Global Correction

[fletchsmile]

what happened to BingoBongo's global correction?

I don't think we'll hear much more about that, at least not from bingobongo, until the market has a few more down days.

but i miss his "d@mn i'm good!"

He was right that the credit markets would get worse this week. Default swaps have continued to sell off. Meanwhile gold is up, oil is up, libor is still at a big premium to o/n, dollar is down, yet the equity markets are very resilient. Something has to give.

i am "dam_n good" Naam as I am long gold and silver, and short the DOW and the stocks CFC (countrywide) and IMB (indymac), i noticed you dropped the "Dr" from your Naam, i guess you have realized you aren't as good as you thought as I already did long ago......

anyway, back to the worsening credit markets which will either cause global central banks to increase liquidity thereby making your som tham more expensive or a collapse of the credit market.........see my post #206 with the MARKIT charts before it is too late Naam and you may learn something.........additionally you may soon have a yen for yen

sonicdragon, what do you make of the credit market mess? you seem to be one of the few folks on this board who realizes the importance of the deteration in the "markit" charts, is a value of "0" possible for the AA and A tranches?

Let's not get carried away here shall we. Yes a few recent predictions have been in line with what you said. What about the ones that haven't. Let's start with the main one. Global correction. You've been saying doom and gloom for months, way before this thread. This post started mid-Aug.

Take the chart added here - Asian equities. You predicted a global correction almost at almost the bottom (see below) - if you check the dates below. Since then SE Asia equities up over 40% 2 months later. YTD up 70%. Anyone following your advice would have missed these. Even if Asian markets (ex Japan) correct downwards by 50%, for many I'm better of than at the start of the year.

Of course there will be a correction. When it comes you'll tell us all you've been right all along. Let me give your next prediction after that, there'll be a bull market again. Markets have been rising for years, eventually will hit the top of the cycle and go down. Then rise again. The key bit is you've got the timing way out on the big picture. A few small predictions coming right in the last weeks or so, are not necessarily "dam_n good". When you toss a coin, you can't just highlight the times you get it right....

Edited November 3, 2007 by fletchthai68

[sonicdragon]

what happened to BingoBongo's global correction?

I don't think we'll hear much more about that, at least not from bingobongo, until the market has a few more down days.

but i miss his "d@mn i'm good!"

He was right that the credit markets would get worse this week. Default swaps have continued to sell off. Meanwhile gold is up, oil is up, libor is still at a big premium to o/n, dollar is down, yet the equity markets are very resilient. Something has to give.

i am "dam_n good" Naam as I am long gold and silver, and short the DOW and the stocks CFC (countrywide) and IMB (indymac), i noticed you dropped the "Dr" from your Naam, i guess you have realized you aren't as good as you thought as I already did long ago......

anyway, back to the worsening credit markets which will either cause global central banks to increase liquidity thereby making your som tham more expensive or a collapse of the credit market.........see my post #206 with the MARKIT charts before it is too late Naam and you may learn something.........additionally you may soon have a yen for yen

sonicdragon, what do you make of the credit market mess? you seem to be one of the few folks on this board who realizes the importance of the deteration in the "markit" charts, is a value of "0" possible for the AA and A tranches?

There is obviously a big disconnect between the credit markets and stock markets. At some point it must revert; so either credit has to recover or equity markets go down. My guess is that some of both will happen. Continued support from the Fed and other CBs will likely avert a catastrophe, but the obvious result is inflation. I agree on avoiding the US$ and owning gold (and other commodities). Yen is a tough one, since the japanese economy is far from strong and it's not clear at all how the US problems will affect asia as a whole and japan specifically, although Yen obviously benefits from carry-unwind. For me, I do own yen assets but have not added to it for several months.

You shouldn't get too carried away by credit default swap pricing. Remember - it's a derivative and and the price is going down simply means that there are no sellers of credit protection at the higher levels - it doesn't mean that the underlying credit is actually deteriotating since, from a pricing perspective, it's very hard to construct a perfect hedge (but obviously in this case we do know that the underlying credit is deteriorating, but we just don't know by how much). It's somewhat analagous to the Libor market pricing short term loans very high relative to overnight fed funds funds - it's an unwilingness to lend (risk aversion, and/or wanting to keep cash on hand) rather than an actual credit problem with counterparty.

