Sub-prime Meltdown Hits Thailand With Force

[LaoPo]

Now I'm confused. if the sidebar question is who said "Most men would rather die than think. Many do" then the answer is Bertrand Russell, stated in the context of the First World War and his refusal to fight, his involvement in pacifist activities leading to a conviction.

Maybe I missed the hidden question.

Regards

/edit tense//

OK, I post it once more, without spaces:

"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

My question was WHO said this and I meant the WHOLE quote, not just what Bertrand Russell said.

The guy who said this was talking about "pessimism" and "optimism" in investing-in-stocks and he quoted Bertrand Russell....

LaoPo

[A_Traveller]

Now I'm confused. if the sidebar question is who said "Most men would rather die than think. Many do" then the answer is Bertrand Russell, stated in the context of the First World War and his refusal to fight, his involvement in pacifist activities leading to a conviction.

Maybe I missed the hidden question.

Regards

/edit tense//

OK, I post it once more, without spaces:

"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

My question was WHO said this and I meant the WHOLE quote, not just what Bertrand Russell said.

The guy who said this was talking about "pessimism" and "optimism" in investing-in-stocks and he quoted Bertrand Russell....

LaoPo

Warren Buffet

Regards

[LaoPo]

Now I'm confused. if the sidebar question is who said "Most men would rather die than think. Many do" then the answer is Bertrand Russell, stated in the context of the First World War and his refusal to fight, his involvement in pacifist activities leading to a conviction.

Maybe I missed the hidden question.

Regards

/edit tense//

OK, I post it once more, without spaces:

"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

My question was WHO said this and I meant the WHOLE quote, not just what Bertrand Russell said.

The guy who said this was talking about "pessimism" and "optimism" in investing-in-stocks and he quoted Bertrand Russell....

LaoPo

Warren Buffet

Regards

:D

CORRECT! That'll cost me ! I give you a PM when I expect to come to LOS....soon I hope.

LaoPo

[lannarebirth]

Hi LP.

Charts are comprised of time and price, nothing else. I didn't know there was any news due on Friday, but I have a turn scheduled in the fri-mon window.

I'm interested/fascinated by your Charts-view. What interests me most is the difference in Global economy since, let's say, 10-15 years with the rise of the economy in the Far East, and China, India, Vietnam and others in particular, which weren't there, not so long ago, economically spoken.

How do your charts interpret that ?

I mean, your charts probably show a long history in the US and EU, Australia, NZ and such, but the total picture can't be compared, can it ?

LaoPo

I don't trade any of those markets as it's just all too illiquid for my tastes. But the rise of their economies can be attributed to major markets growth. It is mature economies, whose long established businesses (S&P500, Wilshire 5000) that now are manufacturing and outsourcing to these countries that has enabled their growth . While domestic demand is probably increasing in these emerging markets, it has not been the driver of growth has it?

If you want to find a chart for it, look at US money supply growth and treasury yields. Those are as good as any to tell you that money is going to be put to use elsewhere.

I have to tell you, I don't follow emerging markets much, as I'm too risk averse. I don't have the luxury and good sense to make 50 bets with no greater than 2% risk (absolutely textbook correct). That's why I stick to larger, more liquid markets and use leverage. Also, I just hate being in the market, so I only participate when great movement is expected by me.

[LaoPo]

Hi LP.

Charts are comprised of time and price, nothing else. I didn't know there was any news due on Friday, but I have a turn scheduled in the fri-mon window.

I'm interested/fascinated by your Charts-view. What interests me most is the difference in Global economy since, let's say, 10-15 years with the rise of the economy in the Far East, and China, India, Vietnam and others in particular, which weren't there, not so long ago, economically spoken.

How do your charts interpret that ?

I mean, your charts probably show a long history in the US and EU, Australia, NZ and such, but the total picture can't be compared, can it ?

LaoPo

I don't trade any of those markets as it's just all too illiquid for my tastes. But the rise of their economies can be attributed to major markets growth. It is mature economies, whose long established businesses (S&P500, Wilshire 5000) that now are manufacturing and outsourcing to these countries that has enabled their growth . While domestic demand is probably increasing in these emerging markets, it has not been the driver of growth has it?

