcloses.Dont think it will take long for the word to get out leaving banks unable to forclose as the value of the asset depreciates more while the home "owner" sits there.Certainly they wont be taking care of the place .Potentially more losses coming up for the banks.

[tricha]

Russian passion for stocks and shares

By Duncan Bartlett
Business reporter, BBC News, Moscow
http://newsimg.bbc.co.uk/shared/img/999999.gif


http://newsimg.bbc.co.uk/media/images/44453000/jpg/_44453308_micex_trader203.jpg Micex is Russia and Eastern Europe's biggest stock exchange


Russia's enthusiasm for capitalism is evident at the thriving Micex stock exchange in the heart of Moscow.
The exchange has seen its volumes double every year since it opened in its present form in 2005, and it now trades $17bn (412bn roubles) worth of equities, bonds, derivatives and currencies every day.
But visitors to the building will not meet any excited bankers shouting and waving their hands.
Like most modern exchanges, Micex operates entirely by computer.
Planned economy
Western investors account for about 30% of Micex's trade, reflecting foreign enthusiasm for the new Russian economy.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/media/images/44453000/jpg/_44453315_russian-woman203.jpg
http://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif I prefer not to talk about politics - Russia used to be a planned economy with no stocks http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Elena Kochetkova, Micex


In 2007, foreign direct investment in Russia amounted to $52bn, or about 5% of Russia's Gross Domestic Product.
Many international banks expect that figure to rise.
Micex official Elena Kochetkova wants to encourage more foreign trade, but she admits the operation would probably shock the communists of the Soviet era.
"I prefer not to talk about politics," she says. "But as a Russian person, I appreciate my history. Russia used to be a planned economy with no stocks.
"We're glad the exchange has been successful, and within ten years we hope the wealth of our people will increase."
Soviet repression
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://news.bbc.co.uk/nol/shared/spl/hi/pop_ups/08/business_russian_stock_exchange/img/laun.jpg (http://news.bbc.co.uk/1/shared/spl/hi/pop_ups/08/business_russian_stock_exchange/html/1.stm)
Follow the trading day on Russia's Micex stock exchange
http://news.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif
http://newsimg.bbc.co.uk/nol/shared/img/v3/icons/open_icon.gifIn pictures (http://news.bbc.co.uk/1/shared/spl/hi/pop_ups/08/business_russian_stock_exchange/html/1.stm)


In the pre-Soviet era, Russia was regarded as a world leader in terms of finance.
The first mention of the construction of an exchange in Merchant's yard in Moscow dates back to 1790, and by the middle of the 19th Century there was a thriving trade.
Moscow's main stock exchange even survived the Bolshevik Revolution of 1917, although the centralised Soviet economy later choked demand for long-term credit, the lifeblood of exchange activity.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif We are much closer to capitalism than we were 15 years ago http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Alexei Rybnikov, Micex chief executive

http://newsimg.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif

Russian inflation bites (http://news.bbc.co.uk/2/hi/in_pictures/7263081.stm)


But when the communist system collapsed in the early 1990s, the financial markets developed rapidly, with much less control and regulation than similar operations in the West.
Now, Micex claims its systems are in line with international standards, and it ranks as the 17th largest stock exchange in the world.
Progress
Some investors have been worried by signs of government interference in business.
http://newsimg.bbc.co.uk/media/images/44453000/jpg/_44453312_moscow_shops203large.jpg Russians are getting richer, and looking for ways to spend money


The former chairman of the oil company Yukos, Mikhail Khodorkovsky, was jailed for fraud and tax evasion and his company was taken away by the state.
However, Alexei Rybnikov, the chief executive of Micex, says other business people should not be worried.
"I think it is a bit of a misunderstanding, portraying the situation as if the Russian government is reversing the privatisation trend and trying to get back state ownership in recently privatised Russian companies," he says.
"What the state is actually doing right now is putting together various state-owned assets to form state-owned holding companies which control some of the sectors of the Russian economy."
As further evidence that the government is keen to privatise some of its assets, he points out that many companies which are majority owned by the state, such as the gas giant Gazprom, have shares listed on the exchange. Mr Rybinkov remains proud of Russia's progress. "We have a lot of economic freedom, we have modern and well developed capital markets. We are much closer to capitalism than we were 15 years ago," he says.

[jke_brown]

They say share investing is risk/reward management, surely risk have reduced with current market being 20% down in value to what it was few months back?

ASX200 was up 3 days in a row, I am watching closely.

[tricha]

They say share investing is risk/reward management, surely risk have reduced with current market being 20% down in value to what it was few months back?

ASX200 was up 3 days in a row, I am watching closely.

Sure risk has been reduced jke_brown, but I believe this is the suckers part off the cycle, suck the last bulls in . Wait till the credit card subprime hits the market, whammo.







Fannie Mae hit by housing gloom

http://newsimg.bbc.co.uk/media/images/44455000/jpg/_44455342_fannieone_afp203b.jpg The housing crisis in the US is threatening economic growth

US mortgage giant Fannie Mae has posted a $3.55bn (£1.8bn) loss for the three months to the end of December.
It blamed rising home loan defaults and set aside $2bn to cover further bad loans, warning the US housing slump could still get worse.
The quarterly loss cut into full-year earnings and the firm reported a loss for 2007 of $2.05bn, compared with a profit of $4bn for the year before.
It said it expects US house prices to fall between 5% and 7% in 2008.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif We are working through the toughest housing and mortgage markets in a generation http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Fannie Mae boss Daniel H. Mudd


The forecast was lower than previous predictions of a 4% to 5% decline.
"We are working through the toughest housing and mortgage markets in a generation," said president and chief executive Daniel H Mudd.
"Our results for 2007 reflect the challenging conditions in the market we serve," he added.
Official data out this week shows new and existing home sales and prices plunged in January, while the time it will take to shift unsold homes rose to 10 months.
More difficulties
Fannie Mae is the largest buyer and guarantor of US mortgages, accounting for at least one in five home loans nationwide.
It has little exposure to sub-prime loans, those given to borrowers on patchy credit or on low incomes, which are at the root of the housing and subsequent credit crisis.
Thus its poor results - much worse than expected - show the problems are so deep that creditworthy house buyers are now struggling, analysts say.
Fannie Mae said it expected to lose money this year on eight to 10 of every 1,000 mortgages held in its $2.4 trillion mortgage portfolio.
The firm, together with Freddie Mac, were created by the US government to make it easier for more people to get on the housing ladder. They were later privatised, but are still known as government-sponsored enterprises and are still able to borrow at a lower rate of interest, because bond markets believe that the US government would not allow them to go bankrupt. Freddie Mac is due to report its results on Thursday.

[fihr]

So Tricha, are you sitting out of the market now, or picking up some stocks?

I am in two minds. I think it might take all year for enough information to come through to know what is going on. At the moment, the bad figures just seem to keep coming.

Although some themes might offer some havens. The current classics being resources, emerging markets and BRIC economies, gold, infrastructure and food. Still, I am nervous about Brazil and Russia - too much state interference, not to mention people being shot, and I do wonder if the China bubble bursting after the Olympics might have some credence in the short term - though the long term story looks good to me.

Has anyone any thoughts on using ishares to access emerging markets?

[tricha]

So Tricha, are you sitting out of the market now, or picking up some stocks?

I am in two minds. I think it might take all year for enough information to come through to know what is going on. At the moment, the bad figures just seem to keep coming.

Although some themes might offer some havens. The current classics being resources, emerging markets and BRIC economies, gold, infrastructure and food. Still, I am nervous about Brazil and Russia - too much state interference, not to mention people being shot, and I do wonder if the China bubble bursting after the Olympics might have some credence in the short term - though the long term story looks good to me.

Has anyone any thoughts on using ishares to access emerging markets?

Thats it in a nutshell Fihr, Inflation, Inflation, Inflation

And the answer to it :confused:, does anyone out there have an understanding of where this is leading to.

Rampant Inflation and it is ramping!

How do we preserve our capital :confused: in this inflationary cycle, when it last happened I was only eighteen, so I did not care about it or have a clue. Wages kept going up and so did everything you bought.

Hence a new Thread coming.

P.S Changed tact due to sharemarket correction\losses and at the moment hold,

Gold - CTO

Oil - NWE, NZO, OEL and just re-entered ARQ.

Lithium - ADY ( And I think a dose or 2 of this might help my skitzo behaviour )

[fihr]

I know someone who made their fortune in the last inflationary cycle - inflation was 3% higher than interest rates so they bought assets (property).

[tricha]

I know someone who made their fortune in the last inflationary cycle - inflation was 3% higher than interest rates so they bought assets (property).

How does that compare to now, when houses soared above inflation recently and u might say, house prices are to high?

[Te Whetu]

If that is the case then switch assets... if you can get a situation where inflation is greater than interest rates then all you need to find is an asset that can be easily leveraged.

While property is one of the most easily leveraged asset classes, there are others that you can leverage or have inbuilt leverage. HOWEVER even some property has potential, Auckland apartments are now selling for semi-reasonable amounts, there will most likely be some places where cash flow positive properties are popping up.

[fihr]

How does that compare to now, when houses soared above inflation recently and u might say, house prices are to high?

If I was borrowing $US I could buy an Aussie house and do nicely. :)

But since I borrow in AUD, right now it obviously doesn't stack up. I'd need interest rates to lower or property to go up. But it is an opportunity to look out for over time if inflation rears its head. For example, this might happen to certain asset classes in the US, if their interest rates drop and inflation rises.

Re property now - I think that when Australian interest rates start to come down in 12 to 18 months perhaps, then there will be a spike in residential property values. Reason - now no one is building due to high interest rates and rental returns not justifying purchases. But there is so much pent up demand, that when rates lower again, people (both investors and home owners) will jump in as fast as they can in a market with undersupply, since rents are also getting higher and higher. Unless we end up in a recession. Which would just intensify the jump later.

[fihr]

Nice one! Maybe your suburb will go up even further then, if interest rates lower!

I've got a place in Coolum Beach, where growth is more sluggish than Brisbane. But the rents have risen a lot lately.

[tricha]

How to Escape the Black Hole Called the U.S. Economy (http://www.dailyreckoning.com.au/us-economy-3/2008/01/23/)

By James Howard Kunstler (http://www.dailyreckoning.com.au/us-economy-3/2008/01/23/#) About the Author
http://www.dailyreckoning.com.au/author/James%20Howard%20Kunstler.jpg(born 1948) is an American author, social critic, and blogger who is perhaps best known for his book The Geography of Nowhere, a history of suburbia and urban development in the United States. He is prominently featured in the peak oil documentary, The End of Suburbia, widely circulated on the internet. In his most recent book, The Long Emergency (2005), he argues that declining oil production is likely to result in the end of industrialized society and force Americans to live in localized, agrarian communities.




The dark tunnel that the U.S. economy has entered began to look more and more like a black hole recently, sucking in lives, fortunes, and prospects behind a Potemkin facade of orderly retreat put up by anyone in authority with a story to tell or an interest to protect – Fed chairman Bernanke, CNBC, The New York Times , the Bank of America... Events are now moving ahead of anything that personalities can do to control them.
The "housing bubble" implosion is broadly misunderstood. It's not just the collapse of a market for a particular kind of commodity, it's the end of the suburban pattern itself, the way of life it represents, and the entire economy connected with it. It's the crack up of the system that America has invested most of its wealth in since 1950. It's perhaps most tragic that the mis-investments only accelerated as the system reached its end, but it seems to be nature's way that waves crest just before they break.
This wave is breaking into a sea-wall of disbelief. Nobody gets it. The psychological investment in what we think of as American reality is too great. The mainstream media doesn't get it, and they can't report it coherently. None of the candidates for president has begun to articulate an understanding of what we face: the suburban living arrangement is an experiment that has entered failure mode.

I maintain that all the "players" – from the bankers to the politicians to the editors to the ordinary citizens – will continue to not get it as the disarray accelerates and families and communities are blown apart by economic loss. Instead of beginning the tough process of making new arrangements for everyday life, we'll take up a campaign to sustain the unsustainable old way of life at all costs.
A reader sent me a passel of recent clippings last week from the Atlanta Journal-Constitution . It contained one story after another about the perceived need to build more highways in order to maintain "economic growth" (and incidentally about the "foolishness" of public transit). I understood that to mean the need to keep the suburban development system going, since that has been the real main source of the Sunbelt's prosperity the past 60-odd years. They cannot imagine an economy that is based on anything besides new subdivisions, freeway extensions, new car sales, and NASCAR spectacles. The Sunbelt, therefore, will be ground-zero for all the disappointment emanating from this cultural disaster, and probably also ground-zero for the political mischief that will ensue from lost fortunes and crushed hopes.
From time-to-time, I feel it's necessary to remind readers what we can actually do in the face of this long emergency. Voters and candidates in the primary season have been hollering about "change" but I'm afraid the dirty secret of this campaign is that the American public doesn't want to change its behavior at all. What it really wants is someone to promise them they can keep on doing what they're used to doing: buying more stuff they can't afford, eating more bad food that will kill them, and driving more miles than circumstances will allow.
Here's what we better start doing.
Stop all highway-building altogether. Instead, direct public money into repairing railroad rights-of-way. Put together public-private partnerships for running passenger rail between American cities and towns in between. If Amtrak is unacceptable, get rid of it and set up a new management system. At the same time, begin planning comprehensive regional light-rail and streetcar operations.
End subsidies to agribusiness and instead direct dollar support to small-scale farmers, using the existing regional networks of organic farming associations to target the aid. (This includes ending subsidies for the ethanol program.)
Begin planning and construction of waterfront and harbor facilities for commerce: piers, warehouses, ship-and-boatyards, and accommodations for sailors. This is especially important along the Ohio-Mississippi system and the Great Lakes.
In cities and towns, change regulations that mandate the accommodation of cars. Direct all new development to the finest grain, scaled to walkability. This essentially means making the individual building lot the basic increment of redevelopment, not multi-acre "projects." Get rid of any parking requirements for property development. Institute "locational taxation" based on proximity to the center of town and not on the size, character, or putative value of the building itself. Put in effect a ban on buildings in excess of seven stories. Begin planning for district or neighborhood heating installations and solar, wind, and hydro-electric generation wherever possible on a small-scale network basis.
We'd better begin a public debate about whether it is feasible or desirable to construct any new nuclear power plants. If there are good reasons to go forward with nuclear, and a consensus about the risks and benefits, we need to establish it quickly. There may be no other way to keep the lights on in America after 2020.
We need to prepare for the end of the global economic relations that have characterized the final blow-off of the cheap energy era. The world is about to become wider again as nations get desperate over energy resources. This desperation is certain to generate conflict. We'll have to make things in this country again, or we won't have the most rudimentary household products.
We'd better prepare psychologically to downscale all institutions, including government, schools and colleges, corporations, and hospitals. All the centralizing tendencies and gigantification of the past half-century will have to be reversed. Government will be starved for revenue and impotent at the higher scale. The centralized high schools all over the nation will prove to be our most frustrating mis-investment. We will probably have to replace them with some form of home-schooling that is allowed to aggregate into neighborhood units. A lot of colleges, public and private, will fail as higher ed ceases to be a "consumer" activity. Corporations scaled to operate globally are not going to make it. This includes probably all national chain "big box" operations. It will have to be replaced by small local and regional business. We'll have to reopen many of the small town hospitals that were shuttered in recent years, and open many new local clinic-style health-care operations as part of the greater reform of American medicine.
Take a time-out from legal immigration and get serious about enforcing the laws about illegal immigration. Stop lying to ourselves and stop using semantic ruses like calling illegal immigrants "undocumented."
Prepare psychologically for the destruction of a lot of fictitious "wealth" – and allow instruments and institutions based on fictitious wealth to fail, instead of attempting to keep them propped up on credit life-support. Like any other thing in our national life, finance has to return to a scale that is consistent with our circumstances – i.e., what reality will allow. That process is underway, anyway, whether the public is prepared for it or not. We will soon hear the sound of banks crashing all over the place. Get out of their way, if you can.
Prepare psychologically for a sociopolitical climate of anger, grievance, and resentment. A lot of individual citizens will find themselves short of resources in the years ahead. They will be very ticked off and seek to scapegoat and punish others. The United States is one of the few nations on earth that did not undergo a sociopolitical convulsion in the past hundred years. But despite what we tell ourselves about our specialness, we're not immune to the forces that have driven other societies to extremes. The rise of the Nazis, the Soviet terror, the "cultural revolution," the holocausts and genocides – these are all things that can happen to any people driven to desperation.
James Howard Kunstler
for The Daily Reckoning Australia
Editor's Note: James Kunstler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine . In 1975, he dropped out to write books on a full-time basis.
His latest nonfiction book, The Long Emergency (http://www.amazon.com/gp/product/0871138883/ref=ase_dailyreckonin-20/) describes the changes that American society faces in the 21st century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees the progressive dilapidation of subdivisions and strip malls, the depopulation of the American Southwest, and, amid a world at war over oil, military invasions of the West Coast; when the convulsion subsides, Americans will live in smaller places and eat locally grown food.
You can get more from James Howard Kunstler - including his artwork, information about his other novels.

[tricha]

My personal view on this recession is the price of oil will be the key to the severity of it all.
Do you think twice now, when you fill your car up about where you are going to go.:confused: All that gas money that could has been spent on something else :(



How much oil does the US import ?????????????????

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

I'm guessing at 15,000,000 barrels a day x it by $30 = $450,000,000

Try it again at $60 a barrel = $900,000,000

Try it again at $90 a barrel = $1,350,000,000

Try it at $150 a barrel = $2,250,000,000


The big picture is quite scary.


Come on folks, the maths http://www.youtube.com/watch?v=F-QA2rkpBSY, lets hear your views on this one posted by Financially Dependent on the Peak Oil Thread.

Who out there is in denial, has their head buried in the sand, the dynamics of the world as we know it has changed.



Peak Oil Passnotes: Knock-Through
By Edward Tapamor
07 Mar 2008 at 02:00 PM GMT-05:00

PARIS (ResourceInvestor.com) -- We have long talked about the various impacts of higher oil and energy costs. The way that inflated energy prices knock-through into other commodities, for example by hiking transportation and extraction costs, is one of them. From commodities they then knock through into your pocket, maybe making you feel poorer, or if you bet on their rise, possibly richer.
Other impacts aside from your personal well-being or otherwise have included the run-up in food prices, also linked to transportation and manufacturing, but also to the way biofuels have been so badly mismanaged. All along we have pointed out that there is a correlation between general all round inflation due to rising energy costs, but with a significant time lag.

In other words we are feeling the impact of energy costs at – for argument’s sake – around the $70 per barrel range we had a year ago. Things like capital goods – big stuff such as plant and factory equipment – takes a good while to manufacture. So the estimated cost of say a smelter will rise as energy prices rise, even if the contract was signed when energy prices were lower.
Either the company that ordered the smelter will be hit as costs are passed on to it, or the manufacturer will be hit as it failed to ink any possible rise into its initial contract.
One of the things that has most worried us has been the possibility that the delays in energy costs knocking through were going to be discounted in the current economic malaise. Banks, energy companies and governments are not organisations that like to talk up a crisis, especially as they are the ones that tend to benefit from business as normal.
They all have a vested interest in pretending the next crisis is never going to happen. After all the banks were not exactly screaming out about the credit crunch. We cannot remember too many chief executives warning off poorer folks with bad credit histories from taking out mortgages on the back of the idea of never ending growth.
So what is perhaps slightly worrying at the moment is the prospect of a weakening U.S. economy, losing jobs faster than expected, with continuing banking and housing defaults, faced in no uncertain terms by oil prices wafting around the $106 per barrel price range.
Because, so far we have seen no inclination by any major economy to think their way out of trouble. Instead the only response to troubled times has been to cut interest rates which as those with memories even as poor as the average goldfish will recall, is exactly what got us in this mess in the first place.
We are always told how much more absorbent modern economies are to high energy costs as they have become more efficient, this is indeed true. But the least efficient and most bloated of all of them – with its industries that should have been bankrupt and foreign owned years ago – is the U.S.
Cutting dollar power so that the U.S. becomes some kind of bargain basement shopping mall for the rest of the world – I mean there is only so many pairs of trainers and flats in Manhattan a boy can have - is not going to be the answer. Many people around the world do want to see a smaller less powerful U.S., but a collapsing one is not something anyone is particularly after.
But what happens if that $106 oil takes 18 months to kick through into the U.S. economy? What will happen then? Who will warn us?

[tobo]

....
Because, so far we have seen no inclination by any major economy to think their way out of trouble. Instead the only response to troubled times has been to cut interest rates which as those with memories even as poor as the average goldfish will recall, is exactly what got us in this mess in the first place.


Putting together points from those last two 'discourses'
- the reliance on private (road) transport by suburbia and the centralised production/distribution system (gosh sounds suprisingly socialist, but I digress),
- and the observation that governments don't seem to have the wit to plan and manage with a strategic long term view:

the free economy means profit orientated carmakers will want to find a way to sell cars that don't need gasoline. "Hey, mister suburbian, electric cars plug in at the wall" (where electricity is provided magically - just as much as you want). That allows them to keep their cars.
And power companies will want to find a way to sell just as much electricity as you want. So they will just turn to the list of ways they can increase supply, rank them by price, and just keep picking the next cheapest they can.

Of course that does not address the issue of demand-lead inflation resulting eventually in so many people just not being able to afford all the increasingly expensive coffee, beef, cheese, vegies, training shoes, heating/air con, transport fuel, mortgage... so in time that distributed suburbia problem could start to bite.
I'm just saying, that, yes, economies don't tend to think their way out of trouble. Rather, individual businesses spot a gap in the supply of some product or service, and market the heck out of it.

It's similar to the global warming debate : we won't have a coordinated orchestrated collapse, but rather, individuals (or individual communities) will just fall off the edge one by one. (And some have been falling off that edge already for ages, and we just say "oh, that's just poor people, on the fringe of the system. That's not what the actual system is.")

[tricha]

Big fall in China's trade surplus

http://newsimg.bbc.co.uk/media/images/44348000/jpg/_44348441_shanghai203ap.jpg There is much political interest in Chinese trade figures

China's trade surplus unexpectedly fell in February, suggesting the US slowdown is hitting demand for Chinese goods.
China exported $8.6bn (£4.3bn) more than it exported last month, down from $23.7bn in February last year, according to government figures.
But economists warned that February data are very sensitive to the timing of China's lunar new year celebrations.
There was more concern that factory gate prices had risen 6.6% in the year to February.
Factory gate prices measure the amount that manufacturers are paid for their products and is a key indicator of consumer inflation to come.
Premier Wen Jiabao told parliament last week that the battle against inflation is his top economic priority for the year.
"Virtually everything is on the rise - not just fuel, but coal and iron ore," said Jun Ma, chief China economist at Deutsche Bank in Hong Kong. "All these things are growing much stronger than fuel, plus labour costs are going up too." Consumer prices figures are due out on Tuesday.

[tricha]

Big fall in China's trade surplus

http://newsimg.bbc.co.uk/media/images/44348000/jpg/_44348441_shanghai203ap.jpg There is much political interest in Chinese trade figures

China's trade surplus unexpectedly fell in February, suggesting the US slowdown is hitting demand for Chinese goods.
China exported $8.6bn (£4.3bn) more than it exported last month, down from $23.7bn in February last year, according to government figures.
But economists warned that February data are very sensitive to the timing of China's lunar new year celebrations.
There was more concern that factory gate prices had risen 6.6% in the year to February.
Factory gate prices measure the amount that manufacturers are paid for their products and is a key indicator of consumer inflation to come.
Premier Wen Jiabao told parliament last week that the battle against inflation is his top economic priority for the year.
"Virtually everything is on the rise - not just fuel, but coal and iron ore," said Jun Ma, chief China economist at Deutsche Bank in Hong Kong. "All these things are growing much stronger than fuel, plus labour costs are going up too." Consumer prices figures are due out on Tuesday.

Maybe u need to read a bit more Sector or learn to read.:rolleyes:

[tricha]

Whatever Tricha, Im telling you, you didn`t provide a link, the story left out details and you purposely highlighted one point (heading), to make it look alarmist (as you always do)




EXPORTS WERE STILL UP
IMPORTS WERE UP MUCH MORE (and Aussies companies are benefiting),
hence surplus looked much worse and as you will see IF YOU read the bloomberg news article, there were a couple of extra factors which helped cause the difference
This actually may be a good thing to help Chinas high inflation as mentioned, as too much cash coming back into China sloping around.

Heres the link, and u still can not read, spot the things I left out. Seems u r visually impaired as well.;)

http://news.bbc.co.uk/2/hi/business/7286911.stm

[Halebop]

Suspect the newsworthy element is that factory gate prices were up 6.6%. That's a lot of inflation being exported, which is good for nobody.

[STRAT]

I see the FED put some fresh bandaids on the wounds last night and the US markets have reacted accordingly :rolleyes:

[shasta]

I see the FED put some fresh bandaids on the wounds last night and the US markets have reacted accordingly :rolleyes:

Still seems to me, like putting a plaster on a shark bite! :rolleyes:

[STRAT]

Still seems to me, like putting a plaster on a shark bite! :rolleyes:My point exactly but it will probably turn the herd for a day or two. All I need now is a stock or two to announce something big at the same time :D:rolleyes:

[FarmerGeorge]

My understanding of this is that it is something more than a plaster. Of course it depends on exactly what you see it as trying to fix. This won't have an effect on the 'recession'. (I'm still not convinced the US is in recession, just my view). However the way this is put together may go a long way towards getting the ball rolling again in terms of credit, which is what is really the worry. Even if it turns out that the US is in, or is approaching, recession, this is not an issue for us investing in Australia. Major lack of liquidity and credit is a far scarier thing and this initiative may help. It's not a silver bullet, but it will help.

[STRAT]

My understanding of this is that it is something more than a plaster. Of course it depends on exactly what you see it as trying to fix. This won't have an effect on the 'recession'. (I'm still not convinced the US is in recession, just my view). However the way this is put together may go a long way towards getting the ball rolling again in terms of credit, which is what is really the worry. Even if it turns out that the US is in, or is approaching, recession, this is not an issue for us investing in Australia. Major lack of liquidity and credit is a far scarier thing and this initiative may help. It's not a silver bullet, but it will help.Hi George,
I dont think Aussie investors are outside the loop and all aspects of our current situation are completely interconnected IMO. You only have to look to Europe or the ASX to see that. The US is still the largest economy even if it is on loan from everyone else and as the No1 consumer what ever happens there will have, is having a direct flow on effect. Im not planning too far ahead these days

[FarmerGeorge]

I agree mostly with what you're saying Strat. Our markets are moving roughly in line with the US markets, as tends to happen during periods of market stress, that much we can see. But I think we disagree on why this is, and I would certainly not agree that ALL aspects of our current situation are COMPLETELY interconnected. I simply don't believe that the US market is dropping as it is due to recession (or fears of recession) nor do I think that a recession in the US, even if it occurs (or if it's occurring right now) will have a marked effect on the Australian economy, unless it is long, deep and rugged.

But I should add that my blanket statement about 'us investing in Australia' was a bit over the top, of course it will depend on what you're invested in. My position is that the underlying fears of a lack of liquidity and credit are what's driving US market movements and that anything that moves to alleviate this will have far more positive effects on their market (and consequently the Aust market) than anything which is directed primarily at 'avoiding recession'. I'm also of the opinion that much of this US/Australian stock movement correlation is irrational on the basis of expected earnings and over time will give some investors here (hopefully including me!) some excellent gains.

[STRAT]

I agree mostly with what you're saying Strat. Our markets are moving roughly in line with the US markets, as tends to happen during periods of market stress, that much we can see. But I think we disagree on why this is, and I would certainly not agree that ALL aspects of our current situation are COMPLETELY interconnected. I simply don't believe that the US market is dropping as it is due to recession (or fears of recession) nor do I think that a recession in the US, even if it occurs (or if it's occurring right now) will have a marked effect on the Australian economy, unless it is long, deep and rugged.

But I should add that my blanket statement about 'us investing in Australia' was a bit over the top, of course it will depend on what you're invested in. My position is that the underlying fears of a lack of liquidity and credit are what's driving US market movements and that anything that moves to alleviate this will have far more positive effects on their market (and consequently the Aust market) than anything which is directed primarily at 'avoiding recession'. I'm also of the opinion that much of this US/Australian stock movement correlation is irrational on the basis of expected earnings and over time will give some investors here (hopefully including me!) some excellent gains.Hi George. without going long winded on the topic ( we could probably chew the fat for hours and end up in agreement on most of the symptoms if not the causes ) the most significant connection I see for Auzzie and the US is via Asia. That is to say Australia is somewhat dependent on the satus of Aisia and Aisia on the US. In particular with regard to the mining sector which is where I like to play

[FarmerGeorge]

I think your point is sound Strat. Fewer US purchases from Asia logically should lead to less demand for the raw materials Australia is sending over there (and in which many of us have invested our money!) with the resulting disappointing returns. This argument has been made in the media and on this forum and it may well turn out that this is what happens. I think that this issue has been overdone and it won't be nearly as bad as many are anticipating. Of course this rests on my assumptions about an eventual credit market recovery and no, or at least a mild, recession in the US. If I turn out to be wrong, well I turn out to be wrong and I'll lose a lot of money. But I guess that's the nature of the beast. I simply don't see the data that gives certainty of any of the gloomy scenarios that are being talked about. Obviously I appreciate the knowledge of all the contributors here and I take the point seriously, I'm just not convinced yet.

[STRAT]

I think your point is sound Strat. Fewer US purchases from Asia logically should lead to less demand for the raw materials Australia is sending over there (and in which many of us have invested our money!) with the resulting disappointing returns. This argument has been made in the media and on this forum and it may well turn out that this is what happens. I think that this issue has been overdone and it won't be nearly as bad as many are anticipating. Of course this rests on my assumptions about an eventual credit market recovery and no, or at least a mild, recession in the US. If I turn out to be wrong, well I turn out to be wrong and I'll lose a lot of money. But I guess that's the nature of the beast. I simply don't see the data that gives certainty of any of the gloomy scenarios that are being talked about. Obviously I appreciate the knowledge of all the contributors here and I take the point seriously, I'm just not convinced yet.
Hi George, We all have to play it as we see it and even the most conservative investors here are speculators to some degree. There is a wealth of knowledge on this site and as a relative newbie I consider myself fortunate for the help I have received both directly and indirectly from other members.
I find myself unable to see the future with any clarity at all at the moment and am playing my hand accordingly. With the exception of ADY everything I am involved in is a very short term play.

[Laxmi]

http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html

For those that are interested the analyst is John Authers.

John's analysis suggests the US is now is recession and the financial system is broken. (amongst other things)

I think the question that we should all be asking ourselves is how deep will the US recession go? and how much will it impact on Asia? (assuming that New Zealand and Australia are part of Asia)

Thoughts anyone?

[tricha]

Global Confidence Weakens on U.S. Economic Slowdown (Update1)

By Simon Kennedy

March 12 (Bloomberg) -- The outlook for the global economy deteriorated for a fourth month in March amid declining faith in Asia's ability to dodge the U.S. slump, a survey of Bloomberg users on five continents showed.

The Bloomberg Professional Global Confidence Index fell to 13.1 from 14.3 in February. Respondents in Asia were the most pessimistic about worldwide growth and a gauge of confidence in their own economy fell to 38.1 from 43.5. A reading below 50 indicates negative sentiment.

Asia, almost twice as reliant on overseas sales as the rest of the world, is being dragged down by weaker growth in the U.S., Japan and Europe. Purchasing managers' indexes in China, Singapore, Hong Kong and India already signal slowing manufacturing growth.

`No Growth'

``As the U.S. appears to lurch from modest growth to no growth, that could give a further negative impulse to Asian growth,'' said Edward Teather, an economist at UBS AG in Singapore. ``Evidence has been growing that exports in many countries have slowed.''


Sorry Sector another tacky article, the flow on effect :rolleyes:


China factory output growth cools

http://newsimg.bbc.co.uk/media/images/44348000/jpg/_44348441_shanghai203ap.jpg China is heavily reliant on its exports

China's industrial output weakened in January and February as firms were hit by lower exports, official data shows.
The measure of factory production grew by 15.4% in the two month period, down from 18.5% in the same period of 2007.
Chinese firms are having to deal with higher raw material costs after crude oil prices climbed to record levels.
They have also been hit by a stronger yuan, weakening US demand, and poor weather at the start of the year, which hampered transport and distribution.
"Exporters are facing big problems and they are unable to make profit," said Andy Xie, an independent economist based in Shanghai.
Recent figures showed that Chinese exports increased by 16.8% in the eight weeks to the end of February, less than half the growth rate of 41.5% in the same period a year earlier.
As well as the external problems facing Chinese producers, the government also is taking steps to slow output in an attempt to stop the booming economy from overheating.
China's continuing economic expansion has pushed up the rate of inflation, and prompted higher interest rates. "With heightened inflation risks, we expect that further tightening measures by the government coupled with a gradual softening in exports will likely lead to downward pressure on industrial production," Goldman Sachs said.

[tricha]

Asian shares down on credit fears

http://newsimg.bbc.co.uk/media/images/44405000/jpg/_44405918_traders_ap203b.jpg Traders say deeper problems remain

Shares in Asia have fallen, as optimism about central bank measures to calm the credit crisis were dwarfed by deeper recession fears.
Japan's benchmark Nikkei dropped 3.5% while Hong Kong's Hang Seng shed 3.8%.
The dollar fell to new lows against the Euro, helping push up the price of oil to a new high of $110 a barrel, further adding to market concerns.
Stock markets worldwide had earlier been buoyed by action by central banks to inject cash into credit markets.
US factors
The US Federal Reserve, the European Central Bank and central banks in the UK, Canada and Switzerland said on Tuesday they would inject more than $200bn into money markets, to ease the credit crunch.
However there were signs that the initial shot-in-the-arm that provided to global markets may be wearing off.
The benchmark Dow Jones Industrial Average ended down 0.38% on Wednesday, a day after its biggest rally in five years.
And Japan's Nikkei, which had also rallied on the initiative of the US Federal Reserve and other central banks, closed lower.
"I'd say about 70% of the selling today was based on US factors, with the other 30% coming from Japan," said Yoku Ihara, of Retela Crea Securities.
"The Fed has been doing various things to solve the credit crisis but nothing's been working."
"Buying time"
Asia is highly reliant on exports to the US, so any slowdown there would hit Asian firms.
"Perception that the Fed was just buying time with the cash injections pervades the market" said Kim Joon-kie, an analyst at SK Securities.
He said it had not solved the "fundamental problems". The MSCI index of Asian markets outside Japan fell 2.9%, with finance firms among the main fallers including Australian bank Macquarie down 8.4%. Rising oil prices hit airlines, with Japan Airlines and Singapore Airlines falling 2%.

[Laxmi]

The only thing that can save the US from financial collapse now; is clearly the US FED. This is now the second time in a few short months that a country such as the US has needed to bail out a failed financial company to limit collateral damage to the countries financial confidence. In the UK it cost the Bank of England 57 billion pounds to bail out one failed bank. How much is this latest effort going to cost the US FED? (assuming the cockroach theory)

In reality and all honesty; the US FED is unable to absorb all the losses ‘out there’ and looming. It can only hope that this rare injection of liquidity will help soothe the financial markets sufficiently to help avoid a complete market meltdown. Ben Bernanke is facing a mounting crisis, for which his options for solving easily are fading by the day.

It is now assumed that within a few short days, Ben will announce a reduction is the US cash rate by a massive 1%. To put a reduction like this in perspective; this will be a 33.3% reduction from current levels. (3-2). It can be assumed that the US dollar will tumble further on the news. In turn this will put price pressure on commodities as trader’s hedge again against the falling US dollar. The real problem is that the commodity market is currently in a state of speculation. It no longer has any basis on fundamentals. Crunch time is rapidly calling. It is only so long before a market that ignores fundamentals inevitably corrects. Markets are ultimately very primitive and always revert back to supply and demand forces.

The correction will come about not because of a wish for commodity prices to fall by the speculators. It will come about because somewhere, somebody will be unable to honour a contract at today’s high prices. In a blink of an eye, a contagion will spread like wildfire. Risk Management for even the most novice speculator will indicate to take profits NOW when this scenario occurs.
A sharp drop in prices overnight will cause serious pain to every speculator who was long. The real pain will occur in the future when prices fail to rebound due to a mounting financial crisis. The markets have become so treacherous, that buyers become less and less. As prices drift lower, those caught off guard will become more and more desperate. Losses are mounting and worse, margin calls are calling.

Another round of panic selling, although this time, there are no buyers. Shares and options become effectively worthless in this instance.

[duncan macgregor]

I am mostly out the market and expect to remain so for the remainder of 2008. I think America will crash bringing our markets down to much lower points than they are now. I see the ASX being in negative territory for the year 2008 with a big crash or a series of minor corrections whatever, i wont be investing until the market shows a clear TA uptrend.
Its much safer sitting it on the outside in times like this. Macdunk Thats what i said in early JANUARY 2008 looks like it is coming to pass. Another bad day on the market looming up on monday to be expected, looks like plenty of road kill to pick up in 2009.
My old mate SECTA SURFER reckons i dont know how to trade a bear market which is correct i simply keep out of it. I think the worst has yet to come America is still afloat but only just the ripple effect will swamp our markets when it sinks. Macdunk

[Laxmi]

'Bear, which on Friday said it lined up emergency financing from the New York Federal Reserve and JPMorgan Chase, has been servicing hedge funds for several decades, since the early days of the industry that has grown to some 10,000 funds with $1.9 trillion in assets.' http://www.guardian.co.uk/feedarticle?id=7386388

The more I think about these figures, the more I realise the enormity of the crisis. In these early days of economic turmoil, the first major crack that has manifested since ‘subprime’ is the failure of hedge funds. This is specifically hedge funds tied back into this more risky subprime lending sector. I never realised before how huge these hedge funds had become.

In a normal market environment, any singular hedge fund failure has little economic effect apart from those personally involved. Even then losses are usually already taken into account. In most situations, the buck simply falls with ‘larger’ investors who just grin and bare it; the best they can.

Unfortunately the market today is far from normal. When economic conditions worsen, (such as mortgagee sales with negative equity) then ultimately it is the hedge funds responsibility to make up for these losses to the ‘wall street’ banks. These are the same wall street banks that secured the money for the subprime loans in the first place.

As loan books associated with subprime become a distinct liability, they are heavily discounted. The hedgefund goes bankrupt in a short period of time, especially at margin call time.

The wall street bankers in turn are likely to wipe their losses on this speculative investment if they can. This effectively passes the buck directly back to their mainstream bank supporters.

In this instance we know the first likely casualty to be the mainstream bank called JPMorgan Chase. We also know that the US FED has come to the rescue. This is a most dangerous precedent that does not bear repeating...

[The Big Ease]

this is somewhat akin to LTCM*1000


its the same with these hedgies and subprime. "so long as the music is still playing......" remember that bull****? somehow, taking subprime debt and spreading it around better quality debt made it disappear? ultimate sweeping under the carpet trick.

LTCM failed because they assumed everyday was day 1 in their models with respect to economic outlying events and that developing economies werent connected. wrong indeed. we have some sort of bubble/disaster every 7 years or so. asian currency crisis, tech boom and now subprime. all within ten years, so i guess the world is getting into a bad habit of things.

[Hoop]

'Bear, which on Friday said it lined up emergency financing from the New York Federal Reserve and JPMorgan Chase, has been servicing hedge funds for several decades, since the early days of the industry that has grown to some 10,000 funds with $1.9 trillion in assets.' http://www.guardian.co.uk/feedarticle?id=7386388

The more I think about these figures, the more I realise the enormity of the crisis. In these early days of economic turmoil, the first major crack that has manifested since ‘subprime’ is the failure of hedge funds. This is specifically hedge funds tied back into this more risky subprime lending sector. I never realised before how huge these hedge funds had become.

In a normal market environment, any singular hedge fund failure has little economic effect apart from those personally involved. Even then losses are usually already taken into account. In most situations, the buck simply falls with ‘larger’ investors who just grin and bare it; the best they can.

Unfortunately the market today is far from normal. When economic conditions worsen, (such as mortgagee sales with negative equity) then ultimately it is the hedge funds responsibility to make up for these losses to the ‘wall street’ banks. These are the same wall street banks that secured the money for the subprime loans in the first place.

As loan books associated with subprime become a distinct liability, they are heavily discounted. The hedgefund goes bankrupt in a short period of time, especially at margin call time.

The wall street bankers in turn are likely to wipe their losses on this speculative investment if they can. This effectively passes the buck directly back to their mainstream bank supporters.

In this instance we know the first likely casualty to be the mainstream bank called JPMorgan Chase. We also know that the US FED has come to the rescue. This is a most dangerous precedent that does not bear repeating...

A very informative post Laxmi Thanks

[mark100]

Another round of panic selling, although this time, there are no buyers. Shares and options become effectively worthless in this instance.


Shares my trade at a level near zero but that doesn't mean they are worthless. Millions of people around the world will still go about their daily lives. Despite this massive crisis Woolworths will still be selling food and toilet paper and Caltex will still be selling petrol etc. If their shares reach zero I will launch a takeover bid for both companies!

