SHHH...greenie
that said he knows he created the ship that is about to implode
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Another grim turn as Greenspan blasts bailout
Fri Oct 19, 2007 3:45pm EDT
By Burton Frierson
NEW YORK, Oct 19 (Reuters) - The outlook for ailing credit markets took a grim turn on Friday as former Fed chief Alan Greenspan blasted the industry's plan to bail itself out and stocks fell on new worries over bank profits and the economy.
Greenspan said in an interview with Emerging Markets magazine that a multibillion-dollar fund top banks are assembling to settle jittery financial markets may actually hurt rather than help.
On the 20th anniversary of the Black Monday stock market crash, major indexes fell about 2 percent as Caterpillar said key industrial sectors were in recession and that it saw a 50 percent chance the U.S. economy would fall into such a slump.
The concern is that a weakening economy could add to stresses in a credit market already being shunned by investors after subprime loan losses brought on by a housing slump.
Fourth-largest U.S. bank Wachovia (WB.N: Quote, Profile, Research) posted a 10 percent drop in quarterly profit, concluding a dismal week for large financial institutions. It took write-downs of more than $1 billion for credit market related losses.
Caterpillar's gloom captured the mood of financial markets worried the credit crunch is growing into a full-scale economic downturn.
Doug Oberhelman, Caterpillar group president with responsibility for engines, said his market segment was the softest he had seen in his career.
"We're experiencing the worst market ... probably since World War II," Oberhelman said.
The top executive of U.S. motorcycle maker Harley-Davidson Inc (HOG.N: Quote, Profile, Research) also raised the prospect that the U.S. economy is sliding into recession as he talked about his company's disappointing third-quarter results.
COLD COMFORT
In one of the few bits of good news, Citigroup (C.N: Quote, Profile, Research) said a group of its funds that some had feared would be forced to sell $80 billion of securities will not have to do so through at least the end of the year. It said its structured investment vehicles have secured financing for 98 percent of their assets through year-end.
Wachovia said it once had about $7 billion of exposure to SIVs, but no longer does after having moved that exposure to its balance sheet.
Wachovia, Bank of America (BAC.N: Quote, Profile, Research), Citigroup and JPMorgan Chase and Co (JPM.N: Quote, Profile, Research) are putting together a fund to bail out structured investment vehicles. SIVs are funds that buy bonds linked to mortgages and other debt and finance their purchases by selling short-term debt known as commercial paper.
SIV's have had trouble funding themselves recently and could be forced to sell billions of dollars of debt into the market to pay back their investors.
This bailout was the target of criticism from Greenspan, who said it was geared to support a faltering asset class. He argued that the prices of these assets should be allowed to fall until speculative excesses are wrung out and bargain-hunters emerge.
"If you intervene in the system, the vultures stay away," he said. "The vultures sometimes are very useful."
The money markets were also a source of comfort, if not optimism, with easing rates indicating banks had become more willing to lend to each other.
London interbank offered rates for three-month euros and sterling moved lower, while three-month dollar rates fell to their lowest since mid-2006. Dollar rates have fallen by just over 43 basis points since the Federal Reserve cut U.S. interest rates last month (LIBOR: Quote, Profile, Research).
In the U.S., the Federal Reserve had to provide only a modest amount of liquidity to the banking sector, adding $3.25 billion in temporary reserves to the banking system through three-day repurchase agreements. Friday's operation was the lowest daily total this week.
that said he knows he created the ship that is about to implode
----------------------------------------------------------------
Another grim turn as Greenspan blasts bailout
Fri Oct 19, 2007 3:45pm EDT
By Burton Frierson
NEW YORK, Oct 19 (Reuters) - The outlook for ailing credit markets took a grim turn on Friday as former Fed chief Alan Greenspan blasted the industry's plan to bail itself out and stocks fell on new worries over bank profits and the economy.
Greenspan said in an interview with Emerging Markets magazine that a multibillion-dollar fund top banks are assembling to settle jittery financial markets may actually hurt rather than help.
On the 20th anniversary of the Black Monday stock market crash, major indexes fell about 2 percent as Caterpillar said key industrial sectors were in recession and that it saw a 50 percent chance the U.S. economy would fall into such a slump.
The concern is that a weakening economy could add to stresses in a credit market already being shunned by investors after subprime loan losses brought on by a housing slump.
Fourth-largest U.S. bank Wachovia (WB.N: Quote, Profile, Research) posted a 10 percent drop in quarterly profit, concluding a dismal week for large financial institutions. It took write-downs of more than $1 billion for credit market related losses.
Caterpillar's gloom captured the mood of financial markets worried the credit crunch is growing into a full-scale economic downturn.
