Financial Crisis

[12DrinkMore]

a complete different story is of course when you live in Oz and your expenses are in AUD.

I have a solution, at least for me,

If it happens then I am going to bugger off to Oz for a couple of years and spend the AUD's down under......

[cloudhopper]

Great interview -

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/9/21_Jim_Rickards.html

[Naam]

a complete different story is of course when you live in Oz and your expenses are in AUD.

I have a solution, at least for me, If it happens then I am going to bugger off to Oz for a couple of years and spend the AUD's down under...

...and pay a multiple what you'd pay in Thailand. that would compensate for any exchange rate loss

[Abrak]

As you say, this is very interesting and 40 years is to short, I think this is the biggest experiment in trying to fix an economy ever. I don't think it will work.

Yes well dont try this at home.

In particular, I believe it is going to cause the complete self-destruction of the Liberal Democrats.

[12DrinkMore]

...and pay a multiple what you'd pay in Thailand. that would compensate for any exchange rate loss

Aah, but there seems to be a long lag between the devaluation of the currency and inflation taking off. Take the UK a huge net importer. After the GBP sagged down to 55 from 72, I expected to see this reflected strongly and quickly in the inflation rate. This never really happened; although possibly the GDP through some magic has been supported by it, but certainly not through increased exports.

So if the sheepshaggers have a currency mishap, then for a while I could spend my AUD's having a pleasant time supporting the Aussie-Economy, enjoying different scenery. But, in spite of a property bubble going on, at least the Aussies have a load of raw stuff they can sell to the Chinese, so I am remaining optimistic about the AUD.

But moving on from my personal finances to world finances, a humongous leap, as I don't work for GS, which rewards its toilet cleaners with more annual bonus than my entire wealth.

The storyline to believe or disbelieve in is the ability of the western consumer to keep on consuming Asian produce. My take is that they have no alternative but to continue to buy stuff from Asia in massive quantities, as the stuff is either not produced in the west or much more expensive. The Asian consumer is becoming wealthier and is also buying Asian produce. I cannot see that the market for Asian produce is going to collapse causing depressions, recessions here in the East. I just don't see that happening.

I base that partly on direct observations with the locals and tourists from Singapore, Malaysia and China. I find them well educated, optimistic, keen to learn, they have a desire to improve their education and experience, they have more money than before and strike me as being happy. In contrast the Westerners I meet tend to be the total opposite.

Time will tell, as always.....

[Naam]

...and pay a multiple what you'd pay in Thailand. that would compensate for any exchange rate loss

Aah, but there seems to be a long lag between the devaluation of the currency and inflation taking off. Take the UK a huge net importer. After the GBP sagged down to 55 from 72, I expected to see this reflected strongly and quickly in the inflation rate.

i am not talking about inflation but the difference in general living expenses Oz/Thailand, not to mention the income tax implications.

[Naam]

I dont understand why the USA people dont invest their dollars in Australian banks at 7% and pay the with holding tax and still keep 4%

After all the US$ is fcked

why would anyone be stupid enough to invest in AUD and pay taxes when that can be done without any hassle tax free?

besides... some clever "USA people" bought Aussie Dollars mid 2008 at 98 and lost nearly 40% within a few months.

disclaimer: i like and hold AUD!

Withholding tax in Australia is 10%.

disclaimer: i like and hold AUD! - so do I!

But I do seem to remember Naam disparaging the "Australian Peso" some while ago. Must have been trying to push it down before buying in heavily, ala GS & Co

that wasn't me but the chap who used to post here every day and has now disappeared. he's working for some finance company and when it concerned currencies every second sentence of his was "AUD = biggest basket case", "€UR is doomed" and "don't pick a nickel in front of a steamroller"

however, i admit that i am trading once in a while HY currencies such as AUD, NZD, TRY, BRL and ZAR. trading partly cash and partly in short term bonds.

[BlackJack]

I dont understand why the USA people dont invest their dollars in Australian banks at 7% and pay the with holding tax and still keep 4%

After all the US$ is fcked

why would anyone be stupid enough to invest in AUD and pay taxes when that can be done without any hassle tax free?

besides... some clever "USA people" bought Aussie Dollars mid 2008 at 98 and lost nearly 40% within a few months.

disclaimer: i like and hold AUD!

read on

http://www.sharecafe.com.au/fnarena_news.asp?a=AV&ai=18041

assumptions and opinions as far as the future is concerned. the fact remains that AUD has been an extremely volatile currency for the last three decades vs. a bunch of major and even minor currencies like Thai Baht.

i still remember spring 2001 when one US-Dollar bought 2.10 Aussie Dollars and of course 2008 when in the cash market one had to shell out 1.03 US-Dollars to buy one Aussie Dollar. but only three or four months later one AUD bought 60 US-Cents!

by the way, i admire people who are able to have a good night's sleep having invested AUD in long term deposits which makes a switch impossible without incurring big losses. but then, they are people... not investors

a complete different story is of course when you live in Oz and your expenses are in AUD.

add to this of course that one would never put their eggs in the one basket

diversification should straighten things out

you know that naam

[BlackJack]

But for our part, we feel the moment of clarity is now very close. And barring an 'October surprise' we see a turning point coming very soon – for the stock market.