[tricha]

Sorry Sector, couldn't find any good news. :eek:

Markets decline on credit worries

http://newsimg.bbc.co.uk/media/images/44464000/jpg/_44464206_stocks_ap203b.jpg Investor confidence has been hit by Bear Stearns' problems

There were heavy losses on Asia's major stock markets as investors reacted badly to news that troubled investment bank Bear Stearns had been sold.
The Nikkei average was down 3.7%, Hong Kong's Hang Seng shed 4% and Mumbai's BSE Sensex fell 3.8%, although most markets recovered from earlier lows.
The dollar fell to 95.72 yen, a 12 year low. The euro hit a record against the dollar, buying $1.5903.
Oil prices rose to another record, with light sweet crude trading at $111.42.
Credit uncertainty
Investor confidence has been hit by the trouble at Bear Stearns.
The investment bank was forced to seek emergency funding from the US Federal Reserve last week and was sold within days to JP Morgan Chase.
The quick sale failed to calm investors' nerves who this week will receive earnings announcements from other big US investment banks including Lehman Brothers, Goldman Sachs and Morgan Stanley. "There is persistent credit uncertainty. Market players have been repeatedly let down which shows the sub-prime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist at Shinko Securities in Tokyo. "Just buying an investment bank does not solve the problem," he added.

P.S I lied! SPOT MARKET IS OPEN
closes in 13 hrs. 41 mins.Mar 17, 2008 03:35 NY Time Bid/Ask1024.60-1025.40 Low/High1022.00-1028.50 Change (javascript:NewWindow('/glossary/LiveSpotGold.html#Change','LiveSpotGold','top=50,l eft=200,width=500,height=350,channelmode=0,dependa nt=1,fullscreen=0,resizable=no,toolbar=0,status=0, scrollbars=1,location=0,menubar=0,directories=0'); )+22.10 +2.20%30daychg (javascript:NewWindow('/glossary/LiveSpotGold.html#30day','LiveSpotGold','top=50,le ft=200,width=500,height=350,channelmode=0,dependan t=1,fullscreen=0,resizable=no,toolbar=0,status=0,s crollbars=1,location=0,menubar=0,directories=0');) +122.90 +13.63%1yearchg (javascript:NewWindow('/glossary/LiveSpotGold.html#1year','LiveSpotGold','top=50,le ft=200,width=500,height=350,channelmode=0,dependan t=1,fullscreen=0,resizable=no,toolbar=0,status=0,s crollbars=1,location=0,menubar=0,directories=0');) +372.40 +57.10%Charts... (http://www.kitco.com/charts/livegold.html)

[STRAT]

Shasta here is the rest of the article I sent you a snipit from. Others might want a gander too

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml

But dont worry Bush and his advisors are getting together today for a chinwag so it should all be sorted by the morning. If not at least it will supply the Late Show with some more amusing snipits from a great leader of our time :rolleyes:

[shasta]

Shasta here is the rest of the article I sent you a snipit from. Others might want a gander too

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml

The chinese wouldnt screw over the US, in a bid to overtake them as a world super power would they? :eek:

Well, at least not until after the Bejing games anyways :D

[STRAT]

Well, at least not until after the Bejing games anyways :DThe Olimpics? Are you subscribing to some Macdunkology there Shasta? :eek:

[shasta]

The Olimpics? Are you subscribing to some Macdunkology there Shasta? :eek:

LOL macdunk & i last saw eye to eye in HQP many moons ago. :eek:

The writing is on the wall, we all just have to read it, perhaps it may be in chinese characters :D

[STRAT]

Shasta.
Regarding that article I posted I recon as the US feels the squeese from being stuck between a rock and a hard place they are going to take a very American stance with the Insto's/countries they owe big time. By that I mean they will start playing the part of the bully boy. How and when their creditors react will seal our fate one way or the other. I think it will all come to a head this year.
I previously thought around the end of the year but Trichas scary posts have got me thinkin maybe sooner.:D

[shasta]

Shasta.
Regarding that article I posted I recon as the US feels the squeese from being stuck between a rock and a hard place they are going to take a very American stance with the Insto's/countries they owe big time. By that I mean they will start playing the part of the bully boy. How and when their creditors react will seal our fate one way or the other. I think it will all come to a head this year. I previously thought around the end of the year but Trichas scary posts have got me thinkin maybe sooner.

People have to stop thinking of the US as the be all & end all, China, India & ultimately Europe will overtake the US, its merely a matter of time.

I still content things will go "pear shaped" shortly after a successful Bejing games.

[STRAT]

People have to stop thinking of the US as the be all & end all,Not yet I recon. That is a likely senerio but a shift of that size in the order of things will take time and a lot of pain. If they fall off the cliff a hell of a lot of us are gonna go over with em :( Just look at how much their many foreign shareholders stand to loose if the US goes belly up

[FarmerGeorge]

I like the definition "anything that charges 2 and 20". But I suppose that's not of much help to us in this situation. I have been lucky enough to attend numerous presentations of, and personally meet, some very knowledgable people over here who are active in the hedge fund industry, either as analysts, fund managers, endowment heads, or FoF managers. Admittedly, this has given me a skewed vision of the upsides of HFs but I've also been lucky enough to get many of the stats and facts about the industry which are generally overlooked by mainstream journalists in the press.
If there are any specific questions around HFs that anyone has then feel free to PM me and I'm happy to pass through the information I have, or try to point you in the right direction.
The two things I've found most interesting are these: first the HF industry growth figures are a bit wonky because much of this growth is simply coming from propriety trading desks closing and managers going on their own, and second the global mutual/pension/insurance fund assets collectively are about USD60T, while the HF industry is seldom estimated to be more than USD2T, perhaps levered two to one on average. This may put into perspective the claim that hedge funds created or are driving the current problems.

[tricha]

Not yet I recon. That is a likely senerio but a shift of that size in the order of things will take time and a lot of pain. If they fall off the cliff a hell of a lot of us are gonna go over with em :( Just look at how much their many foreign shareholders stand to loose if the US goes belly up

I'll sleep like a baby knowing I'm partly cashed up after selling my beloved ADY, the market is in no mood for gambling stocks or potentially multi baggers, period, it is past tense.
I'm sticking to gold and oil producers with little debt and cash flow or impending cash flow and huge upside and a little cash to weather the storm.
If another US bank crashes, I shudder to think .........




Fed battles to restore confidence

http://newsimg.bbc.co.uk/media/images/44468000/jpg/_44468054_bernanke2_ap203b.jpg US Federal Reserve Chairman Ben Bernanke is battling the credit crisis

The US central bank is expected to slash interest rates on Tuesday to help boost confidence in the US economy.
Economists are forecasting that the benchmark US interest rate will be cut by up to 1%. The decision will be made at 1815 GMT (1415 EST).
Policy makers are hoping to ease the credit crisis which caused the emergency sale of investment bank Bear Stearns over the weekend.
Investors will also be watching results from Lehman Brothers and Goldman Sachs.
Both banks are expected to announce a sharp fall in profits, when they report results later on Tuesday.
http://newsimg.bbc.co.uk/shared/img/o.gifMAIN SUB-PRIME LOSSES SO FAR
Citigroup: $18bn
Merrill Lynch: $14.1bn
UBS: $13.5bn
Morgan Stanley $9.4bn
HSBC: $3.4bn
Bear Stearns: $3.2bn
Deutsche Bank: $3.2bn
Bank of America: $3bn
Barclays: $2.6bn
Royal Bank of Scotland: $2.6bn
Freddie Mac: $2bn
JP Morgan Chase: $3.2bn
Credit Suisse: $1bn
Wachovia: $1.1bn
IKB: $2.6bn
Paribas: $197m
Source: Company reports

http://newsimg.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif

Timeline: Sub-prime crisis (http://news.bbc.co.uk/2/hi/business/7096845.stm)
Q&A: Bear Stearns crisis (http://news.bbc.co.uk/2/hi/business/7296827.stm)


Lehman Brothers shares plunged 20% on Monday, its biggest ever one-day fall.
Investors were panicked by the sale of rival investment bank Bear Stearns over the weekend.
It faced bankruptcy when clients lost confidence in the firm and started to withdraw funds.
Many consider the $240m (£120m) price tag paid by JP Morgan Chase to be a bargain.
The US Federal Reserve has been trying to restore confidence in the banking business.
Bank have been unwilling to lend to each other because they are worried about losses on investments backed by US mortgages.
Those investments have been hit by the slump in the US housing market.
To help restore confidence economists expect the Fed to cut the benchmark, Fed funds rate, by between 0.75% and 1%. "There is no reason for the Fed not to be aggressive," said Mark Zandi, chief economist at Moody's Economy.com. "The economy is in a recession, the financial system is in disarray and inflation is low." he added.

P.S - U R so right Sector, spot the mistake.

[tricha]

yes, I didnt think yould been sleeping much lately, they were much tougher in the ancient times - living in caves and all:D

relax Tony, take your meds man

I'm disappointed Sector u missed the mistake :D

[tricha]

you always make mistakes T

I can`t keep up and look after you ALL the time:D

I guess so Sector, I'll take a dose of Lithium and hit the sack.
Dam that feels better all ready :eek:

[STRAT]

I'll sleep like a baby knowing I'm partly cashed up after selling my beloved ADY, the market is in no mood for gambling stocks or potentially multi baggers, period, it is past tense.
I'm sticking to gold and oil producers with little debt and cash flow or impending cash flow and huge upside and a little cash to weather the storm.
If another US bank crashes, I shudder to think .........

Hi Tricha,
A few here have got stuck into you for selling up some and its amusing because at the end of the day each of us have different risk profiles and each has varied amounts of our net worth hanging out in the breeze. Personally I think you are being prudent and there are plenty who would agree. Personally I still think it comes down to evaluating each stock individually but I have a lot less at stake than many.

[bermuda]

sorry, but its not Lithium!

you ran out this morning

Sector,
If you are talking energy and GOLD, listen to what Tricha has to say....you may like to re-read this a few times.

[Laxmi]

I imagine that President Bush is praying a lot these days. (or he should be). High oil for the US is unlikely to come down if the US dollar keeps falling. Meanwhile the US dollar is not likely to improve unless the US economy proves that it is not in recession. (or America wins lotto and manages to get its spiralling debt under control by paying some of it back).

Meanwhile for the average American homeowner, he/she is feeling poorer. Everything costs more; especially food and energy. Wages are no longer keeping up with inflation, and worse; house prices are falling at a dramatic pace. Foreclosures are common and as a result some company shares are collapsing in price. This all adds up to the average American putting off spending at the moment while he takes stock of the situation. (especially the pensioners earning interest in the bank) This lack of spending is a major problem and risk for the US economy. Unfortunately it is also bad for the world economy, especially Japan, China, India and Europe. (not to mention Australasia)

Unfortunately this is all adding up to a classic self reinforcing economic loop of falling demand due to high prices, oversupply and subsequent falling prices. As prices fall due to oversupply, production is cut back and workers laid off at short notice. An atmosphere of doom and gloom starts to pervade through the air, replacing previous sentiments of optimism and trust. How low will prices go and for how long will prices stay depressed? More importantly; how many more panic liquidations are looming?

This all depends on the level of fallout from previous credit excesses. It would appear that just because you provide easy credit so as to fulfil a larger number of homeowner dreams; this does not mean necessarily that all credit will be repaid in full by those less creditable, regardless of any sign of faith to the contrary.

This is a lesson that is proving costly to us all. The consequences of credit excesses are staring us in the face. Will it be hyper inflation due to a printing press mania or a prolonged depression? You know my prediction. I think that I will hedge my bets.

[bermuda]

I dont have to listen to a nobody, Bermuda, you are a nobody too, I read this site, listen to lots of BS, and take what I can. Who are you both? nobodies really right.

Now and then I dont treat STer like a joke, but mostly I do

and you have to be dreaming that I am going to listen to someone that says Gerry Stolwyk has been right since 2001???? you what

No need to stick up for Tony now that you two have had a love in, I would rather play the devils advocate in your case, since you both are in love with the same things, it would be difficult for you to see outside your own bubbles

I can think for myself, thanks for your concern:D

Tony is far too schitzo for me, but amusing

Nice.

But please dont speak ill of the dead.

RIP Gerry.

[Packersoldkidney]

I'll sleep like a baby knowing I'm partly cashed up after selling my beloved ADY, the market is in no mood for gambling stocks or potentially multi baggers, period, it is past tense.
I'm sticking to gold and oil producers with little debt and cash flow or impending cash flow and huge upside and a little cash to weather the storm.


I am not bullish either on gold or oil. Investor sentiment on both is extremely high - close to a 100%. When that happens you know a peak is at hand - for who is there left to actually invest if most already have?

Gold in particular looks bearish to me - the classical view of oil is changing because of the supply- demand thing and history is now no guide with oil. I am surer of calling gold down than oil.

Would not surprise if the US $ found a bottom in the near future.

[stevo1]

oh Laxmi, I think its about time the US dropped a couple of countries off their GDP like the whole of Oz and NZ

Although the economies of countries like China and India are growing at an incredible rate, the US remains the nation with the highest GDP in the world – and by far: US GDP is projected to be $13,22 trillion (or $13.220 billion) in 2007, according to this source. That’s almost as much as the economies of the next four (Japan, Germany, China, UK) combined.

http://asecondhandconjecture.com/index.php/2008/01/18/other-countries-gdps-as-us-states/

Its seems a pity then that 70% of their GDP is made up in CONSUMPTION spending their way to increasing GDP.That woulnt look too good in a major RECESSION now will it

[tricha]

Sector,
If you are talking energy and GOLD, listen to what Tricha has to say....you may like to re-read this a few times.

I tried to edify him into reading a few good books Bermuda, he can not read, but hes one hell of a delinquent :)

[tricha]

I am not bullish either on gold or oil. Investor sentiment on both is extremely high - close to a 100%. When that happens you know a peak is at hand - for who is there left to actually invest if most already have?

Gold in particular looks bearish to me - the classical view of oil is changing because of the supply- demand thing and history is now no guide with oil. I am surer of calling gold down than oil.

Would not surprise if the US $ found a bottom in the near future.

Packersoldkidney - Where do you recommend we park our investments.?

I do not understand how the US can keep on lowering interest, would u loan them any money?
I am dam sure I wouldn't.

[Laxmi]

As it turns out; one day. A distinct pattern is appearing, The US FED announces a rescue package, the share markets stage remarkable multiyear one day recoveries and then the market falls again. This time the fall is around 300 points and it only took one day for the market to retreat.

The main culprit this time for the retreat is the dramatic fall in the price of gold.
http://www.forbes.com/feeds/ap/2008/03/19/ap4795558.html
"Gold futures had their worst day in nearly two years Wednesday, beaten down after a smaller-than-expected interest rate cut bolstered the dollar and diminished the metal's appeal as a hedge against inflation. Other commodities also traded lower, with crude oil, silver, copper and agriculture futures all falling sharply as part of a broad commodities sell-off. Gold for April delivery plunged $59 to settle at $945.30 Wednesday on the New York Mercantile Exchange. The 5.9 percent decline was the largest one-day loss since June 2006. Gold soared to an all-time high of $1,033.90 Monday, following the Fed-approved bailout of Bear Stearns by JPMorgan Chase & Co."

Today could turn out to be a very costly day for some. A sudden spike downwards in commodity prices is going to bring with it a degree of panic for future traders who were long. The real test will occur at some time in the future when margin call time appears again with monotonous regularity. If prices recover then all will be well. If prices remain at these levels or lower; then panic will turn into fear. A hoard of cold hard speculator cash could disappear as a wave of panic selling begins in earnest.

[Packersoldkidney]

I am not bullish either on gold or oil. Investor sentiment on both is extremely high - close to a 100%. When that happens you know a peak is at hand - for who is there left to actually invest if most already have?

Gold in particular looks bearish to me - the classical view of oil is changing because of the supply- demand thing and history is now no guide with oil. I am surer of calling gold down than oil.

Would not surprise if the US $ found a bottom in the near future.

"Gold prices slid in their biggest one-day drop in nearly two years and oil posted its worst slide in seven months, weighed down by persistent worries about the US economy's health."

link (http://business.smh.com.au/us-markets-retreat/20080320-20l5.html)

;)

[Packersoldkidney]

Packersoldkidney - Where do you recommend we park our investments.?

I do not understand how the US can keep on lowering interest, would u loan them any money?
I am dam sure I wouldn't.

I'm in cash. If I were trading and my technical abilities were on a par with Arco's I would be looking for opportunities to play the volatility in the market, the rallies and dips this early in a bear market are a trader's dream.

[lakedaemonian]

I am not bullish either on gold or oil. Investor sentiment on both is extremely high - close to a 100%. When that happens you know a peak is at hand - for who is there left to actually invest if most already have?

Gold in particular looks bearish to me - the classical view of oil is changing because of the supply- demand thing and history is now no guide with oil. I am surer of calling gold down than oil.

Would not surprise if the US $ found a bottom in the near future.

My short-to-medium term hunch is that both oil and gold will come off the boil a BIT with fears of a deep recession being front of mind.

I have no idea where gold/silver/oil will deflate a bit to.....but I suspect it will be a great opportunity to load up for the long-term.

I doubt any oil/gold/silver drop will be severe.......growing energy demands in Chindia, even in a recessionary environment will cushion any selloff, and the increasingly frenetic hunt to find a quality haven for dollars losing their purchasing power will see gold/silver continue to do well in my opinion.

Gold below $900 will be nice, below $850 would be nicer

Silver below $18 would be nice, below $17-ish would be nicer

Oil below $90 would be nice, below $80...back up the tanker truck

Inflation adjusted none of the three have exceeded past highs.

I find it hard to imagine the US digging itself out of the huge hole it's in by any means other than accelerating already far-under-reported inflation figures.

I think of oil/energy/food(and gold/silver to a much, much lesser extent although all interrelated) as the new global currency.

I'm betting on my own personal financial Maslow's heirarchy of needs:

food(ag commodities)
energy(oil/natural gas)
money to buy food and energy

Who can stick their hand up and put their cajones on the line and say with authority how the $500+ TRILLION derivatives debacle will unwind?

I certainly cannot...and while there is considerable risk in investing too much in commodities on the cusp of a potentially very severe recession I'd rather be sitting on a mix of commodities and cash(cash to take advantage in the growing buyers market).

Bear Sterns is just the beginning.....kind of like the iceburg that sank the Titanic....very little of the 'burg is visible.....very little of the derivatives debacle is in mainstream media, and no one really knows what danger lurks below the surface.

Just my 0.02 doom and gloom cents :)

[lakedaemonian]

One more thing to add.......

So many people are focused on the price of oil(and specifically the price of a litre of 91).

When people see charts of energy prices going parabolic when measured in US Dollars I cringe a bit.

I'd like the see mass media display a chart showing the price of oil measured in "stuff" like silver, gold, wheat, milk, copper, iron, etc.

I bet if you took a basket of commodities and used them as a pseudo currency you'd find the price of oil hasn't really moved considerably higher in the last 7 years......which tells us the problem is INFLATION.

Inflation in necessities has been masked by cheaper Chinese made rubber dog poop.

Again just my 0.02c

[Laxmi]

Against all odds, the US financial markets have recovered with a few exceptions. The Dow is up by 260 points, the dollar is up, and gold has plummeted again. In the space of a few short days, gold has fallen by well over $100 dollars to a new close around $910. This has signalled an end to the commodity bull run of several years with almost all commodities down significantly over recent days. Oil is down around 10% to now be hovering around $101.50. Even spot thermal coal has shifted lower.

With all this gloomy news on the horizon, it is surprising that the Dow and US dollar have held up so well, let alone made reasonable gains. The best explanation for this result, comes courtesy of John Authors of FT.com. A simple graph over several years from a fund manager’s survey shows that a lot of fund managers have more cash available than is average. (in fact the graph indicates multi year highs) This would go some way to explain recent market behaviour. Now that the FED has come out and made emergency funding available to a far wider audience, fund managers are hedging that the worst is over. They are now searching out and buying up any shares that they feel, holds excellent potential and may have been oversold over previous months and days.

Hence the recent dramatic rise in some individual shares; and the subsequent uplift for the overall market sentiment. However John’s latest report suggests that the rush into agricultural commodities has ended with a crash. Investors remaining in this sector of speculation are now up 5% for the year compared to 25% a few short days ago. With so much speculation going on in the market and a resounding return to fundamentals by more and more mainstream investors, it is impossible to predict any goings on in the market apart from a likely increase in volatility with a decidedly downward trend over time.

To make long term investors even more nervous, it is rumoured that the latest tool in the US FED’s impressive armoury to fight off a recession; is titled ‘ATM for 401K' The reason for this tool is to help out workers who may have recently lost their jobs and may be in need of extra liquidity to starve of the likely fees associated with making new arrangements on pension fund payments. Generally considered a most stupid idea by respected analysts of CNBC, the reason given by a proponent was; ‘where else are these people going to find upwards of 6k?’ It should also be remembered that this will only act as a loan and will be subject to most loan conditions. The loan will need to be repaid back into the person's 401K account at some time in the future.

I personally think that although the idea is feasible in theory, in practice it puts at risk people’s retirement savings. For that reason alone, it would have to be discounted; unless of course there was a real emergency and there was no other choice.

[tricha]

Super Loses $84 Billion
London, England - Melbourne, Australia
Thursday, March 20 2008
In This Issue:Super loses $84 billion...

Gold at $2,138...

Financial horror stories...

----------------------------------
From Dan Denning at the Old Hat Factory:

--Boy did we hear it from readers yesterday. Below, you'll find some clarification on our remark about who really bombed Pearl Harbor in 1941. But first, let's cover the markets before we jump on a plane to Sydney for the weekend.

--"Fed gamble may pay off this time," reports a headline in the Australian. "Fed plants seed of hope," says the Age. "Share prices boosted by Fed action," reads the Sydney Daily Telegraph.

--Sure enough, the ASX/200 was up 200 points yesterday, or about 4%. In dollar terms, local shares recouped about $43 billion in lost value. Keep in mind it's down about $400 billion since November first. But you have to start somewhere, don't you?

--One good place to start is to re-examine the fundamental assumption that stocks always go up. Obviously they don't. Whole generations of investors (and by that we mean the 15 to17 years at a time) go without seeing any real progress in the share market. If you're investing during one of those cycles, shares don't help you get any closer to your financial goals.

--Take a look at the charts below and you'll see what we mean. The first shows the Dow Jones Industrials based on a monthly closing average. You can see that until the Federal Reserve came into existence in 1913 and World War one kicked off a few years later, shares were and up and down affair-a mechanism for funnelling capital to America's ambitious corporations, but not really a way for the average punter to get rick. J. Pierpont Morgan probably did pretty well. The man in the street, not so much.

http://www.dailyreckoning.com.au/images/20080320d1.jpg

--Then there is the matter of the crash in 1929. When you put it on a long-term chart, it all looks pretty sudden. But when you lengthen it out over just a few years, you can see that after the first plunge in October of 1929, the market didn't go straight to the bottom. It fought. The chart shows this.

http://www.dailyreckoning.com.au/images/20080320d2.jpg

--You can see that the Dow didn't make its all-time bear market low of 41 until 1932. Remember, the market had topped at 381 in 1929. It took over three years to reach the bottom, some 89% off the highs.

--What happened those three years? Economic reality fought bitterly with investor psychology. Trained to buy the dips, and perhaps driven by the optimism and will to survive that's buried in human DNA, investors never quit and never quit losing money.

--Something deeply psychological happens during a bull market. The bull market that peaked in 1929 somehow made it impossible for investors to believe you could go whole years-decades even-and lose money in stocks. It clashed with their direct experience. And if your past experience is no reliable guide for the future, what are you to believe?

--In any event, we are not at all convinced that a rate cut here, a smashing of the discount window there, or a new lending facility here AND there will forestall economic reality. We know Ben Bernanke is a student of the Great Depression. Surely he knows bad debts have to be liquidated before an economy can move on. But it doesn't mean he won't keep trying to re-inflate. And some investors-as yesterday shows-are willing to follow his lead.

--The Japanese are increasingly unconvinced that Bernanke can turn things around. They are selling the dollar and buying back the Yen. "For financial firms and the U.S. economy, the worst is not over,'" said Tetshisa Hayashi, a currency strategist of foreign-exchange trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. He told Bloomberg that, "`Japanese investors think now is a good opportunity to sell the dollar, taking advantage of its big rally yesterday"

--How will you know when the greenback is well and truly doomed? Keep an eye on the TIC data. TIC stands for Treasury International Capital report. It's a report published by the U.S. Department of the Treasury showing net foreign purchases of U.S. stocks and bonds.

--Despite the nominal rise in U.S. stock prices, the falling U.S. dollar acts as a huge dis-incentive to buy dollar-denominated financial assets. Last month's TIC data showed no big changes in the overseas consumption of U.S. bonds. But watch out for next month. You could also just keep an eye on bond prices and short-term yields in the U.S. Yesterday, short-term bond prices fell. We expect to see a lot more of that.

--A falling dollar should also contribute more strength to commodities. But yesterday gold and oil fell quite a bit. What gives?

-- The dollar had a rare moment of inspiration. It was delusional inspiration, though...it won't last. Besides, commodities have other reasons to go up than dollar weakness. Our French technical and currency guru, Gabriel Andre, explains:

--"Commodities are negatively correlated with the US dollar, and in the short-term the US dollar is oversold. Many traders feel the Fed has played its hand fully, and see this as a reason to buy back into the dollar…in the short term, that is.

-- "But with cheaper commodities, there are likely to be bargain-hunting investors looking for a good entry point into the market. Further down the track, strong demand from Asia for real goods is likely to continue. Tangible assets still have the wood over financial assets…so cheaper commodities will generate more buyers, particularly in gold.

--"A fall in gold gives it buying strength, technically…and it will enjoy fundamental demand from those wishing to hedge against an inflation and the long-term dollar weakness."

--Gabriel has more to say on the topic of gold and commodities in the latest edition of Diggers and Drillers (http://www.portphillippublishing.com.au/research/osi/inflation.cfm?source=e9aoj204&alias=ar149). He even points out exactly where gold should be a buying opportunity.

[stevo1]

Believe if you will commodities bull run is over personally I cant see it.There was a large amount of speculation in commodities by hedge funds and financial institutions(whose prior financial shenanigins have just been underwritten by the Fed and the US taxpayer).One wonders what the conditions of the underwriting are and Bush's Crisis Committee's requirements on Investment community and banks.The US will attempt to maintain the US $ as the commodity exchange currency at all costs for without that the US influence over the rest of the world is undermined.Storeage of wealth in commodities is not in the US interest. Iran's insistance away from $US settlement for oil has practically assured " liberalisation" of Iran by the US so the people there may enjoy the same great democratic joys their Iraqi neighbours have endured and continue to have.Sadam also was about to decouple oil from US $ before all those nasty weapons of mass misinformation were discovered.The point here is commodities have been artifically driven down for the moment.The demand for the "real stuff"(physical product) is still there the artificial stuff(futures etc) has been changed.Now will the rest of the world buy this sudden revival to shore up US stockmarket and dollar?

[tricha]

http://www.youtube.com/watch?v=gUkbdjetlY8&NR=1

http://www.youtube.com/watch?v=4sZCNlPwG8o&feature=related

[FarmerGeorge]

Cramer's vid has been doing the rounds over here the past few days. The original question was indeed about whether an investor should be concerned about the liquidity of their investments at Bear, rather than their ownership of Bear stock. Those with investments in the Bear funds should still be fine, as Cramer says.
He's not someone to listen to for investment advice, his show is a joke, and he tends to just be a follower of the crowd rather than give any actual insight into markets, but this time I think he may actually only be guilty of being unclear, rather than being stupid. But on a show like this, given the people who would make a decision based on his advice, I can understand why he's being chased by a lynch mob. I wouldn't take that job no matter what the salary is!

[winner69]

Whatever they say about his tips being worthless Cramer worth a fair bit himself

[tricha]

What History Tells Us About Recessions

Deloitte might be an accountancy firm, but it is happy to weigh in with some interesting historical statistics surrounding past US recessions and what usually happens next.
Consider first that since the beginning of 2008, the S&P 500 index (large cap stocks) is down 11%, the Russell 2000 index (small cap stocks) is down 12.5%, the MSCI Europe, Australasia and Far East index has fallen 9%, and the MSCI Emerging Markets index has fallen 13%. These are significant falls.
Consider now that the cumulative returns for the period 2003-07 have been 83% for the S&P 500, 112% for the Russell 2000, 166% for the MSCI EAFE, and 383% for the MSCI EMI.
If one assumes a recession actually began in the US in December, it is useful to look at how the recessions of the past 50 years played out. If this recession were to play to the average, it would last until October. The S&P 500 would ultimately fall 24.38% before turning around. Within one year it would have rallied 31.44% Within two years it would have rallied 56%. The turnaround in the index would occur somewhere between 4-10 months before the bottom of the business cycle which, in this case, means any time between now and July.
The S&P had fallen 20.2% from its 2007 high to its recent low. If that proves to be the extent of the correction, the index will have to rally 25.5% to retest the high. However, the longest recession in the last 50 years, following the Arab oil embargo of 1973, lasted 16 months and caused the S&P to fall 46%. But it still performed relatively well on the way out, as the following table suggests:





Deloitte is also happy to point out several factors in place today which should help to keep any recession shallower than most. Firstly, balance sheets of non-financial companies were strong going in. Secondly, there was not a lot of hiring on the way up, meaning there should thus be little firing on the way down. Thirdly, inventory levels have been low on the way up. Typically recessions impound when companies have overextended their balance sheets, over-hired staff and built up inventories.
But perhaps most importantly, growth in much of the rest of the world is still strong, which also provides a market for US exports.
Given this current crisis is in the banking sector, Deloitte recommends looking at two specific factors as signals for a bottom. Firstly, a feature of the crisis has been the freezing of the asset-backed commercial paper market, which had shrunk for 18 weeks in a row from August. It has recently shown signs of stabilising, and any growth can be taken as a sign of turnaround. The second is the Fed's Term Auction facility - the means by which commercial banks access funds. The Fed has been furiously pumping liquidity into the system via this facility, and has since extended it temporarily by other means to investment banks. When this facility is no longer being utilised, it could be all over.
As to when that might happen is as yet unknown.
But Deloitte does advise that investors with a time horizon greater than one year would be foolish at this point to be unwinding stock positions and hiding in cash. As most recession bear markets have recovered within the space of one year, longer term investors are at risk of missing the early returns. To quote Baron von Rothschild, "The time to buy is when there is blood in the streets, even if it's your own".
The accountants also remind, however, of what it always says in the fine print:
"Past performance is no guarantee of future results".

[Laxmi]

UBS announces another major right down associated with subprime and the markets react positively. 19 billion dollars seems like a large sum to me, however the news was greeted favorably. Seemingly the worst is over. Indeed; Lehman Bros, of Bear Stearns fame; has just announced a capital infusion of 4 billion dollars from private investors.

What is going on? I struggle to see who would be brave enough to invest in such a risky Wall Street bank associated with subprime, so soon after the crisis. This latest rally can be seen as no more than speculation alone. No other investors would dare suggest that the financial crisis is over so soon. Therefore it can be best seen as yet another chance for risk adverse equity holders; to sell. Sell now while there are still opportunist buyers. This may well be your last chance before the inevitable downturn begins. The downturn is now inevitable for many reasons. One is that the market is no longer reacting sensibly. I mean a gain on the Dow maybe on the UBS news, but nearly 400 points on such distressing numbers. This sounds like desperation. Who knows, perhaps wishful thinking and denial of the severity of the crisis will suffice to usher in a new bull market.

I fear the rally will be short lived. The world is in a crisis. Many leaders credibility’s are on the line. Is climate change really that much of a concern that we would risk adding significant financial strain to an economy already under severe risk of recession? I fear that when the point is made as dramatic as this;
Many will hedge against practicalities. For example, Australasia will need to start imposing some taxes soon to pay for some of the carbon credits that it will need to buy in the not too distant future.

In reality, there is no advantage in Australasia rushing ahead on this issue since the size of Australasia makes any of our efforts negligible compared to the world stage in any case. Therefore it could easily be argued, that Australasia would be better off putting off any major changes in this direction. Australasia might feel inclined to renege on its international obligations for a while and play a wait and see approach. Let America and China lead by example first. In other words; Australasia steps aside while this entire carbon trading scheme is being set up. In the meantime, the Australasian governments will invest in clean technologies and encourage energy conservation. Renewable energy sources will be favored. Investments will be made in researching and developing methods of sequestering CO2, especially in regards to burning vast amounts of coal.

In other words; nothing will essentially change, but at least Australasia does not suffer from burdensome taxes. In this regard, Australasia becomes much like China and America, vast parts of Africa and South America, Russia, India, etc etc.

Meanwhile, the climate change clock ticks away, but as nothing is done to reduce greenhouse gases, these gases increasingly start to accumulate to levels unseen in many a millennium.

Sorry that I changed the subject to climate change. Please ignore the last section.

[mark100]

The world is in a crisis.

Is the world really in a crisis or is it just the financial world at present? The world will be in a crisis when we run low on energy and then climate change will probably be forgotten

[Laxmi]

Yep you are right. If world growth continues at recent historic rates; energy is going to be a big concern, especially electricity when oil becomes too expensive. Unlike oil, electricity is already unable to meet demand, especially in some countries such as South Africa and vast parts of Asia. The only thing that could save us from this concern in the short term, is if growth stalls.

But the big problem at the moment is the financial crisis. Yet another finance company has collapsed in New Zealand. The reason is straightforward. A shortage of funds to pay term investments falling due due to a lack of incoming investors and too many 'bad' loans. Alas, this is one of the many flow on effects of the subprime crisis in the US. In a global economy, the contagion quickly spreads.

Most investment guru's at the moment are cautious about where to best invest you money in the equity market, however there does appear to be one reocurring theme:
Companies with good balance sheets and low levels of debt seem to be favoured.

[Hoop]

An curiosity value article (http://killeenroos.com/1/Romefall.htm) from someones viewpoint...is history repeating itself ?? and do we actually learn anything from history?? ....From this persons viewpoint it seems maybe not.

Reasons for the fall of the Roman Empire. All left Rome open to outside invaders

adapted from History Alive material

There were many reasons for the fall of the Roman Empire. Each one intertwined with the next. Many even blame the introduction of Christianity for the decline. Christianity made many Roman citizens into pacifists, making it more difficult to defend against the barbarian attackers. Also money used to build churches could have been used to maintain the empire. Although some argue that Christianity may have provided some morals and values for a declining civilization and therefore may have actually prolonged the imperial era.
Decline in Morals and Values
Those morals and values that kept together the Roman legions and thus the empire could not be maintained towards the end of the empire. Crimes of violence made the streets of the larger cities unsafe. Even during PaxRomana there were 32,000 prostitutes in Rome. Emperors like Nero and Caligula became infamous for wasting money on lavish parties where guests ate and drank until they became ill. The most popular amusement was watching the gladiatorial combats in the Colosseum. These were attended by the poor, the rich, and frequently the emperor himself. As gladiators fought, vicious cries and curses were heard from the audience. One contest after another was staged in the course of a single day. Should the ground become too soaked with blood, it was covered over with a fresh layer of sand and the performance went on.
Public Health
There were many public health and environmental problems. Many of the wealthy had water brought to their homes through lead pipes. Previously the aqueducts had even purified the water but at the end lead pipes were thought to be preferable. The wealthy death rate was very high. The continuous interaction of people at the Colosseum, the blood and death probable spread disease. Those who lived on the streets in continuous contact allowed for an uninterrupted strain of disease much like the homeless in the poorer run shelters of today. Alcohol use increased as well adding to the incompetency of the general public.
Political Corruption
One of the most difficult problems was choosing a new emperor. Unlike Greece where transition may not have been smooth but was at least consistent, the Romans never created an effective system to determine how new emperors would be selected. The choice was always open to debate between the old emperor, the Senate, the Praetorian Guard (the emperor's's private army), and the army. Gradually, the Praetorian Guard gained complete authority to choose the new emperor, who rewarded the guard who then became more influential, perpetuating the cycle. Then in 186 A. D. the army strangled the new emperor, the practice began of selling the throne to the highest bidder. During the next 100 years, Rome had 37 different emperors - 25 of whom were removed from office by assassination. This contributed to the overall weaknesses of the empire.
Unemployment
During the latter years of the empire farming was done on large estates called latifundia that were owned by wealthy men who used slave labor. A farmer who had to pay workmen could not produce goods as cheaply. Many farmers could not compete with these low prices and lost or sold their farms. This not only undermined the citizen farmer who passed his values to his family, but also filled the cities with unemployed people. At one time, the emperor was importing grain to feed more than 100,000 people in Rome alone. These people were not only a burden but also had little to do but cause trouble and contribute to an ever increasing crime rate.
Inflation
The roman economy suffered from inflation (an increase in prices) beginning after the reign of Marcus Aurelius. Once the Romans stopped conquering new lands, the flow of gold into the Roman economy decreased. Yet much gold was being spent by the Romans to pay for luxury items. This meant that there was less gold to use in coins. As the amount of gold used in coins decreased, the coins became less valuable. To make up for this loss in value, merchants raised the prices on the goods they sold. Many people stopped using coins and began to barter to get what they needed. Eventually, salaries had to be paid in food and clothing, and taxes were collected in fruits and vegetables.
Urban decay
Wealthy Romans lived in a domus, or house, with marble walls, floors with intricate colored tiles, and windows made of small panes of glass. Most Romans, however, were not rich, They lived in small smelly rooms in apartment houses with six or more stories called islands. Each island covered an entire block. At one time there were 44,000 apartment houses within the city walls of Rome. First-floor apartments were not occupied by the poor since these living quarters rented for about $00 a year. The more shaky wooden stairs a family had to climb, the cheaper the rent became. The upper apartments that the poor rented for $40 a year were hot, dirty, crowed, and dangerous. Anyone who could not pay the rent was forced to move out and live on the crime-infested streets. Because of this cities began to decay.
Inferior Technology
During the last 400 years of the empire, the scientific achievements of the Romans were limited almost entirely to engineering and the organization of public services. They built marvelous roads, bridges, and aqueducts. They established the first system of medicine for the benefit of the poor. But since the Romans relied so much on human and animal labor, they failed to invent many new machines or find new technology to produce goods more efficiently. They could not provide enough goods for their growing population. They were no longer conquering other civilizations and adapting their technology, they were actually losing territory they could not longer maintain with their legions.
Military Spending
Maintaining an army to defend the border of the Empire from barbarian attacks was a constant drain on the government. Military spending left few resources for other vital activities, such as providing public housing and maintaining quality roads and aqueducts. Frustrated Romans lost their desire to defend the Empire. The empire had to begin hiring soldiers recruited from the unemployed city mobs or worse from foreign counties. Such an army was not only unreliable, but very expensive. The emperors were forced to raise taxes frequently which in turn led again to increased inflation.
THE FINAL BLOWS
For years, the well-disciplined Roman army held the barbarians of Germany back. Then in the third century A. D. the Roman soldiers were pulled back from the Rhine-Danube frontier to fight civil war in Italy. This left the Roman border open to attack. Gradually Germanic hunters and herders from the north began to overtake Roman lands in Greece and Gaul (later France). Then in 476 A. D. the Germanic general Odacer or Odovacar overthrew the last of the Roman Emperors, Augustulus Romulus. From then on the western part of the Empire was ruled by Germanic chieftain. Roads and bridges were left in disrepair and fields left untilled. Pirates and bandits made travel unsafe. Cities could not be maintained without goods from the farms, trade and business began to disappear. And Rome was no more in the West.

???? Fall of the United States ????

[tricha]

An curiosity value article (http://killeenroos.com/1/Romefall.htm) from someones viewpoint...is history repeating itself ?? and do we actually learn anything from history?? ....From this persons viewpoint it seems maybe not.

Reasons for the fall of the Roman Empire. All left Rome open to outside invaders

adapted from History Alive material


???? Fall of the United States ????



