Financial Crisis

[midas]

This whole title issue will be the start of the final meltdown of the US economy unless OB will sign some kind of rule that will help the bankers to avoid court cases in whatever way.

Take care!

Alex

.

and I referred to you as irrelevant. The title issue is now are going to going to cause the final melt down. I'm furiously selling all my equity positions as I type. THANK YOU!

Good!

As I said unless congress tries to sneak in some bill that resolve this issue in favor of the banks and those MBS investors, the system will brake down while exposing this fraud.

This thread is not about how to invest, it is about something else.

Your investment ideas might be more useful in the who is back in the stock market Fred.

Well i do think you would have to be brave to continue to hold long positions

- at least until after this matter has been resolved ?

Wall Street Begins To Fear Nightmare Foreclosure-Gate Scenario Where All Of Housing Finance Is Wrecked

Read more: http://www.businessinsider.com/foreclosure-fraud-worse-than-you-think-2010-10#ixzz12CHkGlRv

[Abrak]

I am talking standard wood home construction? What is that supposed to mean? Building a standard wood home and having the internet is not consistent. You might have built a 'special' wood home but there really is no such thing as a standard wood home. No developer would actually build or sell a wood home.

If you have actually built a home out of wood then congratulations and I hope you dont get termites. I am sure it can be done very cheaply a bit like if you built a home out of corrugated iron. The reality is that the cost of build in US$ terms has essentially doubled over the past 12 years. You can argue over the fine details but that is a fair rule of thumb.

:lol:

Your a funny guy

What is your building experience?

I can promise that when it comes to Thailand it is far more than yours. My experience is more in low/mid end condominiums approximately 13,000 in JVs with Sansiri, LPN and Prinsiri (mostly town houses). I know absolutely nothing about building but I do keep fairly detailed numbers in terms of statistics. I do realize that a sqm build cost between say Sansiri and LPN will be different on average Bt11,000sqm as will the sales price. I also realize that you can build cheap or expensive and the baht has appreciated so that as building costs have risen in baht terms they have risen more in US$ terms.

If the comment about a standard wood price construction is correct it may well be but it would be deeply affected by the currency movement imbetween. I actually do not know of a developer that sells standard wood houses, so I guess I cannot comment. As someone who was involved in the business from a peripheral manner, mostly financing and asset turn, I also kept fairly close tabs on the competitors such as LH, AP etc. Being a financier all I can do is question costs relative to others as well more importantly, asset turn. I am very asset turn orientated so that cost control is key in order that you can reduce your margin.

To be honest what I state is clearly pretty close to the truth because it can be cross checked against a variety of listed companies in Thailand on the stockmarket. If you wish to argue simply do the maths and prove me wrong. It isnt difficult to come by. And please separate costs from margins, if you happen to be in the business of selling something over 4 years you may well need a margin of 70% it is not a concept I am familiar with.

On a rather more unfortunate note I own rather a lot of property personally that I have built to a high standard, shall we say villas that I think will be worth US$2m but have clearly never achieved that price and are therefore not worth it. It happens to be my worst vice, I own far too much property personally. I built my first villa between February 1998 and December 1999. I am currently building 3 villas since 1998 (of course Naam will point out that I have infact chosen a data point thst is so flexible it is unlikely to be wrong) and the cost has approximately doubled in sqm terms relative to the quality of the finish.

As you well know Flying I do not simply make things up apart from my opinions. I am a geek when it comes to statistics, so I genuinely do not make them up although my opinions based on them can be full of bullshit.

[midas]

If you believe that the Obama Government is essentially a 'communist' one by way they tax everyone 100% of income, then I can see your anger, confiscate private land would be an example.

no..........definately looks more like Fascism than communism every day

[flying]

I can promise that when it comes to Thailand it is far more than yours

As you well know Flying I do not simply make things up apart from my opinions. I am a geek when it comes to statistics, so I genuinely do not make them up although my opinions based on them can be full of bullshit.

With all due respect & not having to get into a dick measuring contest...

While i do not build in Thailand...

I am a Licensed General Contractor here in the USA with over 25 years building experience.

I have built both residential & commercial structures.I do not mean I was merely involved I mean I built them from design to finish. Doing all material lists & Costing/Ordering all the materials then as I said the actually building.

So I am also speaking from experience. That may differ from yours but is my reality none the less.