Doug Oberhelman, Caterpillar group president with responsibility for engines, said his market segment was the softest he had seen in his career.
"We're experiencing the worst market ... probably since World War II," Oberhelman said.
The top executive of U.S. motorcycle maker Harley-Davidson Inc (HOG.N: Quote, Profile, Research) also raised the prospect that the U.S. economy is sliding into recession as he talked about his company's disappointing third-quarter results.
COLD COMFORT
In one of the few bits of good news, Citigroup (C.N: Quote, Profile, Research) said a group of its funds that some had feared would be forced to sell $80 billion of securities will not have to do so through at least the end of the year. It said its structured investment vehicles have secured financing for 98 percent of their assets through year-end.
Wachovia said it once had about $7 billion of exposure to SIVs, but no longer does after having moved that exposure to its balance sheet.
Wachovia, Bank of America (BAC.N: Quote, Profile, Research), Citigroup and JPMorgan Chase and Co (JPM.N: Quote, Profile, Research) are putting together a fund to bail out structured investment vehicles. SIVs are funds that buy bonds linked to mortgages and other debt and finance their purchases by selling short-term debt known as commercial paper.
SIV's have had trouble funding themselves recently and could be forced to sell billions of dollars of debt into the market to pay back their investors.
This bailout was the target of criticism from Greenspan, who said it was geared to support a faltering asset class. He argued that the prices of these assets should be allowed to fall until speculative excesses are wrung out and bargain-hunters emerge.
"If you intervene in the system, the vultures stay away," he said. "The vultures sometimes are very useful."
The money markets were also a source of comfort, if not optimism, with easing rates indicating banks had become more willing to lend to each other.
London interbank offered rates for three-month euros and sterling moved lower, while three-month dollar rates fell to their lowest since mid-2006. Dollar rates have fallen by just over 43 basis points since the Federal Reserve cut U.S. interest rates last month (LIBOR: Quote, Profile, Research).
In the U.S., the Federal Reserve had to provide only a modest amount of liquidity to the banking sector, adding $3.25 billion in temporary reserves to the banking system through three-day repurchase agreements. Friday's operation was the lowest daily total this week.
the relentless credit hungry consumer starting to feel the pain of the inflation
like Ron Paul has said the little people already think we are in a recession its just that wall-street isn't there yet
this holiday season going to be extremely interesting and likely a disaster for retailers.
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Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.
Food pantries, which distribute foodstuffs to the needy, are reporting severe shortages and reduced government funding at the very time that they are seeing a surge of new people seeking their help.
While economists debate whether the country is headed for a recession, some say the financial stress is already the worst since the last downturn at the start of this decade.
From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing accordingly. Sales data show a marked and more prolonged drop in spending in the days before shoppers get their paychecks, when they buy only the barest essentials before splurging around payday.
"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family Dollar. "It seems like to us, customers are running out of food products, paper towels sooner in the month."
Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August.
And 7-Eleven says its grocery sales have jumped 12-13 percent over the past year, compared with only slight increases for non-necessities like gloves and toys. Shoppers can't afford to load up at the supermarket and are going to the most convenient places to buy emergency food items like milk and eggs.
"It even costs more to get the basics like soap and laundry detergent," said Michelle Grassia, who lives with her husband and three teenage children in the Bedford-Stuyvesant section of Brooklyn, N.Y.
Her husband's check from his job at a grocery store used to last four days. "Now, it lasts only two," she said.
To make up the difference, Grassia buys one gallon of milk a week instead of three. She sometimes skips breakfast and lunch to make sure there's enough food for her children. She cooks with a hot plate because gas is too expensive. And she depends more than ever on the bags of free vegetables and powdered milk from a local food pantry.
Grassia's story is neither new nor unique. With the fastest-rising food and energy prices since the 1980s, low-income consumers are stretching their budgets by eating cheap foods like peanut butter and pasta.
Industry analysts and some economists fear the strain will get worse as people are hit with higher home heating bills this winter and mortgage rates go up.
like Ron Paul has said the little people already think we are in a recession its just that wall-street isn't there yet
this holiday season going to be extremely interesting and likely a disaster for retailers.
---------------------------------------------------------------------------------------------
Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.
Food pantries, which distribute foodstuffs to the needy, are reporting severe shortages and reduced government funding at the very time that they are seeing a surge of new people seeking their help.
While economists debate whether the country is headed for a recession, some say the financial stress is already the worst since the last downturn at the start of this decade.
From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing accordingly. Sales data show a marked and more prolonged drop in spending in the days before shoppers get their paychecks, when they buy only the barest essentials before splurging around payday.