Distortions, Deceptions and Outright Lies
by Martin D. Weiss, Ph.D. (http://www.gliq.com/cgi-bin/click?weiss_mam+90001-3+MAM900)
http://images.moneyandmarkets.com/900/martin-weiss.jpgBeware.
The greatest threat to your financial future is not the danger you see or the beast you know. It stems from all those realities that you don't see or don't know.
This great uncertainty is not your fault. Quite the contrary, I lay the blame squarely on ...
1. Washington's distortions of its most vital economic data ...
2. Wall Street's deceptive evaluations of most of your investments, and ...
3. The outright lies that officials of both Washington and Wall Street tell you on a daily basis to cover their tracks or protect their turf.
Take Friday's news, for example.
If you thought that the surge in the U.S. unemployment rate to 5.1% was a shock, consider John Williams' Shadow Government Statistics (http://www.gliq.com/cgi-bin/click?weiss_mam+90001-11+MAM900).
First, Williams points out that the total job loss the government reported on Friday wasn't just 80,000. It was 147,000. Reason: The previous two months of job losses had been greatly understated, forcing the government to revise them by a combined 67,000.
Second, he argues that these huge revisions are no accident. They are the consequence of the government's continuing misuse of seasonal adjustments.
"If the process were honest," he writes in his Flash Update issued to paid subscribers on Friday, "the differences would go in both directions. Instead, the differences almost always suggest that the seasonal factors are being used to overstate the current month's relative payroll level, as seen last month and the month before."
Third, his analysis shows that the job numbers have a built-in bias based on a model that makes assumptions about birth and death rates. Without those distortions, he calculates there would have been additional job losses of 135,000 in February and 142,000 in March.
Fourth and most important, as you probably know, the government excludes "discouraged workers" from its count of the unemployed; and the definition of "discouraged" is highly questionable — anyone who has not looked for a job in just the past four weeks!
His conclusion: The true unemployment rate in America is not 5.1%. It's 13%, or over two and a half times worse than officially reported.
The government's distortions of other critical data are no less egregious, says Williams.
http://images.moneyandmarkets.com/900/annual-consumer-inflation.gifInflation: The government reports that the Consumer Price Index (CPI) is essentially the same as it was two decades ago: It was approximately 4% in 1987, and it's near 4% right now.
But without the cumulative affect of a series of questionable adjustments (http://www.gliq.com/cgi-bin/click?weiss_mam+90001-12+MAM900) made in recent decades, Williams calculates that the CPI has actually risen to almost 12%, or about three times higher than the official figures.
Economic growth: The government reports that, except for a brief interlude in the early 2000s, the U.S. economy has escaped recession throughout this decade, growing by 2% to 4% each year.
But Williams shows how, without the government's distortions of the GDP data (http://www.gliq.com/cgi-bin/click?weiss_mam+90001-13+MAM900), the opposite would be true: Except for brief interludes of mediocre growth in 2000 and 2004, the economy has been stuck in a recession throughout the entire decade.


These are vital stats that could make or break your financial future. To the degree that the shadow government stats are closer to the truth than the official versions, it means that ...
The value of your bonds is overstated because of a national complacency regarding consumer price inflation ...


The value of your stocks is overstated because of false optimism regarding the nation's employment and economic growth. And perhaps most dangerous of all ...


Trillions of dollars in derivatives — predicated on the true value of assets like stocks and bonds — could be even shakier than often feared.This alone should be more than enough to send thousands of officials into the confessional and give millions of investors sleepless nights. But the unfortunate reality is that ...
On Top of Washington's Data Distortions,
Wall Street Adds an Equally Dangerous
Layer of Investor Deceptions
First, most of the derivatives owned by commercial banks, investment banks and so-called "non-bank banks" are kept off their balance sheets. This means that ...

The actual value and stability of the nation's largest and most important institutions are largely unknown — and probably greatly overstated.
Second, with only the rarest of exceptions, the hundreds of thousands of bond ratings issued by Fitch, Moody's, and Standard and Poor's are uniformly bought and paid for by the very same companies that are being rated. As I've written here many times, the result is that ...

There is a built-in bias in the entire system, causing inflated ratings, delayed downgrades and the continuing deception of millions of investors.
Third, brokers and brokerage firms, despite a clear self-interest to keep their clients in the stock market, are routinely allowed to play the role of "objective" advisers and managers. The result is that ...

Investors are almost universally encouraged to buy when they should be holding and to hold when they should be selling. Despite a plethora of guidelines, rules and laws created to encourage fairness, the very structure of the system continually promotes unfairness.
Lies, Lies, Lies


In this environment, the unrelenting pressure — even the mandate — to transform well-meaning public officials into chronic liars is undeniable, and the examples are many:
High-ranking government officials in the 1970s who swore the S&Ls were safe, even as thousands of thrifts were failing all around them.


FDIC and Federal Reserve officials in the 1980s who vehemently denied the threat to commercial banks, even as the bank failure rate surged to the highest since the Great Depression.


State insurance regulators in the 1990s who swore to the safety of annuities and life insurance policies, even as six million policyholders were being trapped in failed companies.


Major Wall Street firms of the early 2000s that consistently affirmed "hold" and "buy" ratings for the shares of hundreds of companies that were going bankrupt. (For our detailed study documenting these extreme deceptions, see our white paper, Crisis of Confidence on Wall Street (http://www.gliq.com/cgi-bin/click?weiss_mam+90001-9+MAM900).)


Auditing firms like Arthur Andersen, KPMG, and Deloitte and Touche that facilitated or even encouraged accounting distortions and cover-ups. (For the details, see our white paper submitted to the U.S. Senate (http://www.gliq.com/cgi-bin/click?weiss_mam+90001-8+MAM900).)Today, the names and places may have changed. But the systemic deceptions have not.
This leaves you just two choices: Believe them and risk almost everything. Or strike out on an independent path to safety, protection and the potential for very substantial profits.
Good luck and God bless!
Martin

[Steve]

There have been some reports that while the US economy is still slowing, the worst of the bad news has been factored in. Any thoughts on this?

[tricha]

There have been some reports that while the US economy is still slowing, the worst of the bad news has been factored in. Any thoughts on this?


Page last updated at 17:04 GMT, Wednesday, 9 April 2008 18:04 UK
http://newsimg.bbc.co.uk/nol/shared/img/v3/email.gif E-mail this to a friend (http://newsvote.bbc.co.uk/mpapps/pagetools/email/news.bbc.co.uk/2/hi/business/7338326.stm)http://newsimg.bbc.co.uk/nol/shared/img/v3/print.gif Printable version (http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/7338326.stm)
IMF slashes world growth forecast


http://newsimg.bbc.co.uk/media/images/44553000/jpg/_44553351_usmanufacturing226body_ap.jpg Analysts forecast the US will briefly go into recession


Steve the International Monetary Fund (IMF) has said that the world economy will grow much more slowly in the next two years as a result of the credit crunch.
In its latest economic forecast, the IMF says that world economic growth will slow to 3.7% in 2008 and 2009, 1.25% lower than growth in 2007.
The downturn will be led by the US, which the IMF believes will go into a "mild recession" this year.
Growth in the UK will slow sharply to 1.6% in both 2008 and 2009.
It said that the UK economy would be affected by a weakening housing market, the contraction of the financial sector, and the impact on UK exports of weaker growth in the US and Europe.
Its UK forecast is substantially below the Treasury forecast of around 2% growth this year and 2.5% next year made at the time of the March Budget.
'Worst since Great Depression'
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif The greatest risk comes from the still-unfolding events in financial markets (which might lead to) the current credit squeeze mutating into a full-blown credit crunch http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


IMF World Economic Forecast

http://newsimg.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif

How deep will the pain go? (http://news.bbc.co.uk/2/hi/business/7338630.stm)
Darling still optimistic (http://news.bbc.co.uk/2/hi/business/7338056.stm)
Send us your comments (http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=4601&edition=2)


The IMF admits that the global downturn might be still more severe than it is currently predicting, and says that there is a one in four chance of a "global recession" when world growth falls below 3%.
"The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression," the report says.
The world downturn will be led by problems in the US housing market, but the IMF warns that excessive house price inflation in some European countries, including Spain, Ireland and the UK, has made them more vulnerable to a slowdown.
House prices have already fallen by around 10% in the US by some measures, and the IMF says that they may be over-valued by more than 20% in the UK, Ireland and Spain.
It is forecasting further falls in US house prices of 14% to 20% this year.
The head of the International Labour Organisation (ILO) said that crisis required measures to protect workers from the downturn.
"We need to find a better balance between the democratic voice of society, the productive dynamic of the market and the regulatory function of the state", ILO Director-General Juan Somavia said in a statement to the IMF meeting.
US recession
The IMF forecasts that the US economy will grow by just 0.5% during 2008 and will actually contract in the first half of the year.
http://newsimg.bbc.co.uk/shared/img/o.gifWORLD ECONOMIC OUTLOOK
Report in full [5.8MB] (http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/09_04_08_imf_full.pdf)
Executive summary [200KB] (http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/09_04_08_imf_exec_sum.pdf)
Chapter 1: global prospects and policies [1.8MB] (http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/09_04_08_imf_chapter_1.pdf)
Chapter 2: country and regional perspectives [800 KB] (http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/09_04_08_imf_chapter_2.pdf)

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Its recovery will be slow, with growth of only 0.6% forecast in 2009.
"The US economy will tip into a mild recession in 2008 as a result of mutually reinforcing housing and financial market cycles, with only a gradual recovery in 2009, reflecting the time needed to resolve underlying balance sheet strains," the report notes.
It says that, comparing the US economy year-on-year from the four quarter of 2007 to the fourth quarter of 2008. it will be 0.7% smaller, as the recession bites in the first half of this year.
And it warns that with the scale of the credit losses to the financial sector approaching $1 trillion (£500bn), there is a risk that the crisis could get worse.
http://newsimg.bbc.co.uk/media/images/44553000/jpg/_44553264_usindustry226body_ap.jpg Few countries will escape the impact of the global slowdown


"The greatest risk comes from the still-unfolding events in financial markets," it says, warning that the current credit squeeze could "mutate into a full-blown credit crunch".
The IMF says that losses are spreading from sub-prime mortgage assets to other sectors, such as commercial property, consumer credit, and company debt.
The IMF also says that given the potential severity of the problems, "additional initiatives to support the US housing market, including the use of the public balance sheet, could help reduce uncertainties about the evolution of the US financial system" although it warned that "care would be needed to avoid undue moral hazard".
The US Congress and the Bush administration are currently deadlocked over plans for further aid to the housing sector, with Democrats in both branches of Congress proposing an expansion of financial support for home owners facing foreclosure.
European impact
The biggest impact of the US slowdown is likely to felt in Europe, which is the biggest trading partner with the US.
"Activity in the other advanced economies will be sluggish in both 2008 and 2009 in the face of trade and financial spillovers," the IMF says.
It is predicting growth in the eurozone of just 1.4% in 2008 and 1.2% in 2009, with Europe's largest economy, Germany, growing by just 1% in 2009, a sharp revision of its forecast just three months ago.
http://newsimg.bbc.co.uk/shared/img/o.gif2008 GROWTH FORECASTS
United States: 0.5%
Eurozone: 1.4%
United Kingdom: 1.6%
Source: IMF


And it says that in light of the slowdown, the European Central Bank - which has kept interest rates unchanged due to concern about inflation - "can afford some easing of its policy stance".
And it suggests that in future, central banks should take more account of rising house prices when setting interest rates, in effect "leaning against the wind" to prevent house prices moving out of "normal valuation ranges".
This is an implicit criticism of the US Federal Reserve which kept interest rates at 1% for several years under former chairman Alan Greenspan.
Worldwide impact
The IMF says that the big emerging market countries like China and India which are growing rapidly will be less affected by the slowdown, although they will be affected by a slowdown in trade among the rich countries. The rate of growth of imports into rich countries is expected to slow sharply, leading to a cut in the rate of growth of exports by developing countries. And it warns that the spillover will more severe in Latin America or in countries linked to the dollar, which has declined sharply on world currency markets.

[tricha]

There have been some reports that while the US economy is still slowing, the worst of the bad news has been factored in. Any thoughts on this?


US consumer mood at 26-year low


http://newsimg.bbc.co.uk/media/images/44560000/jpg/_44560471_44560294.jpg US consumers appear fearful about the economy


US consumer sentiment is now at its lowest level in 26 years, a closely-watched survey has found.
With sentiment knocked by recession fears, the University of Michigan's index of confidence fell to 63.2 for April from 69.5 in March.
This month's figure is the lowest since March 1982, when the US economy was deep in an economic downturn.
It is just the latest study to show that US consumer confidence has fallen sharply in recent months.
'Recession territory'
"There have only been a dozen other surveys that have recorded a lower level of consumer sentiment in the more than 50-year history of the survey," said the University of Michigan.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif It confirms what we already know, that we are in consumer-led recession, and it's going to be a pretty protracted one http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Carl Lantz, Credit Suisse


It found that respondents were concerned about "persistently high food and fuel prices, as well as rising unemployment".
The figure for April was much worse than analysts' expectations.
"We are definitely in recession territory," said Carl Lantz of Credit Suisse.
"It confirms what we already know, that we are in consumer-led recession, and it's going to be a pretty protracted one."
Bad debt
The increasing indications of possible recession in the US first started last summer when the revelation of billions of dollars of bad debt in the US housing market sparked the current credit crunch.
With banks much less willing to lend to each other, businesses and consumers, the credit squeeze has spread to the wider economy.
With consumer sentiment hit further by high food and fuel prices, it is starting to hit retail spending, which is the main bedrock of the US economy. US Treasury Secretary Henry Paulson admitted earlier this week that the US economy has "turned down sharply". To try to alleviate the situation, the Federal Reserve, the US central bank, has now cut interest rates six times since mid-September

[Steve]

All these facts are lagging, meaning that they should already be factored in. The recovery will be slow, but what I was asking was whether there would be any further shocks not yet factored in...

[ELYOB]

Will the outlying aboriginal communities [Australia] rise up and invade our cities in large numbers destroying out civilized culture if we are unable to pay social security , services like free education; free housing ;so on ....

Three years ago , I moved permanently to the Philippines , building my own empire from scratch ..... 80% cashed up ; invested in 2 oiler producer/explorers ....

You gotter have a plan ....I learnt this in a previous life on the Tiber . It worked then , and it may work again . The next life one may have to go into orbit abit!

[tricha]

this morning with all comentators wrong on GE ELECTRIC earnings DOWN;)

The Bull Market of a Lifetime
The Daily Reckoning Australia

Buenos Aires - Melbourne
Monday, 14 April 2008


----------------------------------
From Dan Denning at the Old Hat Factory:

--There's nothing like starting your week with a kick to the guts. The Aussie market was doomed before trading began today with Friday's shock result by GE in New York. But it's the collapse of yet another Australian broker, Lift Capital and its 1,600 clients, which threatens to swamp the Aussie market this week.

--But wait, it's not just Lift. "The list of stock brokers that have been engulfed by the tumbling stock market may be expanded to a fourth victim with concerns growing about Melbourne stock lender Chimaera Capital," reports today's Herald Sun. We are finally learning just how many people bought their way into the boom with borrowed money.

--Valuations are out the door for now. If small brokers that offered their clients leverage keep collapsing and liquidating their portfolios, you'd have to be a daredevil or playing with someone else's money to be a buyer.

--It's not that there's no value in the market. It's that there are so many sellers. The trouble is you just don't know how much more forced selling there's going to be. With so much stock being dumped on the market, it pays to be very discrete.

--A quick word about GE before we move on. GE is a world-class jet engine maker. It's also a shameless money-lender.

--GE's commercial finance business in Australia has a much higher profile than its business in the States, which goes under a different name altogether But the company's dirty little secret is getting out: it's really a financial company masquerading as an industrial.

--The company generated huge earnings during the credit boom as a commercial lender, not an industrial manufacturer. GE reported a double digit decline in first quarter earnings, and promptly blamed the whole thing on Bear Stearns. But if GE's CEO Jeffrey Immelt were being candid with investors, he would admit that the problem isn't with Bear Stearns, but in the performance of GE's financial segments. Don't take out word for it. Look below.

GE Summary of Operating Segments (unaudited)

http://www.dailyreckoning.com.au/images/20080412DRA.png Source: Edgar Online

--You can see that GE's two big financial segments, Commercial Finance and GE Money, showed a twenty per cent and a nineteen per cent decline in profit in the first quarter, respectively. Earnings in the infrastructure business were actually up.

--GE used to be company that made money by making things. Now it's a company that loses money by lending money. It's a pretty good symbol for much of what's wrong about American capitalism. The truth is, it should probably be two companies, not one.

--While the share market digests the news of collapsing brokers and falling financial profits, the grand poobahs of the world's economy are wringing their hands in worry. What's keeping them up at night? The three Fs, each its own kind of crisis: food, fuel, and finance.

--"The World Bank met on Sunday faced with a mounting food price crisis that has sparked deadly unrest in developing countries, underscoring the urgency of fighting hunger and poverty," reports Channel News Asia.

--How urgent, you ask? The Prime Minister of Haiti was sent packing this weekend by crowds protesting soaring food and fuel prices. We don't even know who the man is but reckon he won't be the last public official to be ridden out of town on a rail before this current crisis is over (and it may not be any time soon).

--As usual, it's the people at the margin (whether lending or with food) that are affected first when surplus turns to scarcity. Despite all the daily signs of abundance here in Australia, let us not forget that there are about four and half billion people on the planet who have little margin for error in their daily lives. If food prices go up, many of these people go hungry.

---World Bank President Robert Zoellick, doing his best impersonation of Franklin Delano Roosevelt, wants a "new deal" for global food programs. He's asked richer nations to contribute US$500 million immediately to help get food to poorer nations.

--IMF President Dominique Strauss-Kahn was less pragmatic but more rhetorical. Wrapping up his organisation's annual spring meeting, he said that, "Food prices, if they go on like they are doing today ... the consequences will be terrible…Hundreds of thousands of people will be starving…As we know, learning from the past, those kinds of questions sometimes end in war."

--People often talk about resource wars being a common feature of the coming century (or decade). But it's usually oil and energy they're talking about, not rice and wheat. Food is fuel for the body (we've been watching the Biggest Loser). If you don't have access to cheap calories, what good is cheap fuel?

--It's our contention here at the Daily Reckoning that both food and fuel are getting more expensive. The scary thought is that artificially low interest rates and cheap energy have, for many years now, sent bogus signals to the world about how much and how fast the population can grow. Agricultural abundance is only a very recent (and perhaps temporary) historical phenomenon. It's no coincidence that it occurred alongside the energy boom from cheap oil.

--Not that it's any consolation to starving people stranded in long petrol lines, but businesses in the agricultural sector are going to boom (provided they aren't nationalised). Farm equipment, fertilizer, and large producers should all see earnings rise this year. And next year. And the year after that.

--The second "f" crisis is in finance. It's been with us so long now it doesn't seem like it's new. But some people are slow on the uptake. The nerve endings of large institutions like the IMF and World Bank are few and far removed from the tiny central brains that direct the movements of these mammoths. Brontosaurus Banks.

--Like a bunch of dinosaurs standing under a meteor shower, the G-7 meeting this weekend produced lots of talk and no action. The ministers agreed that concrete steps need to be taken in the global financial system to improve transparency and the way the banks value certain assets. The G-7 statement also paid lip service to issue of credit ratings and how to make sure in the future that garbage debt doesn't get a Triple A investment grade rating.

--Here's the trouble though…American policymakers are worried about recession and plunging house values. Everyone else-especially the increasingly sweaty Wayne Swan-is worried about inflation. Because of the different concerns, no one can agree on any policy solutions.

--The conclusion? There is no one solution to the credit crisis. That is bad news for people who think of the economy like a machine. It's not just a matter of changing the oil or checking the fuel pump. The engine is sputtering, the drive train is wrecked, the tires are flat, and someone seems to have cut the brake lines. There are no air bags.

--As they say in the used car business, it's not the years, it's the miles. You wonder if this globalisation jalopy is going to make it.

--As for the dollar, Europe would like it to be stronger in order to revive its exports. Dollar-pegging countries in the Persian Gulf would like the dollar to be stronger too, so they don't import inflation and the political instability that goes with it. Even Japan and China would like the dollar to be stronger. Dollar strength maintains the basic economic model of the last 50 years: manufacture cheap and sell to America.

--But the dollar is not strong. And the things that would make it stronger-a lower trade deficit, higher interest rates, lower government spending-are not going to happen. In fact, the opposite will happen. While officials talk up a "strong dollar," everything they actually do weakens the dollar.

--This is why the day-to-day movements in the dollar index and in gold don't tell you much. The most important fact about the gold price is that that the official policy of the U.S. government is to cheapen its currency. Rates are being lowered. The government is spending money. It's also giving away money, hoping Americans can spend the country out of recession.

--Do you know of any person or any nation that ever spent its way to prosperity? Neither do we.

--The fuel crisis hasn't reached the same acute stage as global food markets. But in time, it will. There were two developments in the clean coal front this that caught our eye this week. First, "Australia is now investing $63 million in developing clean-coal technology in China, our biggest coal buyer," according to Dennis Shanahan in today's Australian.

--Making the last stop in his first world tour, Aussie PM Kevin Rudd told reporters made the case for an Australian Chinese partnership on coal, "The fact that Australia is the world's largest coal-exporting country, and that China is the world's largest coal-consuming country, presents both of us with a fundamental responsibility to act in this area of critical technology," he said.

--You say "responsibility" we say "opportunity." Now that we are moving into a world of energy "haves" and "have nots," coal is a realistic source of transportation fuels for oil-poor, coal-rich nations. What coal-rich nations lack is the technology and capital to turn coal into liquid transportation fuel. Australia has several public companies that can help them do it. That's the opportunity.

--The trouble with above ground coal-to-liquids (CTL) technology is that it produces nearly double the carbon dioxide emissions that you get from burning coal to make electricity. In the U.S., green politicians have actually prohibited U.S. government agencies from buying coal-based fuel with tax payer money.

--The U.S. has plenty of coal. The Air Force would like private enterprise to turn that coal into fuel for U.S. planes. But California Congressman Henry Waxman introduced a provision into last year's U.S. Energy bill (section 526) that prohibits government agencies from buying fuels from "unconventional" sources.

--Those "unconventional" sources are oil shale (the Pieceance Basin in Colorado), coal (the Powder River Basin Wyoming), and heavy oil sands (found in Alberta in Canada). Two U.S. Congressman are looking to repeal Section 526 from last year's U.S. Energy Bill and unlock the future fuel from those unconventional hydrocarbons.

--Will the section be repealed? It depends on what you think about global warming. We won't weigh in here. Our main interest is in how governments respond to the dueling crisis of Peak Oil and Global warming.

--The old "real politik" answer is to use your domestic resources to achieve energy security. This way you don't exchange your currency reserves for oil and outsource your supply of a vital industrial commodity to foreign interests. If you have lots of coal but no oil, you turn your coal into fuel.

--But hey, if the planet is warming and coal is the culprit, burning more coal doesn't exactly make things better, does it? What do you do? Go nuclear? Conserve? Go renewable?

--All of these options are on the economic table and an intelligent and prompt response is becoming increasingly urgent. You can bet that the government will do something, and probably the wrong thing. Meanwhile, our money is on the firms doing something with coal, wind, waves, and solar.

--These three crises-food, fuel, and finance-are a formidable triply whammy for the global economy. It's bad news for the indexes, which already have plenty of bad economic news to consider. But for a certain class of agricultural and alternative energy firms, this could be the bull market of a lifetime.

[STRAT]

The last time I posted something from the daily reckoning I was well and truely told off. Scare mungering I think someone said :eek:

[Halebop]

--GE used to be company that made money by making things. Now it's a company that loses money by lending money. It's a pretty good symbol for much of what's wrong about American capitalism. The truth is, it should probably be two companies, not one.

The current quarter earnings equate to US$2.15b. Extrapolated over 4 quarters this is $8.6b. Well down on 2007 where Finance generated around $10.5b on $57b in equity but hardly a company that "loses money by lending money".

While the bears have control, it appears hyperbole has been replaced by a brand of equally hysterical understatement. I prefer to keep my dispassion intact so I can eventually profit while the bears continue to gnash their teeth. This correction has all been done before - it was easy to see coming - just as it will be easy to see changing. Keep centred and profit lest you find yourself wondering around, replete with lank hair and stained coat and an "End is Nigh!" board strapped to your chest.

[skinny]

Indeed, I bought some GE after the sell down. Amongst other reasons, there are around 700 large power plants in the US built in the 1950s and 60s that are ending their useful lives over the next 2 decades. GE stands to benefit enormously from this given its industrial prowess, particulalry in the nuclear-generation feild.

[tricha]

The current quarter earnings equate to US$2.15b. Extrapolated over 4 quarters this is $8.6b. Well down on 2007 where Finance generated around $10.5b on $57b in equity but hardly a company that "loses money by lending money".

While the bears have control, it appears hyperbole has been replaced by a brand of equally hysterical understatement. I prefer to keep my dispassion intact so I can eventually profit while the bears continue to gnash their teeth. This correction has all been done before - it was easy to see coming - just as it will be easy to see changing. Keep centred and profit lest you find yourself wondering around, replete with lank hair and stained coat and an "End is Nigh!" board strapped to your chest.

ShareChat News: Even RB getting nervous as economic alarm bells ring


http://www.tarawera.co.nz/tams/www/delivery/ai.php?filename=iyb08_220x240_2.gif&contenttype=gif (http://www.tarawera.co.nz/tams/www/delivery/ck.php?oaparams=2__bannerid=1072__zoneid=61__cb=a3 a86f0766__maxdest=http://www.goodreturns.co.nz/books/product_info.php?products_id=606) http://www.tarawera.co.nz/tams/www/delivery/lg.php?bannerid=1072&campaignid=460&zoneid=61&loc=http%3A%2F%2Fwww.sharechat.co.nz%2Fnews%2Fscne ws%2Farticle.php%2Fc4c2a586&referer=http%3A%2F%2Freports.asb.co.nz%2Fmorningbr ief%2Findex.html&cb=a3a86f0766
http://www.tarawera.co.nz/tams/adview.php?what=zone:61&n=af4850f4 (http://www.tarawera.co.nz/tams/adclick.php?n=af4850f4)

By NZPA
Wednesday 7th May 2008


Economists said today even the Reserve Bank is getting nervous as economic alarm bells start to clang louder.
Bellwether retail stock Briscoe Group today reported a 10% fall from last year in its April quarter same store sales.
Briscoe managing director Rob Duke said other companies would be similarly hit as households, socked by soaring food petrol and interest bills, stopped their discretionary spending.
"You watch other stocks go," he said. "We are just the first cab off the rank. I think everyone is going to get crunched big time.
"Our customers have been absolutely smashed."
At the same time today, the Reserve Bank issued its half yearly report on the banking system when Governor Alan Bollard was at pains to point out a raft of risks to the system and economy.
He also announced some special measures to boost liquidity in case the global credit malaise deeply infects New Zealand.
"The message is `brace yourself'," BNZ economist Craig Ebert said.
The Briscoe report, which showed same store sales in its Rebel Sport chain down 15%, was indicative of the sort of thing happening in the economy, he said.
However, retail spending and housing were the very areas he expects to go soft and it did not necessarily mean the wider economy was going backwards.
The risks mentioned by the Reserve Bank included the overvalued housing market, stretched household balance sheets and upward pressure on funding costs.
NZ business profitability and cash flow were concerns and the bank warned commercial and industrial property prices would probably fall. New dairy farm entrants had stretched debt levels.
Problems for finance companies, although unlikely to disrupt the banking system or economy, would continue.
Banks were told to diversify funding sources, lengthen the maturity structure of their debt and improve assessments of exposure to economic slowdown.
Bollard said the kiwi dollar was still high and at risk of a steep fall.
On top of all this, the global economy remains a risk.
"It's a long list of concern," said Ebert, who believes Bollard may well start easing rates sooner than the December target.
Bollard refused to answer questions on monetary settings.
There is other evidence emerging of economic stress.
Debt collector and credit agency Veda Advantage reported debt defaults rose 40% in the March quarter from a year ago.
Veda NZ director John Roberts said many households and small and medium-sized enterprises (SMEs) were not paying their bills, particularly for phones and credit cards. For the first time, SMEs were featuring prominently, he added.
Yesterday, Auckland real estates firm Barfoot & Thompson reported house sales halved in April from a year ago and prices were down 2.2% on a year ago.
Goldman Sachs JBWere economist Shamubeel Eaqub said the "housing implosion" could see the economy could fall of a cliff because households were so in debt and that had been backed by house prices. And that could happen as the financial system faced heavy strains due to the global credit crunch.
He called on the Reserve Bank to cut interest rates now.
"At 8.25%, monetary policy is leaning very hard against the economy and we think that is absolutely the wrong stance to have at this stage of the cycle," he told Radio New Zealand.
Duke said mortgage rates rising from 6-7% to nearly 10% and the rise in petrol to around $2 a litre was severely affecting discretionary spending.
"If Briscoe Group and a whole series of other retail enterprises start reporting, and they will, the sorts of numbers that we are reporting, somewhere someone in Government has to sit down and go `Holy Hell, so it's going to slow down this much', and they ought to prepare everyone for that or do something about it."
Duke said tax cuts in September and October would be insufficient to rectify the situation.
He said he had experienced belt tightenings before, but the question is "how tight is tight?"
Whether it was its fault or not, the Government would pay at the general election due in October or November, he said.
Duke said when parents were being squeezed, they were not going to buy their child a new pair of football boots.
Bollard acknowledged a risk of a sharper slowdown than predicted, particularly if the global economy dives. However, China and Australia's economic strength was helping the local economy. Any slowdown would "assist in unwinding some significant economic imbalances that have built up over recent years and have left the economy more exposed to economic shocks", he said. http://www.sharechat.co.nz/images/nzpa04.gif

[Dr_Who]

Hig commodity prices with falling $NZ will fuel inflation, so I dont know how the RB can justify lowering interest rate with inflation over 3%.

[Steve]

Meanwhile, does anyone have any updated thoughts on how the US is going?

[trendy]

FED holdings of treasuries have dropped from $800B to $539B. More drop is to come as AAA/aaa swapped securities are going to blow up.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aozdYkg4RG3A&refer=home

Rubenstein Says `Enormous' Bank Losses Unrecognized (Update2)

By Ryan J. Donmoyer and Alison Fitzgerald

May 12 (Bloomberg) -- U.S. and European banks and financial institutions have ``enormous losses'' from bad loans they haven't yet recognized and may have a harder time wooing sovereign-fund rescuers, Carlyle Group Chairman David Rubenstein said.

``Based on information I see,'' it will take at least a year before all losses are realized, and some financial institutions may fail, Rubenstein said at a breakfast meeting of the Institute for Education Public Policy Roundtable in Washington. He didn't name any companies.

``The sovereign wealth funds are not likely to jump into the fray again to bail out these institutions,'' Rubenstein said. ``Many financial institutions aren't going to be able to survive as independent institutions.''

Rubenstein said sovereign wealth funds are becoming wary after losing $25 billion on their investments in struggling banks and securities firms worldwide.

Financial institutions worldwide have recorded $329.2 billion in credit losses and writedowns and raised $246.6 billion in capital since the beginning of 2007. Rubenstein said about $60 billion of that capital was provided by sovereign funds last fall, and their investments today are worth about $35 billion.

Opportunity

On April 28 at a conference in Baltimore, Rubenstein said financial institutions and financial assets are ``the single greatest investment opportunities'' in the U.S. and ``a lot of private-equity firms like ours are going to try to make investments in these firms.''

Sovereign wealth funds and private-equity firms typically have different investment goals. Sovereign funds usually buy a minority stake in a quest for share-price appreciation, while private-equity firms often assume an ownership role and try to rebuild distressed companies.

Rubenstein said today that the industry and broader economy aren't likely to turn around until early next year.

``The truth is, we're in some kind of economic slowdown,'' Rubenstein said. ``I don't think it's going to be over for quite a while.''

He said the U.S. slowdown doesn't seem to be spreading to the rest of the world because the U.S. economy makes up a smaller share of global economic activity than it has in the past, when recessions typically spread worldwide.

Not as `Important'

``We're not as quite as important to the rest of the world economy,'' he said. He predicted ``slow to no growth'' for the next quarter or two.

The economy's troubles, compounded with tighter lending standards, have brought the leveraged-buyout industry to a standstill, he said. There are fewer buying opportunities because many owners of companies have an inflated and irrational sense of their property's value, he said.

``As soon as there is a little tick-up in the economy, people will want to sell again,'' he said. Rubenstein said he expected leveraged-buyout activity to pick up again after the November presidential election.

Ultimately, he said, he expects more private-equity firms will go public and consolidate like investment banks did 20 years ago, leaving a handful of ``brand-name'' firms controlling the industry.

``We'll see private-equity firms try to buy other private- equity firms,'' Rubenstein said.

[steve fleming]

From Macquarie Research Daily Commodities Comment today:

Global economics
Was that the low point?
Summary

·Another month, another US retail sales release that does not show collapsing spending. Household spending growth has been negligible over recent months, mainly due to sliding auto sales. But so far US consumers have not cut overall spending dramatically.


·Unfortunately the data have been skewed by price increases for gasoline and food. So it is hard to get a handle on the volume of retail sales. Yet the resiliency of some discretionary items, such as clothing and electronics sales, is encouraging.


·Especially since the tax rebates are in the mail and consumer spending should pick up over the next few months. Furthermore, spending increases are increasingly likely to favour US domestic producers.


·Import prices are soaring and this is not just due to higher energy prices. The prices of imported manufactured goods are on the rise, including a rising trend for the prices of imports from China.


·This does not mean that US demand for Chinese exports is about to come to a halt. But it will be a limiting factor and will make it a bit easier for US producers to capture the benefits of the tax rebates.


·The good news from a production viewpoint is that stronger demand for US goods will come when inventories are under control.


·An unexpected drop in retail inventories in March points to a significant downward revision to the Q1 inventory contribution. This will partly offset the large upward revision from the lower trade deficit.


·Yet it also reduces the chances of an inventory hit to GDP growth in the current quarter. So it is conceivable that the production low point may have already passed.

·The relentless rise in the price of oil is still a downside risk to demand and this could yet be a significant problem for US output growth. So there will be considerable uncertainty over coming months. But the data released so far do not support the case for a deep recession in the US and perhaps the point of maximum pessimism has passed.

[tricha]

From Macquarie Research Daily Commodities Comment today:

Global economics
Was that the low point?
Summary

·Another month, another US retail sales release that does not show collapsing spending. Household spending growth has been negligible over recent months, mainly due to sliding auto sales. But so far US consumers have not cut overall spending dramatically.


·Unfortunately the data have been skewed by price increases for gasoline and food. So it is hard to get a handle on the volume of retail sales. Yet the resiliency of some discretionary items, such as clothing and electronics sales, is encouraging.


·Especially since the tax rebates are in the mail and consumer spending should pick up over the next few months. Furthermore, spending increases are increasingly likely to favour US domestic producers.


·Import prices are soaring and this is not just due to higher energy prices. The prices of imported manufactured goods are on the rise, including a rising trend for the prices of imports from China.


·This does not mean that US demand for Chinese exports is about to come to a halt. But it will be a limiting factor and will make it a bit easier for US producers to capture the benefits of the tax rebates.


·The good news from a production viewpoint is that stronger demand for US goods will come when inventories are under control.


·An unexpected drop in retail inventories in March points to a significant downward revision to the Q1 inventory contribution. This will partly offset the large upward revision from the lower trade deficit.


·Yet it also reduces the chances of an inventory hit to GDP growth in the current quarter. So it is conceivable that the production low point may have already passed.

·The relentless rise in the price of oil is still a downside risk to demand and this could yet be a significant problem for US output growth. So there will be considerable uncertainty over coming months. But the data released so far do not support the case for a deep recession in the US and perhaps the point of maximum pessimism has passed.

These facts below Steve do not support the above.


Home Depot hit by housing slump


http://newsimg.bbc.co.uk/media/images/44675000/jpg/_44675182_depot_getty_226b.jpg Home Depot is the world's biggest home improvement retailer


Shares in Home Depot fell 5.2% in New York after the DIY chain reported a 66% fall in three month profit, hit by the US housing slump.
Net earnings fell to $356m (£181m), which included a $543m charge for closing 15 stores and scrapping plans to open 50 new ones.
Home Depot also warned that full year profit could fall by as much as 24%.
Sales were hardest hit in areas such as Florida and California that have seen the biggest housing slowdowns.
"The housing and home improvement markets remained difficult in the first quarter; in fact, conditions worsened in many areas of the country," said Home Depot's chairman and chief executive Frank Blake. But there was better news from outside the US, with sales rising at its stores in Canada, Mexico and China.

[STRAT]

Hi Steve and Tricha,
It wouldnt be hard for me to get out of my depth here but wouldnt it be fair to say that economic data out of the US has been blatantly manipulated, twisted to the point of being plain and simple bull**** since the middle of last year and for what ever reason the US stock market are buying it. Seems to me and has for some time, sooner or the later the penny should drop. Thing is, of late they almost and I say almost seem to be pulling it off. Still dont know whether they will bull**** their way into a mild recession or send the whole wagon train off the end of a cliff but I do know we will follow them so I still have my finger on the sell button every day.

[tricha]

Very interesting times ahead.

After a great weekend at the Southern Convention and a relaxing spa at the Marua springs on the trip home.
I restructured my shares.
Actually I think it started in the brain last week, when I dumped the last of my NWE shares, at a loss I might add. Down to 4.5 different shares. The .5 in transition of being sold.

Back to 30% cash.

Then I listened to the Guru last night :rolleyes:

http://news.bbc.co.uk/2/hi/business/7409517.stm

P.S Absolutely correct to a tee Strat, but what came out of Home Depot is for real and Fletcher's latest report mirrors it.

[Dr_Who]

The so called expert analyst/economist do get it wrong and often. I like reading their analysis, but at the end I make my decisions based on my own analysis. If the experts get it right all the time, then we would have fund managers making super returns in a downturn economy... LOL.. yeah right, pigs do fly.

[Oiler]

Very interesting times ahead.

After a great weekend at the Southern Convention and a relaxing spa at the Marua springs on the trip home.
I restructured my shares.
Actually I think it started in the brain last week, when I dumped the last of my NWE shares, at a loss I might add. Down to 4.5 different shares. The .5 in transition of being sold.

Back to 30% cash.

Then I listened to the Guru last night :rolleyes:

http://news.bbc.co.uk/2/hi/business/7409517.stm

P.S Absolutely correct to a tee Strat, but what came out of Home Depot is for real and Fletcher's latest report mirrors it.

Tricha.... Fletchers do to a degree mirror Home Depot to a degree

Home Depot are retailers to the DIY market in the US and yes a BIG market.

Fletcher... are a diversified "building"company with a manufacturing presence worldwide...from Eastern Europe to Asia to North/Central/South America and of course OZ and NZ.
The unfortunate part now is that may become a takeover target. With big cash reserves and good cashflow they could be self funding.

I am a holder and will continue buying into FBU during these "low times"

I know..its not an oil company :p

Oiler

[Dr_Who]

High oil prices & Commodities + negative growth + High Debt = US RECESSION !

[trendy]

High oil prices & Commodities + negative growth + High Debt = US RECESSION !
$3/gallon was last weeks price it's now $4/gallon.....$5/gallon by June.

I have spent last weeks $1500 stimulus check on gasoline YTD already.

[STRAT]

$3/gallon was last weeks price it's now $4/gallon.....$5/gallon by June.

I have spent last weeks $1500 stimulus check on gasoline YTD already.Gosh Trendy,
at that rate Americans will be paying as much to fill their car as the rest of the world soon :eek: They aint gonna like that

[tricha]

Tricha.... Fletchers do to a degree mirror Home Depot to a degree

Home Depot are retailers to the DIY market in the US and yes a BIG market.

Fletcher... are a diversified "building"company with a manufacturing presence worldwide...from Eastern Europe to Asia to North/Central/South America and of course OZ and NZ.
The unfortunate part now is that may become a takeover target. With big cash reserves and good cashflow they could be self funding.

I am a holder and will continue buying into FBU during these "low times"

I know..its not an oil company :p

Oiler

Hi Oiler, U R right Oiler, it is oil or nothing for me I'm afraid, I've got oil on the brain, hows this for crazy, filled the car up tonight, Paid my 1st $2.00 for a litre, yee ha.
But hey u have heaps of oil yourself, so taking a minus in Fletcher for a while will probably be here nor there :rolleyes:

Go NZO, cheap as chips still :D

[bermuda]

Hi Oiler, U R right Oiler, it is oil or nothing for me I'm afraid, I've got oil on the brain, hows this for crazy, filled the car up tonight, Paid my 1st $2.00 for a litre, yee ha.
But hey u have heaps of oil yourself, so taking a minus in Fletcher for a while will probably be here nor there :rolleyes:

Go NZO, cheap as chips still :D

Oiler,
Please, get out of FBU. You like LMP ( and it's CSG potential ).

Put it all on that.

There is a big recession coming and it aint funny.

[tricha]

Oiler,
Please, get out of FBU. You like LMP ( and it's CSG potential ).

Put it all on that.

There is a big recession coming and it aint funny.


Buffett sees U.S. in recession

Berkshire Hathaway CEO tells German magazine he believes country is now in recession.



http://i.l.cnn.net/money/2008/05/25/news/economy/buffett_recession.ap/warren_buffett_new.03.jpg




BERLIN (AP) -- Warren Buffett, whose business and investment acumen has made him one of the world's wealthiest men, was quoted in an interview published Sunday as saying the U.S. economy is already in a recession.
Asked by Germany's Der Spiegel weekly whether he thinks the U.S. could still avoid a recession, he said that as far as the average person is concerned, it is already here.
"I believe that we are already in a recession," Buffet was quoted as saying. "Perhaps not in the sense as defined by economists. ... But people are already feeling the effects of a recession."
"It will be deeper and longer than what many think," he added.
The 77-year-old chairman and chief executive of Berkshire Hathaway Inc. (BRKB (http://money.cnn.com/quote/quote.html?symb=BRKB&source=story_quote_link)) gave the interview while he was in Europe for what he called a "deferred shopping tour," looking for possible acquisitions.
Omaha-based Berkshire has about $35 billion in cash and is looking to invest. Berkshire's subsidiaries include insurance, clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. and Anheuser-Busch Cos. http://i.cdn.turner.com/money/images/bug.gif (http://money.cnn.com/2008/05/25/news/economy/buffett_recession.ap/index.htm?postversion=2008052517#TOP)

[Steve]

Greenspan is also saying something very similar...