To see something as silly as a statement like No developer would actually build or sell a wood home. did make me laugh. But as i said my reality may differ from yours.

But your blanket statement is just that....a blanket statement that is silly/untrue

While I did not say you were full of bull I did say you were funny.

Not everyone lives in concrete stacked style tombs. Wood construction is alive & well in residential applications. As for termites...you need to read up a bit as wood treated against them has come a long way as well as the fact that termites do not live in cold climates.

Yes we use steel as well as other materials too but the bulk in residential is wood. Then steel/concrete in commercial building of course.

I am not discounting your pencil work but my actual design/building & pencil work experience in all phases is not too shabby either

Different from yours I am sure. Perhaps less complicated or perhaps more I don't know. I am sure you are good at what you do too.

Edited October 13, 2010 by flying

[Abrak]

Actually Flying we are simply having a silly argument over what is a developer. I consider a development a minimum of 50 homes, preferably more like 800 spread over 3 phases.

In Thailand a guy who builds 5 wooden houses calls himself a developer and I guess he is. I have done custom built houses. It just doesnt make sense to do large quantities of wooden houses. And to be honest if you are building 5 houses it would more accurately be called a hobby than a development.

Edited October 13, 2010 by Abrak

[flying]

Developers, or the major ones in Thailand, do not build out of wood. I wood !! guess that the only people you know who live in predominantly wood houses either built it themselves or it was built by a family member

Again as I said in my first post...I do not live or build in Thailand I live & build in the USA.

In the USA the majority of residential homes are still built of wood.

Giving you costs would be meaningless as they are location specific.

I would like to say something about this statement then I will leave it as we are getting pretty far off topic now.....

I do not have the first clue how to build a property but I do know what everyone elses building costs are.

For me as a General Contractor to hear you say that I do smile again.

Because due to your lack of clue as to how to actually build... All you know is what everyone else *tells* you is the cost. Yes you see receipts I'm sure but you will never truly know the actual costs.

In my case there is no where for anything to hide....NO WHERE

[Naam]

Example you can still get nice untreated 2x4x8' for $2 each

when i came to the GNoE™ twenty years ago i did a little woodwork myself and was wondering that the measurements did not tally. had to find out myself that a 2x4 is actually a 1.75x3.5

what are the measurements nowadays? perhaps 1.5x3.25 or even 1.25x 3.0 to avoid price increases?

[Naam]

As you well know Flying I do not simply make things up apart from my opinions. I am a geek when it comes to statistics, so I genuinely do not make them up although my opinions based on them can be full of bullshit.

thanks for making my day Abrak. now i know that i'm not the only one who's opinions are once in a while full of bullshit

[Naam]

In the USA the majority of residential homes are still built of wood.

that's the done thing in developing countries with emerging economies like the U.S. of A.

p.s. do they still supply homes with electricity, cable, phone, etc. above ground?

[Naam]

flying, on 2010-10-13 10:15, said:

In the USA the majority of residential homes are still built of wood.

[flying]

when i came to the GNoE™ twenty years ago i did a little woodwork myself and was wondering that the measurements did not tally. had to find out myself that a 2x4 is actually a 1.75x3.5

what are the measurements nowadays? perhaps 1.5x3.25 or even 1.25x 3.0 to avoid price increases?

Yes as you described the actual measurements of a 2x4 is in fact 1.5x3.5

It has been that way forever. Although at times I do find older redwood homes made of rough hewn full dimension lumber. A 2x4 is a 2x4

But all the rest is nominal dimensions. The wood starts as a 2x4 but at the mill when it gets S4 or surfaced 4 sides it is then that it ends up being 1.5x3.5

All fine & well as we are use to it as the building standard.

:lol: Cute ! looks like a old water tank that has had a full hip roof added.

I am guessing a hobit lives there?

Edited October 13, 2010 by flying

[Abrak]

For me as a General Contractor to hear you say that I do smile again.

Because due to your lack of clue as to how to actually build... All you know is what everyone else *tells* you is the cost. Yes you see receipts I'm sure but you will never truly know the actual costs.