"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family Dollar. "It seems like to us, customers are running out of food products, paper towels sooner in the month."
Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August.
And 7-Eleven says its grocery sales have jumped 12-13 percent over the past year, compared with only slight increases for non-necessities like gloves and toys. Shoppers can't afford to load up at the supermarket and are going to the most convenient places to buy emergency food items like milk and eggs.
"It even costs more to get the basics like soap and laundry detergent," said Michelle Grassia, who lives with her husband and three teenage children in the Bedford-Stuyvesant section of Brooklyn, N.Y.
Her husband's check from his job at a grocery store used to last four days. "Now, it lasts only two," she said.
To make up the difference, Grassia buys one gallon of milk a week instead of three. She sometimes skips breakfast and lunch to make sure there's enough food for her children. She cooks with a hot plate because gas is too expensive. And she depends more than ever on the bags of free vegetables and powdered milk from a local food pantry.
Grassia's story is neither new nor unique. With the fastest-rising food and energy prices since the 1980s, low-income consumers are stretching their budgets by eating cheap foods like peanut butter and pasta.
Industry analysts and some economists fear the strain will get worse as people are hit with higher home heating bills this winter and mortgage rates go up.
a bull running uh oh (my mom actually called me today about downsizing her oil holdings), that said glad your thinking of going into protection mode, that's the point of this thread honestly to warn people, not to cheerlead necessarily :aktion033
not really sure your question
but what happens is on the ex-dividend date the price of the stock drops in price at open based on how much the dividend is, than the dividend is paid out on the dividend date and either it is reinvested by buying stock or they give you the cash depending on which option you had pre-elected to take. Most are automatically enrolled in reinvestment.
If you sell your equity in between the ex-dividend and dividend date, you will be paid the dividend in cash whenever it comes due
hope this helps.
here ya go VT
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Enron Accounting at Citigroup
by Mike Shedlock
In the aftermath of the collapse at Enron, new rules were put in place to prevent corporations from holding assets off the books. However, anyone reading about massive SIV problem knows Citigroup and other banks are still operating in the shawdows of post-enron rules.
Changes enacted after Enron Corp.'s collapse were supposed to prevent companies from burying risks in off-balance-sheet vehicles. One lesson of Enron was that the idea that companies could make profits without taking any risk proved to be as ridiculous as it sounds.
Regulators made a great show of slamming closed that loophole. But as the current situation makes clear, they not only didn't close it all the way, but the new rules in some ways made it even harder for investors to figure out what was going on.
My comment: Banks never want anyone to know what they are doing for the simple reason no one would trust the system if they did. In addition it allows them to operate in the shadows making huge profits when all goes well, and requesting bailouts from the Fed when they do not.
SIVs, along with vehicles called conduits, don't get recorded on banks' books because regulators and accounting-rule makers gave banks a pass when crafting post-Enron rule changes meant to curtail off-balance-sheet activity.
No one is saying, of course, that the big banks are literally shams like Enron.
My comment: Although the initial setup was greed and stupidity at Citigroup vs. greed and fraud at Enron, the latest master liquidity enhancement conduit (M-LEC) proposal is every bit the cover-up that was happening in the latter stages at Enron. The worst aspect of this bailout is that it is sponsored by the Treasury.
A spokesman for the Financial Accounting Standards Board, which drafted the current rules, declined to comment.
Citigroup, for example, has nearly $160 billion in SIVs and conduits, but its shareholders wouldn't get a clear view of this from reading the bank's balance sheet. Instead, footnotes only disclose that the bank provides "liquidity facilities" to conduits that had, as of June 30, $77 billion in assets and liabilities.
My comment: That's one problem right off the bat with this mess. No one really knows how big the problem is. So far I have seen three figures for Citigroup: $80 billion, $100 billion, and now $160 million. To be fair the latter includes both SIVs and "conduits". However, I suspect most thought that $80 billion figure was all inclusive. Now we see the all inclusive number is twice that.
Are more disclosures coming? I think we can count on that. In addition, many hedge funds have executed the same fatal strategies as Citigroup (borrowing short and lending long) on mortgage related assets outside of SIVs and banking relationships. For more on the follies of borrowing short and lending long please see Duration Mismatch Causing Severe Stress Everywhere
That lends the question: how many hedge funds have held off marking these assets to market? Potentially massive future writeoffs are hidden by both banks and hedge funds playing shell games, or Don't Ask - Don't Sell strategies which are nothing more than fraudulent attempts at concealment. Is the total amount of money bet on such strategies double, triple, or quadruple what has been disclosed? No one knows. No one wants us to know either.