If you want to find a chart for it, look at US money supply growth and treasury yields. Those are as good as any to tell you that money is going to be put to use elsewhere.

I have to tell you, I don't follow emerging markets much, as I'm too risk averse. I don't have the luxury and good sense to make 50 bets with no greater than 2% risk (absolutely textbook correct). That's why I stick to larger, more liquid markets and use leverage. Also, I just hate being in the market, so I only participate when great movement is expected by me.

Thanks for your explanation.

And, I agree that domestic demand in Emerging Markets as such wasn't -completely- the drive for world growth or, if you wish, in the Mature Economies, maybe only for a small part (imports into EM's and exports from ME's to those countries).

The rest of local demand comes mostly from locally produced items with or without imported parts/products.

LaoPo

[LaoPo]

I'm curious about your comments about this article:

``The current credit crisis is a serious one but it's the tip of the iceberg,''

Title: ABN Amro's (Francois) Moute Cuts Stock Holdings on `Tip of Iceberg' Fears

Francois Moute, portfolio manager for ABN Amro Asset Management, poses at the company offices in Paris, France, on Tuesday, Sept. 4, 2007. Moute, one of Europe's best investors in U.S. stocks, started preparing for hard times more than a year before markets slumped in July.

Sept. 5 (Bloomberg) -- ABN Amro Asset Management's Francois Moute, one of Europe's best investors in U.S. stocks, started preparing for hard times more than a year before markets slumped in July.

Since early 2006 he has slashed his net holdings of shares from 85 percent of assets to 60 percent, the lowest he's allowed. Almost one-quarter of his $343 million U.S. Opportunities fund now bets against indexes. The only equities he is buying are those of U.S. commodity companies selling in emerging markets, such as oil-service provider Schlumberger Ltd.

Moute's fund has ranked in the top 5 percent in the past three years among 541 European-based funds tracked by Morningstar Inc. that invest in North American stocks. It has returned 8.3 percent this year, compared with a 3.9 percent advance for the Standard & Poor's 500 Index, the benchmark.

``The current credit crisis is a serious one but it's the tip of the iceberg,'' Moute, 62, said in a telephone interview from his Paris office. ``There is too much complacency. It's probably more serious than the equity market is pricing in.''

Stock and bond markets have fallen in the past two months over concern that U.S. consumers, particularly delinquent borrowers, won't be able to pay back loans. A global sell-off of equities has dragged the S&P 500 Index down 5.1 percent since July 20.

Going Short

Over the past 18 months Moute has cut his net allocation in equities through so-called short positions on U.S. index-futures contracts. By selling the futures, investors agree to deliver a contract representing the underlying index at a given date, profiting if the benchmark drops in value.

Moute's strategy may backfire if markets rise again. He was foiled by the S&P 500's rally in the second half of 2006, when the index rose 12 percent, ahead of the 5.3 percent gain for the fund. U.S. Opportunities ranked 629 out of 723 funds then, according to Morningstar.

Betting on the movement of markets makes the fund more risky than portfolios that aim to beat markets solely by picking the best-performing companies, according to Fernando Luque, a funds analyst at Morningstar in Madrid.

``There's a danger,'' Luque said. ``It's unusual among managers to be so little invested in equities.''

Moute says he has been successful before. A similar reduction in his stock holdings in 2002 kept his fund's losses to a quarter of the 23 percent decline in the S&P Index, he said.

U.S. Consumers

Paris-born Moute obtained the equivalent of a Master's in Business Administration degree from the Hautes Etudes Commerciales in his hometown in 1966. After working for Schroders Plc and Bear Stearns Cos., he joined the ABN Amro Holding NV unit in 2000. The Dutch money manager, with headquarters in London and Amsterdam, oversees $288 billion worldwide.

Moute says it's time to get as far as possible from the U.S. consumer. U.S. house prices in the second quarter rose at the slowest pace in a decade and consumer confidence dropped by the most in two years: the New York-based Conference Board's index retreated to 105 in August from 111.9 in July.