A Republican win in the House of Representatives means an immediate lift in the fortunes of stocks. And that, indeed, could be what Tuesday's price surge – above former resistance levels – was indicating.

from Oakshire financials

could be interesting for gold

[Lancelot]

PLEASE dont think the Universe revolves around the USA

IT does not

as CHina and India are pointing out

I would argue that it does . The domestic economies of China and India are not weallthy enough to keep the high growth rates that their governments require for their own stability. If the world's economy was a pie, the European Union and the USA would represent a huge slice, amounting to around 70%.

Exporters need importers and 70% of the world's GDP is too large to ignore

[BlackJack]

PLEASE dont think the Universe revolves around the USA

IT does not

as CHina and India are pointing out

I would argue that it does . The domestic economies of China and India are not weallthy enough to keep the high growth rates that their governments require for their own stability. If the world's economy was a pie, the European Union and the USA would represent a huge slice, amounting to around 70%.

Exporters need importers and 70% of the world's GDP is too large to ignore

Well sorry to be the one to tell you but the World is changing and the wealth is moving from West to East - slowly but surely.

I suggest every one read this http://www.aireview.com.au/index.php?act=view&catid=8&id=12041&setSub=1

Remember great economies have fallen before and the USA is just about to bankrupt itself by another trillion dollars

disclaimer: i am anti American and i do not hold US$, I hate Wall street and GS and JP Morgan

[cloudhopper]

Well sorry to be the one to tell you but the World is changing and the wealth is moving from West to East - slowly but surely.

I don't know about wealth Blackjack, but lots of electromagnetic bits representing US treasury debt has. We'll soon see how good a deal that was.

Where real wealth has moved however is raw materials from Australia to China, fueling a housing bubble that will pop as soon as the Chinese are forced by dwindling markets for their exports to take the tit away.

[BlackJack]

Well sorry to be the one to tell you but the World is changing and the wealth is moving from West to East - slowly but surely.

I don't know about wealth Blackjack, but lots of electromagnetic bits representing US treasury debt has. We'll soon see how good a deal that was.

Where real wealth has moved however is raw materials from Australia to China, fueling a housing bubble that will pop as soon as the Chinese are forced by dwindling markets for their exports to take the tit away.

In a recent study conducted by US National Intelligence Council, India has been named as the third most powerful country in the world. With 8% of global power in its hands, India stands 3rd after United States (22% of power) and China (12% of power). If the European Union is included as a block, then it would account for 16% of global power, making India the fourth most powerful nation in the world. The model used by the agency took into account GDP, defense spending, population and technology for each country to come up with its rankings.

like i said the world does not revolve around USA

and we can see the changes happening

chip chip chip

[BlackJack]

PLEASE dont think the Universe revolves around the USA

IT does not

as CHina and India are pointing out

I would argue that it does . The domestic economies of China and India are not weallthy enough to keep the high growth rates that their governments require for their own stability. If the world's economy was a pie, the European Union and the USA would represent a huge slice, amounting to around 70%.

Exporters need importers and 70% of the world's GDP is too large to ignore

In a recent study conducted by US National Intelligence Council, India has been named as the third most powerful country in the world. With 8% of global power in its hands, India stands 3rd after United States (22% of power) and China (12% of power). If the European Union is included as a block, then it would account for 16% of global power, making India the fourth most powerful nation in the world. The model used by the agency took into account GDP, defense spending, population and technology for each country to come up with its rankings.

[12DrinkMore]

http://www.bloomberg.com/news/2010-09-24/ireland-is-very-unlikely-to-experience-greek-style-crisis-goldman-says.html

Investors have dumped Irish bonds partly on concern that the cost of nationalizing Anglo Irish Bank Corp. last year will widen. While the state has already poured 22 billion euros ($29 billion) into the bank, Standard & Poor’s estimates the final bill may be 35 billion euros, equivalent to 20 percent of GDP.

I have to wonder how on earth can a single bank can destroy 20% of the GDP of a country? It is obscene. And still we pander to the bankers, allowing them to "correct themselves" through the new "Basel Agreements". What a load of crap.