In my case there is no where for anything to hide....NO WHERE

Look Flying you simply cannot assume I am a simpleton. I have told you that my company had expertise on the financial side both in terms of negotiating debt deals between the owner who was then discarded and the banks. If I dont know something I dont do it. I would never go near a general contractor because I have neither the qualifications or the patience to deal with such a business. However if you care to take a look at LPN's numbers you will see they are unparrelled in the industry. I would emphasize the asset turn rather than their margin. Essentially if you sell out a project in one week you do not need a high margin especially if it is a partially finished reposession. Dont smile at me because you think I am so stupid that I would even consider making decisions about things I do not understand. These guys make a Bt1bn a year but when you have lunch it is Bt400 for everyone. And when we went to Singapore the entire Board including the Chairman flew economy class. The first project I did with them cost Bt9,600 per sqm to complete (Bt365 per sqm below budget).

And to be honest, I smile at general contractors because certainly in Thailand you eventually go bankrupt in the end. They eventually get caught in a cash flow spiral of death which is fun to see. And the begging for work is so unseemly. And while you smile we have a good joke too. We think 10% prelims is incredibly funny and the contractor is confused why his quote is back within an hour. And honestly Flying, most contractors here cant work a calculator, name a contractor here who hasnt had a major debt restructuring over the last ten years and the answer is it is Japanese which is incredibly strange.

Thailand is an incredibly practical place to do business. I could equally say that the development partner doesnt know how much has been paid to the previous owner to transfer the assets into a new company and then piss off. But there is an illusion in Thailand that Thais are out to screw you and I have known them since their debt restructuring in 2000 - when they were reduced to one floor in one office. All I know is that any success will never be achieved by screwing your partners.

All I care about is things being sold (and I have no problem giving a 3% bonus if it is sold in a week) projects being built within budget and on time and if people have to be paid to extend working hours it is of no concern of mine. When you try to transfer condos it can all be done in a month or it can take you six months but clearly there is an inconvenience in expediting matters. Time is the most valuable competitive advantage you can have in property development which is why restructured debt deals are so attractive because you can finish a 36 storey building in 14 months rather than 48 months and you can totally crucify your competition on price and margin. But in Thailand contracting is like car insurance it ends up as a cash flow game for survival. And a sensible contractor has to compete against a total lunatic like K Tech (RIP). Look that one up and weep Flying.

[Abrak]

As you well know Flying I do not simply make things up apart from my opinions. I am a geek when it comes to statistics, so I genuinely do not make them up although my opinions based on them can be full of bullshit.

thanks for making my day Abrak. now i know that i'm not the only one who's opinions are once in a while full of bullshit

I think it is internet perogative that you write what you think at any given moment. I am also confused why when I write complete bullshit people are generally too polite to point it out. Or maybe if your comments are stupid enough to actually point it out implies you might wish to debate an idiotic comment. If a post is stupid enough you are a bit stupid pointing it out - it is known as the Sokal dilemma.

I think I used to get away with a lot by making things sound complicated enough so that noone read or understood them. I try to make things sound like common sense but it does rather expose you when you are talking bullshit. And to be honest I have no idea why Midas was mortally offended when I accused him of being an idiot on the basis that he joins the ranks of Krugman, Bernanke and Keynes all of whom have had a modicum of success in economics.

[flying]

Look Flying you simply cannot assume I am a simpleton.

And honestly Flying, most contractors here cant work a calculator,

Look that one up and weep Flying.

Kor Tort but I see you have really gone off on a tangent now.

Lets just drop it.

For the record ...I surly do not & never did think you a simpleton.

It was you who came out & claimed something I said is just not done....building with wood

yet it is in fact done isn't it?.....As I said many times I live & build in the USA & in teh USA the majority of homes are built of wood....period.

You do not need to impress me with what you do. As long as your happy at it is all that matters.

We live in different parts of the world. So things are different.

Also if as you say contractors where you live cannot even use a calculator then I am glad they have you.

Because here we General contractors do building calculations on construction master calculators daily. We can also do our taxes on those

Anyway I now return you to your previously scheduled topic of financial crisis

No hard feelings I do enjoy your posts. So excuse me if I dont weep

Edited October 13, 2010 by flying

[Naam]

when i came to the GNoE™ twenty years ago i did a little woodwork myself and was wondering that the measurements did not tally. had to find out myself that a 2x4 is actually a 1.75x3.5

what are the measurements nowadays? perhaps 1.5x3.25 or even 1.25x 3.0 to avoid price increases?