[tricha]

why the massive BLACK headlines???

strange stuff


most have been saying the US has been in some measure of recession for the whole year

Does 24x bold make it any worse for readers?

i like to add a little bit of colour, but taht otpion seems to be miscing. Year, no, more like the middle of last August. :(

[tricha]

ARE WE WITNESSING THE SLOW DEATH OF THE AMERICAN DREAM?
by Kevin Kerr

The world keeps turning and the resources get used up. It’s really quite simple.

Despite that fact, the debates rage over Peak Oil, Peak Food and peak everything else. It’s about as sensible as rearranging deck chairs on the Titanic. So the “experts” continue to debate whether or not resources are running low. But the evidence is pretty clear, at least to this trader.

In the past year, we have seen the oil and agriculture markets explode. And this could be just the beginning of the rally, not the end, as some would have you believe. Personally, I think we are about halfway to the new top for many commodities. That means $200 oil (easily) and gold at $1,500-2,000. The agriculture markets have even further to go, in my opinion.

Key commodities are becoming more and more scarce. So we can expect to see more suffering in the poorest countries first. Then the economic impact will work its way up the food chain (no pun intended).

The facts are fairly grim if we look at them closely. There is going to be less of everything. Yet there will be more people who want those things. Let’s face it – wars have been fought over far less.

In her famous book, On Death and Dying , Elisabeth Kubler-Ross describes the stages of grief:

Denial: “It can’t be happening”
Anger: “Why me? It’s not fair”
Bargaining: “Just let me live to see my children graduate”
Depression: “I’m so sad, why bother with anything?”
Acceptance: “It’s going to be OK.”
In my opinion, the American public is going through the stages of grief right now. Rising prices are just a market-based signal that we are losing our economic and resource abundance. As the American dream fades away, it’s like a death in the family.

Right now, I think we are between the stages of denial and anger. Ask yourself these questions: What do you think when you pull up to the fuel pump and have to pay $4 for a gallon of regular gas, or nearly $5 for a gallon of diesel? Or how about when you go to the supermarket and have to pay $4 for a gallon of “store brand” milk, or the same price for a loaf of “store brand” bread? Are your emotions between disbelief and anger? Are you saying to yourself, “Hey, what the heck is going on?” (I’m cleaning it up a bit because this is a family-friendly publication.)

I think folks mistakenly thought prosperity would go on forever.

Dinner is always fun until the waiter brings the check. Or as my colleague Byron King once said, “It’s easy to look rich as long as you don’t ever pay the bills.”

No sector has recently hit Americans in the wallet harder than energy. But even with those dramatic price increases, major changes are still not happening. We have seen a very small decrease in gasoline usage – only about 1% or so.

But while some travel may be down as costs have gone up, the numbers are not really dramatic. No, I am not pointing fingers. I live here too. If I looked at my own lifestyle, I couldn’t say that I am making radical adjustments, either.

We still like to drive our big SUVs. We still drive alone to work. Most people rarely take public transportation (if there is any). And we love to run our air conditioners full blast while watching the documentaries on global warming and dying polar bears on our 62-inch plasma TVs.

Yes, we like to grumble when we fill up those big SUVs, mostly because it’s easier to complain than make the tough changes that are needed. We feel entitled to keep living as we do. Hey, after all, we’ve earned it. Right?

Rather than make difficult choices, we are in that denial stage and buy the line from the government and media that all is well.

The facts and the fiction often get mixed up when discussing the issue of “Peak Everything.” Take the surging price of crude oil. Some people (including a lot of politicians) want to blame the traders and speculators. Other people blame farmers and corn-based ethanol. A lot of people blame OPEC. The list of culprits goes on ad infinitum.

The fact remains that it’s not just one reason or another that we are in this energy disaster; it’s actually all of these reasons and others. It’s a culmination of many years of poor energy policy, short-sighted planning (if you can even call it planning) and an overdose of arrogance that only superpowers can have.

It’s like a football team saying, “We’re No. 1 and will always be that way.” So the team stops training hard. Players quit working out and coming to practice. The coaches just relax and forget about recruiting or developing new talent. Nobody designs new plays or bothers to scout the opponents to see what they are up to. And then the team expects to go out into the world and bring home the trophy every year. “Hey, we deserve it. Right?”

Or go back to the analogy of the Titanic. The ship was state-of-the art. It was not “supposed” to be able to sink. But now as the water rushes in and the ship is dropping lower and lower into the sea, the cold water is hitting us all in the face. Now our lawmakers are scrambling to plug the holes, and it’s not working. The smart people (or maybe they were just lucky) are already in the lifeboats.

Only time will tell if the United States can actually move into the acceptance stage. But in the meantime, commodities will continue to dwindle.

Kevin Kerr
for The Daily Reckoning Australia

[Dr_Who]

Great read Tricha.

[Laxmi]

The latest US unemployment rate increased the most in over two decades. This is the bad omen that everyone was hoping would not manifest. This is most definitely a recession indicator if ever there was one.

The market has reacted in a knee jerk reaction to the much worse than expected numbers. The mighty US dollar is obviously seen as a poor bet at the moment. ‘Everyone’ is pouring their money into oil as a hedge. The rush is phenomenal and staggering. This latest hike is unprecedented in size. To put things into perspective for the average worker: 12 months ago, the price of oil was $64.77. The last few day’s price hike would have been a staggering 25% increase back then. In real terms, most workers income would have only increased 5% at best during the interval. In other words: Today’s price hike is hurting, and is going to hurt more unless the price of oil starts to fall dramatically very soon.

What to do?

[Huang Chung]

I'd happily trade places with the Yanks when it comes to filling the car with juice. :D

[STRAT]

OK guys and girls,
another bad night in the US tonight and the **** will hit the fan here tomorrow. But over the last year it seems to me we here on the ASX have been less and less, affected by the rallies and drops in American Markets. Im not suggesting for a moment we are becoming detached but we seem a little less connected. Im rather concerned right now about how much of a beating we are in for and which sectors will be hit the hardest.

Will Oil and alternative energy stocks survive unscathed? Oil is going up after all so surely oil companies must be doing better.

Would appreciate everyones thoughts on the immediate future? Whos poised to cash up, whos gonna ride it out and why

[tommy]

Hi STRAT,

When da sXXt does hit the fan, do not fight against the herd... just keep a close eye on trading volumes of the stocks that you are interested in to determine whether the change in price is a major turning point in investor/trader sentiment. No point in trying to "pick the bottom" when the US's bottom is about to fall off, hehehe


In the last couple of weeks, it has been too easy to make money, but things are changing now that political factors are starting to influence market sentiment, that is IMHO when all technical/fundamental analysis goes out the window: If Israel attacks Iran, all markets are gonna go nuts in a split second. But then again, that will also give rise to some opportunities...

I am betting that UCG sector will remain strong on the back of high oil prices BUT liquidity in the market is a major assumption here. If liquidity in the stock market dries up, it's time to run for the hills!

Note: I am 90% cash apart from CXYO which is in trading halt (fingers crossed) and under-the-carpet ISSO plus my beloved freebie BOW. Sold all other holdings and locked in profits on Thursday because I hate long weekends...

[shasta]

OK guys and girls,
another bad night in the US tonight and the **** will hit the fan here tomorrow. But over the last year it seems to me we here on the ASX have been less and affected by the rallies and drops in American Markets. Im not suggesting for a moment we are becoming detached but we seem a little less connected. Im rather concerned right now about how much of a beating we are in for and which sectors will be hit the hardest.

Will Oil and alternative energy stocks survive unscathed? Oil is going up after all so surely oil companies must be doing better.

Would appreciate everyones thoughts on the immediate future? Whos poised to cash up, whos gonna ride it out and why

I'm backing my diversity with energy stocks to hold up, or at least to rebound quickly...

In fact historically ADY goes up when the DOW goes down!

I'm not selling out of any stocks, as i think the DOW over-reacted & may have oversold some stocks in the panic.

Maybe a 100 point rise on the cards tonight?

[STRAT]

Thanks fellas

LOL, thats one "sell the lot" and one "sell none" :D

I was feeling about 50/50 on which way to go but now Im sure Im 50/50 on which way to go :eek:

Anyone else care to comment? :p

[shasta]

Thanks fellas

LOL, thats one "sell the lot" and one "sell none" :D

I was feeling about 50/50 on which way to go but now Im sure Im 50/50 on which way to go :eek:

Anyone else care to comment? :p

Just remember back to last August, & how quickly things rebounded...

Those with cash may find some bargins, but IMO its not the time to sell if your stocks have good fundamentals, or nearing production etc.

[pago]

Thanks fellas

LOL, thats one "sell the lot" and one "sell none" :D

I was feeling about 50/50 on which way to go but now Im sure Im 50/50 on which way to go :eek:

Anyone else care to comment? :p

hi strat,dow futures up 25,means nothing.there is a lot of data from usa this week,i see the whole week being volitile,canada market holding well and prob best comparison to oz resource sector,but lets not kid ourselves,if the usa data is downtrending we could be looking at a retest of 5200 on the oz all ord.too early to say.obviously best sectors are energy now but i see oil price bubble bursting ,give it a few months.prob back to $100 barrel,maybe $80.still very good for investors and good for economies.tuesday is only one day,the data over this week may better define the trend.i dont hold confidence in the usa economy but its the old argument of how the resource sector will progress despite the usa.for what its worth imho ,energy stocks will see us doing well for 08,cheers pago

[JBmurc]

Thanks fellas

LOL, thats one "sell the lot" and one "sell none" :D

I was feeling about 50/50 on which way to go but now Im sure Im 50/50 on which way to go :eek:

Anyone else care to comment? :p

-As all my investment funds & loans are in energy & gold and as of today my first 1kg silver bullion bar I'm more than confindent in my holders.
-selling the lot going cash in the bank be fine if your enjoy saving and waiting.....
If you what to make serious profits you got to have some balls take some risks IMHO-------- less risk =less profits IMHO if getting rich was easy we all would be..

[COLIN]

The Aussies amongst us must be glad that they had a public holiday today, in honour of Her Majesty (what happens when the Monarchy is eventually abolished, as seems inevitable? Can't see a "President's Day", doesn't sound quite right, but there will no doubt continue to be a holiday of some sort - what about a "Respect for the Aged Day" as they have in Japan?! Seems a great idea to this senior citizen.)
Anyway, back to market trends. I'm sure there would have been a rout on the ASX today had it been a trading day, i.e. the first significant market to open following the slump on Wall St on Friday. However, my pick is that there will be some consolidation on Wall St tonight and the final closing - up or down - will be relatively mild. The ASX will turn down, reflecting Friday's movement, but not nearly as severely as it would otherwise have been if it hadn't been a holiday today.
Its interesting that my NZ portfolio actually recorded a slight overall gain today, due to my holdings in NZO (heads & options) PRC and PPP, notwithstanding that my other NZX holdings are greater than these, in total.
My advice would be: look at your portfolio mix, decide what areas of activity hold the most promise for the longer-term, and only discard those shares that you assess have little prospect of performing as well as those in your chosen asset classes. For myself my chosen areas are fuel, food, healthcare and (in NZ) firms with significant offshore earnings.
So, Strat, thats my tuppence worth.

P.S. Interesting to see that the Footsie was actually slightly in positive territory when I last checked a few minutes ago. I was surprised to see that, but of course encouraged.

[STRAT]

hi strat,dow futures up 25,means nothing.there is a lot of data from usa this week,i see the whole week being volitile,canada market holding well and prob best comparison to oz resource sector,but lets not kid ourselves,if the usa data is downtrending we could be looking at a retest of 5200 on the oz all ord.too early to say.obviously best sectors are energy now but i see oil price bubble bursting ,give it a few months.prob back to $100 barrel,maybe $80.still very good for investors and good for economies.tuesday is only one day,the data over this week may better define the trend.i dont hold confidence in the usa economy but its the old argument of how the resource sector will progress despite the usa.for what its worth imho ,energy stocks will see us doing well for 08,cheers pagoHi Pago,
Thanks for your reply. Im thinking its not so much that news from the USA is downtrending as you put it but more a case of sooner or later the figures are going to have less bu!!**** in them and the rest of the country will have to pay the piper. Tonight will be interesting. I was thinking more about sliding out and sliding back in rather than running for the hills. Interesting call on the POO. Im sure some here would argue with that call. Time will tell as always.

[STRAT]

-As all my investment funds & loans are in energy & gold and as of today my first 1kg silver bullion bar I'm more than confindent in my holders.
-selling the lot going cash in the bank be fine if your enjoy saving and waiting.....
If you what to make serious profits you got to have some balls take some risks IMHO-------- less risk =less profits IMHO if getting rich was easy we all would be..Hi JB,
If you have borrowed funds invested in this market then I must conceed you are the one with the bigger balls here. ;)

[STRAT]

The Aussies amongst us must be glad that they had a public holiday today, in honour of Her Majesty (what happens when the Monarchy is eventually abolished, as seems inevitable? Can't see a "President's Day", doesn't sound quite right, but there will no doubt continue to be a holiday of some sort - what about a "Respect for the Aged Day" as they have in Japan?! Seems a great idea to this senior citizen.)
Anyway, back to market trends. I'm sure there would have been a rout on the ASX today had it been a trading day, i.e. the first significant market to open following the slump on Wall St on Friday. However, my pick is that there will be some consolidation on Wall St tonight and the final closing - up or down - will be relatively mild. The ASX will turn down, reflecting Friday's movement, but not nearly as severely as it would otherwise have been if it hadn't been a holiday today.
Its interesting that my NZ portfolio actually recorded a slight overall gain today, due to my holdings in NZO (heads & options) PRC and PPP, notwithstanding that my other NZX holdings are greater than these, in total.
My advice would be: look at your portfolio mix, decide what areas of activity hold the most promise for the longer-term, and only discard those shares that you assess have little prospect of performing as well as those in your chosen asset classes. For myself my chosen areas are fuel, food, healthcare and (in NZ) firms with significant offshore earnings.
So, Strat, thats my tuppence worth.

P.S. Interesting to see that the Footsie was actually slightly in positive territory when I last checked a few minutes ago. I was surprised to see that, but of course encouraged.
Hi Colin thanks for that,
In terms of sectors my current stocks consist of Oil, CSG, U and a few long shots which will or will not pay off regardless of market sentiment. I think everyone took my original post as seeking advice on whether to vacate the market place or not. This isnt what I had in mind but more along the lines of how do the rest of you see the next few weeks playing out. All my stocks are speculative and with that kind of portfolio it can pay dividends sliding in and out on market sentiment. I also see the misleading economic data coming out of the US which has propped the US markets over the last year as a good thing in some ways. It has given the rest of the world time to adjust slowly but surely to a decoupling from the US which I think is becoming evident in how much our own market reacts to what happens over there. A year ago the ASX followed the DOW like they were attached at the hip. This seems less evident now. Anyone else noticed this?

[Hoop]

Strat
Mr(s) bear loses his/her temper again and mauls a few more slow moving investors. Nothing new folks just another normal event within a bear market phase.
What now?... who knows?
If I knew these things I would be richer than Buffett.

All I know is that there is a Bear out there in dem woods with one hell of a bad attitude.

Hoop is 66% cashed up** and 29% in energy shares and riding this Commodity boom (oil and coal) yee ha!!. 5% in currency sensitive share.

Hoop is resisting the temption of one of the deadly sins at the moment (greed)..and will not invest much more into the energy sector..Hoop has nearly enough exposure. May swap around though where opportunities arise...
....but it is Discipline..Discipline...Discipline....keep to the game plan...must not deviate away from the self-appointed semi-conservative Bear Market Strategy.... or Hoop may be Mr(s) Bears next meal :(

It's dangerous times Strat.

The commodity shares is a good hiding place from Mr(s) Bear at the moment...but it won't last forever ...the bear will find it eventually...so have to stay one step ahead by either cashing up or moving to another better hiding place...history and survival instincts has taught us this.

** Was 80% cash but appreciation of the energy shares have changed Hoops % ratios.:cool::cool::cool:

PS Direct Brokering trading account now offering 8.1% interest

[JBmurc]

Hi JB,
If you have borrowed funds invested in this market then I must conceed you are the one with the bigger balls here. ;)

-Yeah alot of investors would say borrowing funds to invest in sharemarkets are risky personal I think people borrowing in the wrong markets is risky -like investing in NZ's overinflated property markets or investing in high yeild finance companys

-All of my borrowed funds is from the bank using my dept free property equity(9% int rate)100% of the funds were invested into the ASX at .94c NZD/AUD currently up 14% from the strong AUD
-All of my investments are traded within a LQAC and because of some of my shares & CFD & Warrents made losses for the tax year uncle cullen will be play back most of my personal income tax +carry forward tax-losses to next yrs Tax review

[Hoop]

-Yeah alot of investors would say borrowing funds to invest in sharemarkets are risky personal I think people borrowing in the wrong markets is risky -like investing in NZ's overinflated property markets or investing in high yeild finance companys ........

...and highly speculative effected commodities market

[JBmurc]

...and highly speculative effected commodities market

My two biggest holdings NZX-NZO at $1 ASX-STX 25c these make up 65% of all my funds invested.

-Both companies are cheap even if energy prices pulled back 30%.(not likely)

-If I had put my unloaned funds into the safe bank for 8% return I'd then have to pay 39% tax on the 8% leaving 5% if I took real inflation into the mix my 5% increase on funds invested wouldn't really buy me much more the it did 12 months earlier.
-I plan on making serious money the two above companies will be the cornerstone to this

[Hoop]

My two biggest holdings NZX-NZO at $1 ASX-STX 25c these make up 65% of all my funds invested.

-Both companies are cheap even if energy prices pulled back 30%.(not likely)

-If I had put my unloaned funds into the safe bank for 8% return I'd then have to pay 39% tax on the 8% leaving 5% if I took real inflation into the mix my 5% increase on funds invested wouldn't really buy me much more the it did 12 months earlier.
-I plan on making serious money the two above companies will be the cornerstone to this

It sounds like you have had a good year too.
It's good policy to have a goal to reach for, yours is a lot more demanding than mine but I wish you all the best.
As they say.. "you have to be in to win".
:)Hoop

Emails from the USA popping up on my computer 7.00am over there
Crude oil futures down stock futures up (http://www.marketwatch.com/)
Possible war with Iran reason for Gold and Oil spike on friday? (http://www.marketwatch.com/news/story/does-gold-commodities-surge-signal/story.aspx?guid=%7BD534C413%2D16E9%2D4738%2DA2A2%2 D5BF0D81936DB%7D)

[trendy]

FED holdings of treasuries have dropped from $800B to $539B. More drop is to come as AAA/aaa swapped securities are going to blow up.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aozdYkg4RG3A&refer=home

Rubenstein Says `Enormous' Bank Losses Unrecognized (Update2)

By Ryan J. Donmoyer and Alison Fitzgerald

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


Another few months and we are now down to $476B. Almost half of the FEDs treasury bonds swapped for junk bonds.

http://www.ny.frb.org/markets/soma/sysopen_accholdings.html


Lenders took possession of 73,794 houses in May -- 158% greater than the 28,548 REOs in May 2007
• 1.2 million foreclosed single-family homes will enter the market
• Foreclosures will account for 30% of national home sales in 2008
• Bank repossessions (REOs) accounted for 28% of total foreclosure activity
• Default notices increased 35% year over year
• The 3 highest foreclosure rates by state are Nevada (1 in every 118 households), and California (1 in every 183) Arizona's (1 out of 201) in May 2008
• Auction notices were up 13% year over year (but decreased 3% from the previous month)
• Foreclosed properties typically sell for ~20% less than comparable homes
• Foreclosed properties depress local home prices by 6%

....and Wall Street and the FED will say the worst is over.

[The Big Ease]

i love these capitalist c-sucking cowboys, masters of the universe, begging for government intervention to save their a$$es due to their own incompetence.

NO, i am not a socialist commy mofo. I just like to see those who hold poor people down by telling them they need to take responsibility for their own actions and earn their way up, also take responsibility for themselves. unfortunately, if this were to happen we would all pay very dearly.

im sure you will all be pleased to know bonuses were still paid out at investment banks. frauds, crooks and cowards.

[STRAT]

Hi Trendy, I lived in the US for a while but most of the people I knew there have moved away. Whats the word in the street. Are people spooked or walking around with blinders on?

PS I have met a lot of wonderful people there and the US will always be the centre of my musical universe :D

[trendy]

Hi Trendy, I lived in the US for a while but most of the people I knew there have moved away. Whats the word in the street. Are people spooked or walking around with blinders on?

PS I have met a lot of wonderful people there and the US will always be the centre of my musical universe :D


Most noticeable is that there is less traffic on the intestate I-91 an I90. Up here the Normal cruising speed was 75 to 85 MPH, now traffic seems to be moving along at about 65 to 70. I'm now passing the big rigs at 70 MPH while they drive with governors set at 65MPH to save gas. Diesel is actually about $5/gallon while gas is $4.10/gallon

Dressed up folks now shopping at WalMart and CostCo.

The other big issue is flying, only yesterday and today both United and US Airways announced they are now charging $15 to check 1st bag and $25 for second bag. It won't be long and I expect the airlines to fly on one engine once at cruising level and keep the other for reserve. :)

Most folks are now vacationing nearby and back to camping in VT.


http://www.youtube.com/watch?v=r7dq9pB_Tz8

[STRAT]

Dressed up folks now shopping at WalMart and CostCo.


http://www.youtube.com/watch?v=r7dq9pB_Tz8 Crap:eek:
If ever there was a sign the world is coming to an end that has to be it.:D

Which part of the big country do you reside in?

[trendy]

Happy weekend to you folks down under. Still Friday here but here are some funny songs to listen to in these interesting times. Cheers.

http://www.youtube.com/v/rY_iz0y2hYM&hl

http://www.youtube.com/v/wQPvrAxT_Sk&hl

http://www.youtube.com/v/r7dq9pB_Tz8&hl

http://www.youtube.com/v/0sbzZ4nNvuo&hl

http://www.youtube.com/v/37pal-PYTUQ&hl

[Dr_Who]

i love these capitalist c-sucking cowboys, masters of the universe, begging for government intervention to save their a$$es due to their own incompetence.

NO, i am not a socialist commy mofo. I just like to see those who hold poor people down by telling them they need to take responsibility for their own actions and earn their way up, also take responsibility for themselves. unfortunately, if this were to happen we would all pay very dearly.

im sure you will all be pleased to know bonuses were still paid out at investment banks. frauds, crooks and cowards.

You have the nail bang on target mate. Just have to look at the investments banks over in Aussie falling over like flies this year to know that even the self labels "masters of the universe" are just an ego hungry bunch of disillusioned buffoons.

Loaded up on debt for an asset only works in a boom market. The real investors are the ones still standing and making money in a depressed market.

[JBmurc]

I see the hunt brothers have sold there oil interests for many billions whats the bet they be looking at entering the silver market again maybe this time having the last laugh

#1 protection IMHO is the old hard currencey- silver & gold bullion

[tricha]

I see the hunt brothers have sold there oil interests for many billions whats the bet they be looking at entering the silver market again maybe this time having the last laugh

#1 protection IMHO is the old hard currencey- silver & gold bullion

Bullion is looking good JBmurc, yes, it is a recession in the States and it seems like NZ is mirroring it.
BRIC will be the key to Australia's surival.
This is very, very serious..:eek:


Crude oil at a fresh high of $140


http://newsimg.bbc.co.uk/media/images/44744000/jpg/_44744646_iranianoilafp226jpg.jpg OPEC believes oil prices could go as high as $170 a barrel this year


The price of oil has surged to a fresh high passing the $140 a barrel level.
Light sweet crude for August delivery touched $140.39 on the New York Mercantile Exchange before edging down slightly.
The combination of soaring oil prices, rising inflation and fears about the health of the global economy sent stock markets tumbling.
In the US, the Dow Jones industrial average fell 2.29% to 11,539.7 in early evening trade.
Wall Street's tumble soured sentiment in Europe where shares fell to their lowest close since October 2005.
The UK's FTSE 100 closed down 2.6%, or 147.9 points, at 5518.2, the lowest level since March this year.
In Paris, the CAC 40 lost 2.4% to close at 4,426.19 and Germany's DAX index also lost 2.4% ending up at 6,459.60.
Added pressure
The spike in the price of oil followed comments from the producers' organisation Opec about the prospect of oil at $170 a barrel this summer.
Oil producer Libya added to the pressure after signalling it may cut output, while a falling US dollar also pushed up the price of crude.
Analysts said a raft of bad news about the health of corporate America, the impact of higher oil on company profits and fears about US financial sector hurt investor confidence.
"I felt we were going to have a garden variety recession, but if oil goes up goes up to $170 and stays in the $170 area, who knows," said Al Goldman, chief market strategist at Wachovia Securities.
General Motors shares fell to their lowest level in 30 years after analysts gave a gloomy outlook for the auto giant. Global banking giant Citigroup fell too after a downbeat assessment for the sector, while shares in Belgian bank Fortis fell sharply after it announced a rights issue to shore up its finances. Gloom spread to the technology sector, where software company Oracle and Blackberry maker Research In Motion painted a pessimistic picture for the future.

[tricha]

America's house price time bomb


By Michael Robinson
BBC World Service
http://newsimg.bbc.co.uk/shared/img/999999.gif


With the American housing market in its worst crisis since the Great Depression of the 1930s, President Bush is expected to sign into law a massive new government intervention designed to slow the slide.
http://newsimg.bbc.co.uk/media/images/44871000/jpg/_44871626_bankowned226getty.jpg Banks in the US could end up owning ever more houses


The intervention would come as a little known quirk of US law threatens to drive down house prices even faster.
Faced with seemingly never-ending falls in the value of their properties, some American home-owners are taking radical action; they are choosing to walk away from homes and their mortgages.
In May 2006, at the height of the housing boom, Karen Trainer bought a $500,000 apartment in California - with money borrowed from her bank.
By this year, Karen still owed $500,000 on her mortgage, but her apartment was worth $200,000 less.
So she was deep in negative equity and, to make matters worse, the interest rate on her loan was about to increase.
"I thought 'this is crazy'," Ms Trainer says. "It just does not make financial sense."
Take the hit
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/media/images/44869000/jpg/_44869660_karentrainer226bbc.jpg
http://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif Is the bank going to pay for my retirement because I was a good girl and paid my mortgage http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Karen Trainer

http://newsimg.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif

City of debt shows US housing woe (http://news.bbc.co.uk/1/hi/business/7164898.stm)


As a successful professional, Karen could comfortably have managed the higher mortgage payments her bank demanded.
Instead, she decided to stop her mortgage payments altogether and let her bank repossess her apartment.
Her credit record will be badly damaged by the decision, but Ms Trainer expects this to recover soon.
"Generally speaking, within 5 years you are about back where you were, so my husband and I decided we'll take the hit and live with it."
Over to the bank
In California and much of the rest of America, there is a powerful incentive for homeowners such as Ms Trainer to walk away from their mortgage obligations.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/media/images/44871000/jpg/_44871660_susanwachter226bbc.jpg
http://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif The dangers are extraordinary http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Professor Susan Wachter, Wharton School of Business

http://newsimg.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif




Though banks can repossess and sell the homes of borrowers who stop paying their mortgages, under a legal quirk originating in the Great Depression of the 1930s, banks cannot easily pursue borrowers for any balance outstanding on the main mortgage on their homes.
Consequently, by walking away from her apartment, Ms Trainer has also walked away from the $200,000 loss on her property.
Her bank gets stuck with that.
Unthinkable option
Traditionally in America there is a social stigma attached to those who default on their debts, which should be a deterrent to walking away from your home.
http://newsimg.bbc.co.uk/media/images/44871000/jpg/_44871615_bushap226bbc.jpg The housing market has become a headache for President Bush


But according to Susan Wachter, professor of real estate and finance at Wharton School of Business, in the depth of this crisis the social attitudes to such actions are changing.
"This is the kind of conversation that's going on at cocktail parties, at swimming pools," Professor Wachter says. "And suddenly this option which was truly unthinkable in the past becomes thinkable."
Worrying development
Ms Trainer says she feels no moral obligation to go on paying a loan on a property that is going to go on losing her money. She says her friends support her decision.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/media/images/44869000/jpg/_44869661_kevinmorgan226bbc.jpg
http://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif It's a business decision for their family that the smartest thing they can do is walk away from their home http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Kevin Morgan, estate agent


"I think people are taking a more cold-hearted look at it," she says.
"Is the bank going to pay for my retirement because I was a good girl and paid my mortgage, even though legally I didn't have to?"
Professor Wachter believes that, to date, most people have had their homes repossessed because they could not manage the repayments.
The trend of people now positively choosing to walk away because it makes financial sense to do so is a worrying new development.
"The dangers are extraordinary," Professor Wachter says.
"If all that is needed is that the house value is less than the mortgage value, there is a large number of homeowners in the United States who are in that situation".
No renegotiation
In the city of Stockton - the foreclosure, or repossession, capital of the US for 2007 - estate agent Kevin Morgan sells repossessed houses on behalf of the banks that now own them.
http://newsimg.bbc.co.uk/shared/img/o.gif
http://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif This is becoming a tsunami of voluntary defaults http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Professor Nouriel Roubini, New York University


According to him, walking away has become commonplace.
"I would say it's probably 70% of the volume of our foreclosures right now," he says.
"It's a business decision for their family that the smartest thing they can do is walk away from their home."
As a sign of the changing times, some 60% of borrowers do not even bother to contact their banks to attempt a renegotiation of their loan, Mr Moran explains.
"They stop paying and they stop talking," he says. "They just plain walk away."
Total disaster
It is impossible to know for sure how many of the people who are now walking away from their homes could have gone on paying their mortgages.
But Professor Nouriel Roubini of New York University, one of the first economists to warn of the dangers of the American house price boom, believes the number of people positively choosing to walk away is growing rapidly.
"This is becoming a tsunami of voluntary defaults," Professor Roubini says.
"The losses for the financial system from people walking away could be of the order of one trillion dollars when the entire capital of the US banking system is only $1.3 trillion.
"You could have most of the US banking system wiped out, so this is a total disaster."
Which is why it is not just US policymakers who are hoping America's new, multi-billion dollar initiative to stabilise the housing market will succeed in its aims and thus make walking away less attractive.
Because if it fails, the economic fallout could be felt far beyond America's shores.

[upside_umop]

Thats incredible Tricha.
USA have been to slack with credit criteria, more legislation will be needed in this area. Ie. minimum deposits should be brought in. I bet they wouldnt be walking away so fast if they had tied up 20% originally into their house and paid off another 5% over the time would they now?
This article shows how bad its getting...scares me a bit!

[lakedaemonian]

Thats incredible Tricha.
USA have been to slack with credit criteria, more legislation will be needed in this area. Ie. minimum deposits should be brought in. I bet they wouldnt be walking away so fast if they had tied up 20% originally into their house and paid off another 5% over the time would they now?
This article shows how bad its getting...scares me a bit!

But ONE problem is that the US residential real estate market is already on its knees, requiring far higher minimum deposit/equity requirements would be like writing the market obituary.

Damned if they do, damned if they don't

I just got back from Las Vegas.....there's nearly as many cranes there as in Dubai...except the ones in Vegas aren't doing much moving.

[tricha]

Strat - "Hi Tricha, In denial in regard to what?
__________________
Timing is everything "

Everyone one is in Denial ( including myself )

We have been on the gravy train for the last few years and it has stopped.

New threads popping up and going around the real issue ( description of Yogi, Poll buying ........., Making money in resources, Investment theories, Beware of investor chat )

Recession and the effect it will or will not have on the rest of the World and our portifilos.

1 - The USA is in recession.

2 - Peak oil and how high oil prices will effect it, the world requires cheap energy for growth.

3 - High interest rates effects on business profitability and consumer spending.

4 - Gold as protection.

Every which way I look at it, I can not see how with high inflation the US can keep dropping interest rates.

It has been a long time coming, But I think this would have been Gerrys year, this year is going to be very different.

Food for thought! Yeo get that grey matter thinking.

Where to from here :confused:

I did not listen to my own safety net, we hit peak oil in 2005, catch 22.

Peak oil = recession, followed by demand destruction.

Will the States recover, probably not in our life time.:( They ceased being a net exporter of oil in 1970, think about it :rolleyes:

[Huang Chung]

Tricha...I think your agrument is a few sandwiches short of a picnic :rolleyes:.

[JBmurc]

hi strat,dow futures up 25,means nothing.there is a lot of data from usa this week,i see the whole week being volitile,canada market holding well and prob best comparison to oz resource sector,but lets not kid ourselves,if the usa data is downtrending we could be looking at a retest of 5200 on the oz all ord.too early to say.obviously best sectors are energy now but i see oil price bubble bursting ,give it a few months.prob back to $100 barrel,maybe $80.still very good for investors and good for economies.tuesday is only one day,the data over this week may better define the trend.i dont hold confidence in the usa economy but its the old argument of how the resource sector will progress despite the usa.for what its worth imho ,energy stocks will see us doing well for 08,cheers pago

Yeah I have to agree with pago some sectors like energy will stay strong maybe not their SP like what we've seen but their underlining cashflows while others fall ,in Aus dollar terms oil price only about 20% of its peak
great reading everyone points of views on their current positions in the sharemarkets uncertainties,Personal I will have cash on hand for investment over the next couple weeks as I'm a still confident on world energy needs going forward and even though I should have sold on stop-losses I'm still confident to hold -STX,PPP,NZO,IPM,PENO,OGC simply because I believe selling at current SP levels selling would be stupid esp. the first 4 as they have very strong cash flows, low debt etc also protection of losses also helps overcome the market fear(I trade within a LAQC)
I'm currently feeling very greedy in this time of mass market fear---

-In my greed -CXC, PPP , PSA ,silver blln- will be add to the portifilo at low levels

Also as I still have funds in my CFD account -daytrading bluechips have been very profitable

[tricha]

Tricha...I think your agrument is a few sandwiches short of a picnic :rolleyes:.

I truely wish it was Huang, a few sandwichs short of a picnic. :(

Sinking Rapidly Into Depression
by Martin D. Weiss, Ph.D. (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-10+MAM1107SPLIT1+ecravagna@hotmail.com)
http://images.moneyandmarkets.com/1107/martin-weiss.jpgThis is the crisis that will change the course of history.
Even before ivory-tower theorists have gotten around to officially calling it a "recession," the U.S. economy is already sinking rapidly into depression.
And even as the government has vowed to embark on a $700 billion spending spree to avert financial panic, over $1 trillion in wealth has been wiped out in just five days of stock and bond market declines.
Cheap credit, the lifeblood of the U.S. economy, has nearly vanished from the scene.
Borrowing from Peter to pay Paul — the norm for decades in the consumer and corporate world — is becoming next to impossible.
Greed has been replaced by fear; euphoria, by panic; trust, by suspicion.
Everywhere, we see vicious cycles of mutual financial destruction:


Falling prices driving homeowners to abandon their homes ... and fire sales on foreclosed homes driving prices into a steeper tailspin.


Strangled consumers falling behind on their credit cards ... and credit card losses compelling banks to choke the available credit for consumers.


Wall Street panic smashing Main Street business ... and Main Street business sowing the seeds for more Wall Street panic.
The probable consequences: Astronomical unemployment rates and intense hardship for millions of Americans; devastating losses for investors in almost every asset class; and, ultimately, deep depression and deflation (falling prices).
I wish that, somehow, this crisis could have been averted. But now that the bombs have been dropped, there's not much chance we can avoid the explosions that typically follow.
The U.S. government's giant bailout may buy some time and buffer some pain. But no matter how hard it may try, it cannot force banks to make risky loans or compel investors to buy sinking bonds. No government can repeal the law of gravity. No force can turn back the clock.
But you and I will get through this — together.
My team and I have everything we need to continue our operations in any foreseeable disaster. We will be here to guide you through thick and thin. And when it's all over, we will be ready to start anew, hopefully on a steadier, more wholesome path.
This Is Not the End of the World;
It's Just the End of a Crazy Era.
Our country has a cornucopia of resources and a wealth of knowledge. Even after a great fall, we will still have the elements for a great recovery.
Inevitably, this decline will deliver severe financial losses to most of those who endure it. But it can also deliver long-lasting benefits to all those who survive it.
If I'm right about the ultimate outcome, burdensome debts will be liquidated. Wild spending will be replaced with prudent saving. Unaffordable luxuries could give way to affordable bargains. And after the worst is over, thousands of new, innovative companies will burst onto the scene with clean balance sheets and a new vision.
Therefore, throughout our journey together — regardless of how dark the tunnel may appear — always remember the benefits. Relax your reactive impulses. Breathe what we trust will be a new atmosphere of collective sacrifice. Let time work its wonders.
But Don't Expect a Recovery To Come Easily or Quickly.
The Deepest Declines of All Are Still Dead Ahead.
A recovery certainly won't come from Washington's $700 billion bailout boondoggle. It's too little, too late to avert a debt collapse. At the same time, it's too much, too soon for all those who will be asked to pay for it.
For the evidence, see our white paper submitted to Congress on September 25 (http://www.moneyandmarkets.com/files/documents/Final-Bailout-White-Paper.pdf). The highlights:


The FDIC's list of problem banks includes only 117 U.S. institutions with assets of $78 billion. But the list has a fatal deficiency:



It did not include any of the large banks that have failed or been forced to merge this year.


Our list did. And that list shows there are 1,479 U.S. banks and 258 thrifts at risk of failure with total assets of $3.2 trillion, 41 times more than estimated by the FDIC. This number alone illustrates the shock and awe ahead for anyone expecting the new bailout law to bring about a real recovery.



The government seems to assume that our debt problems can be resolved by focusing on banks with financial assets gone bad. But the reality is that bad debts are everywhere:



At Fannie Mae, Freddie Mac, Ginnie Mae and other government agencies, $5.4 trillion in residential mortgages continue to rot.


Beyond residential mortgages, there are $2.6 trillion in commercial mortgages.


And beyond all mortgages, there are another $20.4 trillion in consumer and corporate debts — all subject to the same kind of surging delinquency rates we saw in subprime mortgages.



The government's bailout plan is designed to help clean up debts that have gone bad so far. But what about debts that turn sour from this point forward? Do our leaders assume the economic decline is going to stop on a dime? Don't they see that the decline is actually gaining momentum?


The bailout plan does nothing to address the $182 trillion maze of bets called derivatives. Nor does it take into consideration the fact that our nation's three largest banks — Citibank, JPMorgan Chase and Bank of America — are exposed to far more credit risk on their derivatives than they have in capital.


In sum, even after committing $200 billion for Fannie-Freddie, $85 billion for AIG, $25 billion for the auto industry, $700 billion for the Wall Street bailout, another $150 billion tacked on to the plan for pork and tax cuts, plus hundreds of billions in emergency loans from the Fed ... the government's rescue is still too small to cope with the tens of trillions of souring debts and bets in a sinking economy.


At the same time, the government's bailout commitments made so far — now exceeding $1.5 trillion — are already too much for those who will be asked to foot the bill or lend the money:



Even before these bailouts, the Office of Management and Budget (OMB) projected the 2009 federal deficit would rise to $482 billion.


Now, in just three weeks, the government has effectively chartered a course to triple that deficit.