[badge]

To go along with all the refreshingly stimulating views being espoused, heres more 9/11 conspiracy stuff

http://buildingwhat.org/buildingwhat-tv-ad/

[flying]

To go along with all the refreshingly stimulating views being espoused, heres more 9/11 conspiracy stuff

http://buildingwhat.org/buildingwhat-tv-ad/

Actually most who looked closely at the 9-11 event knew about building 7 back when.

Of course none ever got a sufficient answer to why it fell.

Is this actually the first you heard of it?

Edited September 25, 2010 by flying

[cloudhopper]

Actually most who looked closely at the 9-11 event knew about building 7 back when.

Of course none ever got a sufficient answer to why it fell.

Caution - the video you are about to see was uploaded by our masters on the planet Moron 5

[BlackJack]

Actually most who looked closely at the 9-11 event knew about building 7 back when.

Of course none ever got a sufficient answer to why it fell.

Caution - the video you are about to see was uploaded by our masters on the planet Moron 5

[BlackJack]

http://www.bloomberg.com/news/2010-09-24/ireland-is-very-unlikely-to-experience-greek-style-crisis-goldman-says.html

Investors have dumped Irish bonds partly on concern that the cost of nationalizing Anglo Irish Bank Corp. last year will widen. While the state has already poured 22 billion euros ($29 billion) into the bank, Standard & Poor’s estimates the final bill may be 35 billion euros, equivalent to 20 percent of GDP.

I have to wonder how on earth can a single bank can destroy 20% of the GDP of a country? It is obscene. And still we pander to the bankers, allowing them to "correct themselves" through the new "Basel Agreements". What a load of crap.

maybe they were cookin the books

lending ratio 1 dollar in lend out 1150 dollars

just amazing

[Chunky1]

[cloudhopper]

Interesting presentation -

[Abrak]

On the Gold thread I was arguing that there is perhaps more inflation around than people think.

I think some facts out there are quite convincing on the - namely corporate statistics.

For the S&P500 sales in the second quarter were up 9.9% year on year. The figure was US$2.25trn so US$9.0trn annualized. So we are looking at a fair chunk of GDP (although there are substantial overseas sales that would boost the figure a bit). There is definitely no sign of deflation there and maybe higher rates of inflation.

More remarkably earnings per share was US$19.68 (up over 100% mostly due to financials) but also not that far below peak ever earnings of US$21.88 in 2007. For the full year estimates are at US$71 against a peak of US$81. I say this is remarkable because it is nothing like what happened in Japan where after the financial crisis corporate profits collapsed and didnt recover for many years. The key, of course is that the US closed businesses cut costs, laid off workers creating an unemployment problem while the Japanese didnt get around to it. I also think that US companies have managed to raise prices and they clearly havent been cutting them in the face of weak demand and rising input prices.

But this is why the deleveraging process is leading to inflation. Monetary policy is distorted by a crippled banking sector with too low deposit rates and too high lending rates. It is also distorted by the left hand of the Government borrowing at 3% while the right hand lends to the banks at 0.5%. Noone wants to borrow, the banks dont want to lend and noone wants their money on deposit. If you have deposits and loans you are paying off your loans. If you have loans you are paying them down. If you havbe cash you buy yield or speculate.

There will be no investment and no growth until the banks are recapitalised and the deleveraging process is further down the road but the level of corporate profitability means deleveraging should be fairly rapid, employment levels maintained and that any double dip will be shallow especially as the highly geared sectors - say car sales and house building - are still depressed.

[12DrinkMore]

There will be no investment and no growth until the banks are recapitalised and the deleveraging process is further down the road but the level of corporate profitability means deleveraging should be fairly rapid, employment levels maintained and that any double dip will be shallow especially as the highly geared sectors - say car sales and house building - are still depressed.

The figures you quoted look astonishingly good. But all the 70,000,000 odd jobless, discouraged and part time workers wanting full time employment are still looking at a bleak future. How many are on food stamps? Around 40,000,000 I believe.

I wonder to what level a recovery will take us. Will the leaner industries with fewer staff costs start to employ more workers, or will they continue along the efficiency route with fewer staff, more sales and greater profit margins?

[Naam]

There will be no investment and no growth until the banks are recapitalised and the deleveraging process is further down the road but the level of corporate profitability means deleveraging should be fairly rapid, employment levels maintained and that any double dip will be shallow especially as the highly geared sectors - say car sales and house building - are still depressed.

The figures you quoted look astonishingly good. But all the 70,000,000 odd jobless, discouraged and part time workers wanting full time employment are still looking at a bleak future. How many are on food stamps? Around 40,000,000 I believe.