``There is far too much debt,'' Moute said. ``This isn't a good environment for stocks and it's time to be prudent.''

Last year he sold out of financial institutions such as Wachovia Corp., the fourth-largest U.S. bank, because they were too exposed to consumer debt. Shares in the Charlotte-based bank have dropped 11 percent so far this year to $48.98.

He now has ``zero exposure'' to finance companies or those that market to consumers in the U.S. Instead, he's been buying sellers of natural resources and machinery in emerging economies.

`Sneezes'

In the past 12 months Moute added shares of Schlumberger, the largest oilfield-services provider, whose stock has surged 54 percent this year, to $96.50. The Houston and Paris-based company said on July 20 that increased drilling services in the Middle East, Europe and Latin America lifted second-quarter profit by 47 percent.

Among his 10 largest holdings is White Plains, New York- based Bunge Ltd., the world's biggest oilseed processor, whose shares are up 27 percent this year, to $91.44. Bunge is the biggest seller of fertilizer in South America.

Emerging-market economies are resilient enough to overcome a slowdown in the U.S., he said. While U.S. gross domestic product grew at an annual 1.9 percent in the second quarter, Argentina's expanded 8 percent, China's grew 12 percent while India's advanced 9.1 percent.

``It used to be said that when the U.S. sneezes, the world catches a cold,'' Moute said. ``This doesn't seem to be happening.''

Source: http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

[midas]

" The current credit crisis is a serious one but it's the tip of the iceberg,'' Moute, 62, said in a telephone interview from his Paris office. ``There is too much complacency. It's probably more serious than the equity market is pricing in.''

Stock and bond markets have fallen in the past two months over concern that U.S. consumers, particularly delinquent borrowers, won't be able to pay back loans. A global sell-off of equities has dragged the S&P 500 Index down 5.1 percent since July 20.

LaoPo isn't this really interesting ! Now I don't think for one minute that people on this

board would be so naive as to jump up and down and label him a

member of the " doomsday brigade " don't you think

It would be interesting to get a more in-depth insight into exactly what he is referring

to as being the metaphoric six sevenths of the submerged iceberg the

[samran]

``It used to be said that when the U.S. sneezes, the world catches a cold,'' Moute said. ``This doesn't seem to be happening.''

LaoPo

I've come across a couple of articles saying that the Asian and US economies are becoming increasingly de-linked.....

I've always been a touch sceptical, but there does appear a fundamental element of truth though. Nevertheless, it doesn't stop local investors panicing when something happens in New York, but things soon return to what they were...

As for natural resource companies in emerging markets....sound like a nice idea.

[midas]

``It used to be said that when the U.S. sneezes, the world catches a cold,'' Moute said. ``This doesn't seem to be happening.''

LaoPo

I've come across a couple of articles saying that the Asian and US economies are becoming increasingly de-linked.....

I've always been a touch sceptical, but there does appear a fundamental element of truth though. Nevertheless, it doesn't stop local investors panicing when something happens in New York, but things soon return to what they were...

As for natural resource companies in emerging markets....sound like a nice idea.

I don't think I believe this so much

If Asia and US really are becoming " de-linked " why is there so much

concern regarding the tarnishing of the image of Chinese made products ?

( last week it was counterfeit FERRARO ROCHER chocolates from China which had

live worms in them )

[chinthee]

``It used to be said that when the U.S. sneezes, the world catches a cold,'' Moute said. ``This doesn't seem to be happening.''

LaoPo

I've come across a couple of articles saying that the Asian and US economies are becoming increasingly de-linked.....

I've always been a touch sceptical, but there does appear a fundamental element of truth though. Nevertheless, it doesn't stop local investors panicing when something happens in New York, but things soon return to what they were...

As for natural resource companies in emerging markets....sound like a nice idea.

I don't think I believe this so much

If Asia and US really are becoming " de-linked " why is there so much

concern regarding the tarnishing of the image of Chinese made products ?

