Archive through March 25, 2008

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mrlunch

Member

Post Number: 293
Registered: 09-2006

Rating:
Votes: 4


Friday, March 21, 2008 - 12:27 am:

Is this the real price?
Is this just fantasy?
Financial landslide
No escape from reality

Open your eyes
And look at your buys and see.
I'm now a poor boy
High-yielding casualty

Because I bought it high,
watched it blow
Rating high,
value low
Any way the Fed goes
Doesn't really matter to me, to me

Mama - just killed my fund
Quoted CDO's instead
Pulled the trigger, now it's dead
Mama - I had just begun
These CDO's have blown it all away

Mama - oooh
I still wanna buy
I sometimes wish I'd never left Goldman at all.

I see a little silhouette of a Fed
Bernanke! Bernanke! Can you save the whole market?
Monolines and munis - very very frightening me!
Oh Super senior, super senior
Super senior CDO
Magnifico

I'm long of subprime, nobody loves me
He's long of subprime CDO fantasy
Spare the margin call you monstrous PB!
Easy come easy go, will you let me go?
Peloton! No - we will not let you go -
let him go
Peloton! We will not let you go -
let him go
Peloton! We will not let you go -
let me go
Will not let you go
- let me go (never) Never let you go - let me go Never let me go - ooo

No, no, no, no, no, no, no, -
Oh mama mia, mama mia, mama mia let me go S&P had the devil put aside for me For me, for me, for me

So you think you can fund me and spit in my eye?
And then margin call me and leave me to die Oh PB - can't do this to me PB Just gotta get out - just gotta get right outta here

Ooh yeah, ooh yeah
No price really matters
No liquidity
Nothing really matters - no price really matters to me

Any way the Fed goes.....

ody

Member

Post Number: 2255
Registered: 10-2006

Rating: N/A
Votes: 0


Friday, March 21, 2008 - 05:58 am:

Wall Street now up again, but commodities prices sharply down

How is this for the latest Wall Street action?
--------------------------------------------------------
Bulls lead stock comeback
Falling oil and gold prices boost markets as does news that N.Y. Fed will allow banks to secure loans with a wider range of collateral.

By Alexandra Twin, CNNMoney.com senior writer
Last Updated: March 20, 2008: 2:49 PM EDT

NEW YORK (CNNMoney.com) -- Stock gains accelerated Thursday afternoon as falling commodity prices and signs of stabilization in the manufacturing sector gave investors an incentive to scoop up issues hit in the recent selloff.

Investors also reacted to a late-session announcement by the New York Federal Reserve Bank that it will now allow banks to use a wider range of collateral to secure loans.
----------------------------------------------------------

That last news is particularly ironic, I feel: banks will be allowed to use "a wider range" of collateral to "secure" (sic) loans.

But the really bad news for Australia is that commodities prices are plunging badly. There are a number of reasons for this. The US dollar has been recovering, which means that oil and gold - which had been bid up to "maintain value" as a hedge against the dollar - are now falling badly. They are taking other mineral resources (precious and base) with them, and even "soft" commodities. Another reason for the sell-off is simply that the prices for commodities had of late risen absurdly anyway, against the share market as a whole, truly standing out like a sore toe-nail. While they no doubt have more "real" value to back them, ultimately, than much in the market that has been knocked down by debt and a weakening economy, nevertheless commodities had to be "de-leveraged" with the rest of the market. And this makes sense: the market cannot sustain past levels to the extent that the high degree of leverage that has come to light is collapsing and taking prices for assets with it.

So all this is certain, if it continues (as seems likely), to knock the one major factor that set us apart from the US, our supposed source of "decoupling" - the commodities area. And this makes us highly vulnerable to all other bad news - WHICH HAD ALREADY TAKEN OUR MARKET DOWN MUCH FURTHER, IN RECENT MONTHS, THAN WALL STREET.

We are not, much though some Americans would like to believe it, seeing an end to the bear market. Just consider Colin Twiggs's excellent charts and his comments on them: everything, worldwide, is moving in neat bearish fashion, and there is not the slightest evidence of improvement. In situations like the present, where fundamentals are either weakening or frighten people by being unknown, we have to attach great importance to T/A for guidance as to where we are going, and that is unequivocal.

With banks etc. not - on any other evidence than hype - moving into soundness and, on the contrary, much further bad news of the debt crisis continuing to come out, the financials are not, as many hope, actually "turning around", and with everything else - including now commodities and commodities stocks - turning down, the market will not sustain up days (never mind Wall Street at the moment of writing), and the general pattern will continue to be down. For Australia the situation actually looks REMARKABLY BAD. One could perhaps say: WORSE THAN AT ANY TIME SINCE THE END OF THE BULL MARKET, WITH SEVERAL BAD EVENTS COINCIDING. Let us also not forget our high interest rates, while nevertheless our dollar is now under pressure because commodities are losing value, and let us remember several signs of weakening in our economy, though with inflation still a problem. And this (our having a problem) is also true of our huge trading deficit, and enormous debts, not least in the housing market, where our debts are among the highest in the world, as are prices (though beginning to flatten). While matters are not as madly "arranged" as in the US, we are now highly vulnerable to a number of very dangerous forces, and it is no longer at all appropriate to think of ourselves as somehow much better off than others in this crisis.