A and AA ABXHE can go to zero in theory but that implies a **massive** wave of defaults in sub prime.

[fletchsmile]

what happened to BingoBongo's global correction?

I don't think we'll hear much more about that, at least not from bingobongo, until the market has a few more down days.

but i miss his "d@mn i'm good!"

He was right that the credit markets would get worse this week. Default swaps have continued to sell off. Meanwhile gold is up, oil is up, libor is still at a big premium to o/n, dollar is down, yet the equity markets are very resilient. Something has to give.

i am "dam_n good" Naam as I am long gold and silver, and short the DOW and the stocks CFC (countrywide) and IMB (indymac), i noticed you dropped the "Dr" from your Naam, i guess you have realized you aren't as good as you thought as I already did long ago......

anyway, back to the worsening credit markets which will either cause global central banks to increase liquidity thereby making your som tham more expensive or a collapse of the credit market.........see my post #206 with the MARKIT charts before it is too late Naam and you may learn something.........additionally you may soon have a yen for yen

sonicdragon, what do you make of the credit market mess? you seem to be one of the few folks on this board who realizes the importance of the deteration in the "markit" charts, is a value of "0" possible for the AA and A tranches?

There is obviously a big disconnect between the credit markets and stock markets. At some point it must revert; so either credit has to recover or equity markets go down. My guess is that some of both will happen. Continued support from the Fed and other CBs will likely avert a catastrophe, but the obvious result is inflation. I agree on avoiding the US$ and owning gold (and other commodities)....

You shouldn't get too carried away by credit default swap pricing. Remember - it's a derivative and and the price is going down simply means that there are no sellers of credit protection at the higher levels - it doesn't mean that the underlying credit is actually deteriotating ....

A and AA ABXHE can go to zero in theory but that implies a **massive** wave of defaults in sub prime.

Would agree with the above analysis much more. I see some small corrections in certain areas, but not a real "global bust" as decsribed by OP or a crisis like 1987 or 1997, .

Edited November 3, 2007 by fletchthai68

[bingobongo]

sonicdragon, thanks for the reply,the defaults in the US mortgage market are just beginning...... per the graph below, mortgage resets are accelerating, 1 being Jan 2007, 12 being Dec 2007, etc so the paper market will continue to worsen......the $ will go south and foreigners will flee

[sonicdragon]

sonicdragon, thanks for the reply,the defaults in the US mortgage market are just beginning...... per the graph below, mortgage resets are accelerating, 1 being Jan 2007, 12 being Dec 2007, etc so the paper market will continue to worsen......the $ will go south and foreigners will flee

Yes, but

- for a AA tranche of even one individual CDO to default is unlikely (but not impossible of course)

- for the AA ABXHE index to go to zero all the underlyings would have to default

- not only would they have to default but there would have to be almost no recovery value

For these 3 reasons alone they won't go to zero. A lot of the existing underlyings might be downgraded, and this is another reason the index probably won't go to zero. I don't know how and when the ABHHE indices get reset but I assume that if some underlyings get downgraded at some point they will no longer be in the same tranche / index ?

Another thing to bear in mind with these derivatives is that they are derivatives of *synthetic* structures - this means that there can be an unlimited amount of contracts written (ie open interest in futures parlance) whereas most other derivatives are based on not only very liquid underlyings, but the outstanding contracts are effectively limited by the amount of the underlying that is available - not so with these: you could have a US$1billion tranche of a CDO, but $200 billion in derivatives based on it. That's quite scary, and goes some way towards explaning the pricing of these things recently.

[Naam]

i am "dam_n good" Naam as I am long gold and silver, and short the DOW and the stocks CFC (countrywide) and IMB (indymac), i noticed you dropped the "Dr" from your Naam, i guess you have realized you aren't as good as you thought as I already did long ago......

d@mn! how did you find out? looked it up in charts?

[Naam]

Of course there will be a correction. When it comes you'll tell us all you've been right all along.

Fletch, you mean BingoBongo acts like my half dozen broken clocks which show the correct time twice a day?

[fletchsmile]

Of course there will be a correction. When it comes you'll tell us all you've been right all along.

Fletch, you mean BingoBongo acts like my half dozen broken clocks which show the correct time twice a day?

Good analogy khun Naam - unless you go digital, and then the broken clock is only correct once a day.