"Generally, the company has no ownership interest in the conduits," the bank's second-quarter filing, the latest available, states. The Citigroup filing makes no mention of SIVs. In a letter to investors in August, Citigroup disclosed that it had about $100 billion in SIV assets, although that has since declined to about $80 billion.
My comment: Therein lies the problem. That problem is called ownership. Apparently the post-Enron rule for banks was that if you did not own it, you did not have to put it on the balance sheet. So sham corporations were created, banks lent money at short-term rates to those corporations at a markup. Those corporations in turn invested in long term securities like mortgages.
With "borrow short lend long" strategies everything is fine as long as asset prices rise. However, all hell breaks loose when the value of those long term assets sinks.
In adverse conditions, banks are no longer willing to provide short term financing, and instead want their money back. Unfortunately there is no money to give back because the borrowers bet it all on mortgages or other asset backed securities that are now dropping like a rock.
Such strategies caused the complete destruction of two hedge funds at Bear Stearns. See The Redemption Trap & Merrill Lynch Cover-Up for more on Bear Stearns.
Banks typically agree to acquire the assets of their affiliated conduits if they can't roll over their IOUs. But they only backstop a portion of SIV assets. That might make it seem like the banks have some liability, and indeed some have had to step in. But backstops aren't a sign of ownership under accounting rules, though. In fact, most off-balance-sheet vehicles, conduits and SIVs included, don't have "owners" in the traditional sense. Rather they are like corporate zombies and are typically set up in offshore tax havens.
My comment: This is indeed how banks ducked the ownership rule. And now that Citigroup has bent every rule under the sun to avoid Post-Enron Rules, it now is seeking a bailout that will allow it to do exactly what Enron was doing: hide a horrendous balance sheet and in effect keep two sets of books. Paulson calls this a "market based solution". It is anything but a market based solution. The true definition would be called Enron Accounting at Citigroup Sponsored by the Treasury.
How Big is the Problem at Citigroup?
With a hat tip to Polecolaw for the idea, let's compare net tangible assets at Citigroup to the amount at risk at SIVs and conduits. Let's use $160 billion figure for the combined SIV and conduit numbers and see what comparisons we can find.
Citigroup Net tangible assets as of June 30 2007 are $65.5 billion. That's kind of interesting isn't it? Citigroup has $65.5 billion in net tangible assets but $160 billion invested in off balance sheet SIVs and conduits.
If a fire sale of those SIVs and conduits resulted in a 25% loss, Citigroup would have net tangible assets of $25.5 billion. If a fire sale of SIVs and conduits resulted in a 41% loss in those SIVs and conduits, Citigroup would have zero net tangible assets.
Does Paulson, the Fed, or Citigroup want to find out what those assets are worth? Of course not. That is the reason for a Don't Ask - Don't Sell policy and approval of Enron Style Accounting by Paulson.
Except for stupid penny stock risks buy conservative things or short term Wal mart type of stuff, that works for me. Also, think about silver, not that there other stuff at this here moment. Just my opinion.
Rip it! Just buy stuff and hold to it for a moment! Get rich, it feels real good!
Love it!
:toast:
Rip it! Just buy stuff and hold to it for a moment! Get rich, it feels real good!
Love it!
:toast:Odds on the Amero being introduced as the currency of North America in the next 5 years?
+100 ?
http://www.halturnershow.com/AmeroCoinArrives.html
+100 ?
http://www.halturnershow.com/AmeroCoinArrives.html
For my boy Willie, who had no worries at 1.35 and has changed his tune at 1.43...Meanwhile food prices are through the fucking roof. But the gov..ment says no.
In an exchange earlier this week on CNBC, a guest explained that rising oil prices can not cause inflation because prices for other goods must fall as spending is diverted to pay for more expensive oil. That explanation prompted host Becky Quick to ask: "If rising oil prices do not cause inflation, then what does?" Since that question was left unanswered on the air, I thought I would take the time to answer it here.
Inflation has only one cause and that is the Federal Reserve itself. In the United States, the supply of money and credit is regulated by the Fed. Since inflation is by definition an increase in the supply of money and credit, only the Fed can create it. If the money supply were held constant, increases in some prices would be offset by decreases in others. The result would be no overall inflation. In fact, without government created expansions of the money supply, the natural tendency of prices would be to decline as technology allowed for more efficient production of goods and services. So while most regard the Fed as the primary inflation fighter, in reality it is the sole inflation creator.
The main problem for consumers is that most inflation is not detected by the Fed's preferred measuring tools. As a result, inflation has been allowed to grow unchallenged.