( last week it was counterfeit FERRARO ROCHER chocolates from China which had

live worms in them )

Yeah, me too. I don't have any studies to document it, but I would say if anything, markets are becomming increasingly linked, with cross-ownership of foreign subsidiaries, global supply chains and sourcing, global private equity funds (even though the funds are usually segregated), and other cross pollenation. Be good to see some of those study claiming de-linking.

[A_Traveller]

De-linked? I don't believe that at all. At the simplest level, the export drivers {i.e. USA buying from China, China buying from RoW} are contraindicative of this. Equally the CDO contagion shows how the pool of 'assets' are accessed world-wide. Would be interested in any studies on this. I could think of specific asset classes where this might now be true, but they are very limited in effect.

Regards

[samran]

there was an article in the economist a few months back that asked if the Shanghai Stock exchange was overheating and if it was, what would the impact be on the real economy. The conclusion was that given that the proportion of firms listed vs those not listed was much smaller than in the US, UK and elsewhere, any potentil bubble burstnig was likely to be contained.

The other comment I read recently was from the chairman (I think it was) of BHP who basically was bullish that China seemed to run on its own steam as far as his business was concerned.

Anyway. Many older and wiser heads here than me....but there are people out there saying similar things.

[midas]

The conclusion was that given that the proportion of firms listed vs those not listed was much smaller than in the US, UK and elsewhere, any potentil bubble burstnig was likely to be contained.

But Samran IMHO I dont think what you say above is anywhere near

as important as which countries are buying the end products and

I get the impression that USA ( and maybe Europe to some extent

) is sucking up a lot of Asian

made products ? If that goes who else will buy all this stuff ?

[wilko]

Yes, but reading posts from such economic-Neanderthals is what makes reading TV so entertaining.

haven't we all started as Neanderthals once upon a time?

No we didn't! Different species!

[chinthee]

The conclusion was that given that the proportion of firms listed vs those not listed was much smaller than in the US, UK and elsewhere, any potentil bubble burstnig was likely to be contained.

But Samran IMHO I dont think what you say above is anywhere near

as important as which countries are buying the end products and

I get the impression that USA ( and maybe Europe to some extent

) is sucking up a lot of Asian

made products ? If that goes who else will buy all this stuff ?

Yes, this is true. You can't talk about de-linked public and private financial markets without examining the underlying revenue streams that support the various listed or private entities. I still say highly linked....

[A_Traveller]

there was an article in the economist a few months back that asked if the Shanghai Stock exchange was overheating and if it was, what would the impact be on the real economy. The conclusion was that given that the proportion of firms listed vs those not listed was much smaller than in the US, UK and elsewhere, any potentil bubble burstnig was likely to be contained.

The other comment I read recently was from the chairman (I think it was) of BHP who basically was bullish that China seemed to run on its own steam as far as his business was concerned.

Anyway. Many older and wiser heads here than me....but there are people out there saying similar things.

The Chinese stock market is to a degree delinked, though the drop earlier in the year did cause, if memory serves a flutter around the world, hence my asset class comment. However the reasons for that are systemic, and does not point to a wider delinking of the markets of all classes. Activity between markets is very strong and continues to grow. I don't immediately see the relevance of the BHP comment except as it pertains to their specific business exposure/interests.

Regards

Edited September 6, 2007 by A_Traveller

[samran]

I see your point, and I think I should remind you that I said that there is an increasing (but not anywhere total) de-linkage. Globalisation, yada, yada, yada...I'm with you there.

I did say that I suspect that there is an element of truth to the idea. Maybe it is in part due to my background being from Australia, but for me the Asian Financial crisis for me how sometimes a deep recession in a region with major trading partners may not necessarily harm the Australian economy. Following the intial panic in 97, the Australian economy really kicked its heals up with growth that has contintued to this day.

One of the major reasons cited for Australia's success was its ability to quickly find new markets to sell to, and that the benefits of micro-economic reform over the 80's and early 90's which meant that the economy was effectively buffered from the turmoil 500km across the Timor straights.

I think given the ease in which money can move around the world, if something happens in market A, after the intitial shock, it will quickly find a safer home in markets B, C and D.

[bingobongo]

[Carmine6]

I see your point, and I think I should remind you that I said that there is an increasing (but not anywhere total) de-linkage. Globalisation, yada, yada, yada...I'm with you there.