In practice, the only way the government can try to raise that much money is by borrowing it. And to the degree that it does so, the only possible outcome is huge upward pressure on the interest rates that consumers, corporations and local governments have to pay for mortgages and loans. That can't make the debt crisis go away. It can only make it many times worse.
The Day of Reckoning Is Today —
Monday, October 6, 2008
Today is the day we'll learn whether the global financial markets will welcome the giant bailout plan with open arms ... or reject it with grim disdain.
If the latest events are any indication, it will be the latter, and the markets will crash like never before. Look at what's happened in just the past 72 hours:
First, immediately after the great bailout plan was signed by the president on Friday, the Dow plunged 474 points from peak to close. Not exactly a welcome reception!
Second, on Saturday, the previously agreed-to bailout of Germany's second biggest property lender, Hypo, fell apart at the seams, sending government officials scurrying to come up with an alternative deal. But the amounts needed are huge: 20 billion euros by the end of next week, 50 billion euros by the end of the year, and as much as 100 billion euros by the end of 2009.
Third, UniCredit — the biggest bank in Italy, whose shares have been plunging lately — is trying to raise $9 billion in capital to stay afloat.
Over the weekend, even the country of Iceland has been shopping for a bailout.
Yes, stock markets can sometimes behave in perverse ways — plunging on good news, rallying on bad news and confusing the pundits on virtually any news.
But the world's vast credit markets rarely lie. These are the markets where corporations and governments sell their bonds, notes and short-term paper to investors in exchange for cash.
These markets are far larger than the stock markets. And they are driven by traders who typically are among the first to see through the hype and fluff that pours daily out of Washington or Wall Street.
Join me for a sprint on my time machine — this time, going back just three weeks. Then follow along through each major turning point, and you'll see what I mean ...
New York City, September 15. Officials from the Federal Reserve and the Treasury Department have called together the heads of the biggest financial companies over the weekend. Their mission: To avert the inevitable meltdown that would ensue if two of Wall Street's largest firms — Lehman Brothers and Merrill Lynch — went down.
Merrill has a buyer; Lehman doesn't. So a Lehman bailout is on the table, following the pattern of the Bear Stearns bailout six months earlier.
But after back-to-back handouts week after week, some officials are fed up; they're losing their appetite for more of the same. Instead of a Bear Stearns-type rescue, a vocal minority is arguing forcefully to make an example of Lehman, to let the firm fail.
"Let's teach 'em a lesson," they say. "Let's send the message to complacent investors that risk in the marketplace is not dead after all."
They assume the financial system is strong enough to withstand the shock. But they assume wrong ...
http://images.moneyandmarkets.com/1107/lehman-bros-boxes.jpgSeptember 16. It's Monday morning. In one fell swoop, 158 years of Lehman Brothers' history has been extinguished. Employees are saying their farewells. On 7th Avenue, dozens are carting off boxes of personal belongings.
As these images are transmitted via the Internet and the wire services to the far corners of the financial world, there's a vague sense that something different is happening: For decades, an invisible glass shield called "trust" has protected global financial markets. But on this day, that shield has been shattered.
Suddenly, we have crossed into a new world of mistrust. Instantly, lenders have lost respect for borrowers, banks have lost confidence in fellow banks, and buyers are suspicious of nearly all sellers.
Several pivotal debt markets — already weakened by the on-again, off-again credit crunch that began over a year ago — are now plunging into a new, more acute phase of panic.
The market for commercial paper, the primary source of quick cash for thousands of corporations, is going into convulsions. A giant money market fund is "breaking the buck" — falling below $1 per share, due to huge losses in its Lehman Brothers' commercial paper.
Libor, the international standard for interest rates that banks pay each other for short-term loans, is surging. The cost of credit default swaps, a type of insurance against big company failures, is skyrocketing.
While world credit markets are in turmoil, U.S. government officials are in shock. Their "let's-teach-'em-a-lesson" theory is dead at birth ... and in its place, and a new "Mother of All Bailouts" is in gestation.
http://images.moneyandmarkets.com/1107/bernanke-bush.jpgWhite House Rose Garden, September 19. In 1930, even on the brink of the Great Depression, America's highest officials dared not warn the public of a financial panic.
But today, appearing before the press in the Rose Garden, the nation's three most powerful economic decision-makers — President Bush, Treasury Secretary Paulson and Fed Chairman Bernanke — are doing just that: They're warning of a financial meltdown.
They're deliberately taking a monumental risk with the public psyche, and they're doing so for a single-minded reason — to help justify the greatest government rescue of all time: $700 billion, or nearly five times more than the entire economic stimulus package that came — and went — earlier this year.
Why are they doing it today of all days? Why are they in such a great hurry? Because they can see, with their own eyes, the seizures in the credit markets. By announcing a mega-bailout, with all the fanfare and theatre they can muster, they hope they can restore confidence in the credit markets and stem the flood of panicky selling.
But despite the high drama, and despite knee-jerk euphoria in the stock market, the credit markets barely blink. The credit convulsions continue unabated. Trust is not restored. Confidence continues to sink.
http://images.moneyandmarkets.com/1107/window.jpgCapitol Hill, Sunday, September 28. After a long weekend burning the midnight oil, Congressional leaders of both parties are announcing a "done deal" with "solid bipartisan support."
New York, September 29, 11 AM. Despite the "near certainty" of a deal in Congress, credit market investors are still not impressed. The Libor rate is still rising. The cost of credit default swaps is still surging. Commercial paper buyers are still in hiding.
Same day, 1:15 PM. Just a few minutes ago, in stunning defiance of President Bush, the House of Representatives has rejected the bailout package by a vote of 228 to 205. The news is exploding on the floor of the New York Stock Exchange like a neutron bomb, sending the Dow into a 778-point tailspin for the day and throwing credit markets into virtual cardiac arrest.
Thursday, October 2. While Congress scrambles to recover, Fed Chairman Bernanke — along with his counterparts at foreign central banks across the globe — have jumped in to try to fill the gaping hole left by the U.S. Congress' failure to pass the bailout legislation. In just a few short days, they've injected an astounding $1 trillion into the global financial system, doubling, tripling and quadrupling their already-extraordinary prior infusions during previous bouts of the 13-month-old credit crisis.
But even these huge amounts aren't enough. Several foreign banks are falling by the wayside. Trust continues to erode. Credit continues to vanish from the marketplace. More seizures sweep through the global credit markets.
http://images.moneyandmarkets.com/1107/bush.jpgWashington, Friday, October 3. Congress has stuffed the rescue bill with pork ... Republicans and Democrats who opposed the legislation on Monday have caved in ... the House has voted "aye" ... and the President has rushed to sign it into law.
"Now, finally," they say with a great sigh of relief, "the markets will give us their blessing. Now, finally, we can put this debt crisis behind us."
Ironically, however, even after all the political arm-twisting and even after all the added billions, the package still doesn't seem to be enough to calm credit markets. Quite the contrary, the Libor rate has risen even further. The cost of credit default swaps continues to make new highs. Commercial paper buyers continue to recoil in horror.
Surprising as it may seem, despite the greatest central bank money infusions ever ... despite the largest government bailout package of all time ... the credit crisis is not ending.
Back To the Present
You read these words on your screen or in a printout. And you say: "All this is unbelievable. Give me proof." OK. Here it is ...
Proof #1. Bloomberg (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-3+MAM1107SPLIT1+ecravagna@hotmail.com), October 3: "The market for commercial paper plummeted the most on record as banks and insurers were unable to find buyers for the short-term debt amid the worst U.S. financial crisis since the Great Depression. Commercial paper outstanding tumbled $94.9 billion."
Proof #2. Bloomberg (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-2+MAM1107SPLIT1+ecravagna@hotmail.com), also October 3: "Leveraged loan prices plunged to all-time lows ... and even the safest company bonds suffered the worst losses in at least two decades as investors flocked to Treasuries. Credit markets have frozen and money-market rates keep rising even after central banks pumped an unprecedented $1 trillion into the financial system."
Proof #3. Citigroup is in danger:


TheStreet.com Ratings (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-19+MAM1107SPLIT1+ecravagna@hotmail.com) has just downgraded the Financial Strength Rating of Citi's main banking unit from C- (fair) to D+ (weak).


Separately, Weiss Research finds that Citigroup's global credit card portfolio — 185 million accounts with $201 billion — is in jeopardy with credit losses mounting. And nearly every single category of consumer loans is suffering dramatic increases in delinquency rates (Citigroup's June 30 Quarterly Financial Data Supplement (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-5+MAM1107SPLIT1+ecravagna@hotmail.com), pages 10 and 15).
Proof #4. Silent bank runs — mass withdrawals by institutional investors — are hitting some major banks, accelerating the credit crisis even more:


At Washington Mutual, the biggest bank failure in history, the Office of Thrift Supervision (OTS) reports $16.7 billion in cash withdrawals in just nine business days (MarketWatch (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-6+MAM1107SPLIT1+ecravagna@hotmail.com)).


At Wachovia, when the bank opened on Monday, it's reported that it would have had no other source of liquidity if the FDIC had not stepped in to arrange a shotgun marriage with another major bank (Charlotte Observer (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-4+MAM1107SPLIT1+ecravagna@hotmail.com)). But which is the groom — Citigroup or Wells Fargo? Based on a judge's decision this weekend, the answer is now up in the air, another source of uncertainty for investors and depositors.
Proof #5. In a thinly veiled attempt to stem the bank runs, the FDIC is changing its rules: The new bailout law now includes a jump from $100,000 to $250,000 in FDIC coverage limits for depositors.
But it's unlikely this will be enough to significantly slow the outflows from banks. Reason: Too many banks may be relying too heavily on large, uninsured deposits that are not affected by the change. (For the data, see Weiss Research's latest press release and report, "Many Banks and Thrifts Overly Reliant on 'Hot Money' Deposits (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-9+MAM1107SPLIT1+ecravagna@hotmail.com).")
All this evidence leads you to a single obvious conclusion: The crisis is gaining momentum and worsening at an even more rapid pace.
Perhaps not so obvious is whether the long-term outcome might be ...
Inflation or Deflation?
Clearly, ours is a debt-addicted society.
Without debt, U.S. consumers, corporations, local governments and, ultimately, even the federal government must cut spending drastically, driving down demand.
And without demand, most prices for goods and services are bound to plummet.
That's deflation ... unless, of course, the government can somehow end the debt crisis ... unless the Fed can print money in unlimited amounts ... and unless that money turns the threat of deflation into the specter of hyperinflation.
Which will it be? Watch the credit markets. As long as they continue to contract, they're telling you that ...

This collapse is bigger than any government: Despite the inflationary spending and bailouts, ultimately, DEFLATION is the more likely outcome.
If so, that implies the real possibility of further declines in some of the markets that previously were among the biggest winners, including foreign currencies, foreign stock markets and industrial commodities.
Nearly two months ago, in his August Real Wealth Report, Larry Edelson explained it this way: "The U.S. economy is dealing with a pricing collapse. It's a deflationary spiral in a global recession that will lead to depression" — all in the broader context of major, long-term bull markets in commodities.
Regardless of inflation or deflation, however, there's always money to be made in a great crisis like this one — on the way up since the early part of the century ... on the way down in a period of deflation ... and on the way up again once the deflationary period has passed.
And no matter happens in the months ahead, your number one priority right now must be safety and liquidity.
Move most of your money into the safest, most liquid investment on the planet — 3-month T-bills bought directly from the Treasury or a Treasury-only money market fund.
For specific instructions on how to buy short-term Treasuries, see my September 30 report, "Your Last Chance to Act (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-13+MAM1107SPLIT1+ecravagna@hotmail.com)."
And for answers to all your urgent questions, join our emergency online Q&A session this week.
The time: Friday, October 10 at 12 Noon Eastern Time.
Promotion and sales content: None.
Free registration: Click here. (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-1+MAM1107SPLIT1+ecravagna@hotmail.com)
More information: See "Why I'm Deeply Concerned and What I'm Doing (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-14+MAM1107SPLIT1+ecravagna@hotmail.com)."
But beware: If you don't reserve your spot ahead of time right now, you could miss it.
Good luck and God bless!
Martin




About Money and Markets
For more information and archived issues, visit http://www.moneyandmarkets.com (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-7+MAM1107SPLIT1+ecravagna@hotmail.com)
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com (http://www.gliq.com/cgi-bin/click?weiss_mam+110701-7+MAM1107SPLIT1+ecravagna@hotmail.com).

[STRAT]

And after the worst is over, thousands of new, innovative companies will burst onto the scene with clean balance sheetsThis is my fav bit from that article but shouldnt it read ??

"And after the worst is over, thousands of new, innovative companies will burst onto the scene with clean balance sheets and being run by the same dodgy bastards that ran the old companies"?

[tricha]

Some people are slow, what the rest of the world knew long ago and personally I do not think there is a come back for the US inside the next 20 years.

property screwed
banks screwed
airlines screwed
car companies screwed
investment companies screwed


Where this leaves OZ will depend on China :eek:
US now in recession, says Fed



15th October 2008, 10:30 WST


The United States has entered a recession, the head of the San Francisco branch of the Federal Reserve, the nation’s central bank, said today.

“The recent flow of economic data suggests that the economy was weaker than expected in the third quarter, probably showing essentially no growth at all,” said Janet Yellen in an address in Palo Alto, California.

“Growth in the fourth quarter appears to be weaker yet, with an outright contraction quite likely,” she said.

“Indeed, the US economy appears to be in a recession.”

AFP

[tricha]

Soros slams Paulson’s rescue package

13th October 2008, 6:45 WST

Billionaire businessman George Soros has criticised the US administration’s “ill-conceived” handling of the global banking crisis, reserving especially harsh words for Treasury Secretary Henry Paulson.
“This US700 billion dollar plan, if it had been better constructed, if they had thought about it earlier, if they would deal with the housing situation - the damage would be less,” Soros told CNN in an interview broadcast Sunday.
“The Paulson plan was ill-conceived,” he said.
“It was basically the same kind of financial engineering that got us into the trouble that they wanted to use for getting us out of it. And it was just the wrong thing,” he said.
The legendary financier added: “The market is now collapsing. He just is not able to ... come to terms to what needs to be done.”
Soros, one of the world’s richest men, also had criticism for the overindulgence of US consumers.
“We have gotten into the habit of consuming six to seven per cent more than we are producing. And that game is finished. That was part of the bubble,” he said.
“America, as the centre of the globalised financial markets, was sucking up the savings of the world. You know, China was buying government bonds.
“This is now over. The game is out,” he said, adding that the time has come for “a very serious adjustment” in Americans’ consumption habits.
A Hungarian-born US citizen and fabled hedge fund manager, Soros has been active in US politics and is a fervent backer of Barack Obama for the US presidency, after backing Democratic Senator John Kerry for the White House in 2004.
Famous for speculating against the British pound in 1992, he is chairman of Soros Fund Management and the Open Society Institute.
AFP

[Lizard]

Although Soro's actually said that last Sunday and was talking about the previous bail-out plan, not the most recent developments. At the same time, Soros also said this:

"The policy direction now is much more productive than it was a week ago," Soros said.

Financial markets, which plummeted last week amidst uncertainty about whether the meltdown would lead to a deep global recession, should rebound as a result, Soros said.

Associated Press (http://ap.google.com/article/ALeqM5iksaetZG9ISnBrjOGcEpsgC-uo8wD93P998G0)

[tricha]

Although Soro's actually said that last Sunday and was talking about the previous bail-out plan, not the most recent developments. At the same time, Soros also said this:


Associated Press (http://ap.google.com/article/ALeqM5iksaetZG9ISnBrjOGcEpsgC-uo8wD93P998G0)

Its now 2009 and nothing has changed me to alter the Thread title.

I'm still calling it a depression for the USA, it's coming, I guess the US will call it in about 9 months time.
What happens to the rest of the world ? where does it leave the ASX :confused:

I've just changed my portfilo around, gone to 50% cash on this suckers rally and the rest mostly cash cows. My tolerence for high risk is gone. Reporting season out soon and I do not expect any good news.

Can anyone out there find some good news that says otherwise ?

P.S U will have to excuse me, the news off BBC business got a bit mixed, basically shows the overall big picture, worldwide.
And sorry for the doom and gloom, but is is as I personally see it unfolding.

Index data delayed 30 min.http://www.kitco.com/images/down.gif DJIA8599.2-143.28http://www.kitco.com/images/down.gif NASDAQ1571.59-45.42http://www.kitco.com/images/down.gif NIKKEI8,836.80-39.62http://www.kitco.com/images/down.gif RUSSELL481.30-20.71http://www.kitco.com/images/down.gif NYSE5703.69-133.45http://www.kitco.com/images/up.gif USD (http://javascript<b></b>:NewWindow('/glossary/usd.html','AU','top=50,left=200,width=420,height=4 20,scrollbars=yes');)82.48+0.84http://www.kitco.com/images/down.gif Crude Oil (http://javascript<b></b>:NewWindow('/glossary/crude.html','AU','top=50,left=200,width=525,height =570,scrollbars=yes');)40.36-1.34Charts... (http://www.kitconet.com/indexes.html)




http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/media/images/45362000/jpg/_45362595_job226.jpg (http://news.bbc.co.uk/2/hi/business/7820164.stm)http://newsimg.bbc.co.uk/shared/img/o.gifUS job losses hit record in 2008 (http://news.bbc.co.uk/2/hi/business/7820164.stm)
More US workers lost jobs in 2008 than in any year since World War II, with employers axing 2.6 million posts.
Why is unemployment rising? (http://news.bbc.co.uk/2/hi/business/7820128.stm)
Obama urges action on economy (http://news.bbc.co.uk/2/hi/business/7818347.stm)
US deficit 'to hit $1 trillion' (http://news.bbc.co.uk/2/hi/business/7816035.stm)
http://newsimg.bbc.co.uk/shared/img/o.gif
http://newsimg.bbc.co.uk/media/images/42471000/jpg/_42471299_keyboard66.jpg (http://news.bbc.co.uk/2/hi/business/7821087.stm) http://newsimg.bbc.co.uk/shared/img/o.gif Indian IT scandal boss arrested (http://news.bbc.co.uk/2/hi/business/7821087.stm)

The founder of scandal-hit Indian software company Satyam is arrested two days after he admitted falsifying the firm's accounts.

http://newsimg.bbc.co.uk/shared/img/o.gif
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/media/images/45359000/jpg/_45359599_carsgetty66.jpg (http://news.bbc.co.uk/2/hi/business/7819569.stm) http://newsimg.bbc.co.uk/shared/img/o.gif Spanish industrial output plunges (http://news.bbc.co.uk/2/hi/business/7819569.stm)

Production in Spanish factories fell by 15.1% in November, the biggest fall on record, as the downturn gathers pace.

http://newsimg.bbc.co.uk/shared/img/o.gif

[Dr_Who]

Aussie is looking very ugly.

Down 4.5%! :eek:

[macduffy]

It's okay, tricha and doc.

We don't hold you personally responsible!

:)

[Dr_Who]

Hey McDucky, you crack me up ..LOL.. this place would be boring without you.

You know the difference between Africa and America?

In Africa the leaders and the wealthy dont hide the fact that they are stealing from the country. In America they use the combination of Bernankie and complex financial instruments to steal from mum, dad and the nation.

[tricha]

It's okay, tricha and doc.

We don't hold you personally responsible!

:)

Thanks Macduffy:)

This is written by a dedicated gold bug, unfortunately if you are a realist like me ............................. :confused:


Another Great Depression



I don’t like to start any new year on a gloomy note. I am by nature an optimist, but I am also a realist who readily faces facts. Right now those facts are not very pretty and suggest to me that the world has entered into another Great Depression. Here are some shockers about the US economy that are worth pondering.
The National Bureau of Economic Research reckons that the present recession began in December 2007. In only one month since then has the US economy not lost jobs, but worryingly, the job losses are occurring with increasing momentum suggesting that the economy is spiraling downward.
Last week the US government announced that the unemployment rate rose this past December to 7.2% from 6.8% the month before. The US economy lost 2.6 million jobs in 2008, of which 1.9 million were lost in the past four months. Of these, 524,000 were lost in December alone.
Importantly, there are clear indications that employment will drop further. Companies have been cutting back on hours worked, which reached a record low in December of 33.3 hours per week. This measure is a leading indicator because companies first cut back on hours worked before they cut jobs. Also, layoffs are growing. The Wall Street Journal reports: “The new year has brought no letup on layoffs, as employers have already announced more than 30,000 cuts.”
The monthly unemployment report is prepared by the Bureau of Labor Statistics <http://www.bls.gov/news.release/empsit.nr0.htm (http://www.bls.gov/news.release/empsit.nr0.htm)>. It reveals that the number of unemployed has climbed over the past year by 3.6 million to 11.1 million, but the real numbers are much worse when looking through the government sugar-coating in these reports. As The Wall Street Journal explains it: “While the official unemployment rate is 7.2%, a different figure that includes discouraged workers who have dropped out of the labor force and those working part-time because they can't find full-time work hit 13.5% in December. That was nearly a full percentage point higher than in the previous month and up from 8.7% at the end of 2007.”
While a 13.5% unemployment rate is shocking, the truth is even worse because the WSJ is still relying upon government reports. To get the unadorned picture, we need to turn to private economists, and I reply upon the work of John Williams of Shadow Government Statistics <http://www.shadowstats.com/ (http://www.shadowstats.com/)>, who presents in his latest report the true picture of the dire unemployment situation: “During the Clinton Administration, ‘discouraged workers’ those had given up looking for a job because there were no jobs to be had were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, as estimated by the SGS-Alternate Unemployment Measure, rose to 17.5% in December from 16.6% in November.”
Unemployment is the key measure that signals whether or not a depression has begun, and by the SGS measures we are rapidly approaching the 25% unemployment rate usually mentioned as the most important signpost marking the depths of the Great Depression. That high rate of unemployment cut a wide-swath of misery through the American population.
Given the current 17.5% rate of unemployment, it would appear that I am not far off the mark to suggest that we have entered another Great Depression, and I am not alone in my thinking. Others who are more attuned to the economic situation see it the same way as I do.
For example, the following quote is from an OpEd piece by Nobel Laureate Paul Krugman that was published in The New York Times on January 5th: “The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.”
I agree, which is unusual because I don’t often agree with Mr. Krugman. But not only do I think his observation about another Great Depression is accurate, but I also agree with another key point of the analysis in his article.

Namely, Mr. Krugman observes: “In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades. Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply...It turns out, however, that preventing depressions isn’t that easy after all.”
Not only is it not “easy”, it is impossible, and the reason is simple. Ludwig von Mises explained this phenomenon in 1912 in his seminal work, “The Theory of Money and Credit”.
Basically, banks make too many loans creating a ‘boom’ that is built upon an unsustainable and shaky foundation of credit. Eventually, the bankers and their borrowers realize that these extensions of credit and the mountain of borrowing that resulted from it was imprudent, and they then seek to improve the dire state of their overleveraged balance sheets. The ‘bust’ occurs because the loans made during good times inevitably lead to bad investment decisions that appear sound only within the illusory prosperity of the boom.
In short, prosperity comes from hard work and savings, not borrowed money and consumption. Unfortunately, hard work and savings have been in short supply, and economies around the world are now feeling the consequences.
For decades the global economy in general and the US economy in particular have enjoyed the boom. They are now in the throws of the bust, and this where Mr. Krugman and I part company. He believes that this current bust can be avoided by more of the same – government spending.
He says: “Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy – large-scale deficit spending by the government – is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.”
This wrong-headed thinking is what put the US economy – and indeed, the global economy – in this mess in the first place. Therefore, the cure cannot possibly come from government spending, all of which is going to come from debt – some $2 trillion of it that is estimated the government will borrow this current fiscal year.
If Mr. Obama follows this advice – and he has clearly indicated that he will – the US government will have gone ‘to the well’ once too often. It is foolhardy to think that the federal government’s resources and borrowing capacity are unlimited. They are not, and more to the point, they have already been exceeded. It’s just that too few people today recognize this reality, which is what always happens in bubbles. People accept certain conventional wisdoms without question or even any cursory analysis. For example, consider the following.

Circa 2000 – It doesn’t matter that Internet stocks are trading at multiples of revenue because ‘these companies are going to change the way we do business’.
Circa 2005 – It doesn’t matter that people are borrowing 125% of the home purchase price because ‘the price of homes always goes up’.
Circa 2009 – US government ‘T-bills and T-bonds are risk free’, so the federal government can borrow unlimited amounts of money. This example of bubble-mentality thinking not only ignores the defaults by countless governments, it also ignores the history of US sovereign defaults (gold in 1933 and silver in 1967) as well as the continuing debasement of the sorry US dollar from inflation.

It is questionable whether Keynesian dogma ever worked, but regardless, one thing is clear. Increased borrowing and spending by an overleveraged government in an overleveraged country that is already the world’s largest debtor will not make the economy strong or lead to an economic revival. It will lead to a collapse of the currency, just like it has done in dozens of countries throughout the world. By pursuing defunct Keynesian dogma the new administration is ringing the bell that signals the death knell of the dollar.
In short, the biggest bubble of them all – that the US dollar is ‘money’ – is about to pop. The US dollar is on the path to the fiat currency graveyard, and will soon get there.
Not only does the US have problems, but like the 1930s, they are global. While it had been hoped that China would be the shock-absorber of the world, both its exports and imports are falling from year-ago levels as its manufacturing activity stalls. Germany is also faltering, as is much of Europe. There is another similarity to the 1930s.
Most people mark the beginning of the Great Depression with the stock market crash in October 1929. I think it actually began over a year later with the collapse of the Bank of the United States in December 1930, a commercial bank based in New York City. Its failure turned an economic downturn into a full-fledged panic that rocked the American banking system to its core, which in turn sent ripple effects throughout the world, just like the collapse of Lehman has done.
Is there some good news for 2009? There are two things that should bring some cheer.
First, the plummeting price of crude oil to $40 a barrel has put some $200 billion back into the pockets of Americans. That may help economic activity somewhat or at the very least, help repair household balance sheets.
Second, gold is likely to have another good year as the world increasingly wakes up to today’s realities. As they do, they will also come to understand that gold is money, which is a good thing to hold any time, but particularly during economic and monetary turmoil.

by James Turk

[kazza]

Great post tricha I totally agree with everything you said. especially the Quote:

"In short, prosperity comes from hard work and savings, not borrowed money and consumption"

I prefer to be optimistic also but as you say you can't just ignore the facts. What is the big deal about a collapse in the US dollar? it might mean they have to start consuming within their means which has to be a good thing.

There are definite similarities with what is happening now and the start of the great depression - Worldwide stock market crash, Banking failures, Ever increasing unemployment. Except this time there is a property crash in the mix also.

Society is a lot different now than back then though so IF America is in a depression how are they going to get out of it this time? it took a world war last time!!

as you say borrowing and throwing more debt on the flames isn't going to work. The fact is they (and us) are going to have to take it on the chin, do our penance for the next 1-2-5? years as a consequence of living beyond our means for too long and learn from our mistakes (yeah right).

[MrDevine]

Kazza, what we forget is the America has a LOT of bombs –*this gives you a few chips when it comes to changing the game, which is what I think they will do, or are doing now.

The US has changed the money system before, when Nixon made the US dollar the reserve currency when he took it off the gold standard (Bretton Woods II, btw who setup Bretton Woods I – the US), they'll change it again.

One fault in that post from Tricha, is that it's another gold bug story. Every gold bug out there is keen for gold to go sky high, but guess what? Its priced in US dollars. Until you can exchange gold again, its a moot point what price it is, as the US dollar will be inflated in correlation.

I sincerely hope we're not headed to the Second Great Depression, as you mentioned, the first one caused another world war. I think what differs to this recession is the unprecedented amount of money injected into the system by the world banks. an low low interest rates, It will soon make no sense to have cash on call as you'll be losing money doing nothing. Do not under estimate America, they will be back. The country wasn't built on pessimism.

Also, everybody keeps talking about the 'Japan' problem, last time I looked it seemed the Japanese have some of the most interesting architecture in the world, pay good salaries, produce great cars and can buy up to the minute consumer goods, what's the problem there?

Mr D.

Mr D.

[tricha]

"In short, prosperity comes from hard work and savings, not borrowed money and consumption"

I prefer to be optimistic also but as you say you can't just ignore the facts. What is the big deal about a collapse in the US dollar? it might mean they have to start consuming within their means which has to be a good thing.

There are definite similarities with what is happening now and the start of the great depression - Worldwide stock market crash, Banking failures, Ever increasing unemployment. Except this time there is a property crash in the mix also.

Society is a lot different now than back then though so IF America is in a depression how are they going to get out of it this time? it took a world war last time!!

as you say borrowing and throwing more debt on the flames isn't going to work. The fact is they (and us) are going to have to take it on the chin, do our penance for the next 1-2-5? years as a consequence of living beyond our means for too long and learn from our mistakes (yeah right).

U R onto it Kazza, a realist. The big question is how one is to protect themselves in 2009 in the ASX.:confused:

Mr Devine - give us one bit of good world news, just one. ???, The ASB business report is shocking today, just shocking.



Credit markets suggest shares can fall even further






David Uren, Economics correspondent | January 19, 2009

Article from: The Australian (http://www.theaustralian.news.com.au/)
SHARE prices still have a long way to fall, if credit markets are any guide.
Although credit markets have improved slightly over the past eight weeks, they remain in the worst shape since the last downward lurch of the Great Depression in 1937.
Since bonds rank ahead of equities in default, equities should be underperforming the debt markets. In the event of default, there is likely to be nothing left for shareholders.
However, share markets have been playing catch-up ever since the credit crisis erupted in the second half of 2007.
For the first nine months or so, share investors tried to pretend the chaos in credit markets had nothing to do with them. The S&P/ASX 200 was only a fraction below 6000 as recently as mid-May, barely 3 per cent down from its level in August 2007 on the eve of the credit crisis. Equities have tumbled since, but over the past two months investors have been scouring for value.
Although the banks are still untouchable, stocks such as CSL and Crown have rallied, as the market as a whole seemed to find a floor. More bad news was expected but many felt it was priced in.
This mood was broken last Thursday as the drumbeat of world recession hit a new decibel level, sending markets tumbling around the world.
Credit analysts believe equities markets are underestimating the risk of widespread default. Moreover, equity markets cannot stage a recovery until financial markets resume normal functioning.
Some neat research by UBS interest rate strategist Matthew Johnson compares credit market spreads and share prices since the 1920s.
A good measure of the risk premium in debt markets is the spread between Moody's Aaa rated bonds and Baa rated bonds, for which there is data going back to 1919.
As the chart shows, the risk premium in debt markets has closely tracked the (inflation adjusted) Standard & Poor's 500 index over the past 80 years.
Johnson notes credit spreads have never widened so far and so fast as over the past 18 months, although they were ultimately wider during the Depression. He believes the current cycle most closely resembles that of 1937.
If the relationship still holds, it suggests either that credit markets are about to stage a remarkable recovery or that share markets have only fallen about half the depth they have yet to plumb. Could the improvement in credit markets in recent months be the early seeds of that recovery?

The spread between interbank lending rates (Libor) and Treasury bills narrowed to under 100 basis points last week for the first time since before the Lehman Brothers collapse (though it didn't stay there long, rising to 107 basis points on Friday).

In the immediate aftermath of the collapse it reached a peak of 463 basis points.

The cost of insuring against bonds defaulting has also fallen.

The Itraxx measure of the pricing of credit default swaps for the 25 top Australian companies hit a high of 390 points last October but dropped as low as 283 points by January 7, although it has started to rise again, reaching 313 points late last week.

There has been an increase in the deal flow, accompanying the easing in market tension.

The US commercial paper market, which is the main source of working capital for US business, has risen from a low of $US1.5 trillion last October to $US1.8 trillion now.

In both the US and Europe, there have been a number of corporate debt issues by sub-investment grade companies, which was unthinkable late last year.

Aberdeen Asset Management credit analyst Stuart Gray says investors are accepting non-guaranteed issues from major corporates, such as WalMart, at around 170 basis points above the swap rate, which is not a large premium over the going rate for guaranteed bank bonds in the US, which is about 50 basis points above swap.

The Australian banks have been making the most of the thaw in the markets, and the government guarantee, pushing out $38 billion in guaranteed long-term funding.

Showing fine chutzpah, ANZ has obtained a government guarantee for a medium term euro-note program with a maximum value of $US50 billion. Although markets would complain of indigestion long before this limit was reached, it sits as a contingent liability on the Government's balance sheet, not far short of the size of its total commonwealth bond issuance.

The Australian bank issues have been popular among global investors, as they are getting government guaranteed paper with a yield 200 basis points or more above the commonwealth bond rate.

Deutsche Bank fixed-income strategist David Plank says markets have stopped pricing in a "financial Armageddon", with credit default swaps last year indicating a disaster far worse than the Depression. However, it is still a long way from the pre-crisis world.

The problem for both credit and equity markets is that the global recession will give banks a whole new set of headaches. The banks' desire to conserve capital while exercising extreme caution with their lending will intensify as existing debts to the corporate world and householders go bad.

A negative feedback loop between the economic downturn and the weakened world banking system will keep credit markets in a state of distress during 2009.

Plank says that global credit markets are still priced for a very severe global recession, if not something close to depression.

"Credit analysts look at equities as at best fair value but not cheap. Over the next six months or so, we will continue to see an interaction between a share market that tries to convince itself that it is pricing in all the bad news and the continued flow of bad data."

[mark100]

I sincerely hope we're not headed to the Second Great Depression, as you mentioned, the first one caused another world war.

The depression wasn't the main reason for WWII. The controls placed on Germany following WWI was the main trigger.

[lakedaemonian]

The depression wasn't the main reason for WWII. The controls placed on Germany following WWI was the main trigger.

I'd have to agree it was the main trigger...but far from only.

It's a very interesting period of history.......that is poorly covered in school today.

My perception is that history presents the Depression as an insignificant footnote before WWII is covered...and fails to connect the many dots between the two.

The Bonus Army, General Butler, and the Business Plot are unknown to nearly 100% of Americans.

[kazza]

I'd have to agree it was the main trigger...but far from only.

It's a very interesting period of history.......that is poorly covered in school today.

My perception is that history presents the Depression as an insignificant footnote before WWII is covered...and fails to connect the many dots between the two.

The Bonus Army, General Butler, and the Business Plot are unknown to nearly 100% of Americans.

These are unknown to me also can you explain who/what they are?

[macduffy]

These are unknown to me also can you explain who/what they are?

Have a look on Google.
A great invention!

;)

[lakedaemonian]

These are unknown to me also can you explain who/what they are?


Military veterans protesting in Washington Dc during the Depression led to later famous Gen MacArthur and Major Patton to murder a number of them perceived as a threat by government

http://en.wikipedia.org/wiki/Bonus_Army

Marine Corps General Butler, one of very few people twice awarded the US Congressional Medal of Honor(US equivalent of the VC). Gen Butler informed Congress of a supposed plot by wealthy industrialists to overthrow President Roosevelt via military coup. Also wrote a book that quite possibly represents the first credible opinion on the problems/conflicts associated with defense industry.

He was a shoe-in for Commandant of the Marine Corps....but stepped on too many influential toes by publically disclosing the skeletons in the closet of democracy.

http://en.wikipedia.org/wiki/Smedley_Butler


Business interests approached Gen Butler and others to launch a military coup against President Roosevelt. The coup was never paunched but some speculate that it could have ended with fascism akin to Italy or Germany in the 1930's.

It is not even mentioned in 99% of history books......it's been largely forgotten.

http://en.wikipedia.org/wiki/Business_Plot

I'm a big fan of 20th century history as it pertain to where we are at and where we may be headed.

I think these things will bear relevance over the next 5 ish years as the global economy worsens.

The odds of a nationalistic/fascist coup occurring in a western nation in the next 5 or so years could be reasonably high, in my opinion.

It wasn't that long ago that it occurred on western fringes like Portugal, Greece, Brazil, Argentina, and Chile.

A couple more and bigger Icelands could trigger nastier things than just the massive riots now being seen in Greece and the newest Eastern European disciples.

Just my 0.02c

[kazza]

Thanks for that lakedaemonian, very interesting times alright.

[tricha]

Special Report

Obama’s Newer Deal

A special report from the editors of
The Casey Report
© 2008 Casey Research
Special Report
Obama’s Newer Deal

www.caseyresearch.com

- 1 -
www.caseyresearch.com - 2 - Special Report Obama’s Newer Deal
than the sharecroppers, who used the money to buy farm equipment that eliminated the need for the sharecroppers, sending thousands into deeper poverty.)
There was the National Recovery Act (NRA), which • attempted to create fair competitive practices and set minimum wages and maximum work hours.
And there were many more.
And then there was the Second New Deal in 1935. Its programs included:
Works Progress • Administration (WPA), which provided government employment on an unprecedented scale for the purpose of building highways, buildings, and bridges, as well as reforestation, urban development, and more. By 1943, when it officially terminated, the WPA had employed 8.5 million Americans. Given its tremendous size, it was inevitably plagued by waste, graft, and favoritism.
The Social Security Administration, too, was part of • the 1935 legislation.
From 1933 until the beginning of World War II, the New Deal legislation cost, in total, $500 billion in today’s dollars. As a lesson in macroeconomics, it reached a less than satisfying conclusion; we’ll never really know what the outcome would have been had the war not intervened. But we do know that in just a decade, federal government debt as a percentage of GDP rose a whopping 28%, from 16% in 1929 to 44% in 1939.
Obama’s Newer Deal
At the writing of this report, House Democrats have released a proposed stimulus plan that totals $825 billion — subject to certain change once it passes through the legislative process. The plan covers five areas of spending and tax breaks: health, education, infrastructure, energy, and support for the unemployed and the poor. As Larry Summers, who will lead the Obama White House National Economic Council, puts it, the plan "represents not new public works but, rather, investments that will work for the American public."
Summers described job creation as a "key pillar" of the plan. "More than 80 percent of these 3 million jobs will be in the private sector, including emerging sectors such as environmental technology."
Faced with its own rising costs, flat or falling revenue, and an uncertain future, the private sector is likely to provide little or no help. Why would a $3,000 tax incentive entice any employer to hire a $30- or $50,000 employee to build product it can’t sell? It seems more likely that, should the administration want business to create 3 million jobs, it is the administration that will have to pay for them.
Summers goes on to say that the plan "relies on both government spending and tax cuts to raise incomes and promote recovery." Obama advisor David Axelrod reinforces the notion of economic stimulus: "People need money in their pockets to spend. That’ll get the economy going."
Will it? We think not. What the economy needed in 1933, and what it needs even more so now, is vast deleveraging: using assets to pay down debt. Like a household with finite income and too many credit cards, there comes a time when the piper has to be paid. Getting more credit cards only temporarily makes the problem go away, and surely makes it worse.
Details of the Recovery Plan as we know them, as well as the rest of the planned 2009 expenditures, are listed at the end of this report (see Appendix 1). The result of this spending will be a deficit that, by growing consensus, will very likely exceed $2 trillion in 2009 alone. If tax
What the economy needed in 1933, and what it needs even more so now, is vast deleveraging: using assets to pay down debt.
(continue)
www.caseyresearch.com - 3 - Special Report Obama’s Newer Deal
revenues fall, the deficit may even exceed the total U.S. budget of 2008: $2.9 trillion.
We simply can’t afford to borrow that much money. In fact, we will be unable to borrow that much money.
Here’s what we know about the budget deficit for 2009:
The base case, as published by the Congressional Budget Office, includes only those items that have been legislated. This ignores potential updates, for example, additional spending for the wars in Iraq and Afghanistan and, most importantly, Obama’s new stimulus package.
The Office of Management and Budget (OMB) baseline deficit published January 7, 2009, starts out at $1.186 trillion.
They admit there’s much more. Here are the additional outlays that will have to be borrowed by the U.S. Treasury:
The Obama stimulus package is, at present, $825 billion. That alone gets the 2009 deficit over $2 trillion.
The $700 billion of TARP is only entered at $180 billion of outlays by estimating the present value of all future cash flows. OMB assumes the $700 billion TARP will be spent, but still claims that they are investing in some profitable ventures. Even if that is the case, they will have to borrow the entire $700 billion to buy whatever troubled assets or banks’ equity they deem necessary. So add the total of the TARP accounting for $520 billion more.
Bringing the total to $2.53 trillion.
For economic assumptions, the OMB recognizes the economy slowing:
"In addition, economic developments have reduced tax receipts (particularly from individual and corporate income taxes) and boosted spending on programs such as those providing unemployment compensation and nutrition assistance as well as those with cost-of-living adjustments."
According to the assumptions in the OMB’s projections, the GDP in 2009 will be flat compared to last year, and the average 3-month T-bill is estimated at only 0.2%. But interest rates are very likely to rise, because with the vastly expanded money supply, inflationary pressure must eventually prevail, and higher interest rates will necessarily follow. Furthermore, the economy is likely to get even worse, leaving us with lower tax revenue. At the bottom of the Great Depression, tax receipts had fallen 50% from prior levels. Anything approaching that level in the current slowdown would blow an even bigger hole in the budget.
On Fannie and Freddie, the cost is recognized as only $200 billion, but those two institutions, now de facto extensions of the U.S. government, have $5 trillion in guarantees:
"Recognizing the cost of the takeover adds about $200 billion (in discounted present-value terms) to the deficit this year, reflecting the long-term net cost of the more than $5 trillion in credit guarantees issued and loans held by those entities at the start of the fiscal year."
The purchase of mortgage-backed securities requires cash and borrowing by issuing new Treasuries, but it is not considered a loss to the budget because they are getting the asset:
"Additionally, the Treasury is purchasing
If the tax revenues fall, the deficit may even exceed the total U.S. budget of 2008:
$2.9 trillion.
(continue)
www.caseyresearch.com - 4 - Special Report Obama’s Newer Deal
mortgage-backed securities from the private market; CBO assumes that such purchases will total nearly $250 billion this year, thereby necessitating additional borrowing of a similar amount (although the budgetary impact of the purchases, shown as an estimated subsidy amount in 2009, is relatively small)."
There is nothing mentioned about the new healthcare promises. Try $300 billion as a down payment.
The tab for borrowing for next year, so far:
$1,186 Base$825 Obama stimulus$700 - 180 = $520 TARP fully accounted$300 Healthcare$250 Accounting for MBS$100 War supplement$100 AMT, autos, or …
= $3 trillion += 21% of the Gross Domestic Product= more than the total 2008 budget
Slowly, the news headlines are beginning to grasp the reality of the coming deficit. Even Obama said in a speech on January 6 that "we can expect trillion-dollar deficits for years to come." Hopefully, many of the promises and programs that comprise this enormous cost (see Appendix 1) will not be fulfilled.
What’s Different This Time Around
In 1933, the U.S. was the manufacturing hub of the world, rich in natural resources, self-sufficient in oil. States were solvent. And while individuals held mortgages on their homes, they also had savings. The credit card was decades away.
Total federal debt in 1933: $360 billion in 2008 dollars. Total federal debt in 1933 as percent of GDP: 40%
Total federal debt in 2008: just under $11 trillion.Total federal debt in 2008 as percent of GDP: 70%
Now it looks like our government would like to add close to $3 trillion to that in 2009 alone.
And the $11 trillion is only part of the deficit. In a speech to the National Press Club, Comptroller General David Walker noted the release of the 2007 Financial Report of the United States government, saying the "federal government’s total liabilities and unfunded commitments for future benefits payments promised under the current Social Security and Medicare programs are now estimated at $53 trillion, in current dollar terms — up from about $20 trillion in 2000."
This "translates into a de facto mortgage of about $455,000 for every American household, and there’s no house to back this mortgage," Walker said. The Medicare program represents $34 trillion of the "fiscal gap," with the prescription drug benefit along equaling about $8 trillion of the $34 trillion Medicare total.
www.caseyresearch.com - 5 - Special Report Obama’s Newer Deal
"Generations of Americans will be paying the price—with compound interest — for this new entitlement benefit," Walker noted. "In other words," Walker said, "our government has made a whole lot of promises that, in the long run, it cannot possibly keep without huge tax increases."
Where, exactly, is the money going to come from? China? Japan? The Middle East? Europe? Not likely. Every country on the planet is increasingly strapped for cash. Whether as a result of reduced exports (China) or declining commodity prices (Middle East & Russia), the fact is that there will be a lot less excess cash available for investment in the U.S. in the coming years. In addition, while the lion’s share of bailout money worldwide is being spent by the U.S. (see Appendix 2 for details), most of the developed world is anteing up boatloads of cash to support domestic economies:
EU: $2 trillion +China: $586 billionRussia: $150 billion
Further, Obama’s personal pledge to give "investment deficit" priority over "budget deficit" cannot be welcome news to the holders of foreign dollars. Sooner or later, their willingness to continue to both hold the dollars they own and continue to buy more will disappear, particularly in light of interest rates that are now effectively zero.
The time will come, and probably during 2009, that the only way the U.S will be able to fund its deficits is to create money by printing it. The Treasury will have to sell bonds, and, in the absence of foreign buyers, the Fed will have to print the money to buy them. The consequence will be runaway inflation, increasing interest rates, recession, and inevitable tax increases on all Americans.
Using Federal tax revenue as a percent of GDP to measure the general burden of taxation, the toll was only 3.2% in 1932, but it doubled to 6.8% by 1940. In 2007, Federal tax already accounted for 18.6% of GDP. Could it double again? Probably not — it would be political suicide. Politicians much prefer increasing debt to increasing taxes. But tax increases are inevitable in the light of skyrocketing funding requirements from social programs and falling tax revenues due to the recession, combined with increasing national debt servicing costs. A federal tax burden of 30% or more is a possibility in future years. Add state and local taxes, and the total national tax burden could exceed 40% of GDP. With taxation to that degree, incentive for entrepreneurship and economic success will evaporate, jobs will be lost, and the brain drain experienced by some high-tax European nations in past decades will become reality in the U.S.
The era of runaway U.S. consumerism is over, and the piper is demanding payment for past American overindulgence — at a time when the U.S. government itself is broke. The economy’s eventual turnaround will only occur after the debt that permeates the economy is substantially reduced. It’s going to be a painful process.
www.caseyresearch.com - 6 - Special Report Obama’s Newer Deal
What Now?
The truth is, there is no catbird seat for investors. At Casey Research, we believe that a widespread market recovery to previous levels is very unlikely any time soon, and that the slowing economy, rising interest rates, and severe downward pressure on the dollar will conspire to make profitable mainstream investing very difficult.
In the inflationary cycle that is coming, many currently undervalued commodities will provide very significant hedges against the devaluation of the dollar. In fact, the supply destruction that has followed the credit crisis and current deleveraging is already starting to create shortages.
While mainstream stock analysts are urging their clients to buy stocks and take advantage of bargains, we believe that we have only seen the first wave of casualties in the markets. Black Tuesday was on October 1929, yet the markets bottomed almost three years later, in July 1932 — and it took until 1954 to recover to their pre-depression levels. We are not in the middle of a cyclical recession, and most sectors of the economy will see significant further declines. Most stocks and bonds will see their value decline as inflation reduces corporate profits, and as climbing interest rates affect consumption and raise costs.
But, as always in times of crisis, investment opportunity will exist. And as always, the best opportunities will be not where the herd goes, but where the well-informed go. In a political economy, there will be plenty of opportunities to take advantage of distortions introduced by misallocation of assets by government; certain sectors will boom while most others collapse. In the face of the current turmoil, the Casey Research team of experts has identified several significant upcoming bull markets.
We invite you to take a look at their monthly research in The Casey Report, the flagship publication from Casey Research. There you can follow the unfolding of the Obama Recovery Plan and its consequences, featured in our new regular column, "Obama Watch." Most important, it will provide you specific advice about developing trends, and specific investment moves you can make to profit during the coming Greater Depression.
In contrast to most mainstream brokerage firms, Casey’s unbiased analysis is conducted for the strict benefit of subscribers; there are no underwriting fees that could affect objectivity. Casey’s team of economists and analysts leaves no stone unturned in its quest for opportunity, whether it is shorting the markets that will be next to collapse or looking at the sectors and companies that will emerge as the winners in the current crisis.
If you are not yet a subscriber, now is the right time to take advantage of our no-risk trial offer. See details of a risk-free subscription to The Casey Report here.(http://www.caseyresearch.com/casey-services/the-casey-report) We suggest that you don’t put it off.
Special Report
Obama’s Newer Deal