For example, on Wednesday the government told us that consumer prices as measured by the CPI rose by only 2.8% over the past year. My estimate is that the actual rise was at least three times as great. The report showed that energy prices only rose by only 5.3%. Given that crude oil prices are up over 35% and heating oil prices are up 20% during that time period, how is it possible that energy prices are up only 5%? Are other energy costs falling to compensate -- firewood perhaps? The same CPI report claimed that medical costs rose by 4.6%. As a small business owner, I can't remember the last time my company's health insurance premiums rose less than 5% per year, and they typically rise at an annual rate of more than twice that. Perhaps the most incredulous of all the data in this week's CPI report is that food prices only rose by 4.5% during the past year. I don't know where the guys at the Bureau of Labor Statistics buy their groceries, but I'm spending at least 15% - 20% more for food this year than last. Wheat prices alone have practically doubled in the past year! The last time I checked, people tend to eat a lot of wheat. Does anyone really believe food prices are only up 4.5%?
As the U.S. dollar weakens, a few analysts are beginning to wonder whether we will now be "importing" inflation as the cost of imported goods rises to reflect the lower value of the dollar. Once again, Wall Street still doesn't get it. Our inflation problem is home grown. The reason the dollar is losing value in the first place is that we are creating too many of them. Since our biggest export is U.S. dollars, which foreign central banks have been foolishly monetizing, if anything it is our nation that exports its inflation to the rest of the world.
My guess is that right now inflation is already as bad as anything we experienced back in the 1970's. Some may argue that rising prices for food and energy are being offset by falling prices for such things as cell phones, iPods, digital cameras, plasma TV, etc. However, back in the 1970's, prices for similar items, such as television sets, clock radios, digital watches, calculators, etc. were also falling in price. However, despite such price declines, the more honest CPI yardsticks we used at that time still recorded double digit annual gains.
Still, the intoxicating effects that inflation has on nominal asset prices and GDP figures will eventually fade. When this happens Wall Street will sober up to the reality that the U.S. economy has actually been mired in recession for years, and that U.S. stocks have been in a stealth bear market all along. Priced in gold, euros, or Canadian dollars, (which are more accurate ways to adjust for inflation than phony government numbers) both the U.S. stock market and U.S. GDP have declined by approximately 58 %, 17 % and 21% respectively since January 2000. No wonder the government and Wall Street hang their hats on official inflation measures.
Like a student allowed to grade his own report card, he can ditch his classes, not do his homework, flunk his exams, yet still bring home straight A's. As long as Wall Street and the media continue to represent government inflation numbers as if they had any validity whatsoever, inflation is only going to get worse.
Prices Are The Cart, Money Supply Is The Horse
Peter Schiff
The sad truth is that despite the best efforts of monetary economists everywhere, fundamental misconceptions about inflation remain entrenched in government, business, and the media.
Peter Schiff
In an exchange earlier this week on CNBC, a guest explained that rising oil prices can not cause inflation because prices for other goods must fall as spending is diverted to pay for more expensive oil. That explanation prompted host Becky Quick to ask: "If rising oil prices do not cause inflation, then what does?" Since that question was left unanswered on the air, I thought I would take the time to answer it here.
Inflation has only one cause and that is the Federal Reserve itself. In the United States, the supply of money and credit is regulated by the Fed. Since inflation is by definition an increase in the supply of money and credit, only the Fed can create it. If the money supply were held constant, increases in some prices would be offset by decreases in others. The result would be no overall inflation. In fact, without government created expansions of the money supply, the natural tendency of prices would be to decline as technology allowed for more efficient production of goods and services. So while most regard the Fed as the primary inflation fighter, in reality it is the sole inflation creator.
The main problem for consumers is that most inflation is not detected by the Fed's preferred measuring tools. As a result, inflation has been allowed to grow unchallenged.
For example, on Wednesday the government told us that consumer prices as measured by the CPI rose by only 2.8% over the past year. My estimate is that the actual rise was at least three times as great. The report showed that energy prices only rose by only 5.3%. Given that crude oil prices are up over 35% and heating oil prices are up 20% during that time period, how is it possible that energy prices are up only 5%? Are other energy costs falling to compensate -- firewood perhaps? The same CPI report claimed that medical costs rose by 4.6%. As a small business owner, I can't remember the last time my company's health insurance premiums rose less than 5% per year, and they typically rise at an annual rate of more than twice that. Perhaps the most incredulous of all the data in this week's CPI report is that food prices only rose by 4.5% during the past year. I don't know where the guys at the Bureau of Labor Statistics buy their groceries, but I'm spending at least 15% - 20% more for food this year than last. Wheat prices alone have practically doubled in the past year! The last time I checked, people tend to eat a lot of wheat. Does anyone really believe food prices are only up 4.5%?