I did say that I suspect that there is an element of truth to the idea. Maybe it is in part due to my background being from Australia, but for me the Asian Financial crisis for me how sometimes a deep recession in a region with major trading partners may not necessarily harm the Australian economy. Following the intial panic in 97, the Australian economy really kicked its heals up with growth that has contintued to this day.

One of the major reasons cited for Australia's success was its ability to quickly find new markets to sell to, and that the benefits of micro-economic reform over the 80's and early 90's which meant that the economy was effectively buffered from the turmoil 500km across the Timor straights.

I think given the ease in which money can move around the world, if something happens in market A, after the intitial shock, it will quickly find a safer home in markets B, C and D.

I think de-linked is the wrong terminology, because if anything Asia is much more linked to the US than before, through sheer volume of trade and direct investments in US assets.

"Less dependent" is what people really mean. As more trade goes to other countries and demand within Asian countries has grown, it leaves the economies less dependent on trade with the US. Even many US companies are less dependent on the US economy than before through international operations or international sales. High tech, oil companies, McDonald's, Johnson & Johnson, etc.

Edited September 6, 2007 by Carmine6

[chinthee]

Well, if there is any degree of "de-linkage" it is intentional by institutional investors and others. They are just trying to isolate their risks. There is no organic de-linkage mechanism.

[VegasVic]

Well, if there is any degree of "de-linkage" it is intentional by institutional investors and others. They are just trying to isolate their risks. There is no organic de-linkage mechanism.

Chinthee, spot on once again! The primary difference these days as compared to say 1997, is the exponential growth of hedge funds and private equity firms over the last ten years. The interdependant relationships between the U.S. the E.U., Japan, China and India are if anything more "linked" than ever before. Lao, if you are out there, I got sold off the other day at $19/sh on my Countrywide shares that I picked up 3 weeks ago, I turned an 18% profit in 3 weeks (not too shabby for that dangerous U.S. equity market) Geting back to the subprime mess, some interesting statistics came out today and that is if you take southern California, Nevada, Arizona and Florida out of the equation, then home foreclosures in the U.S. are actually down YOY! I still don't look for the FED to bail out the hedge funds and the real estate flippers, Mr. Bernanke wants Wall Street to go through a cleansing, so it looks like there may be more bargains in late September-October, stay tuned

[Martin]

I hadn't read this thread for about a week.

About 20 pages back, we were considering that Thailand's stock market would only be hit (by the sub-prime meltdown) with a little bit of force, and that the effect on Thailand as a whole would be miniscule.

But a few pages ago, 'Lao Pao' said:

"If USA's Isolationism/Protectionism would become reality the complete world would collapse and be in serious, very serious, trouble and recession. "

Are we now saying that the knock-on effects will be greater than we thought?

I would still maintain that Thailand would not collapse with the rest of the complete world. It can say "Bye, Bye" to its exports to the USA etc and to its tourist industry, to Rayong, Phuket, Koh Samui, Pattaya/Jomtien and half of Bangkok without anything like the painful messiness that is implied by "collapse".

Also a few pages back, the ability of the USA to grow grain was being lauded. But that will soon not look so rosy as it depends on inputs of inorganic fertiliser that is getting increasingly expensive, since its raw material is natural gas and oil figures large in the manufacture and distribution. America can feed itself, but its populace will have to cut back on all other consumptions to afford their food.

[VegasVic]

I hadn't read this thread for about a week.

About 20 pages back, we were considering that Thailand's stock market would only be hit (by the sub-prime meltdown) with a little bit of force, and that the effect on Thailand as a whole would be miniscule.

But a few pages ago, 'Lao Pao' said:

"If USA's Isolationism/Protectionism would become reality the complete world would collapse and be in serious, very serious, trouble and recession. "

Are we now saying that the knock-on effects will be greater than we thought?

I would still maintain that Thailand would not collapse with the rest of the complete world. It can say "Bye, Bye" to its exports to the USA etc and to its tourist industry, to Rayong, Phuket, Koh Samui, Pattaya/Jomtien and half of Bangkok without anything like the painful messiness that is implied by "collapse".