www.caseyresearch.com

- 7 -
www.caseyresearch.com - 8 - Special Report Obama’s Newer Deal
Appendix 2
Obama’s Long-Term Platform
Obama’s long-term platform includes calls for a hike in the payroll tax cap, new pro-union legislation, blocking insurance companies from denying coverage, a home foreclosure bailout fund, a cap on payday loan interest rates, carbon cap-and-trade, tripling the size of AmeriCorps, doubling foreign aid contributions, and increasing the size of the military by 92,000. And that’s just for starters. Inherent to his proposals are plans to spend:
$60 billion toward a "National Infrastructure Reinvestment Bank" that would finance high-speed railways, improved energy grids, and other projects.
$15 billion a year at least for basic research
$250 million per year to create "a national network of public-private business incubators."
Unspecified amounts (probably in the billions) for various educational programs
$150 billion to "advance the next generation of biofuels and fuel infrastructure."
$50 billion for a "Clean Technologies Venture Capital Fund" to fill the gap between discovery and commercialization and subsidize investment in "socially productive activities."
$50 billion to cut "extreme poverty around the world in half by 2015."
Unspecified amounts, most likely trillions in unfunded liabilities, to "make available a new national health plan to all Americans" for which no applicant can be turned down and which will be comprehensive.
$1 billion for "transitional jobs and career pathway programs."
$50 billion to "move the U.S. health care system to broad adoption of standards-based electronic health information systems."
.

[The Big Ease]

i have noticed more and more articles hinting at the credit markets "thawing" with libor rates dropping significantly, though still high by recent years.

anyone got a view on whether we have seen the beginning of the end of the "credit crisis", though the economic downturn has some way to run yet.

[Seti]

The great stall of China (http://www.smh.com.au/news/world/the-great-stall-of-china/2009/01/22/1232471496219.html)
John Garnaut in Beijing and Phillip Coorey
January 23, 2009

CHINA may never again power the Australian economy like it has over the past five years, posing huge risks to the local economy, ripping billions from exports, and almost certainly driving the budget into deficit.
In figures significantly worse than the Rudd Government was anticipating, China's National Bureau of Statistics yesterday said annual growth almost halved from 13 per cent in 2007 to 6.8 per cent in the year to December - below the arbitrary 8 per cent threshold that Chinese leaders say creates risks of social instability.
Citigroup calculates the economy shrank 0.1 per cent in December from the September quarter - the first contraction in at least 16 years.
Frank Xu, the head of mergers and acquisitions at China International Capital Corporation, said 2008 was likely to mark the peak of China's appetite for Australian resources, particularly iron ore. He said the resources boom, which inflated Australian commodity export prices by 150 per cent over five years, was driven by China's unprecedented and unsustainable growth in exports and building of factories and infrastructure.
"If you look at each one of those drivers they're going to decline," he told the Herald in a rare interview. "The part that was not sustainable was the investment that goes into producing capacity for more steel companies, more cement plants, more equipment manufacturing, more power generators, because if you don't have demand for the output then these plants are going to be wasted," he said.
Mr Xu, who advises most of China's giant resource and heavy industry companies, said it was "physically inconceivable" China would return to the resource consumption rates of the past. "We simply don't have enough land, we don't have enough clean air to support such growth, at some point it has to slow down and even decline in absolute terms," he said.
The Australian Government warned this week that a fall below 8 per cent would have enormous ramifications for jobs and revenue in Australia and did not hide its disappointment yesterday.
"Today's growth figures from China are bad news for jobs in Australia and bad news for economic growth," the Finance Minister, Lindsay Tanner, said.
"They're worse than the market expectations and they confirm that the Chinese boom that has supercharged the Australian economy over the past five to seven years is receding rapidly."
The Australian economy has been propelled largely by coal and iron ore, both of which depend on the steel mills of North-East Asia. Figures this week from the World Steel Association show global production collapsed 24 per cent in December from a year earlier.
China led the world's industrial downturn, throwing tens of millions of people out of work and generating huge social and political stresses. But Australia's other top two export markets, Japan and South Korea, are in even worse shape, with figures yesterday showing Korean GDP contracted 5.4 per cent in the December quarter and Japanese exports plunged by a record 35 per cent in December from a year earlier.
China looks likely to be the first country to have stabilised its heavy industry sector, thanks to the Government pledging trillions of yuan of new construction projects and leaning on banks to flood the economy with new loans. New lending rose 1000 per cent in December, according to the investment group CLSA's China economist Andy Rothman.
Global steel production would have fallen 35 per cent in the year to December if not for a rebound in China.
The data came only a day after the mining giant BHP shed 3400 jobs because of slowing demand from China.
Many analysts say that the Chinese Government-led construction effort will stimulate a short term recovery but exacerbate structural economic and social imbalances.

[Seti]

Amazing announcement by Sony Corp. (http://search.japantimes.co.jp/cgi-bin/nb20090123a1.html)

Back in just October 08 forecating a 200bn Yen profit and now a 260bn Yen loss, after only last week forecasting a 100bn loss.

[tricha]

i have noticed more and more articles hinting at the credit markets "thawing" with libor rates dropping significantly, though still high by recent years.

anyone got a view on whether we have seen the beginning of the end of the "credit crisis", though the economic downturn has some way to run yet.

http://blip.tv/file/1528079 Make your own decision :eek:

[stevo1]

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FOOd FOR THOUGHT






Relax: There Will Be No Depression

Kenneth J. Gerbino

I want everyone to relax. You are being bombarded with numerous facts and figures that look pretty bad, but the facts are being interpreted with emotion and hype and hysteria. The predictive value of mis-emotion is usually chaos. There will be no Great Depression.

First, let's review what happened in the last few years in simple terms:

The Federal Reserve manipulated interest rates below the real market rate for over a decade, creating dislocations in the normal markets.
Low interest rates forced retirees and savers to abandon safe investments and buy into all sorts of higher risk investments, including the stock market. (As a grandmother of one of my employees said many years ago, "I can't afford to live on 3% interest when I use to get 6%"…a sad but true story).
Easy money created speculation and an artificial business expansion as the good times rolled.
The dot.com bubble was the first sign of trouble from the recent easy money regime. The solution: more easy money to bail out Wall Street and avert further panic.
Commercial banks are allowed to become investment banks as Glass-Steagall is repealed. Commercial banks can now invest and speculate globally outside of their normal areas of expertise.
Real estate booms, as new and creative ways to lend money appeared. Lending became a no brainer as loan packages could be sold away to another institution covered by a new insurance scheme (Credit Default Swaps). Therefore credit worthiness of customers became less important. Lenders became undisciplined. Who cared if the loan defaulted if the loan was "insured?"
Other exotic derivatives were concocted by the investment banks and commercial banks to make more fees and profits. Tried and true centuries old banking policies 101 were thrown out the window
The government pressured financial institutions to lend money for homes to millions of borrowers who were not only unqualified but high credit risks.
The excessive and low interest rate loans for homes fueled an even more over-heated and extended housing boom and housing price inflation - creating a housing bubble.
The over-the-counter derivative market went beyond $300 trillion and no one cared. $400 trillion - no problem. $500 trillion - no big deal.
Wall Street and the establishment press and authorities did not pay attention to the hard money newsletter writers who were screaming bloody murder about derivatives: Schultz, Skousen, Dines, Wood, Daughty, Sinclair, Casey, Katz, Turk, Taylor, Adens, Coffins, Lundin, Morgan, Ruff, Roulston, Grandich, Nadler, Bonner, Day Russell, Mauldin, Sinclair and others.
Complacency was everywhere. The Dow was over 14,000. Wall Street and Main Street thought the economy was "fine," paper money was "working" and debt levels were high but no big deal, the Fed was in control. So far so good.
The banking industry usually gets hit hard when the economy gets hit hard. But this time the major commercial banks were also speculating along with the investment banks.
Huge losses from leveraging and speculating in stock and bond markets as well as derivatives start showing up at the largest commercial and investment banks in the U.S. and abroad.
A national nightmare now is confronting Washington.
Global stock markets collapse and credit markets seize up everywhere. Many foreign countries are as bad off as the U.S.
The financial pyramid was brought on by easy money. We are now faced with global investment losses and economic numbers that are at dangerous levels, and foretell a drastic future.

But the future will be the exact opposite to what Wall Street and Main Street think will happen.

Why There Will be No Depression

The Fed, U.S. Treasury and foreign central banks will print their way out of the problem. A bad solution to a bad problem.
The U.S. is in a recession. This is the natural reaction following the huge economic paper money binge that has taken place the last 15 years. The major banks, insurance companies and investment houses are in real trouble. The pain is too much and the government will print the money to bail these institutions out.
3 million people are losing their homes. They should never have bought the homes in the first place. These people will go back to being renters. The homes are still there, they have economic value.
Investment bankers that busted Lehman, Bear Stearns and Merrill and lost their jobs will form hedge funds and buy many of these homes for 30 cents on the dollar. Then they will sell them in a few years for 50 cents on the dollar to people and other funds. Some people will move into a home and get a good bargain. Funds that buy these 50 cents on the dollar homes will sell them in 2-3 years for 70 cents on the dollar. Life goes on.
Banks and investment houses that lost money on these homes are already being bailed out. The losses are being covered by the printing press or debt from Washington
Unemployment: This is bad. In the U.S. we are at 7.2% and going higher. We are not at 10.8% ('82 recession) or 9% ('74-'75 recession) and may not even get to these levels. Sophisticated investors say, "Unemployment is being low-balled by the government, it's much higher". I agree. But check out Shadow Government Statistics' website run by brilliant economist John Williams (who should be a White House Adviser). This shows that the "shadow or real" unemployment number could actually be 17%. Sounds like a disaster. But back in 1994, the "shadow" unemployment number was 15%. So what happened in 1994? GDP was up 6.2%. The S&P 500 the following year was up 34%. There was no Depression from this horrendous unemployment. Official U.S. unemployment hit an 8-year high in 1992 at 7.8%. The solution to this was a 14% increase in the money supply (M1) and the stock market went up 6%. Do not panic because of unemployment.
There are still 144 million people getting paychecks. This means the economy is not dead yet. They will either spend the money or save some of it. When they save it, sooner or later the banks will lend to someone to buy or build or invest in something.
The average wage earner in the U.S. makes $47,000 a year. Multiply this by a possible 12% official unemployment rate which would be considered a disaster in this country, and you have the following: 18 million people out of work. Using $47,000 per person, this would equal about $850 billion a year of lost income and GDP. That would be a huge hit to the economy.
But wait a minute. Unemployment insurance for a $47,000 worker is about $400 a week. That reduces the $850 billion considerably. Also, the Government will simply print more money to handle this. They could print half the amount of the possible lost GDP - $425 billion. Using Washington logic, this would effectively handle half the consequences of 18 million unemployed people. Then it would be like there were only 6% unemployed. Printing or borrowing $425 billion would not be difficult compared to what they are already doing.
The great recessions of 1974-5 and 1981-82 resulted in the following: GDP increasing on average 15% within 36 months, the stock market booming the following year, and unemployment going down dramatically the following two years. Why? Because they increased the money supply and "bailed out" everyone with paper money.
The 74-75 recession had an 85% (that is eighty five % and not a typo) decrease in the price of the average NYSE stock from the previous high in 1973 and the Dow was down 41%. In 1982, the Dow Jones dropped 34% from its previous high. Both these market wipe outs were handled by the money supply being increased by 12.6% in 18 months in 74-75 and 14% in the 81-82 period.
The money supply increases in 2009 and 2010 could reach 50%!
So far, with bailouts, guarantees, the stimulus packages, $2-3 trillion of new money is already a foregone conclusion. This will equal a 25-35% increase in the money supply. The U.S. government will print as much money as is needed. They have panicked and are now going overboard. It is obvious that whatever happened in the past is going to happen again.
This means that we are not going to have a Depression but a huge paper money induced boom. It will be artificial and inflationary. It is all in the works right now.
Finally, if we were going to have a so-called Depression, why is copper above $1.50? Copper for delivery in December of 2009 and 2010 is above $1.60! You have heard the expression Dr. Copper. It is because as this commodity goes - goes the industrial world. It has always been a great economic indicator. Copper prices would be at 60 cents if a Depression was coming. Copper above $1.50 is saying, despite all the horrendous layoffs and headlines, that there is a lot of life left in the global economic patient.
The financial system will be temporarily "saved" by paper money but working people and savers will be eventually crushed by this currency depreciation. Capitalism and free enterprise will get another bad rap when inflation rips through the system. Honest capitalism and classic free enterprise does not include paper money….the cause of all modern day economic problems.

What to Do

Expect Inflation not a Depression.
Expect a boom to start sooner than later.
Know the past and respect logic, not headlines.
Am I telling you all is OK? No. I am telling you things are as bad as you think. But the authorities are using this crisis to bail out the system with paper money and because of that, the economy will once again go into a so-called boom that will be very inflationary. If you think a Depression is coming you will have your assets in the wrong place at the wrong time.

What Happens Next

The economy stagnates for another 9-12 months then turns around.
Unemployment goes down with the induced economic upturn.
The stock market rallies but never gets above its old highs.
Inflation comes back with a vengeance.
Commodities resume their bull market and turn the deflationistas into inflation believers.
Interest rates will go up with inflation and probably to much higher levels.
The stock market will go down when interest rates start going up.
Long term bonds will become the worst investment in the world.
The dollar will go down but so will other currencies as many world governments print their way out of their economic woes as well.
Gold will go to new highs.
Housing and real estate will recover but higher interest rates will slow this sector down considerably in the future.
The gold and silver mining stocks will become the best performing sector on Wall Street for many years.
The price of oil will go up due to inflation and global production declines of 5-8% per year from most of the largest oil fields in the world.
The U.S. "recovery" will help the world recover and almost all countries will have another artificial economic expansion from all the paper money they have printed as well.
China and India will create more shortages of basic materials and commodities by the sheer size of the populations and their economic and industrial progress.
The U.S. will have even more economic dislocations from all the new paper money and debt taken on by Washington.
The country gets set up for the next horrible recession some time in about 3-4 years.
A Depression is impossible in the old sense of the word. If one describes a depression as the loss of purchasing power of the wage earner (a correct definition), then we have been in one for the past 50 years since wages have not kept up with the cost of living. But since everyone is thinking breadlines and the 1930's, I will stay with that picture for our definition. It is not going to happen.

Also, remember that the $2-3 trillion bail out numbers you are reading about can easily be bumped up to $4-5 trillion. Why not? The reason for the increase is simple….."We are heading into the Greatest Depression in history." As long as this misguided concept gets press and the NY Times, the media and politicians buy into it, then the government has a green light to create as much money as is needed.

Next week I will finally get to the promised article about deflation and inflation.

For more articles on the economy, gold and mining stocks please visit our website at www.kengerbino.com



Kenneth J. Gerbino
26 January 2009

Kenneth J. Gerbino & Company
Investment Management
9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
Telephone (310) 550-6304
Fax (310) 550-0814
E-Mail: kjgco@att.net
Website: www.kengerbino.com



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[MrDevine]

Yep, another BUY GOLD post. Where do these guys get off?

[MrDevine]

I do agree with some of his sentiment though. But since GOLD is priced in US dollars, its value is irrevocably tied to that currency. Until you can buy stuff with it, gold doesn't make sense.

[lakedaemonian]

I'm in agreement with the iTulip "disinflation" doctrine.

I expect food, precious metals, energy, and other strategic commodities to rise consistantly over time within the next 12-26 months.

I expect residential property to continue to fall as well as commercial property to get destroyed.

I see cash or cash-like the same as democracy...it's the "least bad" option at the moment.

I expect that to change in the next 12-24 months as inflation inevitably flows through like a flood extinguishing the credit destruction fire and drowning Joe Bloggs.

[tricha]

I'm in agreement with the iTulip "disinflation" doctrine.

I expect food, precious metals, energy, and other strategic commodities to rise consistantly over time within the next 12-26 months.

I expect residential property to continue to fall as well as commercial property to get destroyed.

I see cash or cash-like the same as democracy...it's the "least bad" option at the moment.

I expect that to change in the next 12-24 months as inflation inevitably flows through like a flood extinguishing the credit destruction fire and drowning Joe Bloggs.

Happy Weekend reading folks.;)

__________________________________________________ ____________________________
_____________________SPECIAL REPORT________________________
The Day the Earth Stood Still
Some years ago when Kay and I lived in Washington, D.C., we went to see a new science-fiction movie, The Day the Earth Stood Still, at the RKO Keith Theater, located across the street from the White House. As the movie opens, a huge flying saucer is landing on the ellipse, south of the White House.
Ironically, at that moment in the real world, some police cars or fire trucks were going right past the theater with their sirens blaring, at the same time we were watching this huge flying saucer land on the screen. It sounded like there was actually something serious going on.
As the movie progressed, the actor, Michael Renney, came out of the flying saucer with a huge robot and announced that he was an ambassador from a Federation of Planets who were worried about the war-like tendencies of this planet and were there to impose peace on us, which he later did by stopping all electronic and electrical devices – elevators, airplanes, trains, cars, etc.
When we left the theater, I had to reassure myself that everything was still working – that we could still get on a real-world bus or streetcar and go home and it would all work normally.
I‟ve never forgotten that dramatic day. What we have seen in the last few weeks equals what happened – the earth has stood still.
Wall Street, no longer exists, and is a hiss and a byword. Merrill Lynch is a distress merger, as well as Washington Mutual. Fannie Mae and Freddie Mac are sick, Bear Stearns and AIG are gone, and Lehman Brothers is bankrupt, Citibank is near collapse. The government has taken over almost everything we used to call "Wall Street."
How did this all happen in a few short days? What happened? Whose fault is it? What should you invest in? Is there opportunity here?
It started with a naked Democrat-driven political decision in Congress in the „80s that they could acquire more votes if they could make it possible for people who couldn‟t afford them before, to buy homes, usually poor minorities, so they will vote Democratic. So, starting in the 80‟s, Congress began talking about "red lining," which means that banks would write off certain parts of the community for disapproval of mortgages because most of the home buyers could not qualify financially or credit wise, and the banks worried if their loans could even be repaid.
Soon Congress passed criminal penalties for banks and mortgage companies that would turn down a mortgage for any reason, legitimate or not.
Mobs from the radical, left-wing activists (ACORN?) would sit outside the offices of the CEOs of banks to intimidate them so they would grant mortgages that they should have declined.
So people who really could not afford mortgage payments or didn‟t have a down payment or good credit could get a home mortgage, and could suddenly become "a homeowner." Bankers then offered Adjustable-Rate Mortgages (ARMs) with low starting rates for two to five years, after which the interest rate would jump up, and stupid home buyers did not
__________________________________________________ ______________________________________ The Ruff Times ______________________________________________SPEC IAL REPORT____________________________________________ _ 2 www.rufftimes.com
read the small print in their contracts to be sure they could make their higher future mortgage payments. Mortgage companies saw a chance to earn commissions by approving these easy sells. That created a huge bubble of real-estate sales, and the Federal Reserve kept rates as low as one percent for years, and buyers believed home prices would keep going up. If they had to, they could just refinance the homes. Because they had no skin in the game (no down payment), they had nothing to risk. Then, surprise! Interest rates rose slightly and suddenly people found that their adjustable mortgage interest rates had gone up, and they couldn‟t pay them, and foreclosures began to soar as home prices fell. As real-estate prices topped out and foreclosures grew, the inventory of unsold properties started to rise. They could not refinance or sell their homes. Home values plummeted, and they still are as this is written. People with no cash invested in the homes thought "I can just walk away from it; I can‟t lose any equity, because I don‟t have any." A wave of foreclosures swept across the country. Vacant, foreclosed homes in their neighborhoods drove down the value of all homes, even for those people who were current on their mortgages. Soon millions owed more than their homes were worth. Mortgage Backed Securities Now the plot thickens. Bankers and brokers bundled their mortgages into bond-like instruments called "Mortgage-Backed Securities" (MBS) and sold them to investors and big financial firms, giving them more cash to loan again to new buyers. Mortgage-Backed Securities became the basis of the balance sheets of the world‟s largest financial institutions.
The credit-rating agencies gave them AAA ratings because they felt they were secured by real estate, so the world‟s largest banks and other financial institutions bought them in droves for their portfolios. AAA? Why not! They were paying higher yields than almost anything else. When it dawned on some that some of these mortgages were not worth the paper they were written on, forecloses rose. The value of the underlying security, the real estate, began to be in question. The financial institutions that added Mortgage-backed Securities to their balance sheets found they could not accurately determine the real value of their portfolios. GAAP How did giant Wall Street institutions fail so abruptly? GAAP (Generally Accepted Accounting Principles) accounting rules were modified so financial institutions had to "Mark to Market" their assets. If the market had no bid nor ask, no one knew what the MBSs were really worth, so the market for them dried up. Some bank assets were marked to "zero," so their assets just disappeared overnight. Banks would not loan or borrow from each other, because their balance sheets were now suspect. I had said in The Ruff Times: "The issuance of mortgage-backed securities began to decline with less money inflow into the system, and home prices began to fall faster, throwing the whole bubble into reverse. Since the viability of the related paper assets was dependent upon rising real estate prices and asset valuations, the entire edifice began to crumble." The turmoil at Bear Stearns is illustrative. Bear Stearns had made lots of money speculating in subprime real estate, buying subprime loans and selling and buying mortgage-backed securities.
Though the amount of money involved in the Bear Stearns crisis was relatively small, the implications of the phony and suspect MBS values sent shock waves reverberating through a system chockfull of such phony valuations, trillions upon
__________________________________________________ ______________________________________ The Ruff Times ______________________________________________SPEC IAL REPORT____________________________________________ _ 3 www.rufftimes.com
trillions of dollars of bank assets which are based on low valuations and unpayable debt. Reduced flow into the financial system and the vaporization of bank asset values has created the "credit crunch" which is causing all the panic. Businessmen are finding that the money they were counting on is drying up. Hedge funds are failing left and right, others are taking heavy paper losses, and still others are stopping investors from withdrawing their money. The very system itself is vaporizing, because the value of their assets is suspect, to say the least. The entire global financial system has collapsed. Consolidations have disguised failures by the movement of bad assets off their books via the derivatives markets, and phony accounting – with the complicity of regulators and guilty politicians who encouraged this corruption. Some big banks are bankrupt several times over, protected only by the illusion that the assets on their books have value, but those illusions – which are all that kept the banks open – have faded. As the level of panic rose, the central banks (the Fed?) turned on the spigots. They panicked when they realized the dimension of the losses facing the system. Irrational fear is now calling the shots. The politicians panicked, the markets panicked, the banks panicked, the central banks panicked. This game was over. In October, 2008, Wall Street and the securities industry were socialized by Congress, and the Democrats used $700 billion, allegedly to buy up the bad mortgages that people can‟t pay, and alter the terms to stop foreclosures so everyone, no matter how unworthy, can own a house they can‟t lose, whether they make the payments or not. When large amounts of the portfolio on their balance sheets could not be valued (marked to a non-existent market), banks began placing whatever value they thought they could get away with, and their accountants often gave them zero value. Overnight, when large portions of their balance sheets disappeared, the banks didn‟t have enough assets to meet the statutory requirements for cash reserves.
Almost overnight, big institutions that had invested heavily on these mortgage-backed securities began to fail. That‟s when Wall Street imploded. Goodbye Merrill Lynch, Lehman Brothers, Washington Mutual, Bear Stearns, etc. With no market to determine the real worth of the assets on their balance sheets, they had to mark these assets down, sometimes to zero, and trillions disappeared from balance sheets overnight. When a bank or brokerage house balance sheet is deeply impaired, they have to raise additional capital. When that is happening to everyone, who will loan you money? Consequently, the assets just plain disappeared, and the normal credit system froze up. Root of the Problem Congress and the Administration decided to bail out these firms that had bought all these bad mortgages and whose balance sheets had disappeared. But government money is not without its strings, so government took equity position as part of the price of their loans, and took control of Wall Street. At the same time, Barrack Obama, who was elected President, had made a trillion dollars in additional new promises, and they had to get the money from somewhere. To sum up, this mess had three roots: 1) a political decision to buy votes; 2) the unprecedented view that everyone should own a home, whether they could afford it or not; and 3) the accounting rules had tightened up. In my book How to Prosper During the Coming Bad Years and in my newsletter, The Ruff Times, I tell you how to profit from the inevitable consequences that had been brewing for years and were accelerated by these recent events, creating serious systemic weaknesses in society. And I‟ll explain why the real long-term consequence will be runaway inflation. The ones who did it to us are politicians – legislators. But this is not just a Democratic issue; a lot of ignorant, weak-kneed Republicans forgot their conservative principles and were enablers.
__________________________________________________ ______________________________________ The Ruff Times ______________________________________________SPEC IAL REPORT____________________________________________ _ 4 www.rufftimes.com
And guess who we asked to fix the problem? The ones who had caused the problem! If they want to find the villains, they should look in the mirror. The average American has no grasp of the real facts, so they are easily buffaloed. The real solutions are politically impossible. We must allow the foreclosures (voters) to continue until the market "clears." The villains would be unmasked. Lots of luck! My role is to tell you what will really happen and then help you middle-class Americans deal with the world as it really is and profit from it. This is close to being a problem beyond the ingenuity of human leadership; so big and perverse that they decided they had spend billions to buy up bad assets from banks and stop foreclosures, bailing out improvident borrowers by buying their mortgages and readjusting the terms so they don‟t get thrown out of the home they can‟t afford and should not have bought! It may kick the bankers‟ problem down the road, but it won‟t fix America‟s problem. Everything you have been reading about and seeing on TV is aimed at saving the tattered reputations of the politicians who created this problem, and the really dumb borrowers. The consequence will be inflation after a few months of price deflation, with its accompanying recession and unemployment Throwing Money at Problems Eventually Equals Inflation The only way Congress knows how to try to fix an economic problem is to throw money at it. They create the money out of nothing. They vastly expand (inflate) the money supply to try to stop deflation because it could cause a 1930‟s-type depression. One of the immutable laws of the financial universe is that when you expand the supply of a paper currency, you create monetary inflation, often and sooner or later, this inevitably causes price inflation (currency dilution), with deflation in the interim.
The politicians won‟t even consider the only valid solutions. But I know how to profit from what is happening! When the government throws money at a problem, they eventually create monetary inflation. This flood of money dwarfs anything we have seen in our lifetimes. If you understand that reality, you can now profit from the sure thing – monetary inflation. One day we will wake up in the grip of huge price inflation. But as Will Rogers said, "Invest in inflation, it‟s the only thing that‟s going up." In this artificial environment, you can easily turn small amounts of money into big fortunes if you know a few simple things to do. What to Do When I saw what was coming, I saw the need to write a book; but rather than writing a whole new book, I simply updated the humongous best-seller that I wrote back in 1978 (2.6 million copies) because the principles were again the same for the 21st century. This report updates it still further as of November, 2008. Will the principles that worked in the „70s work again? These principles are as close to eternal as financial principles can be. Advice How can your family cope with the coming inflation? Prices will eventually rise sharply due to big price inflation! Normal commerce is crippled by inflation. The commodities you ordinarily to buy whenever you want, at the price you want, may not always be there, as inflation drives up the cost of fuel so the trucks will find it harder to pull up to the back door of your local store and restock the shelves. You must turn a liability into an asset. Prices will rise higher and higher. How do you turn this into an asset? Store things now while they are still relatively cheap, then consume them later at higher prices. This includes every commodity you would buy at your local store, ranging from food, to diapers, to soap, to auto parts, to everything else.
__________________________________________________ ______________________________________ The Ruff Times ______________________________________________SPEC IAL REPORT____________________________________________ _ 5 www.rufftimes.com
How do you survive in an age of Inflation? 1) Get out of debt, and pare down your consumer spending; 2) eventually exchange your cash and dollar-denominated holdings for inflation hedges; 3) if a politician promises to give you money, run don‟t walk to vote against him/her; 4) keep the old clunker for a few more years; don‟t buy a new car; 5) recognize socialism is here to stay; 6) the real-estate bubble has caused the biggest burst bubble in the history of bubbles. Government is trying to maintain our sick society by saving home buyers (voters) from their own stupidity. Socialism Socialism is government owning or controlling the means of production, like when they own large chunks of Wall Street banks or offer General Motors many billions of dollars if they agree to make small gas-sipping cars consumers won‟t buy, compounding their government-imposed collapse. 7) Social Security, Medicare and Medicaid, are unsustainable and can only be maintained by creating money, so we have a lead-pipe cinch guarantee of more inflation in the future.
Prices will not go straight up. Take gas for example. The price has recently plummeted. Oil may fall to as low as $40 per barrel temporarily, but that doesn‟t matter. If inflationary prices retreat temporarily from time to time (price deflation), you can buy now at low prices to later consume at higher prices. The Stock Market Avoid blue chips and most mutual funds, as they are an endangered species. The recent decline in the Dow is a harbinger of the future. The stock market has many independent pieces, and some aspects of the stock market should prosper. 1) Uranium mining stocks. In the quest for cheaper energy, we will have to build nuclear plants. If they proceed with the nuclear plants that are on the drawing board or under construction today, there is only half enough uranium above ground to provide their needs. So buy the mining stocks. 2) Oil Service Companies such as Schlumberger and Halliburton. We will drill for oil off shore, and the companies that build and service the oil rigs will do very well indeed. In the meantime, we will watch with interest as Congress throws money at the problem, creating runaway inflation.
I repeat again what Will Rogers said, "Invest in inflation; it‟s the only thing that‟s going up." __________________________________________________ ______________________________
Howard J. Ruff, the legendary author and financial advisor, has re-edited and re-issued his 1978 mega best seller, How to Prosper During the Coming Bad Years, still the biggest-selling financial book in history, with 2.6 million copies in print. He is founder and editor of The Ruff Times financial newsletter. This is a Special Report, written in December, 2008.

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skip to main (http://thegoldbugnet.blogspot.com/#main)| skip to sidebar (http://thegoldbugnet.blogspot.com/#sidebar) The Gold Bug


Howard S. Katz is author of the One Handed Economist, a financial newsletter with timely market advice that integrates technical analysis with insights about Austrian economics and analysis of Federal Reserve Bank policy. For additional information see http://www.thegoldbug.net.









Monday, January 26, 2009

THE HISTORIC MOMENT (http://thegoldbugnet.blogspot.com/2009/01/historic-moment.html)


by Howard S. Katz
1-26-09

When I survey current events, I often have to pinch myself. I have a sense that “this cannot be happening” for the simple reason that people cannot be this stupid. But it is happening. I am talking here about the public reaction to the inauguration of Barrack Obama.

In fairness to President Obama, I must distinguish between the man himself and the public reaction to him. I was very suspicious when Obama started getting large votes in the Democratic primaries. He had none of the qualities usually required for successful politicking in America. He had no name recognition. Hillary Clinton, for example, had been in the public eye since 1992. People saw TV reports on her and read her name in the newspapers. No matter what policies you advocate that is a very good start to get a large number of people to vote for you in an American election.

Neither did Barrack Obama have an issue. He had a record which put him on the extreme left of the Democratic Party, and he ran a campaign based on meaningless clichés. “Change,” as he used the term, had no meaning, and all the people echoing it could not point to specific policies. What was it that Barrack Obama wanted to change from, and what did he want to change to? So no strong constituency was voting for him because of an issue (such as the right to own guns or homosexual marriage).

All of this became clear in the period leading up to the inauguration. The top media in the country could not contain their joy. Time magazine expressed this by a cover showing Obama in the pose of F.D.R. (riding in the back seat of a convertible smoking a cigar). In the minds of the editors of Time, this was a high compliment. They still do not know that F.D.R. was a Wall Streeter whose goal was to enrich his old buddies at the expense of the working people of the country. The enormous rise in stock prices since his election and the decline in the real wages of the average American since 1972 are the fruit of his policies.

The message that came through, again and again, was, “We are so happy. We are relieved of our white guilt.” The background to this is that for most of my life a continual stream of hate has come from the intellectual left directed against America. A fellow alumnus of mine put it well in the title of his book: “Harvard Hates America.” It was true and remains true today.

Now none of this directly has anything to do with race. Harvard and the intellectual left hate America because they are (ideological) Germans. And all this dates from central Europe in the year 1875. In that year, a party based on love was founded in the new country of Germany. This party was called the Social Democrats. They argued that the government should be like a big father who loved his subjects and gave them something for nothing. The Social Democrats became more and more powerful. In 1880, they forced the German chancellor, Otto von Bismarck, to institute a part of their program, socialized medicine, and, circa 1890, came up with a fraudulent retirement program we today call social security. In 1912, the Social Democrats became the largest party in Germany and took control of the German legislature. They did not formally control the government because Germany was still, officially, a monarchy. But the Social Democratic politicians were much smarter than the Kaiser or his officials and effectively controlled the German government. In 1914, they plunged the world into war by supporting Austria’s aggression against little Serbia and attacking neutral Belgium.

After being defeated in this first test of strength, Germany was unrepentant, acting like a spoiled child. You have probably heard about the issue of how the mean Allies imposed reparations on defeated Germany after the war and how unfair this was. This is pro-German propaganda. You have probably never read that a victorious Germany imposed reparations upon France after the Franco-Prussian war of 1871, and these reparations were speedily paid without complaint. After World War I, the U.S. lent Germany the money to make her reparations payments, and these loans were never paid back.

After World War I, Germany transited from the country of love to the country of hate. A Social Democrat named Adolf Hitler led this movement toward hate, and by 1933 he had won the allegiance of the majority of Germans. (Pro-German propaganda in this country makes much of the fact that Hitler did not get an absolute majority in the 1933 election. But Germany, as every other European country, was a multi-party country, and it was virtually impossible for any one party to get an absolute majority. In reality, the party with the largest plurality would form a government, and in 1933 the Nazis got 44% of the vote. This was a very, very large plurality. Further, there were two smaller parties, the Catholic Party and the nationalist party who, a few months after the election, voted with the Nazis to abolish democracy in Germany and make Hitler dictator. These parties had programs very similar to that of the Nazis. They simply had cultural or religious attachments which led them to express their support for Hitler in a different way.)

Those people who have complained about my attack on the philosophy of love have to deal with this case. It is a textbook perfect example. A country was converted to an explicit government based on love. (When Bismarck adopted the Social Democratic program in 1880, he called it his Christian program.) In a little over 50 years, it turned from the country of love into the country of hate. Then it went on a rampage and murdered 50 million human beings.

A similar thing happened when Rome became Christian in 394 A.D. And a similar thing happened with Jesus of Nazareth himself. The history of brutality and destruction which constitute the Middle Ages are simply variations on this theme.

This long and sorry period (more than a thousand years of ignorance, poverty and savagery) came to an end when John Calvin taught people that nothing one could do on earth could get one into Heaven. However irrational this idea may appear, it led the followers of Calvin to disregard the philosophy of Jesus (the motivation for which was admission to Heaven via the Catholic Church). The Calvinists started paying attention to the Old Testament instead of the New. They reinvented democracy and became the first people in modern times to say that human beings had rights. They founded many of the modern sciences. They created wealth beyond the imagination of previous generations. They cured diseases, introduced romantic love and created a society where the average person did not have to live in fear of his fellow man.

As the Calvinist countries (America, Britain, Holland and Switzerland) began to spread freedom and democracy around the world, a key event was the French Revolution. The French Revolution gets a bad press, and there are certain aspects of it fit for criticism. But on the whole this was a period when the French were adopting the (American) ideas of freedom and democracy. The bad in the French Revolution came from the fact that no society changes its social institutions instantaneously. The change from the evil society of the Middle Ages to the good society of the 19th century took several hundred years, and to judge the French harshly because they could not do the equivalent in 2-3 years is being unfair.

The French Revolution threw Europe into turmoil. French armies defeated the greatest powers of Europe. The French were energized by freedom. It was a new world. But the people of central Europe set their face against this new world. They hated freedom and democracy. In 1866, they formed themselves into the new country of Germany, and, as noted, in 1880 they founded the welfare state. In 1933, they chose Adolf Hitler to be their leader. In 1939, they set out to make themselves the master race, and, as noted, from 1939-1945 they killed 50 million human beings.