As the U.S. dollar weakens, a few analysts are beginning to wonder whether we will now be "importing" inflation as the cost of imported goods rises to reflect the lower value of the dollar. Once again, Wall Street still doesn't get it. Our inflation problem is home grown. The reason the dollar is losing value in the first place is that we are creating too many of them. Since our biggest export is U.S. dollars, which foreign central banks have been foolishly monetizing, if anything it is our nation that exports its inflation to the rest of the world.
My guess is that right now inflation is already as bad as anything we experienced back in the 1970's. Some may argue that rising prices for food and energy are being offset by falling prices for such things as cell phones, iPods, digital cameras, plasma TV, etc. However, back in the 1970's, prices for similar items, such as television sets, clock radios, digital watches, calculators, etc. were also falling in price. However, despite such price declines, the more honest CPI yardsticks we used at that time still recorded double digit annual gains.
Still, the intoxicating effects that inflation has on nominal asset prices and GDP figures will eventually fade. When this happens Wall Street will sober up to the reality that the U.S. economy has actually been mired in recession for years, and that U.S. stocks have been in a stealth bear market all along. Priced in gold, euros, or Canadian dollars, (which are more accurate ways to adjust for inflation than phony government numbers) both the U.S. stock market and U.S. GDP have declined by approximately 58 %, 17 % and 21% respectively since January 2000. No wonder the government and Wall Street hang their hats on official inflation measures.
Like a student allowed to grade his own report card, he can ditch his classes, not do his homework, flunk his exams, yet still bring home straight A's. As long as Wall Street and the media continue to represent government inflation numbers as if they had any validity whatsoever, inflation is only going to get worse.
should be interesting to see how asian markets respond tonight, to friday's move in the US
77.31 on the dollar nother new low
uh oh yen carry not looking good, yen big move up outta the gate......getting interesting
http://www.forexdirectory.net/jpy.html
smell bears ready to unleash a mauling after 5 years of complaining
I expect asia to panic...no clue how US will respond...should be interesting.
euro pretty insignificant IMO its still a flawed currency...yen carry just pertinent cause all the leverage and hedgies involved in this one sided trade. Once everybody is forced to get out it will be a stampede.
Theyve had a rabbitt in their hat each time it looked like the market would have more than a 10% correction.
Its not easy to get markets lower with all the money thats been printed and put into the worlds monetary system.
Just goes to show everyone how lousy the economy and deep the banking problems are that after all the liquidity aug/sept, the s&p here is still falling.
This rate cut has just about completely blown up in their faces.
Its not easy to get markets lower with all the money thats been printed and put into the worlds monetary system.
Just goes to show everyone how lousy the economy and deep the banking problems are that after all the liquidity aug/sept, the s&p here is still falling.
This rate cut has just about completely blown up in their faces.
DAW -
they've got all the tools at their disposal......
"they" are just not going to allow a recession going into an election year no matter what
of course, the more they tinker, the harder the fall when it comes....and it will....less and less wiggle room but a couple years off still
just a once in a lifetime opportunity to profit off this IMHO...gl
rate cut (well moving 50 bp vs. 25 bp) was a pre-emptive move, they were going to lower sooner or later as economy was set to likely head to recession, and also gave some time for the big boys to bail
sentiment drives markets alot of the time, and being october, and all the crappy earnings that came out on friday just don't see how we don't have the 10% "correction" (think it will be worse than this)
plus the market action very similiar to 1987 and 2000 before the swan dive began....
For econ people with a clue its blown up. For the lemmings who watch CNBS and their pom poms they simply don't know any better. They see large numbers on indicies and that's all that matter....As to liquidity, that;s why I believe we are going higher. The day of reckoning is coming though.
yeah this is the only thing making me think this might not be it...with ron paul making noise (talking about how we are living beyond our means and crap is going to hit the fan sooner or later, a major market move down would likely give him a bump)...and a big election coming up
that said i think they are finally out of wiggle room to keep the ship afloat but i've thought that before so who knows.
yen carry still unwinding up .7% vs. USD, and 1.38% vs. kiwi (#1 target for carry trade)
jdog, you can bet if this market tanks, ill be there.
im sure you are locked and loaded with precious metals. this homerun is got alot further to go.
these mortgage insurance stocks ive been short are looking like they are heading to bankruptcy.
mtg & pmi. also short mco.
not a play of mine, but a good friend has been riding tgic (short) down over 30 points and 75% lower since june.
im sure you are locked and loaded with precious metals. this homerun is got alot further to go.
these mortgage insurance stocks ive been short are looking like they are heading to bankruptcy.
mtg & pmi. also short mco.
not a play of mine, but a good friend has been riding tgic (short) down over 30 points and 75% lower since june.
if you look closely at what the fed has been doing it really hasn't been adding liquidity persay alot of it is false press etc....like i said markets run on sentiment alot of times rather than fundamentals.
hussman has talked about this a few times
http://www.hussman.net/
always has great reads....posts an new article every week....
his article from the beginning of last week great call
Warning - Examine All Risk Exposures
John P. Hussman, Ph.D.