Also a few pages back, the ability of the USA to grow grain was being lauded. But that will soon not look so rosy as it depends on inputs of inorganic fertiliser that is getting increasingly expensive, since its raw material is natural gas and oil figures large in the manufacture and distribution. America can feed itself, but its populace will have to cut back on all other consumptions to afford their food.

I have some time on my hands this afternoon so it sounds like I better go out and buy up all the canned goods and bags of flour and rice that I can find On a more serious note, we will all get through this current "crisis" relatively unscathed, there will be no depression, no recession, no isolationisim(on the U.S.'s part) or devaluation of currencies and six months from now the U.S. equity markets will be hitting record highs (with the exception of the NASDAQ which will hit post .com crash highs). Of course 2-3 years from now when the current expansion begins to run out of steam, now thats a different situation but thats too far out to start predicting now

[LaoPo]

Lao, if you are out there, I got sold off the other day at $19/sh on my Countrywide shares that I picked up 3 weeks ago, I turned an 18% profit in 3 weeks (not too shabby for that dangerous U.S. equity market)

YES, I'm here Vic..

As a matter of fact I was thinking about your investment in Countrywide and, noticing they ended at $ 18.48 today, I thought "Vic must have sold his shares" and guess what ?

You did... and hope you bought your wife a nice present.

BoA did a very good job with their $ 2 Billion of preferred stock yielding 7.25 percent (!), convertible into common stock at $18; that's a 'Holy Moly' profitable investment for them as Countrywide is down some 55%+ this year !

Wait to return to them (Countrywide) though when they end up lower and buy them back at, let's say, maybe $ 10.-- ... ???

Good for you.

LaoPo

[VegasVic]

Lao, if you are out there, I got sold off the other day at $19/sh on my Countrywide shares that I picked up 3 weeks ago, I turned an 18% profit in 3 weeks (not too shabby for that dangerous U.S. equity market)

YES, I'm here Vic..

As a matter of fact I was thinking about your investment in Countrywide and, noticing they ended at $ 18.48 today, I thought "Vic must have sold his shares" and guess what ?

You did... and hope you bought your wife a nice present.

BoA did a very good job with their $ 2 Billion of preferred stock yielding 7.25 percent (!), convertible into common stock at $18; that's a 'Holy Moly' profitable investment for them as Countrywide is down some 55%+ this year !

Wait to return to them (Countrywide) though when they end up lower and buy them back at, let's say, maybe $ 10.-- ... ???

Good for you.

LaoPo

The shares got sold off automatically as my stop was $19, when I got off the golf course and checked the days results I was actually surprised to see that I got sold off until I saw the daily chart and found out that it actually traded as low as $18.92! As I have said before you can never go wrong by taking a profit. I still think B of A will eventually buyout Countrywide, but until they announce something it will drift lower, especially if Mr. Bernanke leaves the FED funds rate unchanged at the Sept. FOMC meeting, and I think that sub $15/sh might be possible if we get some good sized down days in October, but $10/sh is really pushing it (although I hope your hunch is right) Have a good weekend my friend!

[LaoPo]

Greenspan points to market 'fear'

Current financial turmoil is identical to that seen in earlier stock market crashes, Alan Greenspan has warned

Alan Greenspan has been more outspoken since leaving the Fed

The ex-Federal Reserve boss compared today's situation to the crash of 1987 and the fallout from the near-demise of Long-Term Capital Management in 1998.

Anxiety over a global credit squeeze triggered by the US housing slump was driven by "fear", he said in a speech.

"The human race has never found a way to confront bubbles," he said, alluding to booms suddenly grinding to a halt.

'Identical behaviour'

According to the Wall Street Journal, Mr Greenspan drew parallels in a speech in Washington with US financial panics down the years, driven either by a collapse in confidence in banks or land speculation turning sour.

The current turbulence is being driven by banks' unwillingness to lend until the full extent of their exposure to the troubled sub-prime mortgage market becomes clear, a situation which threatens to hurt the US economy and spread to other countries.