Yes as you described the actual measurements of a 2x4 is in fact 1.5x3.5

It has been that way forever. Although at times I do find older redwood homes made of rough hewn full dimension lumber. A 2x4 is a 2x4

But all the rest is nominal dimensions. The wood starts as a 2x4 but at the mill when it gets S4 or surfaced 4 sides it is then that it ends up being 1.5x3.5

All fine & well as we are use to it as the building standard.

this is what i found in "Wicket Pedia":

The nominal dimensions are 1 3/4 by 3 1/2.

and here we have the 'fractional' culprit that caused the housing crisis:

Within their rules the standard for a standard dressed (planed)green 2x4 is 1 9/16 by 3 9/16. This will allow for shrinkage. If the lumber has been kiln dried to the standard of 19% moisture the dressed size is 1 1/2 by 3 1/2. This has been the standard for a number of years. Rug green is manufactured to 1 3/4 by 3 3/4 This allows for shrinkage or saw snake.

[flying]

Within their rules the standard for a standard dressed (planed)green 2x4 is 1 9/16 by 3 9/16. This will allow for shrinkage. If the lumber has been kiln dried to the standard of 19% moisture the dressed size is 1 1/2 by 3 1/2. This has been the standard for a number of years. Rug green is manufactured to 1 3/4 by 3 3/4 This allows for shrinkage or saw snake.

Yes that is the crux of it

You know its all fine and well as I said because it is the building standard so things are made with those dimensions in mind.

For instance a interior stud wall with common 1/2" dry wall on both sides becomes a 4.5" thick wall & things like interior door casing manufacturers make the doors according to the building standard. So it all works fine

Of course once you go outside of standard & do custom work then it all changes

[Naam]

For instance a interior stud wall with common 1/2" dry wall on both sides becomes a 4.5" thick wall & things like interior door casing manufacturers make the doors according to the building standard. So it all works fine.

don't tell me it all works fine Flying when i was building i was with the framers when they arrived in the mornings till they finished the sixpack of Beck's i supplied at 17.00 hrs sharp. extrapolating the time they used to calculate (pencil on a piece of 2x4) 2' 7½" plus 1' 3/16 plus 1' 1/8+ equals...... on all construction (past and present) in the GNoE™ ah sez 171½ godzillion manhours have been already wasted and many more godzillions will be wasted in future because America rather prefers a fractured invasion from Mexico before giving up fractions and adopt the metric system.

tiny steps are made. i still remember when UST prices were given as 107 13/64 and 99 7/16 at least the armed forces were clever enough and (though not by 100%) use simple metrics

nothing negative to report otherwise about the framers i worked with. excellent crew, used them for three homes, beautieffingful solutions how to implement my ideas and sometimes even improving them.

[siamamerican]

Siamamerican,

I at no point said that you are not aware of the faults in the recovery we have seen.

As a long term investor in say equities you can look over the last 100 years and see that the median equity return is 10% based on a highly biased PE, yield and growth rate. The bias is created by the skewed payout ratio. The actual return on equities will tend to be the dividend yield plus growth rate or more accurately the FCF return on equities.

Any valuation that you care to put on equities will depend on your future real growth rate and your inflation rate (only if you care to base your discount rate on historic values) as opposed to considering real values in which case inflation essentially is irrelevent. All you can really tell about equities is that they are cheap relative to bonds unless you assume deflation of prices (or that interest rates can fall below zero.)

What it is very easy to do is to take the current risk free rate and justify equities or even speculating in distressed property. But the valuations that you see as attractive are very much dependent on those low interest rates (and to a lesser degree that inflation will remain positive.) You cannot make an absolute return argument unless you believe in significant real growth. From where I stand the natural assumption is no real growth and positive inflation, which is clearly bullish for equities. In fact it is fairly illogical not to be bullish of equities at the current moment on the basis that the FCF yield is high relative to risk free returns and nominal rates cannot fall below zero.

I genuinely have no idea how things are going to pan out. I basically trend towards no growth and positive inflation. Economies built on unrealistically lower interest rates and unrealistically high fiscal deficits, I find difficult to predict. Realistically they are unsustainably high whether the economy can grow over the next ten years is debatable rather than a foregone conclusion. Anyone who happens to believe that say US real GDP is unsustainably high is supported by the fact that the US is inherently cash flow negative.