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Reprint Policy
The S&P 500 registered a record high last week, exactly 5 years after the market registered its bear market low in 2002. With the last bit of the 2000-2002 bear market now removed from the 5-year window, the past 5 years comprise a pure trough-to-peak market advance, without an intervening bear market decline, nor even a 10% pullback in the S&P 500 (on a daily closing basis). This is entirely unrepresentative of what an investor can expect over the long-term. Ironically, the brutal 2000-2002 bear market has now moved out-of-sight and out-of-mind at just the time that investors would benefit most from its memory. The completion of the current market cycle may be closer than investors think.
I generally try to avoid near term forecasts of market direction. The predictable amount of market return over a one-week period is overwhelmed by short-term volatility, and forecasts based on longer time horizons implicitly assume that the Market Climate we identify will not change over the forecast period. Moreover, if we partition history into “buckets” according to the Market Climate that was prevailing at the time, and look at how the market performed over say, the next week, month, or quarter we find that every bucket includes periods that were followed by advances, as well as periods that were followed by declines.
In other words, we can rarely predict that the market will reliably advance or decline over the next week or month or quarter. What we can say is that the average return/risk profile varies substantially across buckets. Given observations over at least one complete market cycle, we regularly find that the strongest average return/risk profile was associated with periods that one could identify in advance as having favorable valuation and (already) favorable market action, and that the poorest subsequent return/risk profile was associated with the bucket of periods having unfavorable valuation and unfavorable market action. Over the complete market cycle, this knowledge has generally been enough to achieve strong full-cycle returns with moderate risk.
It's not difficult to find various indicators that have been positive in recent years. But you don't find useful market indicators simply by looking at an advance and asking what conditions accompanied the advance. Nor do you find useful indicators simply by looking at a decline and asking what conditions accompanied the decline. Suppose that 100% of the people who have the flu are positive on a given test. Even if you test positive, you still don't have any information about whether you have the flu. What you also need to know is how many times the test was positive, and people didn't have the flu. The counter-examples are essential. It is also important to base the diagnosis on more than one factor – are there muscle aches? Chills? General fatigue? The more the symptoms fall into a well-defined syndrome the better the accuracy of the diagnosis.
For example, though investors are convinced that successive cuts in the Discount Rate are good for stocks, you will find that nearly all of the historical instances occurred when stocks were well into bear market declines, and valuations were already depressed. Indeed, the exceptions when stocks did not respond well to successive Discount Rate cuts were precisely those where valuations were still rich and stocks were not far from their highs at the time. Again, you have to look at the overall syndrome of conditions, and ask whether there are any informative counter-examples.
As I noted in prior comments about Bayes' Rule, there is one particular syndrome of conditions after which stocks have reliably suffered major, generally abrupt losses, without any historical counter-examples. This syndrome features a combination of overvalued, overbought, overbullish conditions in an environment of upward pressure on yields or risk spreads. The negative outcomes are robust to alternative definitions, provided that they capture that general syndrome (for instance, Treasury yields need not be obviously rising – an absence of strong downward pressure on yields is sufficient).
Presently, the price/peak earnings multiple of the S&P 500 is at 18.4 even without normalizing the level of profit margins. The S&P 500 is at a record high, is clearly overbought, and is pushing the upper Bollinger band at every horizon (daily, weekly, and monthly). Treasury yields provide no assistance, with the 10-year yield about the same level as 6 months ago and well off of its lows, while Treasury bill yields are also well off their lows. Sentiment readings from Investors Intelligence indicate 60.2% bulls and just 18.3% bears. Finally, we have what has historically been a sharply negative additional feature: our measures of market action are unfavorable (this is in contrast to points earlier this year, when we could infer the risk of abrupt corrections despite constructive internals).
There are only a handful of historical periods that fall into this syndrome of conditions: December 1972, August 1987, July 1998, July 1999, December 1999, March 2000, and October 2007.
All of the prior instances were followed by steep market losses. When the declines were not abrupt, they were protracted. There is not a single counter-example. This is clearly a small sample of events, but it is some sample. Note that even the 1999 instances were followed by separate declines of at least 10%, even before the 2000-2002 bear market began. Could October 2007 be the first exception? Sure. But for investors to ignore present risks, they would need very strong “prior beliefs” that reduce the weight that they place on this set of observed evidence.