The Federal Reserve has said sub-prime losses could total $100bn and is under pressure to cut interest rates later this month to make borrowing cheaper for banks and consumers.

"The behaviour in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998 and what we saw in the stock market crash of 1987," Mr Greenspan said.

The remarks were made at a meeting in Washington organised by the academic journal Brookings Papers on Economic Activity.

Historical parallels

1987 saw the largest one-day peacetime fall in the US stock market, when more than 20% was wiped off the value of the Dow Jones index of leading companies.

The collapse was triggered by the widespread fear that the US economy was set to slow after a period of feverish expansion, in which borrowed money, some of it high-risk, was used to fund huge takeovers.

The financial problems of Long-Term Capital Management, which caused consternation in the global derivatives market, were triggered by the Asian financial crisis of 1997, which spread to Russia and Brazil a year later.

Stock markets in the US recovered relatively quickly after both upheavals.

Mr Greenspan, who now advises a number of hedge funds and other financial institutions, said the nervousness which typically gripped markets when a period of "euphoric" expansion ended was extremely powerful.

"The expansion phase of the economy is quite different and fear as a driver, which is going on today, is far more potent than euphoria," he said.

http://news.bbc.co.uk/2/hi/business/6983051.stm

LaoPo

[LaoPo]

Although a side line to the subprime crisis, this is an interesting -must- read:

Alarm raised over Japan real estate

The head of Japan's second biggest housebuilder yesterday warned Japanese property prices were a bubble set to burst, fueling concerns that real estate prices have reached unsustainable levels just a few years into a recovery from a prolonged slump.

"The property market has become dangerous and I wouldn't be surprised if the real estate bubble goes bust," Takeo Higuchi, chairman of Daiwa House, told Bloomberg.

Mr Higuchi's remarks come as two of the world's hitherto most buoyant property markets - the US and the UK - face widening problems, raising fears of a global property slump.

The US market has been hit by fears about problems in the subprime mortgage sector, which has aggravated a downturn in the broader real estate market while the UK has seen a sharp decline in the value of real estate investment trusts.

Mr Higuchi's comments highlight growing concern that Japan's property sector, which has risen strongly on a wave of investment, particularly by foreign funds, has peaked.

They sent property stocks down 4 per cent yesterday, which contributed to a1.5 per cent fall in the benchmark Nikkei average.

"Given Japan's recent experience of 15 years of painfully dropping housing and land prices, it's no wonder these remarks sent shivers through the investor community," said Royal Bank of Scotland in a note.

Investors such as Australian pension funds and Singaporean funds have helped boost prices in some prime areas of Tokyo by 30-40 per cent last year. Japanese real estate investment trusts have also, until recently, performed strongly on the back of the boom.

However, a recent clampdown by regulators on lending for property investment, the already strong rise in rent and real estate prices and pressure on foreign investors from the downturn in other markets have conspired to spur the selling of Japanese real estate issues and J-Reits.

"I don't expect a crash yet, but if [Europe and the US] crash, the Japanese market could crash too," said Yoji Otani, real estate analyst at Credit Suisse Securities in Tokyo. Since early last month Japanese real estate investment trusts have fallen more than 20 per cent, while the property sub-index of the Tokyo Stock Exchange has fallen 26 per cent.

Nevertheless, Japan still offered a 1 per cent to 2 per cent spread over 10-year Japanese government bonds while spreads in western markets are negative, said Machio Honda, J-Reit analyst at Deutsche Securities in Tokyo.

Financial Times: http://www.ft.com/cms/s/0/79b81888-5c11-11...00779fd2ac.html

LaoPo

[bingobongo]

for the uninformed Countrywide (aka Countryslide or Countryfried) is the BIGGEST mortgage lender in its space in the US and will soon file for bankruptcy, and with the net loss of jobs reported today (loss of US 4000 as opposed to expections of 110,000 created, first net job loss since 2003), export dependent economies like Thailand with strong currencies will only feel more pain.....but hey PALM, have a lollipop with a helping of denial on me..................