I dont believe we will have a crisis to match March 2009. I do not believe that we will return to historic growth rates because they were not real. The big risk is inflation getting out of control because there is no way the economy can sustain a very significant rise in nominal rates.

By that I am assuming something of a conspiracy theory, inflation is forecast at no more than 2% over 10 years and I believe that equity valuations point lower. However if inflation was to reach 6% (and who is really to say it isnt there)_then you can basically throw everything out of the window although you will have made so much out of your equities by then you probably wont care.

To be honest if you take nominal rates low enough you can ramp any market you choose to, especially if you combine it with a bit of inflation. QE2 is a recipe to ramp markets by lowering interest rates and increasing inflation. To say there is anything much real happening is really optimistic. Really to believe in equities only takes a little faith that inflation will be positive and that real interest rates are not going to rise. To be honest I dont think your bet on equities is based around real growth as it isnt that sensitive in terms of FCF. I am willing to bet that you are essentially betting on inflation being positive which is a pretty good bet but doesnt tell you anything much in terms of the real growth rate.

So really your argument is slightly circular, if in fact what you are really betting on is positive inflation and low interest rates rather than positive real growth. And to be honest if you look at the parameters betting on positive rather than negative inflation seems a sensible worldview, betting on nominal interest rates remaining low (as in 10 year rates not exceeding 5%) seems a good call, I just dont feel that there is any real conviction to invest in equities on the basis of real growth.

What you see in equity prices (starting to happen) and in PM's to a large extent is a growing conviction in inflation (which you can also see in corporate profitability). And whatever the numbers tell you I think there is more conviction in inflation (or the lack of deflationary prices) than there is in any significant real growth.

Abrak,

I generally agree with your macroeconomic statements. Well, at least those that aren't over my head. I still have ~20% of my investment portfolio in bonds and for the reasons (if I correctly grasped what you were saying) you discussed, I worry. Not an avid follower of diversification but I do like to keep my money spread between a few investment options.

I also concur with your growth forecast as it pertains to the USA and at the moment, have no opinion about Europe as a whole growth prospects. I do think Asia and certain countries in Europe offer some incredible opportunities. Germany is healthy relative to Europe as a whole, China, and possibly Russia are interesting. I am currently heavily ( >50% of my equities) invested in Germany and Asia equities. In the short-term, I do worry (China property boom, trade wars...)but am confident all will be well a few years down the road

I decided a few months ago, from a macroeconomic perspective, it was time to return to value investing and stop timing the market. Now I wakeup every morning and look at my portfolio as entertainment, opposed to eying it strategically. It goes up, down, and sideways for no sound reason most days. Looking at it in monthly or quarterly time periods, it starts to make more sense.

[Abrak]

OK Flying,

I was being incredibly boring so let's forget it.

What I am genuinely interested in is this comment by the Head of the Chicago Fed.

…”The size of the employment gap, combined with the fact that inflation has been running below the level I consider consistent with long-term price stability, suggest that it would be desirable to increase monetary policy accommodation to boost aggregate demand. Inflation could stay below desirable levels for the foreseeable future. “

Leaving aside whether is any economic sense it what he says and the fact he has to refer to unemployment as an 'employment gap' which is novel, what I really want to know is what is happening to inflation as a rough guess. I mean he is implying that there is a serious worry about deflation of prices.

Now back in early 2009 that was a clear and present danger but I just dont see it now. I am not trying to suggest that there is substantial inflation only that deflation doesnt seem on the cards and given that price stability is 2% inflation, we do see inflationary tendencies about.

But I do live in Thailand and there is a bit of a buzz in the air.

I know I am not totally making things up because I can see the gold price and commodity prices. I can also see the US$ which should be inflationary. It is very easy to sit in a booming economy and get the gut feeling there is inflation in the wind. But that is not what I am really saying. Personally I do feel that there might already be more inflation then numbers suggest BUT are things in the US at a stage that you can argue there is a serious risk of deflation or that inflation is not consistent with price stability.

I know I have been going on a bit about inflation and it just amounts to little more than conspiracy theory, but am I delusional to believe that there is at least a degree of inflationary bias or that he is telling porkies by claiming a deflationary price environment.

Every single economic indicator is generally inflationary M0, M1, M3 have all bottomed. SGS implies inflation is actually 8%, commodities, gold even corporate lending is picking up. And he makes this statement as though it is a fact that we all should know.