[Naam]

Of course there will be a correction. When it comes you'll tell us all you've been right all along.

Fletch, you mean BingoBongo acts like my half dozen broken clocks which show the correct time twice a day?

Good analogy khun Naam - unless you go digital, and then the broken clock is only correct once a day.

not in my case. i have a few digital once which cannot be switched from anachronistic "a.m./p.m." to international 24hrs

[bingobongo]

thank you naam, if your opinion mattered i would actually care......

anyway, the credit market stabilized for a few days due to FED money credit pumping per the graph below, and viola, the $ dives, gold is up, as is oil, and the DOW has a meager bounce. but as the credit market can't be pumped forever, the US futures are down hard this morning and the AAA tranche (as are the AA and A) is about to resume its nose dive as will global markets (if the FED pumps more money to support the credit market, the $ will continue to turn to confetti and the graph below will bounce/flatline albeit temporarliy as will global markets) ..........enjoy

US futures.....quite nasty as of 6.31am est (perhaps another emergency fed cut?, i hope not)

http://money.cnn.com/data/premarket/

credit market to resume its plunge shortly........so please have your tray tables in the upright and locked position and assume the crash landing position

Edited November 7, 2007 by bingobongo

[up-country_sinclair]

it does seem like we are on the cusp of a global correction for equities and perhaps bonds....but i wonder about commodities. IYO, is the rally about to end, or will it continue through 2008?

Edited November 7, 2007 by up-country_sinclair

[lannarebirth]

Evil Empire:

New York Times reporting that Goldman's 2007 bonus pool is larger than the current market cap of Bear Stearns. Presumably the Treasury Secretary from GS and the Congresmen, Senators and Governor from GS will be compensated amply as well.

[sonicdragon]

it does seem like we are on the cusp of a global correction for equities and perhaps bonds....but i wonder about commodities. IYO, is the rally about to end, or will it continue through 2008?

I think it will be a mixed bag for commodities. Precious metals should continue to do well, but base metals may suffer due to their reliance on industrial production. Some agriculturals will also suffer but overall I think soft commodities should do well in the medium-long term.

[bingobongo]

and there you have it, DOW down 360 points on Nov 7, and FED did not pump liquidity today and viola just as my previous post (#220) stated........and it will get oh much worse as the credit market locks up........yesterday the AAA tranche was around 80 and today about 72.......are you learning something naam? glad i could help

enjoy the ride down, short the DOW and NASDAQ, soon global market including the SET will follow

Edited November 7, 2007 by bingobongo

[lannarebirth]

and there you have it, DOW down 360 points on Nov 7, and FED did not pump liquidity today and viola just as my previous post (#220) stated........and it will get oh much worse as the credit market locks up........yesterday the AAA tranche was around 80 and today about 72.......are you learning something naam? glad i could help

enjoy the ride down, short the DOW and NASDAQ, soon global market including the SET will follow

You're an astute fellow, but I have to ask; haven't you ever noticed a reverse correlation between market movements midweek of the week prior to OEW and OEW price movement? Hint: Wall Street makes a lot of it's money selling and trading options. That said, everyone trades/invests in different time frames, so mileage may vary.

[Naam]

are you learning something naam? glad i could help

Honourable BingoGloomBongoDoom, Esq.;

what you are trying to convey makes me yaaawwwwn. however i admit that your postings produce (once in a while) a tired but sympathetic smile on my face, especially when you try hard to explain that two plus two equals four. please keep up the good job of spreading valuable information for us small scale investors. perhaps it enables us to afford higher baht bus rates in future if we follow your advice?

[samran]

I'm no expert on debt, but if this current environment is so bad and credit markets are seizing up, why are BHP-Billiton happy to make a $110Billion offer on Rio?

I dunno, I'm an economist, and yes, at the margins there by definition would be bad debt in the US (marginal investors etc, etc, etc), but by definition 98% of borrowers should always be fine, and credit lines for most business, except those (again) at the margin will more or less be unaffected.

[sonicdragon]

I'm no expert on debt, but if this current environment is so bad and credit markets are seizing up, why are BHP-Billiton happy to make a $110Billion offer on Rio?

Because they are generating around $30billion a year in cash flow between them. And there would be a lot of competition advantages.