Mortgage Lender Countrywide to Cut As Many As 12,000 Jobs

http://biz.yahoo.com/ap/070907/countrywide..._cuts.html?.v=4

Edited September 7, 2007 by bingobongo

[chinthee]

Although a side line to the subprime crisis, this is an interesting -must- read:

Alarm raised over Japan real estate

The head of Japan's second biggest housebuilder yesterday warned Japanese property prices were a bubble set to burst, fueling concerns that real estate prices have reached unsustainable levels just a few years into a recovery from a prolonged slump.

"The property market has become dangerous and I wouldn't be surprised if the real estate bubble goes bust," Takeo Higuchi, chairman of Daiwa House, told Bloomberg.

Mr Higuchi's remarks come as two of the world's hitherto most buoyant property markets - the US and the UK - face widening problems, raising fears of a global property slump.

The US market has been hit by fears about problems in the subprime mortgage sector, which has aggravated a downturn in the broader real estate market while the UK has seen a sharp decline in the value of real estate investment trusts.

Mr Higuchi's comments highlight growing concern that Japan's property sector, which has risen strongly on a wave of investment, particularly by foreign funds, has peaked.

They sent property stocks down 4 per cent yesterday, which contributed to a1.5 per cent fall in the benchmark Nikkei average.

"Given Japan's recent experience of 15 years of painfully dropping housing and land prices, it's no wonder these remarks sent shivers through the investor community," said Royal Bank of Scotland in a note.

Investors such as Australian pension funds and Singaporean funds have helped boost prices in some prime areas of Tokyo by 30-40 per cent last year. Japanese real estate investment trusts have also, until recently, performed strongly on the back of the boom.

However, a recent clampdown by regulators on lending for property investment, the already strong rise in rent and real estate prices and pressure on foreign investors from the downturn in other markets have conspired to spur the selling of Japanese real estate issues and J-Reits.

"I don't expect a crash yet, but if [Europe and the US] crash, the Japanese market could crash too," said Yoji Otani, real estate analyst at Credit Suisse Securities in Tokyo. Since early last month Japanese real estate investment trusts have fallen more than 20 per cent, while the property sub-index of the Tokyo Stock Exchange has fallen 26 per cent.

Nevertheless, Japan still offered a 1 per cent to 2 per cent spread over 10-year Japanese government bonds while spreads in western markets are negative, said Machio Honda, J-Reit analyst at Deutsche Securities in Tokyo.

Financial Times: http://www.ft.com/cms/s/0/79b81888-5c11-11...00779fd2ac.html

LaoPo

Lao Po, I agree with you this is serious. If Hong Kong also takes a dive then we are in for tough times indeed.

[LaoPo]

for the uninformed Countrywide (aka Countryslide or Countryfried) is the BIGGEST mortgage lender in its space in the US and will soon file for bankruptcy, and with the net loss of jobs reported today (loss of US 4000 as opposed to expections of 110,000 created, first net job loss since 2003), export dependent economies like Thailand with strong currencies will only feel more pain.....but hey PALM, have a lollipop with a helping of denial on me..................

Mortgage Lender Countrywide to Cut As Many As 12,000 Jobs

http://biz.yahoo.com/ap/070907/countrywide..._cuts.html?.v=4

Bingobongo, whether you're right or not, maybe it's a bit more chique if you bring news a little more to the truth and less sensational, since you don't know if Countrywide is going to file for bankruptcy or not, unless you have more inside information than we do.

I doubt very much if they would file for bankruptcy since, no doubt, Bank of America, maybe in joint with others, would step in (more, after the $ 2 Billion) before they would do so.

Also, you seem to enjoy bad news and try to find your 'rightness' with other posters.

I can't imagine that anybody here on TV wishes the world to end up into a recession as it would hurt us all, Thailand included.

You seem to be the only one though.

There's nothing wrong with reporting news. I do that as well, but nobody is absolutely sure as to which direction the financial world is going to, although I admit the news is not very promising.

But, IF we end up in a recession, Thai people would be severely hurt and that's a scenario nobody wishes for, here on TV. The majority of Thai are poor enough already.

LaoPo

Edited September 7, 2007 by LaoPo