The thing to do is to batten the hatches: make sure that you are without debt, or have very little of it; avoid dangerous and vulnerable assets like most shares and forms of property; if you buy art go for blue-chip Aboriginal artists rather than mainstream Australian ones, as foreigners buy the former, not the latter - but don't expect the art market to hold out while other things tumble. It often holds up rather better for a while, but will eventually also fall, and buyers are sharply selective and ruthless. We are certainly in a bear market for assets, and we should not exclude the possibility of an eventual recession, particularly if our high interest rates and inflation rate cause grief.

Charlie Aitken (usually writing for the Eureka Report) is spouting much nonsense about cash "underperforming", though 8% on deposit is now easily available. The trouble is that what he argues will go up because HE feels it "should" is often dangerous to buy: in recent weeks there has been plenty of evidence of that, and resources are the latest unequivocal example of his mistiming his choices. Of course, there ARE stocks to make money on, but it is very easy to either make the wrong choices, or to choose the wrong time, and money can be lost very fast.

So the share market at present is only for the exceptionally nimble and/or lucky short-termers, many of whom will not consistently get matters right, and lose money on some stocks that they have made on others. Those who can avoid that fate: good luck. But this is not a market one should be in without having exceptional skills in short-term trading. It is notoriously a risky time for those short-termers who feel they must constantly be active in a market which does provide them with opportunities, but which in their confidence they underestimate the dangers of. However, they at least MAY make money as well as lose it, while most of us are much wider to stand aside until the market moves into a more predictable phase and most of the rot is out in the open, with GENUINE improvements becoming evident.

ody

Member

Post Number: 2256
Registered: 10-2006

Rating: N/A
Votes: 0


Friday, March 21, 2008 - 06:05 am:

COMMODITY PRICES ON LME EARLY ON FRIDAY:

http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/commodities/defau lt.stm

Kitco is also very much worth consulting - terrible spot prices.

cat_lady

Member

Post Number: 432
Registered: 10-2006

Rating: N/A
Votes: 0


Friday, March 21, 2008 - 08:26 am:

mr lunch
you obviously have too much time on your hands at the moment! get my vote for post of the year.

cat lady
though must admit I was always a led zeppelin fan myself

Without my morning coffee I might as well be a dog

lafee

Member

Post Number: 804
Registered: 04-2003

Rating: N/A
Votes: 0


Friday, March 21, 2008 - 12:55 pm:

Mr Lunch,

Thats the best thing I've read in a long time.

Cheers

Lafee

Don't ask an academic if what he does is relevant

rdumas

Member

Post Number: 1264
Registered: 11-2006

Rating: N/A
Votes: 0


Friday, March 21, 2008 - 02:08 pm:

Whilst Bernanke has been dealing with the liquidity problems by printing money and lowering interest rates as well as offering to replace junk assets with treasury notes, this is what has been happening on the inflation front in the US.

As you can see from the Inflation chart below the inflation has increased significantly. Keep in mind that these are the official figures and hence would be low relative to what some analysts believe they really are.

One of the things that would obviously be driving the CPI increases would be the substantial PPI increases. The PPI (Producer Price Increases) are the increases that producers of products and services have to deal with whilst the CPI (Consumer Price Increases) are those increases that the consumers have to deal with.

The above table is extracted from the official figures found at http://www.bls.gov/news.release/pdf/ppi.pdf.

The column that needs to be looked at is the 'Change In Finished Goods From 12 Months Ago'. Note the sudden increase in y.o.y prices commencing in October 2007 through to February 2008. Producers obviously had to decide whether to pass on all of the costs or absorb some of them. It is obvious from the figures that they have been absorbing some of them. This would naturally mean reducing margins. So we have the situation where the interest rates are way below the inflation rates and margins are being squeezed. These effects should show up in future CPI figures and company earnings figures.

Couple that with the fact that US house prices have fallen by 10% so far and investment bank, Goldman Sachs sees that falling further, doubling to 20% or more: perhaps as much as a 30% decline and it is clear that in spite of a US share market that appears to have found a floor at this time, the real economy still has some way to go before there is reason to get excited about equities.