I dunno, I'm an economist, and yes, at the margins there by definition would be bad debt in the US (marginal investors etc, etc, etc), but by definition 98% of borrowers should always be fine, and credit lines for most business, except those (again) at the margin will more or less be unaffected.

Not sure what your point is there....?

[bingobongo]

Consumer Credit died last month. The wall has been hit. Revolving credit went from 9.3 billion last month to 4.4 this last month, and non-revolving (e.g. cars) went from 6.4 billion to 0.3 (in the US that is)

the horror.......support is breaking and the ABX continues to go pear shaped.......asia will continue

to fall......as the US consumer is done

i have a yen for yen at the moment

Edited November 8, 2007 by bingobongo

[samran]

Not sure what your point is there....?

more just trying to understand bingo's point about US credit markets 'seizing up' and having an effect on other countries.

My basic point is that the world seems to be turning still, even though his graph scarily points downwards. I mean, out of the pool of developed economies, the Reserve Bank of Australia just lifted rates, and further rate rises are being hinted. If they were worried about US credit markets, I reckon they would have made noises about it, as it would have affected their decision (even though they don't publish their minutes). They didn't make a peep about them though - even unofficially.

Maybe I've just been eating too much Somtam for bingo's liking.

[lannarebirth]

Tough market. I had a turn scheduled for today but tried to get filled higher so didn't get filled. I've got two intermediate term indicators which haven't been wrong in 25 years. One says the market bottomed into 4 1/2 year cycle lows on August 16th. The other says it's pushing on a string and just doesn't have the breadth to climb much more. One will be wrong for the first time in a very long time. Got some kind of confluence popping up in Nov 6-9 range, maybe nasty.

One thing's for sure though, it's all about the $USD. Every market on earth ihas been going up on the back of it's weakness. UST's confusing the matter even more.

Tech Wreck, Financials at LT support, better bounce.

http://stockcharts.com/h-sc/ui?s=XLF&p...amp;a=121846970

Edited November 8, 2007 by lannarebirth

[lannarebirth]

Citigroup:

[LaoPo]

Economy faces risks, not recession: Bernanke

Thu Nov 8, 2007 2:57pm EST

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke told lawmakers on Thursday the U.S. economy did not appear headed for recession, but warned growth could prove weaker than expected and inflation higher.

"Our assessment is for slower growth, but positive growth, going into next year," Bernanke said as he delivered a status report on the economy's health to the congressional Joint Economic Committee.

The Fed chairman said the economy is likely to experience "noticeably" slower growth in the final three months of the year than the robust 3.9 percent annual rate in the third quarter, saying a housing slump looked set to intensify and consumer and business spending could slow.

However, he said the U.S. central bank expects the world's largest economy to regain steam by the middle of next year as housing and financial markets stabilize.

Financial market strains have persisted since the Fed's last meeting on October 30-31, when it cut interest rates by a quarter-percentage point to 4.5 percent, he said. Further sharp gains in oil prices have put renewed upward pressure on inflation and may further crimp economic activity, he added.

Rest of the article here:

http://www.reuters.com/article/businessNew...oon&sp=true

LaoPo

[sonicdragon]

Not sure what your point is there....?

more just trying to understand bingo's point about US credit markets 'seizing up' and having an effect on other countries.

My basic point is that the world seems to be turning still, even though his graph scarily points downwards. I mean, out of the pool of developed economies, the Reserve Bank of Australia just lifted rates, and further rate rises are being hinted. If they were worried about US credit markets, I reckon they would have made noises about it, as it would have affected their decision (even though they don't publish their minutes). They didn't make a peep about them though - even unofficially.

Maybe I've just been eating too much Somtam for bingo's liking.

Well, best not to lose sight of what the graphs that BB keeps posting are : derivatives on subprime. We know the subprime problem is getting worse so no surprises that default swap indices keep selling off. The Fed is clearly worried about what is happening in housing and the effect on the broader economy, and for good reason, with consumber spending accounting for 70% of GDP. Their focus is on financial stability rather than moral hazard and on growth rather than inflation. The RBA is pretty much diametrically opposed. Sub prime is largle y a US problem. With an economy going gangbusters and unemployment at a 30+year low, it seems reasonable to tighten monetary policy.

[lannarebirth]

Not sure what your point is there....?

more just trying to understand bingo's point about US credit markets 'seizing up' and having an effect on other countries.