If he is telling porkies things will turn very nasty very quickly.

[teletiger]

If he is telling porkies things will turn very nasty very quickly.

Were his lips moving?

Regards.

[cardholder]

So in the UK, unemployment is falling - nowhere close to the 3.25/2.50 million predicted by some.

Inflation is a little over 5% - OK it starts with a 6 and above BoE targets- but it is NOT anywhere near double digits seen in the past.

Oh!, and interest rates? - negligible in some cases, economically affordable in ALL cases.

These 3 key dynamics seem to OK, in absolute terms, and generally moving in the right direction.

Or, have I got it wrong ?

[teletiger]

Have you got it wrong?

"U.K. Jobless Benefit Claims Rise by the Most in Eight Months"

http://www.bloomberg.com/news/2010-10-13/u-k-jobless-benefit-claims-rose-by-the-most-in-eight-months-in-september.html

"Government spending cuts will see a million people lose their jobs, says PwC"

http://www.telegraph.co.uk/finance/jobs/8060539/Government-spending-cuts-will-see-a-million-people-lose-their-jobs-says-PwC.html

Hmmm.....might have.

Regards.

[cardholder]

Have you got it wrong?

"U.K. Jobless Benefit Claims Rise by the Most in Eight Months"

http://www.bloomberg...-september.html

"Government spending cuts will see a million people lose their jobs, says PwC"

http://www.telegraph...s-says-PwC.html

Hmmm.....might have.

Regards.

Hmmm ! teletiger - you were one of those who believed the 3.25m+ figure a year ago..

Clearly, you prefered the above headlines to the BBC's:-

UK unemployment falls to 2.45 million

This is what ACTUALLY happened - the Telegraph remains speculative journalism.

You can add to your list Lloyds TSB forecast of 4.500 'job losses'. A small wager says that 75% of that number will be re-employed in areas of 'need'.

Sir Brian Pitman, deceased ex-LTSB CEO said that 100,000 needed to go in UK banking. He was pilloried for it but he recognosed that mergers and over-supply meant that the labour force (and networks) would have to be cut. That was 15/20 years ago - still see multiple lloyds and TSB sites in your hometown ?

[teletiger]

Also from the BBC...."Many economists fear unemployment will rise later in the year when government cuts begin to kick in."

"Admittedly, employment still rose strongly, but this was a smaller rise than in the previous couple of months and the more forward-looking employment surveys have by and large been weakening."

http://www.bbc.co.uk/news/business-11530816

What I would "prefer" is to see 100% employment, but I just call it as I see it. Next time you cherry pick headlines.....post a link, out of courtesy.

Regards.

[flying]

OK Flying,

I was being incredibly boring so let's forget it.

What I am genuinely interested in is this comment by the Head of the Chicago Fed.

Leaving aside whether is any economic sense it what he says and the fact he has to refer to unemployment as an 'employment gap' which is novel,

If he is telling porkies things will turn very nasty very quickly.

Agreed to forget it but your never boring ... & have a lot of information to give thanks

Yes "employment gap" seems more like a employment canyon for many as the gap between them & a job grows wider daily. Bye bye to income tax from many...

Like you many on the ground here has said as much about inflation for awhile now. The FED/officials claim one thing but the reality we feel buying daily goods here is another.

As for turning nasty quickly that is another term I have heard more than once. Many have said when the drop comes it will be very quick. I always thought this was a nicely controlled collapse & so far they were doing pretty good with it.

Keeping up a nice front & calling it a soft landing. But it seems more & more are feeling now what you feel.

As always hoping for the best

Edited October 13, 2010 by flying

[Abrak]

As for turning nasty quickly that is another term I have heard more than once. Many have said when the drop comes it will be very quick. I always thought this was a nicely controlled collapse & so far they were doing pretty good with it.

Keeping up a nice front & calling it a soft landing. But it seems more & more are feeling now what you feel.

Actually when I said things are going to get nasty I didnt mean an impending collapse, I meant economic conflict. There is a new global imbalance that has emerged over the last 12 months. That is that Europe are planning on fiscal responsibility while the US is not. Now the US$ is the Central Reserve currency so to an extent it is a bit like the Euro in Euro Land. Countries are to some extent forced to ape monetary and fiscal policies of the US.