With Bernanke running out of interest rate lowering options and inflation on the rise, it should not be too many months before we see talk of tax payer bailouts. That should be interesting in a presidential election year.

hilarius

Member

Post Number: 3618
Registered: 04-2004

Rating: N/A
Votes: 0


Saturday, March 22, 2008 - 06:07 am:

Apology to Eugenio

I portrayed the Fed Chairman Mr Bernanke as powerless and tied to the railway track while the Express Train Depression is rounding the bend

However, the London Times is describing Mr Bernanke as a model of decisiveness in saving Bear Stearns over 4 days, compared to the Bank of England which dithered for 6 months over Northern Rock

A London Times commentator neatly sums up the competing issues of (1) not protecting those who caused problems with (2) rational help to guard against the further danger of complete economic collapse

Bear Stearns investors lost just almost everything in the "rescue", so they were hardly protected, but the totally separate issue of avoiding ongoing damage was correctly dealt with according to the commentator :-

[Quote]
Mervyn King, Governor of the Bank of England, has articulated perfectly valid concerns about moral hazard: that more bubbles will be created unless financiers learn the lessons of their folly. Ben Bernanke, the Fed Chairman who wrote his PhD on the 1929 Crash, clearly feels those concerns must be put on hold while the world is on the brink of recession. He is right. The brief reprieve achieved in America this week is by no means the end of the crisis. This is the wrong time for the regulators who failed to regulate to sit back and say: “I told you so.”" [Unquote]

So to Eugenio who commented favourably on the strength of the Fed I say, Sorry. Eugenio you were right.

I hope the Fed continues to plug the dam with its thumb

The consequences of a collapse of the economic system would be far worse than the cost of keeping it in a reasonable state of repair

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

hilarius

Member

Post Number: 3619
Registered: 04-2004

Rating: N/A
Votes: 0


Saturday, March 22, 2008 - 06:20 am:

The idea that Bear Stearns was bailed out is a fantasy

It wasn't

Some of its investors lost 98% or more of their peak share value, and many others lost enormous amounts based on the final offer they received

What was done was to support its ability to function as a counter-party to financial transactions into which it had entered, with the added credit standing of JP Morgan

Hundreds of Bear Stearns jobs were saved at least temporarily, but who can doubt that this is anything other than an orderly funeral for Bear Stearns and its highly paid executives?

It is time the hand-wringing stopped about "moral hazard" and sensible realisation of what needs to be done to restore confidence is recognised

Just because people drive recklessly you don't fail to call an ambulance for the victims, criminal as the driving may have been

I applaud the Fed's actions

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

coyotte

Member

Post Number: 536
Registered: 12-2002

Rating: N/A
Votes: 0


Sunday, March 23, 2008 - 08:38 am:

http://www.youtube.com/watch?v=CnnOOo6tRs8

The "Sea of Uncertainty" is defeated by the nimble vessel "Probability", not the unwieldy vessel "Prediction".

kate

Member

Post Number: 863
Registered: 04-2005

Rating: N/A
Votes: 0


Sunday, March 23, 2008 - 09:24 am:

Pretty grim Coyotte, I'd heard this was happening but hadn't seen any footage. Unfortunately, this appears to be just the beginning of the human crisis. From the voices I would say that most weren't from the lowest socio economic groups either.

Wouldn't it be nice if economists could find a way around the boom and bust cycles, something that is more sustainable?

Kate

rdumas

Member

Post Number: 1265
Registered: 11-2006

Rating: N/A
Votes: 0


Sunday, March 23, 2008 - 11:05 am:

Hi Coyotte,

As Kate said, pretty grim footage once you see the human picture that's behind the facts and figures that we keep reading about. I'm sure that there are some real horror stories yet to be told.

rdumas

Member

Post Number: 1266
Registered: 11-2006

Rating: N/A
Votes: 0


Sunday, March 23, 2008 - 01:09 pm:

Does the US Fed have many more bullets left ?...... is this the beginning of the end of the credit crisis??

Joachim Fels from Morgan Stanley gives the Morgan Stanley view at
http://www.morganstanley.com/views/gef/index.html#anchor6127

rdumas

Member

Post Number: 1267
Registered: 11-2006

Rating: N/A
Votes: 0


Sunday, March 23, 2008 - 01:32 pm:

Will the tax payer finally be asked to foot the bill?

First there's denial and then ............

==================================================================

12:32 PM Mar 23, 2008

BoE, Fed deny mortgage security buyout}

By Sumeet Desai and Tim Ahmann of Reuters

LONDON/WASHINGTON -- The Federal Reserve and Bank of England have denied a report that they were in talks over possibly using public funds to make mass purchases of mortgage-backed securities to ease the global credit crisis.

However, the Bank of England said it was considering a number of other, unspecified options to address the turmoil in financial markets, which has continued despite the injection by central banks of billions of dollars of liquidity and cuts in interest rates.

The European Central Bank had no comment.

The Financial Times, without citing sources, sai