My basic point is that the world seems to be turning still, even though his graph scarily points downwards. I mean, out of the pool of developed economies, the Reserve Bank of Australia just lifted rates, and further rate rises are being hinted. If they were worried about US credit markets, I reckon they would have made noises about it, as it would have affected their decision (even though they don't publish their minutes). They didn't make a peep about them though - even unofficially.

Maybe I've just been eating too much Somtam for bingo's liking.

Well, best not to lose sight of what the graphs that BB keeps posting are : derivatives on subprime. We know the subprime problem is getting worse so no surprises that default swap indices keep selling off. The Fed is clearly worried about what is happening in housing and the effect on the broader economy, and for good reason, with consumber spending accounting for 70% of GDP. Their focus is on financial stability rather than moral hazard and on growth rather than inflation. The RBA is pretty much diametrically opposed. Sub prime is largle y a US problem. With an economy going gangbusters and unemployment at a 30+year low, it seems reasonable to tighten monetary policy.

I agree. Unfortunately, this is an area where the US Fed always shows that their true allegiance is to it's member banks rather than the nation and it's citizens. Very disheartening sometimes.

[samran]

Well, best not to lose sight of what the graphs that BB keeps posting are : derivatives on subprime. We know the subprime problem is getting worse so no surprises that default swap indices keep selling off. The Fed is clearly worried about what is happening in housing and the effect on the broader economy, and for good reason, with consumber spending accounting for 70% of GDP. Their focus is on financial stability rather than moral hazard and on growth rather than inflation. The RBA is pretty much diametrically opposed. Sub prime is largle y a US problem. With an economy going gangbusters and unemployment at a 30+year low, it seems reasonable to tighten monetary policy.

I agree. Unfortunately, this is an area where the US Fed always shows that their true allegiance is to it's member banks rather than the nation and it's citizens. Very disheartening sometimes.

while your comment about the US Feds motives are probably right, I think Sonic was actually refering to the Australian economy there going gangbusters.

[lannarebirth]

Well, best not to lose sight of what the graphs that BB keeps posting are : derivatives on subprime. We know the subprime problem is getting worse so no surprises that default swap indices keep selling off. The Fed is clearly worried about what is happening in housing and the effect on the broader economy, and for good reason, with consumber spending accounting for 70% of GDP. Their focus is on financial stability rather than moral hazard and on growth rather than inflation. The RBA is pretty much diametrically opposed. Sub prime is largle y a US problem. With an economy going gangbusters and unemployment at a 30+year low, it seems reasonable to tighten monetary policy.

I agree. Unfortunately, this is an area where the US Fed always shows that their true allegiance is to it's member banks rather than the nation and it's citizens. Very disheartening sometimes.

while your comment about the US Feds motives are probably right, I think Sonic was actually refering to the Australian economy there going gangbusters.

Oh, Ok. Probably applies therealso. Hey samran, maybe some good news for the "samran postfolio".. Profunds has just established a "2x short Asia equities" fund. If the past is any clue to the future, these new funds are usually born at the worst possible moment.

[samran]

cheers for that lanna!

[sonicdragon]

Well, best not to lose sight of what the graphs that BB keeps posting are : derivatives on subprime. We know the subprime problem is getting worse so no surprises that default swap indices keep selling off. The Fed is clearly worried about what is happening in housing and the effect on the broader economy, and for good reason, with consumber spending accounting for 70% of GDP. Their focus is on financial stability rather than moral hazard and on growth rather than inflation. The RBA is pretty much diametrically opposed. Sub prime is largle y a US problem. With an economy going gangbusters and unemployment at a 30+year low, it seems reasonable to tighten monetary policy.

I agree. Unfortunately, this is an area where the US Fed always shows that their true allegiance is to it's member banks rather than the nation and it's citizens. Very disheartening sometimes.

while your comment about the US Feds motives are probably right, I think Sonic was actually refering to the Australian economy there going gangbusters.

Yes I was talking about Oz, but I do agree about the Fed's bias towards looking after wall street (stemming from being owned by the banks) which should naturally put other CBs in a more hawkish light.

[TonyLeung]

the Feds are going to cut rates again. the stuff they said about not cutting rates again was like when your mom threatened to leave you in the hotel room alone while the rest of the family went to Disney World if you didn't stop misbehaving.