Actually this isnt necessarily true in a normal world. You could tighten fiscal policy which would enable you to lower interest rates without you r currency moving - unfortunately that option is out of the window. You could say that Asian economies do not ape US monetary and fiscal policy but that is because they have basically pegged their rate at an attractive level against the US$.

Now everyone has been trying the race to the bottom currency wise. The US$ has very good reasons to want to win, its external debts are fixed in US$ and also if you can crater the US$ (which is very difficult) you pass the cost of say China's pegged currency onto other Nation's such as the Euro area. So here is where the conflict will come. When say the UK starts acting fiscally responsible it will put pressure on its currency to rise. (What is actually supposed to happen is that you stop it appreciating by lowering rates which helps your private sector grow.) Anyway the last thing you need is for your currency to appreciate so you have a loose monetary policy which you can easily justify by your tightening of fiscal policy. In fact that is the whole point.

It is clear that say the UK should accompany fiscal tightening with a bias towards a weaker currency so that the private sector can grow. In fact if you go back in economic history most fiscal imbalancies were largely solved by devaluation. Trying to achieve a weak currency against the US domestic policy is a huge challenge. When I say get nasty I believe that say the UK will think it is entitled to a looser monetary policy than the US which is not addressing its fiscal stance.

I also think that QE1 which was about addressing deflation is going to turn into QE2 which is about keeping nominal rates low and creating inflation. This would be great for all markets, bonds, equities and even house prices (not falling further.) But it is clearly a ramp based on negative real rates. Another game of spoof. (But remember that Bernanke plays his own games and has clearly stated in the past that announcing the possibility of QE can achieve the goals of actually implementing it.)

[Abrak]

Have you got it wrong?

"U.K. Jobless Benefit Claims Rise by the Most in Eight Months"

http://www.bloomberg.com/news/2010-10-13/u-k-jobless-benefit-claims-rose-by-the-most-in-eight-months-in-september.html

"Government spending cuts will see a million people lose their jobs, says PwC"

http://www.telegraph.co.uk/finance/jobs/8060539/Government-spending-cuts-will-see-a-million-people-lose-their-jobs-says-PwC.html

Hmmm.....might have.

Regards.

Well it is very easy to get to a million.

5.8m Government employees - 25% spending cuts.

The other side is what they are going to do on welfare. 500,000 people who are currently considered disabled and unable to work are expected to lose their benefits. However they might reclassify say 1m of the unemployed as 'unemployable' and another 1m as 'professional job seekers'.

But really the whole thing is a joke. Look if you really wanted to cut the UK deficit you would simply scrap the entire defense budget and you would be 60% there (a lot of defense costs do not come within the defense budget) but defense is largely immune from the cuts. It is a luxury the country cant afford and seems to serve no meaningful purpose (this is just my opinion, obviously most people disagree) but that is because they are under an illusion that basically most Government spending is waste. Obviously productivity in the public sector is low because educating children is not productive in the short term and medicaire on the elderly is a total waste of resources.

Anyway when you are broke and you have long debates about spending GBP20bn on three submarines to maintain an independent nuclear detterent, you are simply taking the piss.

[midas]

It is ironical that in Australia there is a small list of " chosen professions " including doctors, teachers etc that because they were considered to be " model citizens " , are qualified to countersign a variety of legal documents. The list also includes bank managers and this morning I am asking myself why the hel_l that is ?

Buffett's Pet Bank Joins The Fraudclosure Circus: Wells Caught Lying About Affidavit Practices After Clerk Admits She RoboSigned

" The last bank, and arguably the one that has the most to lose, Wells Fargo, which up until now has fervently denied it engaged in robosigning and thus refused to halt foreclosures, has just been caught red-handed by the FT. In a sworn deposition, which will certainly lead to a foreclosure halt by Warren Buffett's pet bank, and confirmation that WFC was merely lying like everyone else on Wall Street, the Financial Times has obtained legal documents that prove Wells was merely one of many. Per the FT: "Legal documents obtained by the Financial Times suggest that Wells Fargo, the second-largest US mortgage servicer, also used a “robo signer”. Unlike its rivals, Wells Fargo has not halted foreclosures."

http://www.ft.com/cms/s/ed4aa856-d70b-11df-9cd5-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fed4aa856-d70b-11df-9cd5-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.zerohedge.com%2Farticle%2Fbuffetts-pet-bank-joins-fraudclosure-circus-wells-caught-lying-about-affidavit-practices-aft

[siamamerican]

As for turning nasty quickly that is another term I have heard more than once. Many have said when the drop comes it will be very quick. I always thought this was a nicely controlled collapse & so far they were doing pretty good with it.