To bring this back to President Obama, in the 1930s the apostles of love came from Germany to America, and they infiltrated the teaching of (what they called) the social sciences. They managed to get rid of the real professors of history, psychology and economics and started teaching their package of lies to American students. (Traditional education from the end of the Middle Ages through the 19th century consisted of the sciences and the humanities; there was no such thing as social science.) Part of this package is a set of lies deliberately intended to slander America, and the only reason race plays a part is that ethnic hatreds are so intense in central Europe that the Germans thought it would be easy to stir them up in America.

For example, it is routinely argued that the Anglo-Saxon colonists starting in the 17th century began a campaign of eradication against the American Indians. (I don’t call them native Americans. A native is a person who was born in the place he is native to. I am a native American. Most of the readers of this blog are native Americans. The Mongoloid peoples who inhabited what is today the United States are native Americans, but this phrase does not distinguish them from any of the other native Americans of our time.)

To make the case that the European settlers eradicated the Indians, one should, logically, start out with the population of Indians in the land area which is today the U.S. in the year 1620. The best estimate I have seen here is 800,000. The next question is how many Indians are there in this same land area today? There is a difficulty here because basically what happened to the Indians is that they intermarried with the white population. Thus there are today a great many half Indians, quarter Indians, eighth Indians, etc. The only valid way to calculate the Indian blood in the U.S. today is to take half Indians and divide by 2, quarter Indians and divide by 4, etc. The only figures I have seen on this show upwards of 5,000,000 (genetic) Indians in the U.S. today. These modern Indians live in houses, not teepees. They drive cars. They have central heating and hot and cold running water. They watch TV and may even read this blog on their personal computer. Any fair assessment of the situation would have to say that it was a good day for the Indians when the Pilgrims landed at Plymouth Rock.

Another left-wing lie intended to raise racial hatreds refers to the old institution of Negro slavery and its aftermath. At the time of the American Revolution, the revolutionary party made major advances in human liberty, and they succeeded in abolishing slavery north of the Mason-Dixon line. But as noted, social advance cannot occur in just a few years. It is unrealistic to expect another age to come complete with the institutions of our age. We owe those (good) institutions to the good work of many great men who struggled for them through history.

Slavery was a human institution pretty much going back to the dawn of history. One of the few good things to happen in the Middle Ages was the abolition of slavery (meaning that Europeans did not enslave each other and were too weak to enslave more distant nations). However, slavery returned to European society in 1453 when it was sanctioned by the Pope. The Pope of that day was angry at the Muslims because they had conquered Constantinople, and he sanctioned the enslavement of a Muslim by a Christian.

It turned out to be too hard for Europeans to enslave Muslims; so they adopted the easier alternative of buying Negro slaves from the east African coast (where the various tribes would fight with and enslave each other). This was how slavery got its start in the British colonies of America.

The American South at that time was populated mostly by Cavaliers (less Calvinist than the Puritans in New England). These people were reluctant to change and did not understand economics. Their argument at the Constitutional Convention of 1787 that the economy of the South depended on slavery was intellectually destroyed over the period 1788-1860 as the North, using free labor, far surpassed the South in economic growth.

The Civil War is a painful period in American history, mostly because of several important mistakes by Abraham Lincoln (whose only claim to greatness was that he was assassinated). But it was part of the larger march toward freedom which was enveloping the world at that age. While slavery was unequivocally wrong, judging America as a whole and in comparison with other nations, she has much to be proud of and has to be rated as the finest nation in the history of the world.

The South, angered by its defeat, was unable to blame Lincoln, who was now the martyred hero. So they directed their hatred against the former slaves. This is the origin of that racial bigotry which disgraced America from the end of the Civil War to the age of Martin Luther King. (To return to my theme of Christianity and love, please note that it was the most Christian part of the country which was the heart of this period of bigotry.)

That period is now over. If we judge America by the standard of other nations, then Americans have a great deal of which to be proud and very little of which to be ashamed. America is the greatest nation on the earth, the greatest nation that is now and the greatest that ever was. Slavery was a blight upon mankind and existed through all previous ages, and the freedom movement, which got its great impetus from the American Revolution, abolished that blight. America is the land of freedom and democracy. It is the land of private property and freedom of enterprise. Americans took this land and turned it from a place of scarcity to a place of the greatest bounty in human history. By the early 20th century, it seemed that Americans could do anything: build the Panama Canal, defeat Hitler, cure polio.

When Bill Clinton’s disgraceful treatment of women became public in the late 1990s, the political left (refusing to apologize for having supported him) propagated an old slander against Thomas Jefferson, saying that he had had a child by one of his Negro slaves. (The idea here was that everybody, or every President, does it.) This allegation completely failed of proof and belongs in the gossip columns. Jefferson tried to get slavery abolished in Virginia (but failed), and he condemned the slave trade in the Declaration of Independence. (He was unable to free his own slaves because of Virginia law; had he done so they simply would have gone into slavery with another, unknown, owner.)

The neo-Germans on the political left hate the Declaration of Independence and everything to do with America. They still want to go back to the Middle Ages, where we were all ruled by a king and most of the people were serfs. They don’t dare to say this openly, but they have spent most of the past generation slandering America, and evidently Time, Newsweek and a large part of the population has fallen for their lies.

Martin Luther King’s message was to judge a man not by the color of his skin but by the content of his character. But the modern left is telling us that all whites in America are guilty of the sin of a few southern aristocrats of 2 centuries ago in owning slaves. That is, we are guilty because our skin is white (even though many northerners fought and died to free those slaves). This is the same bigotry that persecuted Negroes from 1865-1964. Only its object has been changed. But then hate is hate, and love is love, and there is not as much difference between them as most people think.
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Howard S. Katz

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Monday, January 19, 2009

WHAT IT’S ALL ABOUT (http://thegoldbugnet.blogspot.com/2009/01/what-its-all-about.html)


by Howard S. Katz
1-19-09

In this blog, I want to present an overview of my philosophy in the hope that it will help readers understand my comments on specific issues. Man is the animal who perceives reality by means of abstractions. A principle is a statement about abstractions. Therefore, it is very important for each of us to understand the correct principles if we want to achieve the good things of life.

The first question that every human being addresses when he enters life is what kind of a world is this in which I find myself? And this is the most important question he will ever consider because almost all other questions depend on the answer to this one. Further, as per paragraph 1, the answer to this question must be framed in terms of principle.

The first explanation of the world which human beings accepted was animism. This is the view that events happen because every object has an animate spirit, and the spirit wills the event to happen. For example, why does a volcano erupt? There are two explanations.

• The volcano is an animate being. This volcano spirit gets mad, and the volcano erupts.
• Deep under the earth’s surface is very hot rock in a semi-solid, semi-liquid form called magma. Occasionally this magma breaks through a weak point in the earth’s crust, and the result is an eruption.

You are familiar with these two ideas as the religious world view and the scientific world view. However, the issue goes deeper than that.

The form of animism we meet in the very earliest reports of human society is called polytheism. Here the inanimate object is associated with but distinct from the spirit, which is usually represented as a human being or an animal. For example, the spirit, or god, of the sun is conceived as a charioteer who pulls the sun across the heavens. The reason that the sun rises and sets so regularly is because the god of the sun is very reliable in his habits.. The god of the sea is given to fits of temper, which is why there are storms at sea. The goddess of the earth is kindly and bountiful, which is why the earth brings forth food.

About 1500 B.C., a radical movement arose in ancient Egypt which rejected animism and declared that events happened because of cause and effect. We say today that lightening does not strike because Zeus is angry and is hurling thunderbolts; rather, the rapid movement of the clouds causes friction, which creates static electricity (much as happens when you shuffle across a rug or rub your comb against certain fabrics. The lightening bolt is simply the discharge of this static electricity and is similar to the spark which jumped from your finger to the electric light switch. in the old-fashioned wall-to-wall carpeting.

This ancient Egyptian movement was what we would call atheist. It argued that events happened because of cause and effect not because of the will of a spirit or god. However, this atheist movement found it too difficult to persuade people of the radical idea that there were no gods. So it compromised and argued that there was just one god. In this form, it was successful, and the Egyptian pharaoh, Amenhotep IV, converted to this new monotheism and became a worshiper of Aton, the god of the sun. In line with this, he changed his name to Akhenaten (spirit of the sun)

Akhenaten’s reign is a bright spot in ancient Egyptian history. There is an artistic revolution as the human figure is depicted realistically. His writings show that he was deeply in love with his wife. The preoccupation with war and conquest is gone.

But Akhenaten’s revolution did not last. His nephews who succeeded him (the second of which was King Tut) were weak. The old polytheist priests organized a revolution and reestablished polytheism.

Moses was a prince of Egypt in the province of Gosen (Goshen) in northeast Egypt. He was a believer in Akhenaten’s monotheism and probably understood the more radical atheistic position. Just at the time when the old polytheists were victorious, he devised a plan for political action.

The English “Moses” is derived from the Hebrew “Moishe,” which in turn is derived from the Egyptian “mose.” “Mose” was a name fragment, meaning son of (similar to “mac” in Scottish names). So undoubtedly, Moses had a long Egyptian name which the Hebrews could not pronounce and shortened to (the equivalent of) “Mac.” I prefer to think of Moses as Mac because religious people today have reinterpreted these events from the view of a body-soul dichotomy, which distorts the character of what happened.

As you know, Moses led the Hebrew people out of Egypt. They invaded the land of Canaan. (:It wasn’t called “Palestine” until 1400 years later when the Romans made up that name to establish the fiction that the Jewish people had never lived there.) Monotheism then spread through most of the world from Judea/Israel, and most of the people in the world today owe their basic world view (which they value above anything else) to these events.

Thus far, I have described Moses’ and Akhenaten’s causal view of the world in terms similar to the conflict between science and religion of the past few centuries. This is partly accurate, but it does not fully state the enormous change in human thinking which occurred at this time.

For example, when Moses sought to teach his new causal view of the world to the Hebrews, his first thought was to explain to them how to act. This is perhaps the second most important question of human existence. Since we are living in a world governed by the law of causality, the way we must act is in accord with the law of causality.

• The law of causality says (with regard to inanimate entities) that every event must follow from its cause, and every cause must have its effect.
• The correct principle of action in a causal universe is that you must live in accord with the law of causality. You must expect to receive the consequences of your actions (the effects of their causes), and you must treat other people by giving them the consequences of their actions. This was later called (by the Greeks) the idea of justice.

Let us go back to my favorite example of the lazy farmer and the industrious farmer. The lazy farmer produces a small crop. The industrious farmer produces a large crop. But the lazy farmer wants to escape the consequences of his laziness (starvation). So he steals the crop of the industrious farmer. Thus we see that the moral principle, thou shalt not steal, follows directly from the principle of justice, which itself follows from the causal view of reality.

Notice that the law of causality is immutable. We cannot prevent each cause from having its effect. But the principle of justice is not immutable. We human beings have free will and can choose to act in accord with justice or against it. Any human society is free to establish the principle thou shalt not steal or the principle thou shalt not resist the thief who comes to rob you. But in this case, the principle of justice operates on a higher level. Once stealing is legalized (e.g., the bank bailout bill of last October), then the people of that society give up the hard work of producing wealth and concentrate on stealing from others. The victims of the robberies then simply give up and stop producing. Indeed, they too may become thieves. (This was a common event in the 4th century A.D. when the new Christian Roman Government pretty much outlawed most productive activity and abolished property rights.)

A modern person who identifies with and supports the law of causality immediately applies it to physical objects (mechanics). But Moses and the ancient Hebrews immediately applied the law of causality to the science of morality and developed the concept of justice.

Further, Moses added to the concept of monotheism some ideas of his own which indicated that he had in mind the original idea of the causality movement – to do away with the idea of gods or spirits altogether. The god that Moses taught to the Hebrews had no place. Every other god had a place. (The Greek gods lived on Mount Olympus.) Further, the god of Moses had no physical shape. (Later it was said that man is made in the image of God. This is a contradiction, but most people are not bothered by it.) Now something that isn’t anywhere and doesn’t have any shape doesn’t really exist, does it?

There is a passage in Exodus which is very relevant here. Moses meets God at the burning bush, and God tells Moses to bring forth the children of Israel from Egypt. Moses at this point still thinks of himself as an Egyptian prince. He belongs to the group which is oppressing the children of Israel. If he announces to them that he is their leader in a project to bring them out of Egypt, they are not at all likely to believe him. Maybe he is just a nasty Egyptian trying to lure them into making a break for freedom intending to turn them over to the authorities. How can he prove to them that he is sincere and get them to follow him?

Moses decides that, since he has spoken to God face to face, he can prove that he is sincere by telling them God’s name. So he asks God:

“Behold, when I come unto the children of Israel, and shall say unto them, The God of your fathers hath sent me unto you; and they shall say to me, What is his name? what shall I say unto them?”

Exodus, Ch. 3, vs. 13.

A reasonable question. But God’s answer has puzzled biblical scholars right up to the present day.

“And God said unto Moses, I AM THAT I AM: and he said, Thus shalt thou say unto the children of Israel, I AM hath sent me unto you.”

Exodus, Ch. 3 vs. 14.

What is God saying here? He is saying that he does not have a name. He has no place. He has no shape. And he has no name.

And to top it off, he asks you to do what you would do if he did not exist (act in accord with the law of cause and effect). It is hard to avoid the conclusion that Moses was trying to gently ease the children of Israel into the idea that there was no god (were no gods).

As a result of this idea (that God has no name), the Jewish religion, to this day, has a lot of confusion about the name of God. Modern Jews believe:

• God has a name, and it may be written, but it must not be spoken (except by the High Priest in the olden days on very special holidays.
• When a modern Jew comes to the name of God written in a prayer, he substitutes “Adonoi” (the Hebrew form of Aton, the god of Akhenaten).
• Since Hebrew does not use vowels (except for children and beginning students of the language), the name of God is written only with the consonants, which are YY (or YHYH, where the two H’s are silent).

Since the destruction of the Temple by the Romans, the name of God has not been pronounced; hence the vowels have been lost. When the Roman pagans converted to Christianity and decided to worship the Jewish God, they tried to learn His name. They went to prayer books written for children. But due to the rule that what was supposed to be pronounced was “Adonoi”, the vowels were those for that word rather than for God’s name. Thus, the early Christians, not having much of an idea of what they were doing, put together the consonants from “YHYH” and the vowels from “Adonoi” and got a nonsense word, “Jehovah. (The first Y was changed to J and the second to V.)

Whenever the idea of justice entered a human society, it caused a burst of energy. This idea was brought from the Israelites to the Greeks by the poet Hesiod in the 8th century B.C. This caused the flowering of classical Greece in the 6th century B.C. Rome was an offshoot of Greek culture, and the Roman empire resulted from the fact that the Romans focused almost entirely on politics and are the first nation in history to declare that human beings had rights.

Plato hated the idea of justice, and his supposed search for justice in The Republic led to the belief that justice could not be defined. Actually Isaiah had an excellent definition of the concept of justice in Ch. 3, vs. 10 and 11 (500 years before Plato was born). All Plato’s followers had the right to say was that they did not know how to define justice. But this ignorance was somehow twisted into a kind of knowledge. As Platonism became more and more influential in ancient civilization, Plato’s attack on justice undermined the concept of Roman law and led to the collapse of Rome.

Christianity was one of these neo-Platonist movements which mounted an attack on the idea of justice. Jesus’ argument about love said that love was opposed to and superior to justice. (Today you will hear people advocate justice tempered with (meaning compromised with) mercy. When the Roman people adopted Christianity in 394 A.D., they immediately declined into an orgy of hate, cowardice and violence. Civilization then collapsed in western Europe, and every measure of human values declined for 500-600 years.

John Calvin revived the concept of justice by teaching people that the Old Testament should be elevated in importance above the New (because you can’t get to heaven). The 17th century English Calvinists carefully studied the Old Testament and many of them were literate in Hebrew. (William Bradford, the second governor of the Pilgrims and their historian, could read and write Hebrew and kept a Hebrew diary.) In the 17th century, they began a movement for democracy, which succeeded in 1689 with the passage (by Parliament) of the English Bill of Rights (the ancestor of the American Bill of Rights a century later). The American Revolution of 1775-83 was simply an imitation of this English democratic movement carried to a more consistent conclusion. Today a neo-Platonist attack on justice is destroying democracy and freedom in America with results which will be devastating to all of our lives.

# # #

Howard S. Katz can be visited at http://www.thegoldbug.net (http://www.thegoldbug.net/).

Posted by theGoldBug.net at 11:53 PM (http://thegoldbugnet.blogspot.com/2009/01/what-its-all-about.html) 3 comments (https://www.blogger.com/comment.g?blogID=7759641266004417974&postID=7898742639293748847) http://www.blogger.com/img/icon18_email.gif (http://www.blogger.com/email-post.g?blogID=7759641266004417974&postID=7898742639293748847)http://www.blogger.com/img/icon18_edit_allbkg.gif (http://www.blogger.com/post-edit.g?blogID=7759641266004417974&postID=7898742639293748847)
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[Dr_Who]

IMF says Aussie now in recession and still contracting. :eek:

[macduffy]

A small glimmer of optimism being shown by a slight upturn in shipping rates?

http://www.dryships.com/pages/report.asp

:cool:

[tricha]

Caught that too ... There's been a few other positives coming out of the supply chain too. I'm beginning to suspect that the 'wholesalers' are re-positioning inventories and materials ... Early days tho but a must watch indicator.

Just an FYI - be careful of panamax only fugures as the shipping lines are also sending stuff around the end and the trend may be/is(?) increasing. I need to do a bit more reasearch on this. If anyone already has, please share.

I can not find any positives anywhere, it's rattling down the pipe.:eek: From the US, across to China and it's now hitting Australia hard.
And that's the big question, where to find protection.

And below relates to most States in the US.

http://newsimg.bbc.co.uk/media/images/45259000/jpg/_45259505_1168b728-fd12-4915-ac8a-0fdb9eb5f082.jpg (http://news.bbc.co.uk/2/hi/business/7893965.stm) http://newsimg.bbc.co.uk/shared/img/o.gif 20,000 jobs may go in California (http://news.bbc.co.uk/2/hi/business/7893965.stm)

Cash-strapped California will start notifying 20,000 state workers on Tuesday that they may lose their jobs.

[trader10]

Hi Tricha,

Gerry would be watching gold very closely.....probably he's doing it right now...... ahhhh we miss that old fella.... great thinker.....

16th of December..... 1year 2 months and 1 day.....

------------------------------------------------

As I see, Japan's GDP being calculated for the last 3 months of 2008....might have an effect on our markets but temporary only..... Since we are in the second month of the year, results could be slightly better....even thou unemployment figures are stacking allover the world.....

Interesting to see what manouvers US and Japan will bring next......another couple of big packages perhaps ? Hillary Clinton had a speach in Japan this afternoon..... I wonder if she will visit China also..... IMHO China is the key to make things moving this year....

cheers

[tricha]

Hi Tricha,

Gerry would be watching gold very closely.....probably he's doing it right now...... ahhhh we miss that old fella.... great thinker.....

16th of December..... 1year 2 months and 1 day.....

WOW, sucks, all his forcasts come to frution and he is not here to have his day in the sun.

------------------------------------------------

IMHO China is the key to make things moving this year....

cheers

Thats it in a nut shell Trader10, can China be king ????????

[trader10]

Dear Tricha,

..."can China be king ???????? "......

Well, I bet many are hoping they will and many are not.....

IMHO I think they will be not the king but they should become the rooks, bishops or knights this year before they become the queen...... it's a long way to the top and they have a lot of work to do in their own backyard IMHO.....

But, no doubt about it.....they are the movers of this point in time and the whole world needs them to keep on moving..... If they can achieve this state many others will follow them....the rest of the BRIC and other countries like us here .....OZ land......

Interestingly in the last few weeks we've seen their hunger once again.....slightly via PEM, RIO, GBG and OZL....

I really hope they do get it right..... the latest Chinese stimulus - 4 trillion yuan (USD$586 billion)...should be the first of a few IMO....
Their massive infrastructure spending will be a bonus to countries like AUS.....

China will be a very minority of the countries that will achieve growth on 2009..... and I really do hope they do keep things going.....

cheers

[tricha]

London Metal Exchange Warehouse Stocks
( February 23 )
MetalTonnes in StorageChange from
previous dayAluminum3147300+28375 Copper545600+17350 Nickel93024+714 Lead56425+775 Zinc354925+475
U want the big picture, its full on demand destruction and does the bottom theme sound like a repeat of history. :confused:

http://news.bbc.co.uk/2/hi/in_depth/7900122.stm

Audio slideshow: The road to Hooverville


The Wall Street Crash of October 1929 was a trigger that quickly plunged the United States from economic prosperity to the depths of the Great Depression.
Millions of Americans lost their jobs and homes, and many were forced to live in shanty towns, nicknamed Hoovervilles after the country's president Herbert Hoover.
Through this collection of archive photographs, Professor David Reynolds, presenter of Radio 4's landmark series America, Empire of Liberty (http://www.bbc.co.uk/radio4/america/)looks at what happened when the United States went from boom to bust.

Javascript and Flash plug-in required
Either the Flash plugin was not detected on your computer or the JavaScript features of your brower have been disabled.
To enable Javascript on your browser we recommend that you contact your computer support line.
Click here to download the Flash plugin from the Macromedia website (http://www.macromedia.com/software/flashplayer/)

Click 'show captions' for photograph information. Music: Hot Foot Stomp, composed by Tony Kinsey / Speakeasy, composed by Richard Myhill / Happy Ending, composed by James Dooley / Lonnie's Jug Blues composed by Richard Etheridge. Photographs courtesy Getty Images / AFP / AP. Slideshow by Paul Kerley. Publication date 23 February 2009.

[tricha]

Hmm, its not looking good.


Is the US heading for a depression?



By Steve Schifferes
Economics reporter, BBC News
http://newsimg.bbc.co.uk/shared/img/999999.gif

http://newsimg.bbc.co.uk/media/images/45429000/jpg/_45429709_us_rec_466.jpg


The sharp contraction of the US economy accelerated in the last three months of 2008, with official figures showing GDP shrinking at an annualised rate of 3.8%.
With forecasters already predicting the worst US recession since World War II, how big a danger is there that the US economy will slip into a depression similar to the 1930s?
The latest figures paint a gloomy picture of the US economy.
Consumer spending, which makes up two-thirds of the economy, fell for the second quarter in a row, by 3.5%.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif For all the talk of this being a consumer-led downturn, the credit crunch is hitting businesses even harder http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Paul Ashworth, Capital Economics

http://newsimg.bbc.co.uk/nol/shared/img/v3/inline_dashed_line.gif

US enters recession (http://news.bbc.co.uk/2/hi/business/7860892.stm)


This drop was led by a 22% drop in spending on durable goods like automobiles and washing machines.
The decline in motor vehicle production was so great that it alone contributed 2% to the fall in GDP.
Businesses hit
Businesses as well as consumers have been hit hard by the slowdown.
Exports, which had helped boost GDP earlier in the year, fell sharply, by 19.7%, as foreign markets for US products were hit by their own recessions. http://newsimg.bbc.co.uk/media/images/45348000/jpg/_45348525_006678669-1.jpg US recession is a continuing disaster, President Obama says


Investment fared even worse.
Residential investment fell 23.6% as the glut of foreclosed properties reduced new home sales. Business investment was down 19.1%, led by a 27.8% drop in purchases of equipment and software.
Business inventories of unsold goods mounted. If the inventory build up - which is likely to be temporary - is excluded, GDP fell at an annualised rate of 5.1%.
"For all the talk of this being a consumer-led downturn, the credit crunch is hitting businesses even harder," said Paul Ashworth of Capital Economics.
Consumers save
The economic uncertainty does seem to be changing consumer behaviour. People are saving more in preparation for the coming downturn.
The personal savings rate rose to 2.9%, more than double the 1.2% rate in the previous quarter. Mr Ashworth predicts the savings rate will double again, to 5%.
Consumers are being hit by a triple whammy: rising unemployment, which could rise from 7% to 10% of the workforce by the end of the year; restricted access to credit; and falling asset values.
The fall in stock markets and house prices has reduced household wealth by 20%, from the middle of 2007. This alone has reduced consumption by around 1%, some economists estimate.
It may make sense for consumers to save instead of spend, but in an economy as reliant on consumer spending as the US, this does add to recessionary pressures.
How long?
The key question in whether this will turn from a recession to a depression is how long the slowdown will last. http://newsimg.bbc.co.uk/media/images/45430000/jpg/_45430669_44436215.jpg FDR pledged a New Deal to combat the recession


In the 1930s, output declined for four years, with GDP cut by half while unemployment soared to one-quarter of the workforce.
Despite the New Deal, output did not recover to its 1929 level until World War II when there was a massive boost in government spending.
At the moment, most economic forecasters are predicting that the US slowdown will last around two years, with the economy returning to weak growth by 2010.
The National Bureau of Economic Research says the current economic slowdown actually began at the end of 2007 and is likely to be the longest post-war recession.
The non-partisan Congressional Budget Office (CBO) estimates a drop in real GDP for 2009 of 2.2%, followed by a rise of 1.5% in 2010, while the IMF predicts a fall of 1.6% this year, following by a recovery of 1.6% in 2010.
But economic forecasts have changed frequently in the past year. It is unclear what will happen after 2010, said the IMF's chief economist Oliver Blanchard.
Government rescue?
The only thing currently boosting the US economy is Federal government spending, which rose 5.8% in the quarter. http://newsimg.bbc.co.uk/media/images/44866000/jpg/_44866044_1goresaleafp226c.jpg The government may have to help the millions who have lost their homes


But even if Mr Obama gets rapid approval for his $800bn stimulus plan - which has passed the House of Representatives and is currently being considered by the Senate - it will take some time for the money to be felt in the economy.
Only $170bn will be spent before 1 October 2009, representing just over 1% of US GDP, according to the Congressional Budget Office.
The bulk of spending (including tax cuts) would occur in 2010 ($354bn) and 2011 ($174bn).
Individual states may not be able to rapidly increase spending on infrastructure projects which make up a large part of the stimulus package.
It is also unclear how many jobs will be created: President Obama aims to create 3.5 million new jobs, but others say the stimulus package could create between 1.2 and 3.6 million more jobs.
Financial squeeze http://newsimg.bbc.co.uk/media/images/45290000/jpg/_45290747_bankou226afp.jpg Big US banking groups may need a bigger bail-out.


The other big uncertainty is whether the financial sector can be restored to health and at what cost.
There is now $2.2 trillion of toxic bank debt worldwide, the IMF says, $500bn more than it estimated a few months ago.
The collapse of financial markets in the autumn had a dramatic effect on consumer and business confidence.
There are plenty of reasons why growth might be even less than forecast, the IMF's Olivier Blanchard said, not least if banks have so many bad debts, they will further drag down the real economy.
The Obama administration still has $350bn left of the $700bn bailout for banks approved in October last year. It may need to ask for more. If it gets the money it needs and if the money is spent promptly and wisely, the US might just escape with a relatively mild recession. But given the extraordinary events of the past six months, most economists are still hedging their bets.

[macduffy]

"If it gets the money it needs and if the money is spent promptly and wisely, the US might just escape with a relatively mild recession."

QUOTE FROM PREVIOUS ARTICLE.

Bit of an "each-way bet " article, IMO. I'd have thought that the US was well past the stage of hoping that the economy may escape with a " relatively mild recession ", however that may be defined.

[ELYOB]

The Depression was a series of recessions ..... so we are in recession [1+......+(n-1)!]

so, D = [1+.......+(n-1)!]
____________

t -1

[tricha]

The Depression was a series of recessions ..... so we are in recession [1+......+(n-1)!]

so, D = [1+.......+(n-1)!]
____________

t -1

An interesting articule on where to place ones bets. And by reading it

Rule #1 Cash is King

Rule # 2 No debt


The Daily Reckoning Presents: As Bill wants to point out, what the United States is facing right now is not a recession, it's a depression. So, we better figure out how to profit in the face of it. Chris Mayer explores...

Great Depression Survival Guide, Part II
by Chris Mayer

"Although most Americans think of the 1930s as a decade of economic stagnation, the period was far from being one of unalloyed decline." - Robert Sobel, The Age of Giant Corporations

Robert Sobel's book is our chief guide for the second leg of the Great Depression Survival Guide. As his book's title lets on, it was the larger companies that did the best.

To illustrate this point, let's start with the auto industry. In 1929, the auto industry sold more cars than it ever sold before - 5.3 million units. But the wrecking ball called the Great Depression hit the auto industry especially hard. By 1932, only 1.3 million units were sold.

As you might imagine, plenty of automakers never made it out of the Great Depression. Moon, Kissell, Elcar, Marmon and others all disappeared. What they all had in common was that they were small. Some were specialty carmakers, serving a small niche that got a lot smaller - too small to make a business out of it. Novelties - like Franklin's air-cooled engines - were desirable when times were good, but no one wanted to pay for them when times turned bad.

But the Big Three - GM, Ford and Chrysler - survived. In fact, the falling away of the competition helped that. It allowed them to fill in and consolidate markets. So we have our first takeaway.

The survivors often had large-scale operations and were leaders in their industries. Smaller companies had a harder time dealing with the Great Depression, as Sobel shows in his book. But the sales and profits of the largest companies increased during the 1930s.

What else did the Great Depression survivors have in common? Here are more of my thoughts based on Sobel's research...

The survivors were self-financing. They didn't need their bankers as a source of funds. In fact, most of large Corporate America didn't need their bankers for loans. The flush times of the 1920s led to the near disappearance of corporate bank debt by 1929. Banks had to go elsewhere to find borrowers. They began to finance real estate heavily and broker loans for the purchase of stocks and bonds. Ultimately, the banks got in trouble with these bets, but most of larger industrial America stood on its own bottom.

Take the Gulf Oil Co., for instance. In 1929, the company produced 90 million barrels of oil. It was like granite as far as financial strength goes. In the 1930s, Gulf was able to expand operations, gain a foothold in the rich Kuwaiti oil fields, increase its advertising budget, pursue undersea exploration and refinance what debt it had at attractive rates. "Most of this would have been impossible were it not for the firm's strong position on the eve of the Depression," writes Sobel.

The winners also often had great leaders. GM had Alfred Sloan as its president through 1937. Sloan was a brilliant strategist and organizer. The harsh environment of the 1930s rewarded tight ships and the accumulation of small advantages. These were things at which Sloan excelled.

In fact, Sobel goes on to say that GM actually benefited in a number of ways from the Great Depression. "A management aware of possibilities and [with] adequate financing could hold its own and even flourish during the Depression," Sobel writes.

Sobel finds other examples in other industries, everything from American Can in the tin industry to the New York Yankees in baseball. "Good leadership and finances could expand and dominate in the 1930s," Sloan concludes. Hence, we reaffirm once again the value of a good operator, a point I stress in these pages.

Industries that were hard to get into did best. Another other important point here is that Sobel finds industries with high capital costs that kept competitors out did better than those with low barriers to entry.

This one also makes intuitive sense. In a depression, money is tight. And if it takes bucket loads of money to crack into an industry, it's not likely to happen. The chemical industry held up well in part because to get in the business required heavy capital spending on equipment and research and marketing. Companies like DuPont, Monsanto and Union Carbide held onto market-leading positions simply because there was no threat of new entrants.

Oil refineries, too, were another example. Sobel estimates that one barrel of gasoline capacity required $240 of capital. By the end of the '30s, it would cost you $320 to add one barrel of capacity. On a per worker basis, the refinery industry was about 10 times more capital- intensive than the typical American manufacturer. Those high costs discouraged new competitors and kept prices for gasoline up. It's no surprise, then, that price of gasoline did not go down in the 1930s.

Productivity gains helped. Since money was tight and business was slow, you had to be innovative to squeeze out profits. You had to husband your resources carefully, like a caravan mindful of its water supply as it crosses the Sinai Desert.

In the oil business for example, oilmen got much better at finding oil. Necessity is the mother of invention, after all.

Crude prices fell in the 1930s, from $1.27 a barrel in 1929 to only 67 cents a barrel by '33. So the oil biz had to rely on new technologies to improve results. And it did. For instance, in 1929, about a third of all drilling resulted in a dry hole.

By 1937, that figure was down to 22%.

That's just one example among many in the oil industry, and other industries as well. In general, Sobel finds that output per man - productivity - increased 20% in the 1930s.

Expanding markets also helped. Despite what you might think, demand for everything didn't topple over in the 1930s. Demand for gasoline, for instance, declined only in 1932. From then on, the number of cars and trucks on the road went up every year. And so did the demand for gasoline. That helped the oil companies. Oil also got some help from other industries. The rise of aviation in 1930s required fuel. The oil companies made that fuel. And the demand for highways required asphalt, also made by the oil companies.

Some industries today will also see expanding markets for their goods. It seems obvious, but the point was often overlooked at the time - and so, too, it is overlooked today: There is some base-line level of consumption for things like energy, food and water - even in depressions. This base-line consumption is bound to rise, if for no other reason than population rises over time. You can't say the same thing for decorative balls sold at Target for $4.99 a pop, or for fancy $30 candleholders at Pier 1. If you want to be sure your money sees the other side of this thing, stick with the necessities.

"The principal preoccupation of almost everybody in the 1930s was getting by," the great A.J. Liebling wrote in May 1963.

It's a good point to remember as you think about investing today. "Almost everybody" is key, though. For the companies that shared the characteristics highlighted above - such as the large-scale leaders with good financing and top managers in expanding markets - the 1930s was a time of opportunity.

Regards,


Chris Mayer
for The Daily Reckoning Australia

Editor's Note: Chris is a veteran of the banking industry, specifically in the area of corporate lending. A financial writer since 1998, Mr. Mayer's essays have appeared in a wide variety of publications, from the Mises.org Daily Article series to here in The Daily Reckoning. He is the editor of Mayer's Special Situations and Capital & Crisis - formerly the Fleet Street Letter

[tricha]

US prints money to stave off deflation
Clancy Yeates

March 20, 2009
THE US has resorted to printing money in a desperate attempt to resuscitate its economy and ward off growing concerns over its foreign debt.
Yesterday the US Federal Reserve said it would buy $US300 billion ($453 billion) worth of bonds issued by another branch of government: the Treasury.
The unprecedented move follows similar efforts in Britain and Japan and is an attempt to encourage inflation to prevent a bigger threat: deflation, or a sustained fall in prices.
The central bank will also buy $US750 billion in mortgage-backed securities from troubled lenders, taking total purchases of toxic assets to $US1.25 trillion.
Amid what could be the steepest US economic decline in 50 years, economists said the Fed was also attempting to reassure the the world's biggest saving nations, which fund the US budget deficit, by buying Treasury bonds.
Figures this week showed that growth in Beijing's US bond purchases slowed to $US12.2 billion in January, from $US14.3 billion in December.
A senior economist at Westpac, James Shugg, said the Fed's move was the digital equivalent of printing money. "They're creating money to purchase assets off banks and the quasi-housing authorities in the US," he said.
In February, the global supply of US dollars was $US8275.5 billion, so yesterday's new measures increase the total supply of greenbacks by nearly 13 per cent.
Economists say the new cash will encourage price rises as economic conditions improve, unleashing inflation. But by the Fed's admission, this is better than the alternative: deflation.
"The committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the long term," the central bank said.
An investment manager at Supervised Investments, Phil Carden, said the move to create money "out of thin air" was "hugely inflationary".
"It's a direct and blatant attempt to ignite inflation because they're scared of deflation," he said.
He said it was the lesser of two evils, as deflation was a bigger menace to the US than inflation. If asset prices started to fall across the economy, it would threaten the country's ability to pay back $US11 trillion in national debt, he said.

[MrDevine]

Tricha, whats better – FALLING asset prices while debt stays the same, or RISING asset prices while the debts stay the same? A deflationary spiral will help nobody.

The Great Depression occurred through deflation and falling asset prices, and we had World War II, would you like to see that again? I gather Ben Bernanke is not stupid, and will certainly want to avoid Zimbabwe style inflation rates –*they'll print dollars, and then nuke them just as quick (you would believe) when things start to improve a little.

Its not perfect, far from it, it'll be messy and there will be more blowups – but why does everybody jump out of a window during a NORMAL part of the business cycle? What goes up, will come down and it'll go back up again!

I just don't buy the rhetoric that you're posting here, mostly driven with Gold in mind, that they world as we know it is going to end, well it has ended – and new opportunities are right in front of you.

And on Gold – if they're printing money of course the value of gold is going to go up as in line with inflation, can't see how its a store of value, when its priced in dollars?

[tricha]

Tricha, whats better – FALLING asset prices while debt stays the same, or RISING asset prices while the debts stay the same? A deflationary spiral will help nobody.

The Great Depression occurred through deflation and falling asset prices, and we had World War II, would you like to see that again? I gather Ben Bernanke is not stupid, and will certainly want to avoid Zimbabwe style inflation rates –*they'll print dollars, and then nuke them just as quick (you would believe) when things start to improve a little.

Its not perfect, far from it, it'll be messy and there will be more blowups – but why does everybody jump out of a window during a NORMAL part of the business cycle? What goes up, will come down and it'll go back up again!

I just don't buy the rhetoric that you're posting here, mostly driven with Gold in mind, that they world as we know it is going to end, well it has ended – and new opportunities are right in front of you.

And on Gold – if they're printing money of course the value of gold is going to go up as in line with inflation, can't see how its a store of value, when its priced in dollars?

Hmm Mr Devine, smoke and mirrors, there does not seem to be a clear picture out there.

Your food on the table, how does it get there :confused:

[tricha]

US banking losses revised upward


http://newsimg.bbc.co.uk/media/images/45588000/jpg/_45588080_wall_afp226b.jpg There were 252 banks in trouble at the end of 2008, the FDIC said


The US banks lost $32.1bn (£22.3bn) in the last quarter of 2008 - even worse than the $26.2bn originally reported, US federal regulators say.
The revised data by the Federal Deposit Insurance Corporation (FDIC) included higher charges for an accounting item known as goodwill impairment.
The FDIC said it was the industry's first quarterly loss in 18 years.
The FDIC also lowered the industry's net income for the whole of 2008 to $10.2bn from $16.1bn.
On Friday, the agency updated its earlier report for the October-December period.
The FDIC said it revised the data because of "substantially higher" charges for goodwill impairment.
Goodwill is an asset on a firm's balance sheets, which helps to determine of what it is worth beyond the tangible, including the added value from the potential for future success.
The FDIC did not provide the names of the institutions which accounted for the largest losses. In the last quarter of 2007, the US banking industry posted a $575m (£399m) profit. Last month, the FDIC said there were 252 banks in trouble at the end of 2008 - a rise from 171 in the third quarter.

[macduffy]

So, given all that's happened recently, what's another $6b between friends?

;)

[tricha]

Tricha, whats better – FALLING asset prices while debt stays the same, or RISING asset prices while the debts stay the same? A deflationary spiral will help nobody.

The Great Depression occurred through deflation and falling asset prices, and we had World War II, would you like to see that again? I gather Ben Bernanke is not stupid, and will certainly want to avoid Zimbabwe style inflation rates –*they'll print dollars, and then nuke them just as quick (you would believe) when things start to improve a little.

Its not perfect, far from it, it'll be messy and there will be more blowups – but why does everybody jump out of a window during a NORMAL part of the business cycle? What goes up, will come down and it'll go back up again!

I just don't buy the rhetoric that you're posting here, mostly driven with Gold in mind, that they world as we know it is going to end, well it has ended – and new opportunities are right in front of you.

And on Gold – if they're printing money of course the value of gold is going to go up as in line with inflation, can't see how its a store of value, when its priced in dollars?