For our part, we are fully hedged, and would be even on the basis of less extreme conditions. Given my general avoidance of forecasts, there are very few situations when I would state my views about the market as a “warning.” Unfortunately, in contrast to more general Market Climates that we observe from week to week, the current set of conditions provides no historical examples when stocks have followed with decent returns. Every single instance has been a disaster.
We can't rule out the possibility that investors will adopt a fresh willingness to speculate (which we would observe through an improvement in market internals). Such speculation might prolong the current advance modestly, but even this would not substantially alter the risks that have ultimately been associated with overvalued, overbought, overbullish conditions.
Accordingly, investors should consider prevailing conditions as a warning about assuming substantial risk. This includes foreign and developing markets, because correlations between U.S. and foreign markets suddenly become stronger during periods of market weakness than they are in periods of general stability. That doesn't mean investors need to make major changes in their investment exposures. There is nothing wrong with buy-and-hold investing, provided that investors recognize at market highs how strong the impulse is to sell at market lows. Whatever market exposure investors accept today ought to be the same market exposure that investors are committed to maintain for the duration of a bear market, without abandoning their investment plan. Investors with no plan to own stocks through a market decline, holding them only in the hope of selling at market highs, may discover in hindsight that these were them.
Market Climate
As of last week, the Market Climate for stocks was characterized by unfavorable valuations and unfavorable market action. The Strategic Growth Fund remains fully hedged based on this combination of market conditions, which has historically been associated with negative average returns even in the absence of the more extreme syndrome of overvalued, overbought, overbullish conditions that we observe in this particular instance.
While the S&P 500 surpassed its prior July 19 peak last week, the Strategic Growth Fund has also achieved positive returns since that date (indeed, outpacing the S&P 500) which underscores the fact that the Fund is not a “bear fund” or a “short fund.” We currently have a “staggered strike” hedge to provide somewhat stronger protection against any substantial loss that might emerge, but are not positioned in a way that would be expected to produce losses as the result of a further market advance. As always, the Fund does accept the risk that our stock holdings will perform differently than the indices we use to hedge (typically the S&P 500 and the Russell 2000). While a substantial performance shortfall in our stocks could result in a loss for the Fund, the difference in performance between our stocks and those indices has been substantially positive since the Fund's inception, and has been the primary driver of Fund returns over time.
In bonds, the Market Climate last week was characterized by unfavorable yield levels and relatively neutral market action. The Strategic Total Return Fund continues to have a duration of about 3 years, mostly in TIPS, with about 15% of assets in precious metals shares, where the Market Climate continues to be generally positive.
I continue to believe that the best approach to current bond market conditions is to change our durations in response to interest rate changes rather than in anticipation of them. The risks to the bond market include the potential for short-term inflation surprises and potential for disappointing talk from the Federal Reserve regarding interest rate policy (purely psychological as it may be). Against that, my impression is that housing weakness, foreclosures, and credit risks will tend to create ongoing surges of demand for Treasuries as safe-havens. So I would expect to gradually increase our exposure in Treasuries in response to any upward spikes in yields that might emerge, but there still isn't sufficient evidence of economic or credit crisis to warrant heavy bond purchases in anticipation of sustained downward yield pressure.
As a final note, the amount of new "liquidity" provided by the Federal Reserve through reserves and discount window lending continues to be nil (see The Bag Will Not Inflate, and Liquidity Will Not Be Flowing). The heavy volume of repos last Thursday, as expected, were nothing but rollovers of existing repos, not "fresh injections of liquidity." Total bank reserves actually dropped in September, from $44.9 billion to $42.5 billion. Meanwhile, the total amount lent by the Fed to the banking system through the discount window amounts to $257 million.
That said, we're likely to observe a growing amount of what will wrongly be viewed as "cash on the sidelines" and "money creation" in the banking system. The problem is that the commercial paper market has dried up. If savers are not buying those securities as the proceeds come due, and a good portion of the borrowing is still somehow being rolled over, then it must be the case that the savers who used to own commercial paper are now saving in another form, and the borrowers who used to issue commercial paper are now borrowing in a different form. Most probably, banks will be the chosen intermediary, because savers view bank deposits as insured and somewhat safer than unsecured commercial debt.
The upshot is that monetary aggregates like M2 and MZM (money of zero maturity) may well increase in the months ahead, but this will not be the result of Fed "liquidity." Rather, it will be a symptom of ongoing problems in the commercial paper market (as well as other securitized loans). To measure Fed induced liquidity, you have to look directly at reserves, currency in circulation, and discount window borrowings. If you don't see it happening there, the Fed isn't doing it.