I wonder to what level a recovery will take us. Will the leaner industries with fewer staff costs start to employ more workers, or will they continue along the efficiency route with fewer staff, more sales and greater profit margins?

some congressman clown, who was yesterday on Bloomberg, claimed that employment problems will be solved once China let CNY float thus enabling U.S. companies to produce a number of goods presently produced in and imported from China.

[BlackJack]

There will be no investment and no growth until the banks are recapitalised and the deleveraging process is further down the road but the level of corporate profitability means deleveraging should be fairly rapid, employment levels maintained and that any double dip will be shallow especially as the highly geared sectors - say car sales and house building - are still depressed.

The figures you quoted look astonishingly good. But all the 70,000,000 odd jobless, discouraged and part time workers wanting full time employment are still looking at a bleak future. How many are on food stamps? Around 40,000,000 I believe.

I wonder to what level a recovery will take us. Will the leaner industries with fewer staff costs start to employ more workers, or will they continue along the efficiency route with fewer staff, more sales and greater profit margins?

some congressman clown, who was yesterday on Bloomberg, claimed that employment problems will be solved once China let CNY float thus enabling U.S. companies to produce a number of goods presently produced in and imported from China.

ya gotta luv the americans

sometimes they just say the darnest things

[Abrak]

There will be no investment and no growth until the banks are recapitalised and the deleveraging process is further down the road but the level of corporate profitability means deleveraging should be fairly rapid, employment levels maintained and that any double dip will be shallow especially as the highly geared sectors - say car sales and house building - are still depressed.

The figures you quoted look astonishingly good. But all the 70,000,000 odd jobless, discouraged and part time workers wanting full time employment are still looking at a bleak future. How many are on food stamps? Around 40,000,000 I believe.

I wonder to what level a recovery will take us. Will the leaner industries with fewer staff costs start to employ more workers, or will they continue along the efficiency route with fewer staff, more sales and greater profit margins?

Getting a bit carried away with your jobless number there - the 10% level I believe is about 15,000,000.

Well the answer is that the US has a structural unemployment problem which isnt going to go away.

The good news I suspect is that the unemployed unskilled are probably not exerting much pressure on the skilled workforce in terms of wages. When I last looked there was still quite a lot of slack in the employed workforce, in that there was still room for man hours worked to increase.

In terms of the earnings next years forecast is US$84, so analysts are forecasting 20% EPS and record earnings next year. As the current margin is 8.04% and the record margin I have is 8.8% (only back 14 years) there doesnt seem much further room for recovery. I suspect most growth will come from share buybacks. And realistically I would guess flat earnings next year.

BTW for anyone who is bearish on US stocks (there are people who believe the Dow will halve in the short term) consider this...

The 10 year UST is yielding 2.6%

Now if you run a filter of S&P500 companies on the basis of.

1) Minimum yield 3.0%

2) 25 years unbroken dividend growth (meaning maintained or increased)

3) Have 'increased' their dividend in 'every single one' of the last 10 years including 2010

You do actually end up finding 13 stocks....

[Abrak]

There will be no investment and no growth until the banks are recapitalised and the deleveraging process is further down the road but the level of corporate profitability means deleveraging should be fairly rapid, employment levels maintained and that any double dip will be shallow especially as the highly geared sectors - say car sales and house building - are still depressed.

The figures you quoted look astonishingly good. But all the 70,000,000 odd jobless, discouraged and part time workers wanting full time employment are still looking at a bleak future. How many are on food stamps? Around 40,000,000 I believe.

I wonder to what level a recovery will take us. Will the leaner industries with fewer staff costs start to employ more workers, or will they continue along the efficiency route with fewer staff, more sales and greater profit margins?

some congressman clown, who was yesterday on Bloomberg, claimed that employment problems will be solved once China let CNY float thus enabling U.S. companies to produce a number of goods presently produced in and imported from China.

ya gotta luv the americans

sometimes they just say the darnest things

Actually I think China should let the CNY float for exactly the opposite reason. Namely all the major Asian export surplus countries have undervalued currencies and manufacture roughly the same things. So demand will be fairly inelastic when their currencies all appreciate. They will create a bit of inflation in the West, they will import more products and even if they move into deficits they can spend their huge forex reserves on improving their own economies which will no longer have inflation problems rather than simply lending it back to the US to finance their deficits.

[Naam]

They will create a bit of inflation in the West, they will import more products and even if they move into deficits they can spend their huge forex reserves on improving their own economies which will no longer have inflation problems rather than simply lending it back to the US to finance their deficits.

[BlackJack]

CHina is having a bit of fun with USA as they know they are on the ropes and one more good punch should be a KO

But let the FED to that with QE then no one can ever blame the chinese - but they can try.

I am not sure of the Chinese proverb but its similar to what goes around come around or the shoe is now on the other foot