The million dollar question, will we have inflation or deflation, two sides to this story :confused: I was kinda hoping for Inflation, but .......................
10 Things You Should and
Should Not Do During Deflation

by Robert Prechter, President, Elliott Wave International | June 19, 2009

Print (javascript:printWindow())

1) Should you invest in real estate?
Short Answer: NO
Long Answer: The worst thing about real estate is its lack of liquidity during a bear market. At least in the stock market, when your stock is down 60 percent and you realize you’ve made a horrendous mistake, you can call your broker and get out (unless you’re a mutual fund, insurance company or other institution with millions of shares, in which case, you’re stuck). With real estate, you can’t pick up the phone and sell. You need to find a buyer for your house in order to sell it. In a depression, buyers just go away. Mom and Pop move in with the kids, or the kids move in with Mom and Pop. People start living in their offices or moving their offices into their living quarters. Businesses close down. In time, there is a massive glut of real estate.
2) Should you prepare for a change in politics?
Short Answer: YES
Long Answer: At some point during a financial crisis, money flows typically become a political issue. You should keep a sharp eye on political trends in your home country. In severe economic times, governments have been known to ban foreign investment, demand capital repatriation, outlaw money transfers abroad, close banks, freeze bank accounts, restrict or seize private pensions, raise taxes, fix prices and impose currency exchange values. They have been known to use force to change the course of who gets hurt and who is spared, which means that the prudent are punished and the thriftless are rewarded, reversing the result from what it would be according to who deserves to be spared or get hurt. In extreme cases, such as when authoritarians assume power, they simply appropriate or take de facto control of your property.
You cannot anticipate every possible law, regulation or political event that will be implemented to thwart your attempt at safety, liquidity and solvency. This is why you must plan ahead and pay attention. As you do, think about these issues so that when political forces troll for victims, you are legally outside the scope of the dragnet.
3) Should you invest in commercial bonds?
Short Answer: NO
Long Answer: If there is one bit of conventional wisdom that we hear repeatedly with respect to investing for a deflationary depression, it is that long-term bonds are the best possible investment. This assertion is wrong. Any bond issued by a borrower who cannot pay goes to zero in a depression. In the Great Depression, bonds of many companies, municipalities and foreign governments were crushed. They became wallpaper as their issuers went bankrupt and defaulted. Bonds of suspect issuers also went way down, at least for a time. Understand that in a crash, no one knows its depth, and almost everyone becomes afraid. That makes investors sell bonds of any issuers that they fear could default. Even when people trust the bonds they own, they are sometimes forced to sell them to raise cash to live on. For this reason, even the safest bonds can go down, at least temporarily, as AAA bonds did in 1931 and 1932.
4) Should you take precautions if you run a business?
Short Answer: YES
Long Answer: Avoid long-term employment contracts with employees. Try to locate in a state with “at-will” employment laws. Red tape and legal impediments to firing could bankrupt your company in a financial crunch, thus putting everyone in your company out of work.
If you run a business that normally carries a large business inventory (such as an auto or boat dealership), try to reduce it. If your business requires certain manufactured specialty items that may be hard to obtain in a depression, stock up.
If you are an employer, start making plans for what you will do if the company’s cash flow declines and you have to cut expenditures. Would it be best to fire certain people? Would it be better to adjust all salaries downward an equal percentage so that you can keep everyone employed?
Finally, plan how you will take advantage of the next major bottom in the economy. Positioning your company properly at that time could ensure success for decades to come.
5) Should you invest in collectibles?
Short Answer: NO
Long Answer: Collecting for investment purposes is almost always foolish. Never buy anything marketed as a collectible. The chances of losing money when collectibility is priced into an item are huge. Usually, collecting trends are fads. They might be short-run or long-run fads, but they eventually dissolve.
6) Should you do anything with respect to your employment?
Short Answer: YES
Long Answer: If you have no special reason to believe that the company you work for will prosper so much in a contracting economy that its stock will rise in a bear market, then cash out any stock or stock options that your company has issued to you (or that you bought on your own).
If your remuneration is tied to the same company’s fortunes in the form of stock or stock options, try to convert it to a liquid income stream. Make sure you get paid actual money for your labor.
If you have a choice of employment, try to think about which job will best weather the coming financial and economic storm. Then go get it.
7) Should you speculate in stocks?
Short Answer: NO
Long Answer: Perhaps the number one precaution to take at the start of a deflationary crash is to make sure that your investment capital is not invested “long” in stocks, stock mutual funds, stock index futures, stock options or any other equity-based investment or speculation. That advice alone should be worth the time you [spend to read Conquer the Crash].
In 2000 and 2001, countless Internet stocks fell from $50 or $100 a share to near zero in a matter of months. In 2001, Enron went from $85 to pennies a share in less than a year. These are the early casualties of debt, leverage and incautious speculation.
8) Should you call in loans and pay off your debt?
Short Answer: YES
Long Answer: Have you lent money to friends, relatives or co-workers? The odds of collecting any of these debts are usually slim to none, but if you can prod your personal debtors into paying you back before they get further strapped for cash, it will not only help you but it will also give you some additional wherewithal to help those very same people if they become destitute later.
If at all possible, remain or become debt-free. Being debt-free means that you are freer, period. You don’t have to sweat credit card payments. You don’t have to sweat home or auto repossession or loss of your business. You don’t have to work 6 percent more, or 10 percent more, or 18 percent more just to stay even.
9) Should you invest in commodities, such as crude oil?
Short Answer: Mostly NO
Long Answer: Pay particular attention to what happened in 1929-1932, the three years of intense deflation in which the stock market crashed. As you can see, commodities crashed, too.
You can get rich being short commodity futures in a deflationary crash. This is a player’s game, though, and I am not about to urge a typical investor to follow that course. If you are a seasoned commodity trader, avoid the long side and use rallies to sell short. Make sure that your broker keeps your liquid funds in T-bills or an equally safe medium.
There can be exceptions to the broad trend. A commodity can rise against the trend on a war, a war scare, a shortage or a disruption of transport. Oil is an example of a commodity with that type of risk. This commodity should have nowhere to go but down during a depression.
10) Should you invest in cash?
Short Answer: YES
Long Answer: For those among the public who have recently become concerned that being fully invested in one stock or stock fund is not risk-free, the analysts’ battle cry is “diversification.” They recommend having your assets spread out in numerous different stocks, numerous different stock funds and/or numerous different (foreign) stock markets. Advocates of junk bonds likewise counsel prospective investors that having lots of different issues will reduce risk.
This “strategy” is bogus. Why invest in anything unless you have a strong opinion about where it’s going and a game plan for when to get out? Diversification is gospel today because investment assets of so many kinds have gone up for so long, but the future is another matter. Owning an array of investments is financial suicide during deflation. They all go down, and the logistics of getting out of them can be a nightmare. There can be weird exceptions to this rule, such as gold in the early 1930s when the government fixed the price, or perhaps some commodity that is crucial in a war, but otherwise, all assets go down in price during deflation except one: cash.
……….
For more on deflation, download Prechter’s FREE 60-page Deflation Survival eBook (http://www.elliottwave.com/deflation-survival-guide.aspx?url=/&cn=finsense).
Copyright © 2009 Robert Prechter
Editorial Archive (http://www.financialsense.com/Experts/ewave/archive.html)

[The Big Ease]

Sorry guys, but isn't deflation impossible when all you need to do is print more money to avert it?

[The Big Ease]

fair post ginshu.
if you are in speculative investments, then time to reconsider.
otherwise, play on...
the world is not falling apart. but PE's are.

good times. now is the time to be eyeing quality companies with excellent prospects and track records of delivering. if they get knocked off, then get stuck into them. you dont get these opportunities very often.


Posted 01/2008

I want to join the chorus of people claiming they picked the market and were right, so you should subscribe to their views until the end of time and suspend your own logic.

I told you it wasn't the end of the world and it's not.
Forget about the 60% fall in equities prices, I was right about the first point and I'll be sure to include it in all the sales and marketing material when I ask you to subscribe to my wealth of rehashed wisdom to ensure you don't miss the recovery.

Come on, I will even give you a ten% discount if you order now. Hurry, hurry while stocks last.

This bear has been a wonderful lesson. I had some BIG losses but have positioned myself well to make it all up and more.

[tricha]

I am mostly out the market and expect to remain so for the remainder of 2008. I think America will crash bringing our markets down to much lower points than they are now. I see the ASX being in negative territory for the year 2008 with a big crash or a series of minor corrections whatever, i wont be investing until the market shows a clear TA uptrend.
Its much safer sitting it on the outside in times like this. Macdunk

Hmm, its not over yet and this reminds of the 1930 depression, trade sanctions, watch this space.


Brazil slaps trade sanctions on US over cotton dispute


http://newsimg.bbc.co.uk/media/images/44710000/jpg/_44710434_cotton_ap226b.jpg The WTO has ruled that subsidies to US cotton producers are discriminatory

The Brazilian government has announced trade sanctions against a variety of American goods in retaliation for illegal US subsidies to cotton farmers. The World Trade Organization (WTO) approved the sanctions in a rare move.
Brazil published a list of 100 US goods that would be subject to import tariffs in 30 days, unless the two governments reached a last-minute accord.
It said it regretted the sanctions, but that eight years of litigation had failed to produce a result.
It said it would raise tariffs on $591m (£393m) worth of US products - from cars, where the tariff will increase from 35% to 50%, to milk powder, which would see a 20% increase in the levy.

http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif US farm subsidies are condemned worldwide. This archaic practice must stop http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Carlos Marcio Cozendey
Brazil's foreign ministry

Cotton and cotton products would be charged 100% import tariff, the highest on the list.
The Office of the US Trade Representative said it was "disappointed" by Brazil's decision and called for a negotiated settlement.
Critics say the US has given its cotton growers an unfair advantage by paying them billions of dollars each year.
In 2008, the WTO ruled that subsidies to US cotton producers were discriminatory.
Tall order
Carlos Marcio Cozendey, head of economic affairs at Brazil's foreign ministry, told a news conference: "The idea was to distribute the retaliation broadly in order to maximise pressure.
"US farm subsidies are condemned worldwide. This archaic practice must stop."
However some analysts say major changes to these subsidies would involve modifying agricultural legislation - a tall order for the US Congress against a difficult economic and political backdrop, says the BBC's Gary Duffy in Sao Paulo.
Our correspondent says the dispute, which began in 2002, is one of the few in which the WTO has allowed cross-retaliation, meaning the wronged party can retaliate against a sector not involved in the case.
He adds that it appears the Brazilian government has deliberately chosen a wide range of products in order to have maximum impact.
Safety net
Cotton producers in the US argue that the system of subsidies has changed since the WTO made its original ruling in 2005.
"The US has made changes in the cotton programme as well as the export guarantee programme," Gary Adams, chief economist at the National Cotton Council told the BBC, adding that US cotton production was now 40% to 45% lower.
Mr Adams said he believed that subsidies were still justified.
"We feel this is a very important financial safety net for producers," he said.
Steven Bipes of the Brazil-US Business Council urged the US to take steps to avoid what he called "damaging" retaliation by Brazil.
"The business community finds it extraordinarily important that countries, including the US, comply with its WTO obligations and otherwise negotiate to find common ground when there are disputes," he told the BBC.

[tricha]

Oh yeah, just when u thought it was safe, it's rattling down the pipe.

Monday, March 8, 2010

March 8 2010: Gazing Through The Long Tall Grass (http://theautomaticearth.blogspot.com/2010/03/march-8-2010-gazing-through-long-tall.html)





http://1.bp.blogspot.com/_9ZzZquaXrR8/S5VKjIX1mdI/AAAAAAAAFnI/ocb8tDBXmSo/s640/Accident1906.jpg (http://1.bp.blogspot.com/_9ZzZquaXrR8/S5VKjIX1mdI/AAAAAAAAFnI/ocb8tDBXmSo/s1600-h/Accident1906.jpg) Detroit Publishing Co. The Accident November 12, 1906
"Accident at Michigan Central R.R. depot, Detroit"


Ilargi: Greece is saved, the Euro will be fine, so will the eurozone, it was all a storm in a teacup. Even Paul Volcker sounds less negative about the Euro than about America’s own finances. Maybe that should tell us something. There will be a European monetary fund down the line (perhaps many years), but since the power structure in the EU is overly clear, it doesn’t really matter. German influence in the union, both economical and political, will increase, but the Germans know very well what their limits are, so maybe that's not such a bad thing. Greece will certainly benefit from better accounting practices.

And then they’ll have to adapt to what is now called austerity, which is in reality nothing but a misnomer for what will befall us all, as it becomes everyday life in the 21st century. And not just for the Greeks, Portuguese, Irish and Icelanders, either, but for all everyday people all over the world. If they are among the lucky ones.

Meanwhile, many gamblers have lost fortunes shorting the Euro, while journalists like the FT’s Wolfgang Münchau - along with many of his peers in the English and American press- have once more shown that their knowledge and insights are exceedingly limited to their own few square inches of land and vision. The Euro lost about 10% of its value from the most recent top, but Europe’s export countries were shooting for a -much- bigger drop than that on the Greek scare. They’ll now have to find the next finance horror flick. A consolation for Germany is that the crisis will give them increased leverage to pressure southern Europe to buy more German instead of Asian products.

And that was why they all entered the European Union to begin with. Germany and Holland needed markets for their products, so they built them in their own backyards. Buy more German may sound like protectionism, but when your currency is 20-25% overvalued, the global playing ground is not exactly level to start with. And then you try to make it level. We've just seen part 1 of that film. America wants to China to to raise its currency, Europe wants America to do the same. beggar they neighbor.

http://2.bp.blogspot.com/_9ZzZquaXrR8/S5VKjWZtxFI/AAAAAAAAFnQ/j8nE7MaL-Y0/s640/SupranationalEU%2B.png (http://2.bp.blogspot.com/_9ZzZquaXrR8/S5VKjWZtxFI/AAAAAAAAFnQ/j8nE7MaL-Y0/s1600-h/SupranationalEU%2B.png) A picture of weakness, or of resilience?

Germany’s main fear today may be that California, Illinois, New York and New Jersey (just to name a few) will crumble before Portugal and Spain do, which will make it that much harder to bring the Euro back to par with the dollar. Some relief could be provided by the currencies that have nowhere to go but up from where they presently are, the yen, yuan and pound sterling. Devaluing your currency can be a beneficial target, as the US shows, but if you let the process run too far too fast, a whole new slew of issues creeps in, and you're looking at a de facto crippled coin. Britain and Japan have no room left to move when it comes to their interest rates, at the very moment they may need -or at least want- it most.

The British commentariat can’t stop waxing about how great it is to control one's own currency (if you do, you can play rate games, which in modern economics means you’re saved no matter what), but they miss out on the fact that Euro is at the same time a bastion of support for all its users, while the pound stands alone. 60 million Britons, 300 million Americans, 330 million Eurozone inhabitants (the EU has over 500 million). It may be nice to have your own currency, but is it really the best option when that currency is comparatively tiny? Do the pundits over there ever wonder why the Euro is so strong in the first place? Could it be because the same markets that are set to pounce the pound any day now have strong confidence in it, and have come to realize that they can’t go after the Eurozone anymore then they can go after the US as a whole? Who would rule out that possibility?

It's all about one question after all now, isn’t it? Who is the weakest link on the globe today that's worth going after? Like a pride of lionesses watching a herd of wildebeest, gazing through the long tall grass, patiently - but increasingly hungry- looking for the proper prey. The least risk and energy, for the most meat. As you know, for me, Greece never fit that description to begin with. Neither does Portugal, too small. Spain and Italy have strengths that will keep them standing for a while longer. Moreover, Europe has indicated it will protect its weakest for now, and nobody in their right mind places best against Germany, France or Holland. At least for now. I'd look outside of continental Europe for minimum the next half year. I’d look at Indonesia, or Argentina, or California, or Anglia. But I’d be hungry.

PS: I realize there’s many of my American and British readers who feel I’m biased in favor of the EU, and against their countries, or even can’t be trusted to understand these countries. Me, I think I need to provide for those exact same readers a balance versus the anti- EU bias inherent in British and American media, simply in order to paint the most realistic picture. We’ll see what happens through the rest of 2010, but for now, I can say that I’ve always from the beginning maintained here that Greece would never be allowed to fail, and the Eurozone is much stronger than some papers would have you believe, and so far I’ve quite simply been proven right. I think the players that went after Greece are looking even more eager than before for the next wounded animal, and that they won’t find it in continental Europe, that George Soros would never dare take on Berlin. And that means the pride have to move on, while their appetite keeps on growing. I’ll be the first to admit this is an intuitive call, but I can't see how they can stop now. They need food to maintain their status.

[yogi-in-oz]

:)

Hi Tricha,

Thanks for the info ... expecting the European mess to continue throughout 2010, with some particularly nasty stuff,
around 03082010 ... 10082010 (currencies ... UK???) ... 13-31082010 (a very critical period for Europe) ... then again,
in September 2010 ..... 24-27092010 and October ... and more negative news, about 04102010 ...

.... and, if you think it is over in USA ... just wait, until December 2010 and again, in March-April 2011 ..... some seriously
negative stuff expected, during those periods, unfortunately ..... (:

have a great day

paul

:)

=====

[tricha]

Hi Paul

You are welcome, another great day over here, blue sky, 24 degrees and only 4 days of rain in 3 monthes.

Yes the WALL of worry is still about. How does this effect us, that's the big question. ????

Cheers Tricha

http://www.marketwatch.com/story/the-rise-and-certain-fall-of-the-american-empire-2010-03-09


Paul B. Farrell
http://i.mktw.net/_newsimages/columnists/farrell_paul.jpg March 9, 2010, 12:01 a.m. EST · Recommend (http://www.marketwatch.com/story/the-rise-and-certain-fall-of-the-american-empire-2010-03-09#) (14) · Post: http://i.mktw.net/MW5/content/Story/Images/icon-facebook.gif (http://www.marketwatch.com/story/the-rise-and-certain-fall-of-the-american-empire-2010-03-09#) http://i.mktw.net/MW5/content/Story/Images/icon-twitter.gif (http://www.marketwatch.com/story/the-rise-and-certain-fall-of-the-american-empire-2010-03-09#)
Collapse of the American Empire: swift, silent, certain

Commentary: Historians warning of a sudden 'thief at night,' an 'accelerating car crash'

[tricha]

WELL folks, its game on, But where does this leave you ????? Where does this leave me, hopefully a rental house goes unconditional on Friday and a big hunk of debt goes.
I was hoping hyperinflation would kick in, debt would vanish .....................,

Monday, March 15, 2010

March 15 2010: Inflation: God is the ultimate hedge (http://theautomaticearth.blogspot.com/2010/03/march-15-2010-inflation-god-is-ultimate.html)





http://3.bp.blogspot.com/_9ZzZquaXrR8/S56EyKJOk9I/AAAAAAAAFpA/QTNP5bmtXbk/s640/Snowbirds1941.jpg (http://3.bp.blogspot.com/_9ZzZquaXrR8/S56EyKJOk9I/AAAAAAAAFpA/QTNP5bmtXbk/s1600-h/Snowbirds1941.jpg) Marion Post Wolcott Snowbirds January 1941
"Guests of trailer park enjoying the sun and sea breeze at the beach, Sarasota, Florida"


Ilargi: Today we have a guest contribution from one of our regular commenters, El Gallinazo, who weighs in on the dead horse of inflation vs. deflation, dissecting a John Williams Shadowstats paper. And while Stoneleigh and I here at The Automatic Earth haven't had any doubts on the issue in "like forever", keeping the discussion alive in some form may be useful, if only simply since it won't go away.

Just let me state two issues that are obvious to us before handing you over to the cantankerous vulture:

There is no way we'll get into hyperinflation BEFORE debt deflation has run its course.
There is no way the Federal Reserve (or ECB, Bank of Japan) can print enough money, electronically or physically, to fabricate hyperinflation, as long as the debt deflation train hasn't finished running over our economic systems.
After that train is done, it's anybody's guess; the damage done will be so severe there may not be a Fed left to inflate even a party balloon.


El Gallinazo: Beating the Dead Horse (again)

Everyone with three functional synapses and an opposable thumb knows that we are headed into a second great depression. Optimizing survival strategies for anyone lucky enough to have any assets really boils down to the question of deflation versus hyperinflation, or a sequential mixture of the two. Most of the hyperinflationistas are morons, even the ones that don't have a faux Nobel. So it was a pleasure when a commenter at The Automatic Earth tipped me off to John Williams' -relatively- recent paper:

Hyperinflation Special Report (Update 2010) (http://www.shadowstats.com/article/hyperinflation-2010.pdf)

Even my cantankerous self wouldn't dare to call Williams a moron. So here we have three hyper-intelligent people with three different viewpoints on the subject.

Robert Prechter: Depression with giant deflation. Cash is king. Inflation nowhere in sight.
Stoneleigh (as well as Ilargi) at The Automatic Earth: Same as Prechter but with the caveat that when nearly all credit disappears and globalized markets cease, then hyperinflation is likely to kick in. As to a timeline of transition from deflation to hyperinflation, Stoneleigh recently indicated 2 to 5 years.
John Williams : Like the two above, he also predicts a great depression with deflation as the immediate outcome. However, Williams differs in that he claims that the deflation will be very short lived, a matter of months, and will morph quickly into hyperinflation.


A possible answer to this quandary can be approached by posing the two following questions:

Would the Fed ever want hyperinflation?
If so, is the Fed capable of instituting it?

Well, the vote breaks down as the following (as far as I can figure):
Both 1) & 2): Prechter and Stoneleigh - no; Williams - yes.

Prechter is quite clear that the Fed would never want hyperinflation and even if it did, it is quite incapable of pulling it off. Stoneleigh has not really weighed in on whether the Fed would ever want hyperinflation, but she is quite clear that until deleveraging is complete, that the Fed is incapable of instituting it. By that time, the Fed may not exist at all and would certainly be quite different than it is today. Williams has claimed that the Fed has wanted inflation since its inception in 1913, and is quite capable of pulling it off.

Well, I am going to weigh in with some opinions now. Williams defines hyperinflation far more severely than I would. He defines it as inflation that is so severe that the money is worth less than the fabric which it is printed on in a matter of months, and people use it as kindling and rather unhygienic bathroom tissue. In this regard, I would imagine uncirculated bills might fetch a certain premium due to their cleanliness.

http://1.bp.blogspot.com/_9ZzZquaXrR8/S56jfqHK4MI/AAAAAAAAFpI/G3KsDMxY7Jc/s400/ZIm-Dollars.jpg (http://1.bp.blogspot.com/_9ZzZquaXrR8/S56jfqHK4MI/AAAAAAAAFpI/G3KsDMxY7Jc/s1600-h/ZIm-Dollars.jpg)Williams claims that hyperinflation is the only way out of the debt trap other than default on treasuries and unfunded obligations. It never seems to occur to Williams that since most unfunded obligations, such as Social Security and Medicare / Medicaid are owed to the helpless and the pissants, as long as NORTHCOM can prevent said pissants from stringing them up to the nearest lamppost, the oligarchs would have little remorse on reneging on these unfunded obligations.

Prechter points out that the Fed is the ultimate narcissistic institution and always does what is best for the Fed. And hyperinflation would be the Fed committing suicide. If they destroy all value whatsoever to the USD, the Fed is quite out of business.

Furthermore, Williams keeps writing about foreign investors losing confidence in the dollar and dumping them. But he never says how. In a river? Buying gold, Euros, land, oil futures, pork bellies? How are these guys going to dump their dollars? He is very bullish on the Canadian dollar and the Swiss Franc. But UBS, which is in deep doodoo, is 8 times the size of the whole country of Switzerland, and Canada is in a bigger (soon to pop) real estate bubble than the US. Williams almost totally ignores credit and does totally ignore the shadow banking system, which is in a slow motion train wreck. If I had to choose the biggest fault in his argument, that would be it.

In the exciting climax section to his essay, subtitled "Hyperinflationary Great Depression", he does deal in some depth with some of the problems which the Fed would face instituting hyperinflation. He claims that after the crash, remaining cash would disappear and we would immediately enter a poorly organized barter system. He admits that there are probably about $400 billion in greenbacks in potential circulation inside the USA now, and he doesn't explain why they would either disappear or become worthless. While $400 billion is not going to run our economy normally, to say the least, it will buy quite a few eggs and radishes at depressed prices. He seems to be confusing FRN's with stuff like demand deposits. How is the cash going to disappear and how does it become worth less as demand deposits disappear through banks collapsing? One would assume this is a perfect scenario for cash as king, as in Great Depression v. 1.0.

Williams does build a strong case that the Fed has wanted inflation from its inception. But there is a huge difference between inflation and hyperinflation. The former is quite useful in extracting the wealth from the peasants and funneling it upward to their betters, but the latter is, quite obviously, the final debt rattle of the whole financial system. Williams does not distinguish between them. Not all con artists are suicide bombers.

Williams also fails to deal with exactly how Uncle Ben is going to pump a gazillion dollars into the economy with any velocity. He admits that doing it electronically is problematic as by then most of the people will have lost their credit card accounts. Printing it and dropping it from helicopters as Uncles Miltie and Ben have suggested also doesn't seem to fill the bill. Squirrels and birds would feather their nests with them.

Then he writes about runs on the banks and how the Fed would fly cash, hot off the press, into banks that were being run on. Even if this were to happen, which I doubt would last more than a few days in a systemic banking collapse, it would not be hyperinflationary as the Fed would just be replacing checking account credit, that had absconded to money heaven, with paper. In terms of the total credit and money supply, it would just be a push in Vegas vernacular.

Well folks, just read this final section for yourselves. If Williams were a mystery novelist, the critics would totally pan him for not pulling all the strings together at the conclusion. It's more like he builds a really strong case for mega deflation, pulls a magic wand out of his back pocket, makes a few passes with appropriate sounds ...... and puff - hyperinflation. Well, read it for yourself, and comment.

I enjoyed the essay, however, as it got my tiny 125cc, single cylinder brain firing at high rpm's, but as to the substance of the work, he just doesn't pull it together. Brings me back to my science days, when a researcher's data point to conclusion A, but the guy is totally invested in B, so somehow he twists the data to support B in a final paroxysm of cognitive dissonance.

As a counterpoint of sorts, I would like to point to another article, this on Zero Hedge by Doug Hornig, titled The Big Dead-Cat Bounce (http://www.zerohedge.com/article/guest-post-big-dead-cat-bounce)
Much shorter and well worth reading. Toward the end, Hornig writes:

"That means it’s likely, in the not_too_distant_future, that the government will be confronted with a very stark choice between defaulting on the debt or trying to inflate its way out. The former would kill off economic growth and likely launch a worldwide depression of epic proportions.

Disastrous as that would be, if the alternative is chosen and Washington’s printing presses beget hyperinflation, that would probably be worse. In a serious deflation, those who have saved for a rainy day can make it through okay. In hyperinflation, which unconstrained further spending could easily bring on, everyone loses. The truly prudent prepare, as best they can, for either eventuality."
(Well, that's exactly what I am doing by investing in Reverend Billy's Passbook to Heaven account. God is the ultimate hedge.)

What is interesting about this quote is that Hornig poses the question of hyperinflation or deflation as a very conscious political choice on the part of the oligarchs. Weimar chose hyperinflation out of revenge to screw the French. "You want blood money? Well here it is and you can wipe your butts with it." Uncle Ben doesn't strike me as a suicide bomber. When he lies in state, he expects his beard still to be immaculately groomed.



Below, for what it’s worth, are some of the notes and page references which I made when reading Williams’ article.


Williams defines inflation and deflation in terms of prices and not the change in the sum of money credit and velocity. p 5
However, he implicitly recognizes the Automatic Earth definition with: "Importantly, a sharp decline in broad money supply is a prerequisite to goods and services price deflation." p 21
Using Williams's CPI, I calculated that the real rate of average price increases since 1982 averaged 13% a year. This would be what the MSM refers to as "inflation." Williams strongest asset is as a statistician who corrects BLS bull**** vis-a-vis the CPI and unemployment.
Williams states that his adjusted CPI never fell below 5% rate of change since the financial crises while the BLS CPI went negative. I wonder how his statistics deal with the value of residential and commercial real estate collapse? This is a huge deflationary pressure either by price or money supply definitions. p 16
For full disclosure, Williams states that he is a conservative Republican of the Libertarian wing. p 17
Williams states that the actual federal deficit is currently at $9 trillion a year. I wonder exactly how he arrived at that figure? p 18
Williams keeps repeating the phrase "dumping of dollars and dollar denominated assets" yet he does not define the other side of the trade. Real estate? Gold? Euros? Swiss Francs? Pork bellies? While Williams admits that the dollar has "soared" since the start of the financial crises, he writes this off to central bank manipulation, but offers no meaningful evidence. Seems contradictory. He repeats like a broken record that Bernanke wants to castrate the dollar, yet here, the central banks, of which the Fed is chairman of the board, suddenly gets into a huge manipulation to strengthen it on the forex markets. Hmm.... p 26
"(2) Includes gross federal debt, not non_public debt is debt the government owes to itself for Social Security, etc., the obligations there are counted as "funded" and as such are part of total government obligations." p 29.

Is this correct? My understanding was that the Social Security Trust Fund was part of the $12T current public debt.

[winner69]

This joker has got it right as well

Could be interesting times - '...... he expects developed economies to be sucked into a deflationary quicksand. His gloomy prognosis for the next five years involves “hyperdeflation, followed by rampant inflation, with a smattering of stagflation thrown in for good measure.”



http://www.businessspectator.com.au/bs.nsf/Article/Pulling-the-plug-on-the-US-or-Turning-off-US-life--pd20100317-3LRVA?OpenDocument&src=sph

[Dr_Who]

This joker has got it right as well

Could be interesting times - '...... he expects developed economies to be sucked into a deflationary quicksand. His gloomy prognosis for the next five years involves “hyperdeflation, followed by rampant inflation, with a smattering of stagflation thrown in for good measure.”



http://www.businessspectator.com.au/bs.nsf/Article/Pulling-the-plug-on-the-US-or-Turning-off-US-life--pd20100317-3LRVA?OpenDocument&src=sph

Hold on for a wild ride of your life.

[tricha]

Hold on for a wild ride of your life.

Interesting times ahead .

Pray For Inflation -- It's Our Only Hope
by Peter Gorenstein (http://finance.yahoo.com/tech-ticker/pray-for-inflation----it's-our-only-hope-464142.html;_ylt=AlCitbBOmaMxDqkZDdhyDadl7ot4;_ylu =X3oDMTE2czBpNTl2BHBvcwMyBHNlYwNyZWNlbnRQb3N0cwRzb GsDcHJheWZvcmluZmxh?tickers=%5Edji,%5Egspc,spy,dia ,udn,tip)





Everyone thinks the Fed's job is to fight inflation, but right now the Fed is actually doing everything it can to cause inflation.
Why?
It part to help the economy get cranking again. Inflation provides an incentive for people to spend cash rather than saving it, because if they save it, the cash will lose value rapidly.
Inflation also helps solve another problem, though--our debt problem. The more inflation we have, the less our dollars will be worth. Because our debts are based on a specific number of dollars and not a specific value, the less our dollars are worth, the easier it will be for us to pay off our debts.
(Imagine owing someone 100 Zimbabwe dollars at a time when the currency is collapsing. If you wait a week, the value of the Zimbabwe dollar will have collapsed, and you'll be able to pay off your 100 Zimbabwe-dollar debt with currency that is only worth half as much as it was the week before).
The Fed can't admit that one reason it wants high inflation is to reduce the real burden of our debt, but you can bet that that's one of its objectives. What's more, says Nobel-winning economist Paul Krugman, inflation should be one of the Fed's objectives. Because that's how we've gotten out from under debt burdens in the past.
Here's Krugman (http://us.lrd.yahoo.com/_ylt=ApQzCvmfvAkqtT3Z3RY_Nyxl7ot4;_ylu=X3oDMTEzMmM 0MzR2BHBvcwMxMARzZWMDYXJ0aWNsZQRzbGsDaGVyZXNrcnVnb WFu/SIG=122vnlcvm/**http%3A//www.nytimes.com/2010/04/09/opinion/09krugman.html%3Fhp):
So how did the U.S. government manage to pay off its [World War 2] wartime debt? Actually, it didn’t. At the end of 1946, the federal government owed $271 billion; by the end of 1956 that figure had risen slightly, to $274 billion. The ratio of debt to G.D.P. fell not because debt went down, but because G.D.P. went up, roughly doubling in dollar terms over the course of a decade.

In other words, after World War 2, we didn't "pay down" our debt. We grew into it.
And, importantly, this growth came from a combination of real growth AND inflation:
The rise in G.D.P. in dollar terms was almost equally the result of economic growth and inflation, with both real G.D.P. and the overall level of prices rising about 40 percent from 1946 to 1956. So inflation is an important tool in getting us out of this mess. It's painful and unfair--those who have been responsible and saved money will pay the price for those who borrowed money, racked up huge debts, and spent more than they could afford. But it's what the Fed is (quietly) aiming for

[tricha]

Reading between the lines of the last depression, trade wars were the order of the day, currency was linked to the gold standard.
Today there is no standard, only paper!:confused:

So are we in the throws of the next leg down, currency and trade wars, you better believe it's a real possibility.:scared:

7 October 2010 Last updated at 23:33 GMT
IMF chief's warning of currency war 'real threat'

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Dominique Strauss-Khan on "rebalancing" of the global economy

Global currency wars pose "a real threat" to economic recovery, the head of the International Monetary Fund, Dominique Strauss-Kahn, has warned.
In an interview with the BBC, he said currency disputes showed countries were not co-operating as well as they had during the financial crisis.
In recent weeks both the US and Europe have led criticism of China over its undervalued yuan.
Meanwhile, Japan has been forced to intervene to curb rises in the yen.
Separately, Indian Finance Minister Pranab Mukherjee on Thursday warned that imbalances in the global economy have become "not sustainable". But he urged major economies to shun confrontation to avoid a feared currency war.
Washington 'watching'
Mr Strauss-Kahn told the BBC that there were signs that countries were trying to use their currencies "as a weapon".
"The willingness of the countries to work together, which was very strong at the climax of the [financial] crisis is not as strong today," he said.
"'Currency war' might be too strong, but the fact the countries want to find domestic solutions to a global problem is really a threat to the recovery."
Continue reading the main story (http://www.bbc.co.uk/news/business-11496300#story_continues_1) “Start Quote


We have been saying for years that the [yuan] was undervalued”
End Quote Dominique Strauss-Kahn Managing director of the IMF
He added that China would have to revalue the yuan in order for the country's economy to reduce its reliance on foreign export markets.
Mr Strauss-Kahn agreed that China should act to raise the value of its currency "the sooner the better".
But he warned against placing too much importance on it.
"We have been saying for years that the [yuan] was undervalued," he said.
"[China] will go in this direction - the question is the speed. Certainly they can go faster than they are today.
"On the other hand we shouldn't believe that all the imbalances in the economy today will be solved if the value of yuan was changed."
The US has been at the forefront of criticism of China's currency policy.
It claims that China is keeping its currency artificially low in order to aid its exporters, hurting US competitors.
On Thursday, Washington reiterated that China needed to take steps relating to its currency.
"We are watching and evaluating the measures and the steps that they take. We continue to believe that China must take steps," White House spokesman Robert Gibbs said.

[STRAT]

What a crock.

Looks like just another example of America picking a fight to get what they want and blaming someone else for a mess created in their own back yard to me and as usual England and Europe tow the line.

More important they are looking for any way possible to get the rest of the world to carry the burden of their debt.


I guess we will be in for a blanketing western ( US ) media campaign on the evils of Chinese monetary policy similar to the one on the global threat posed by Iraq before it was invaded.

[Financially dependant]

Nicely said Strat

[RRR]

I read the whole thread today-Interesting that many of you saw GFC coming well before it started. Well done guys and I am impressed!!

I read the other day that many 'foreign citizens' are abandoning US citizenship due to very stringent tax laws!! Brain drain has started to happen albeit slowly.

[digger]

I read the whole thread today-Interesting that many of you saw GFC coming well before it started. Well done guys and I am impressed!!

I read the other day that many 'foreign citizens' are abandoning US citizenship due to very stringent tax laws!! Brain drain has started to happen albeit slowly.

To be technical it should be said a brain rebalancing. Except for the last very few years the US has enjoyed a positive brain drain,it is only now reversing.Spent the first 21 years of my life in Canada and we always were told about the US ripping off Canada's best brains.

[tricha]

What a crock.

Looks like just another example of America picking a fight to get what they want and blaming someone else for a mess created in their own back yard to me and as usual England and Europe tow the line.
.

Crock or not Strat, blame dose not get the US out of this situation, trade and currency wars will be the prelude to the next round of what will be called "The Greatest Depression"

Paul Volcker,
Former FED chairman'States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s. Gold is the final refuge against universal currency debasement.'


You have no gold exposure? You are Insane.

Saturday, 9 October, 2010 3:59 AM


From:
"Minesite"




Dear Minesite member,

You have no gold exposure? You are Insane.
'We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself. We are no longer talking about a single country having a big depression but the entire world.'

Paul Volcker,
Former FED chairman
'States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s. Gold is the final refuge against universal currency debasement.'

Ambrose Evans-Pritchard,
The Telegraph

‘I expect much higher gold prices in the future. Not just $1,500, but multiples of that. I think in the future the average of the notional long-term gold price is going to be much higher than anybody imagined. I don’t think we’re ever going to see gold below $1,000 again.’

Jeffrey Nichols,
Senior Economic Adviser, Rosland Capital
MD, American Precious Metals Advisors
‘The era when people have faith in paper currencies is drawing to a close. Even the mighty dollar is flawed as the Fed once again turns on the printing press for another round of QE. There is one currency controlled not by politicians but by nature and that is Gold and God is just not making any more of the stuff. As both private investors and Central Banks lose faith in paper they will turn to gold and the supply just is not there. This is basic economics. For the paper currencies supply is increasing & demand falling. For gold the reverse is true. For gold to match - in real terms - the level seen at the top of the last cycle in 1980 it needs to trade at $2,000 oz. But this time that will be just the starting point. If you have no exposure to gold you are taking the most almighty risk with your wealth and that is something you really must change at once.’
Tom Winnifrith,
Senior Fund Manager, SF t1ps Smaller Companies Growth Fund

[STRAT]

Hi Tricha.
Im not denying the situation or the potential and possible turn of events in the future.

Just having a grizzle about the Bull**** we are fed on a daily basis by the talking heads.

[STRAT]

What a crock.


I guess we will be in for a blanketing western ( US ) media campaign on the evils of Chinese monetary policy similar to the one on the global threat posed by Iraq before it was invaded.Let the Bull****ing/brainwashing begin.

Havent read it but the title says it all really.

China Won't Give Peace a Chance Amid Talks of "Currency War"


http://finance.yahoo.com/tech-ticker/article/535496/China-Wont-Give-Peace-a-Chance-Amid-Talks-of-%22Currency-War%22

[Hoop]

[QUOTE=STRAT;322752]Let the Bull****ing/brainwashing begin.

Havent read it but the title says it all really.[QUOTE]

China Won't Give Peace a Chance Amid Talks of "Currency War"
Yes the title said it all..The USA/Europe big boys club giving the up and comer China another poke with the big stick to conform.

USA dilemma
In times of Economic weakness lower your currency below your trading patners creates an inflation pressure to offset the deflationary pressures...gee that easy Monetary theory textbook stuff......damn!!!! our trading partners are reading the same textbook as us...

...so all the economic cot case countries lower theirs as well..Net benefit for the latest USA devaluation = zero..

.. Hey... China doing OK they should be raising their currency the textbook says so...we must tell them they have to raise their currency as per textbook..

Damn again ...China doesn't own and hasn't read and doesn't wont to read that textbook.

China says if you (USA) lower your currency and we raise ours...your $US trillion debt with us will devalue greatly..we in China don't think that is good business... USA you can't tell us what to do !!!... so go suck eggs.. damn, damn again, double damn

[STRAT]

Hi Hoop
Dont you just love the way they throw in a completely irrelevant issue to create an emotional response that will later be associated with the real subject matter when the next bit of brain washing is exicuted.

Strait out of the FOX news hand book I suspect :lol::angry:

[Dr_Who]

What a crock.

Looks like just another example of America picking a fight to get what they want and blaming someone else for a mess created in their own back yard to me and as usual England and Europe tow the line.

More important they are looking for any way possible to get the rest of the world to carry the burden of their debt.


I guess we will be in for a blanketing western ( US ) media campaign on the evils of Chinese monetary policy similar to the one on the global threat posed by Iraq before it was invaded.

You are on to it mate. Seeing through all the BS while the printing press is working overtime.

[STRAT]

Looks like America is going to give China bashing a rest for a bit and go back to plan A. What a hoot. Could be a good week on the ol ASX next week if they do.



http://www.reuters.com/article/idUSWEN120520101014

[Hoop]

Looks like America is going to give China bashing a rest for a bit and go back to plan A. What a hoot. Could be a good week on the ol ASX next week if they do.

Nah Strat...but you will love this article.

http://www.marketwatch.com/story/us-probes-china-green-subsidies-not-currency-2010-10-15?dist=afterbell

USA really p1ssed off..it seems China is better at playing these games than they thought ....and this time dear ol' Uncle Sam is at the receiving end (for once)

Scheeish.. talking about a "pot calling the kettle black" or what..Ha

[STRAT]

Hi Hoop.
have you caught last nights address by Helicopter Bernanki. I havent yet and as wondering if he had gone back to plan A or not?

Plan A being Printing monopoly money and inflation.

as a side note , I really need to get some shares in the company that makes that green ink

[STRAT]

Nah Strat...but you will love this article.
Stories like that will come thick and fast. Thats exactly what I mean by blanketing media campaign. If you say the moon is square to as many people as you can often enough in as many ways as are possible, eventually it becomes believable.

The topic of China will become number 1 on FOX news.
Actually FOX is run by Bush and his outfit. Which network does this administrations bidding?

Isnt it amazing how the format is the same as the last article mentioned on this thread. There will be a little supplementary item on how evil China is with every article released out of the US regarding the economy/US dollar. By the end of the weekend there will be 100,000 red necks believing Chinese Solar Panel manufacturers are the sole reason Americans are loosing their jobs and homes.

Lucky **** cant travel on light beams or Id have a major eye infection by now.

Anyways it looks like they will go for a combo. Plan A and Plan B. I cant wait to see what plan C turns out to be.

[STRAT]

http://finance.yahoo.com/tech-ticker/article/535510/Peter-Schiff%3A-%22Its-Scary-How-Clueless-Bernanke-Is%22

This guy makes sense other than that he calls Bernanki clueless when he should really be asking who does Bernanki really work for and what are the real motives behind what the Fed does.