Depression in the USA - Deflation verus Inflation
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:
Everyone in denial still or are your heads buried in the sand.
Quote:
Originally Posted by
Shrewd 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...
: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:
Just like the demise of the Roman Empire
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/image...ard_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
Part 2 - A bit of a story, but well worth it
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?"
If u want something to scare the living daylight out of U, get your calculator out
Quote:
Originally Posted by bermuda http://www.sharetrader.co.nz/images/...s/viewpost.gif
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/image...2getty203b.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
A slight difference in the payroll
US sees job cuts as economy cools
http://newsimg.bbc.co.uk/media/image...ckplant203.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/...t_quote_rb.gif We should expect to see more bad news on the labour market http://newsimg.bbc.co.uk/nol/shared/...d_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.
Have u done the sums yet. My calculator can not do the numbers
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.
calculator hasnt enough noughts
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.
postive e-mail from wise owl
Are we heading for a bear market?
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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.
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Inflation is running rampant
Quote:
Originally Posted by
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?
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 )
Dam I wish there was some good news.! Is this the start of the flow on effect
Big fall in China's trade surplus
http://newsimg.bbc.co.uk/media/image...nghai203ap.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.
The buck falls with JPMorgan Chase
'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...
Anyone want to hedge how long this latest rally will last?
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/...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.