Keeping up a nice front & calling it a soft landing. But it seems more & more are feeling now what you feel.

As always hoping for the best

Never understood your perspective on America economically. You are still calling for a collapse which could happen but don't you see other outcomes with higher probabilities? If you do, why don't you discuss some of those possibilities. I think you will find it refreshing and ultimately healthy.

Unlike myself you are still working and luck would have it, in arguably the worst occupation possible. General contractors and anything associated with construction is challenging to say the least. I don't see a real turnaround for some time and our ridiculous ( in my simple mind) stimulus and stop gaps are only going to prolong the recovery in this sector.

Bankers and builders overstepping common sense played major roles getting us into this mess and are now suffering the consequences of their actions. I can speak from first hand knowledge, losing my job in the financial sector. Did I do anything wrong to deserve losing my livelihood - yes, I was part of the feds debt food chain. Lenders lent money, builders built, consumers borrowed and everybody was happy until they weren't. Then the blame game started with congress taking the lead. In my opinion, a little ironic considering they were bragging about their part in increasing home ownership and the fed was propping up the economy with loose money policies. Ultimately the easy target became the bankers not the endless players further down or in the case of the fed up the chain.

As for that employment canyon you discussed, it does exist for many. Back in 2000 I was in the IT sector and personally watched the canyon get deeper and deeper. For many people today, it is time to make some important decisions and not base them on their earnings the last 8 years. The debt fueled economy was in large part an illusion in many countries. There are jobs out there but they call for taking a financial hit and starting over from scratch professionally. I don't think most Americans are entitled to welfare and need to find the best job available. If that is cleaning pools, as I did to avoid welfare which was very humbling, or working as a data entry clerk so be it. Why be a leach, especially when the leach receives pittance when it comes to US unemployment checks.

My point, can't remember ...

[flying]

Never understood your perspective on America economically. You are still calling for a collapse which could happen but don't you see other outcomes with higher probabilities?

Unlike myself you are still working and luck would have it, in arguably the worst occupation possible.

Bankers and builders overstepping common sense played major roles getting us into this mess and are now suffering the consequences of their actions.

I don't think most Americans are entitled to welfare and need to find the best job available..

Well actually I would be more than happy to sing a cheery tune if I see any true effort towards a recovery. As yet I have seen none.

Also I am not calling for a collapse I am watching it. It is in fact collapsing right here right now.

Yes I am still working slightly but honestly it is not enough. ie: more still goes than comes at this time. ( Speaking only of income from contracting ) Luckily the metals are doing fine & at least on paper are making up for a lot.

I do agree though that contracting is not a place to be these days or any time soon because as I said it is collapsing. If & when we ever hit bottom it will be ages before anyone with a brain builds something of their own when instead they can buy new unused or slightly used homes for a fraction of build costs.

Like you I have done some IT work as I was a UNIX Sys Admin but that was 5-6 years ago which as you know is a lifetime in the IT world. Nothing is the same today & the learning curve would be steep in a already crowded field.

As for the fault laying with builders. I cannot agree ....At least not the type of General Contractor that I am. As I said I was not active during the boom as I was stuck in the Sys Admin position having my contracting on hold basically.

But if a couple comes to a builder with money & wants a house I do not know of any builder who asks where did you get that money? Can you pay it back? What were the terms of the loan etc.

Also builders did not loan the funds or build on credit. Neither did they then bundle those promises up & re-sell them.

Now if you want to blame banker I agree 101% as they loaned money where they knew it was not repayable. I will even throw the appraiser in there as they appraised property that they knew was in no way worth that price. Lastly lets throw in the AIG types as they rated all those bundled up over priced now called toxic assets.

Lastly I agree that all the handouts for UE extended up to 2-3 years in many places has only increased the burden on the collapsing system & yes of course it goes without saying able bodied should work & stand on their own two feet. If there is any job & we know there is then welfare should also carry a work requirement. But its all a circle. They can tell the welfare folks you go clean the parks & paint the restrooms. Now they can lay off the city county workers & where do they go? