Global Correction

[bingobongo]

The global bust is coming and not all the liquidity, denial, and som tham in the world will prevent it........

and and the Fed today lowered the DISCOUNT RATE (interbank lending rate) and not the FED FUNDS rate (consumer rate)

http://online.wsj.com/public/resources/doc...ailydrop07.html

[lannarebirth]

I don't think a global bust is coming, nor do I believe this fed intervention (which was anticipated and pointed out yesterday by me)to bail out their member banks options desks is going to put a floor under this market for very long. It might though, and it would be instructive for you to look at the events of Oct 15, 1998 to confirm that.

[bingobongo]

I don't think a global bust is coming, nor do I believe this fed intervention to bail out their member banks options desks is going to put a floor under this market for very long. It might though, and it would be instructive for you to look at the events of Oct 15, 1998 to confirm that.

the yen carry trade is unwinding (nikkei down 850 points last night)........have you noticed gold ands silver and oil climbs as the dollar weakens against all major currencies? right.......nothing to see here, all is well.....NOT

[lannarebirth]

I don't think a global bust is coming, nor do I believe this fed intervention to bail out their member banks options desks is going to put a floor under this market for very long. It might though, and it would be instructive for you to look at the events of Oct 15, 1998 to confirm that.

the yen carry trade is unwinding (nikkei down 850 points last night)........have you noticed gold ands silver and oil climbs as the dollar weakens against all major currencies? right.......nothing to see here, all is well.....NOT

Markets will fluctuate.

[sonicdragon]

The global bust is coming and not all the liquidity, denial, and som tham in the world will prevent it........

and and the Fed today lowered the DISCOUNT RATE (interbank lending rate) and not the FED FUNDS rate (consumer rate)

http://online.wsj.com/public/resources/doc...ailydrop07.html

I don't mean to be pedantic or anything, but the discount rate is not the interbank lending rate. It is the rate at which qualified institutions can borrow from the fed. And to say that the fed funds rate is the consumer rate is quite misleading, since the fed funds rate is the actual rate that banks lend to each other, and the rate (I think) you are referring to is the fed funds target rate, which is rate at which the fed would like banks to lend to each other at.

[Aujuba]

Here's a link to some opinions from the experts. The picture is still very unclear from what they say.

http://money.cnn.com/galleries/2007/fortun...tune/index.html

[highdiver]

Here's a link to some opinions from the experts. The picture is still very unclear from what they say.

http://money.cnn.com/galleries/2007/fortun...tune/index.html

thanks for the very good link.......

one can only hope that th OP will read it.

[VegasVic]

Here's a link to some opinions from the experts. The picture is still very unclear from what they say.

http://money.cnn.com/galleries/2007/fortun...tune/index.html

I saw an interview with Mr. Buffet a few days ago in which he said the same thing. He was refering to the hedge fund industry as a whole and in particular to some of the money center institutions like Bear Stearns and Goldman Sachs who run hedge funds that have been hit. This is of course a very small part of Goldmans business model and will be written off, but many smaller stand alone hedge funds will be forced out of business and this may be a good thing. Most major U.S. companies use mark to market accounting proceedures now so this is not an issue for them.

[siamamerican]

The global bust is coming and not all the liquidity, denial, and som tham in the world will prevent it........

and and the Fed today lowered the DISCOUNT RATE (interbank lending rate) and not the FED FUNDS rate (consumer rate)

http://online.wsj.com/public/resources/doc...ailydrop07.html

If this is the case, you are going to make out very well. I can only assume you only hold short positions.

In actuality, no one seems to know how the current liquidity issues are going to impact the global economy. I think, the markets were looking for a correction, and they found their catalyst. I've taken a beating, but expect to recover my losses. As for how long that will take - I haven't a clue.

At least the current market is exciting. I was starting to think the stock market was a sure thing.

[VegasVic]

The global bust is coming and not all the liquidity, denial, and som tham in the world will prevent it........

and and the Fed today lowered the DISCOUNT RATE (interbank lending rate) and not the FED FUNDS rate (consumer rate)

http://online.wsj.com/public/resources/doc...ailydrop07.html

If this is the case, you are going to make out very well. I can only assume you only hold short positions.

In actuality, no one seems to know how the current liquidity issues are going to impact the global economy. I think, the markets were looking for a correction, and they found their catalyst. I've taken a beating, but expect to recover my losses. As for how long that will take - I haven't a clue.

At least the current market is exciting. I was starting to think the stock market was a sure thing.

At the very least, some of the excessively leveraged hedge funds will be going belly up and perhaps the U.S. and the E.U. will pass meaningful legislation regulating the hedge fund industry. I would expect that European and American funds will also continue to make redemtions in the Asian markets over the coming weeks and this should help the BOT in their quest to weaken the baht. Saying the current market is exiting may be the understatement of the century

[Aujuba]

How soon will the markets turn red again? Or will they? Share your thoughts. As of the moment (Mon 15:51) things are green around the globe. I'd bet things will be red by tomorrow. I just have heard too much negative speak and as I noted even the experts are unsure of the future.

[midas]

How soon will the markets turn red again? Or will they? Share your thoughts. As of the moment (Mon 15:51) things are green around the globe. I'd bet things will be red by tomorrow. I just have heard too much negative speak and as I noted even the experts are unsure of the future.

Ok i will make the following punt

I think you may be right but maybe just one day too early ?

As of now ( although its very early AM in the US ) the DJIA

Futures are in the green - so I think the euphoria from the rate

cut may carry through for yet another day but might run out

of steam on Tuesday - IMHO

[Aujuba]

Despite the moves up there are still a lot of voices saying things are going to get worse. I've heard that the auto loans industry could suffer next as people chose between paying off their home mortgages over their cars. This morning on Bloomberg one guy who's big in metals said he believes that there could be serious issues in that area as well. Where's it all going? Why so many extreme differences in opinion?

[lannarebirth]

Despite the moves up there are still a lot of voices saying things are going to get worse. I've heard that the auto loans industry could suffer next as people chose between paying off their home mortgages over their cars. This morning on Bloomberg one guy who's big in metals said he believes that there could be serious issues in that area as well. Where's it all going? Why so many extreme differences in opinion?

Because most of the distribution has already taken place. It's markdown time.

[Aujuba]

Well, it looks like markets are definitely being marked down. If anyone knew the future then things like recessions and crashes wouldn't take place. Buying stocks would be more like shopping at a department store where products have prices on them and their prices fluctuate very infrequently. The truth is right now anything could happen. The fed can't keep the markets in the green. A lot of experts feel that investors need to learn that they can lose money too. Apathy and Greenspan's 'irrational exhuberance' always seem to come back to the market. There's nothing strange about markets being stagnant or weakening for a year or two.

[midas]

Well, it looks like markets are definitely being marked down. If anyone knew the future then things like recessions and crashes wouldn't take place. Buying stocks would be more like shopping at a department store where products have prices on them and their prices fluctuate very infrequently. The truth is right now anything could happen. The fed can't keep the markets in the green. A lot of experts feel that investors need to learn that they can lose money too. Apathy and Greenspan's 'irrational exhuberance' always seem to come back to the market. There's nothing strange about markets being stagnant or weakening for a year or two.

what I find most disturbing is the US economy and hence the health of the global

economies is relying on the U.S. consumer's ability to spend spend spend -it said on the

news today it represents seventy percent of the US economy. what will they do next

start whipping them if they slowdown -trying to get blood out of a stone -they are already

up to their eyes in debt

[lannarebirth]

Well, it looks like markets are definitely being marked down. If anyone knew the future then things like recessions and crashes wouldn't take place. Buying stocks would be more like shopping at a department store where products have prices on them and their prices fluctuate very infrequently. The truth is right now anything could happen. The fed can't keep the markets in the green. A lot of experts feel that investors need to learn that they can lose money too. Apathy and Greenspan's 'irrational exhuberance' always seem to come back to the market. There's nothing strange about markets being stagnant or weakening for a year or two.

Wall Street exists to benefit itself and it's customers. At certain times it will allow the general public to participate in the process, but stay too long and you're a bagholder. They take it up, just so they can take it back down. they win both ways.

Stocks exist to raise capital outside of normal borrowing channels. How good could some of these businesses be if instead of going to the bank, in the lowest interest environment in 50 years, they decide instead to peddle shares? Good companies should have bought a considerable percentage of their shares back in this period and increased dividends, Those would be the best investments for the future probably.

[VegasVic]

Despite the moves up there are still a lot of voices saying things are going to get worse. I've heard that the auto loans industry could suffer next as people chose between paying off their home mortgages over their cars. This morning on Bloomberg one guy who's big in metals said he believes that there could be serious issues in that area as well. Where's it all going? Why so many extreme differences in opinion?

There are always voices saying things will get worse, many of those voices are the same ones telling you that gold will go to $2000/ounce, be careful who you listen to! With that said I think that your observation on the auto industry is spot on, there will likely be some very weak auto sales for the next 6-9 months and most commodities ( the metals in particular) are due for a downturn with slowing economies around the world. Oil has a built in terror premium ($20- $30/bbl) and given the precipitous downturn in natural gas recently I think that oil has a long way to go on the downside especially if the U.S. unveils a troop reduction plan for Iraq in September.

[joeuk1]

Despite the moves up there are still a lot of voices saying things are going to get worse. I've heard that the auto loans industry could suffer next as people chose between paying off their home mortgages over their cars. This morning on Bloomberg one guy who's big in metals said he believes that there could be serious issues in that area as well. Where's it all going? Why so many extreme differences in opinion?

There are always voices saying things will get worse, many of those voices are the same ones telling you that gold will go to $2000/ounce, be careful who you listen to! With that said I think that your observation on the auto industry is spot on, there will likely be some very weak auto sales for the next 6-9 months and most commodities ( the metals in particular) are due for a downturn with slowing economies around the world. Oil has a built in terror premium ($20- $30/bbl) and given the precipitous downturn in natural gas recently I think that oil has a long way to go on the downside especially if the U.S. unveils a troop reduction plan for Iraq in September.

What metals would that be ? Base metals ? i thought fundermentals for base metals are strong and stocks are low .

JB

[Aujuba]

Can't remember exactly what metals the guy was talking about but I don't recall him mentioning Gold specifically. I think he was referring to metals used more in industry. He mentioned some complex reasons why he thought metals would be affected. Who knows if things go up or down? I guess if the US goes into a recession there would be less demand for products and so factories would take less orders and prices would come down.

[Bizz]

From BBC

Cant remember who sang this song Here it comes again.

We are talking ourselves into another recession

Greenspan points to market 'fear'

Alan Greenspan has been more outspoken since leaving the Fed

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

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.

Fear as a driver, which is going on today, is far more potent than euphoria

Alan Greenspan

History of financial panics

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.

E-mail this to a friend

P

Who's who in market turmoil

Stock markets around the world have been falling sharply as worries grow about a credit crunch due to fears about sub-prime mortgage lending. But who are the key actors in the drama, and how are they likely to be affected?

MORTGAGE LENDERS

Much of the sub-prime lending to less-than-creditworthy individuals has been carried out by specialist lending companies, especially in the US.

They have funded much of the lending by borrowing money on credit markets.

But now the fears that their mortgage debts may not be paid back means that lenders are reluctant to refinance their debts.

Because they are borrowing short (over 1-2 years) but lending long (with mortgages lasting 20 years) this has led to a severe credit crunch.

As a result, several lenders have gone bankrupt, and others have seen their share price plummet.

COLLATERISED DEBT OBLIGATIONS

The risk of lending to less credit-worthy individuals has been spread throughout the financial system through the use of special instruments known as collaterised debt obligations.

This meant that the risk of mortgage lending was parcelled out in small bits and combined with other, less risky loans.

These complex financial instruments were then sold to banks, and through them, to private and institutional investors.

The idea was that by spreading the risk, the financial system would be more robust.

But instead, what has happened is that the risks - and the worries about default - have impacted even more widely across a globalised financial world.

CREDIT RATING AGENCIES

Financial markets have traditionally relied on credit rating agencies, such as Moody's and Standard and Poor's, to make sure that the bonds they lend to are a safe bet.

The rating agencies evaluate each bond or debt instrument and give it a letter rating, with AAA the safest.

Investors such as pension funds use the ratings to ensure that they are only putting their money into safe, "investment-grade" bonds.

But now the credit rating agencies are under fire from regulators and politicians for being too slow to spot the dangers of sub-prime mortgage debts.

The regulators say they are too close to the lenders, who pay them for the ratings.

PRIVATE EQUITY FUNDS

Private equity funds are investment funds set up to buy and sell companies.

They generally borrow money at low interest rates in order to buy up the shares in a company listed on the stock market.

Their aim is to take the companies private, improve its performance, and then sell the company or some of its assets at a higher price in a few years time.

The high prices they have been prepared to pay to buy up companies have played a big part in pushing share prices higher over the past year.

But now the higher cost of borrowing may drastically reduce their activity.

INVESTMENT BANKS

Investment banks such as Goldman Sachs, Bear Stearns and Morgan Stanley, aim to make money by trading in financial products.

They have been leading investors in private equity funds and hedge funds, and have also benefited by charging large fees for arranging mergers and takeovers.

They have also played a key role in developing the specialised investment vehicles which parcelled out mortgage debts to other banks and financial institutions.

But now they are facing a sharp fall in their income from these activities, and big losses on some of their investment funds that are linked to risky lending.

Many of the big commercial banks have also engaged in some of the trading activities of the investment banks to boost their income.

CENTRAL BANKS

The world's central banks - such as the Bank of England, the US Federal Reserve and the European Central Bank - see their role as setting interest rates in a way that controls inflation and ensures a steady growth of their economies.

But they are also the lender of last resort to the banking system - and would be likely to intervene to bail out a large bank if they believed that its collapse would cause a more general financial panic.

In the current crisis, the central banks have pumped billions of dollars into overnight lending to banks in order prevent the financial system from seizing up, and to ensure that all the major banks can secure enough funds to continue trading.

[lannarebirth]

Never a borrower, nor a lender be.....

http://online.wsj.com/article/SB118891774435316875.html

[LaoPo]

Never a borrower, nor a lender be.....

http://online.wsj.com/article/SB118891774435316875.html

Yes, European money is likely going to be more expensive...

"European Central Bank policy makers signaled their intention to raise interest rates further to contain inflation once financial-market turbulence has abated."

"The ECB yesterday added 42.2 billion euros ($57.7 billion) [on top of the $ 400 Billion already pumped into the money markets] in emergency cash as the U.S. housing slump threatened to curb economic growth. The collapse of the U.S. subprime-mortgage market has made banks reluctant to lend, pushing up the cost of credit and causing turmoil on world financial markets."

http://www.bloomberg.com/apps/news?pid=206...mp;refer=europe

LaoPo

[lannarebirth]

Never a borrower, nor a lender be.....

http://online.wsj.com/article/SB118891774435316875.html

Yes, European money is likely going to be more expensive...

"European Central Bank policy makers signaled their intention to raise interest rates further to contain inflation once financial-market turbulence has abated."

"The ECB yesterday added 42.2 billion euros ($57.7 billion) [on top of the $ 400 Billion already pumped into the money markets] in emergency cash as the U.S. housing slump threatened to curb economic growth. The collapse of the U.S. subprime-mortgage market has made banks reluctant to lend, pushing up the cost of credit and causing turmoil on world financial markets."

http://www.bloomberg.com/apps/news?pid=206...mp;refer=europe

LaoPo

Over a trillion dollars in short term paper is an ungodly amount of money to find lenders for in a 1 week window. I would expect pressure until it's found a home.

[cclub75]

USD is in free fall.

Watch the Yen and Euro !

After the job report (a mere "fuse" for the huge bomb that we are riding) published today in the US... we are again in "panic mode". Like august 9.

And wait for the FED...

It's going to be so funny (or tragic) to read again some posts of the "USD lovers brigade"...

[lannarebirth]

USD is in free fall.

Watch the Yen and Euro !

After the job report (a mere "fuse" for the huge bomb that we are riding) published today in the US... we are again in "panic mode". Like august 9.

And wait for the FED...

It's going to be so funny (or tragic) to read again some posts of the "USD lovers brigade"...

I'm a $USD lover, but I won't be going down with the ship if the keel gives way.

[cclub75]

I'm a $USD lover, but I won't be going down with the ship if the keel gives way.

Good to read that. Another investor's soul saved !

But still a lot more... to convince.

[lannarebirth]

I'm a $USD lover, but I won't be going down with the ship if the keel gives way.

Good to read that. Another investor's soul saved !

But still a lot more... to convince.

You should try to leave your ego out of investment decisions. It makes you look less silly when you're wrong, and it enables you to get on the right side quicker. The question today is, will the GPB go red like the CND, AUD and NZD, which head faked up.

[Carmine6]

USD is in free fall.

Watch the Yen and Euro !

After the job report (a mere "fuse" for the huge bomb that we are riding) published today in the US... we are again in "panic mode". Like august 9.

And wait for the FED...

It's going to be so funny (or tragic) to read again some posts of the "USD lovers brigade"...

I'm a $USD lover, but I won't be going down with the ship if the keel gives way.

Wow, that's surprising. I'm not a USD bull at all, but I pulled back almost all my foreign positions and went big in US equities. I'm crazy that way.

I know you're a technician, what are you seeing to be bullish and against which currencies?

[JR Texas]

USD is in free fall.

Watch the Yen and Euro !

After the job report (a mere "fuse" for the huge bomb that we are riding) published today in the US... we are again in "panic mode". Like august 9.

And wait for the FED...

It's going to be so funny (or tragic) to read again some posts of the "USD lovers brigade"...

I'm a $USD lover, but I won't be going down with the ship if the keel gives way.

Wow, that's surprising. I'm not a USD bull at all, but I pulled back almost all my foreign positions and went big in US equities. I'm crazy that way.

I know you're a technician, what are you seeing to be bullish and against which currencies?

About the global correction.........the global economy has already crashed several times.........the only thing that has prevented the majority from realizing it is the fact that the central banks have bailed out the failed system. I wonder how many times they can get away with that.

If the global economy were run like any ordinary business, it would have long since gone out of business.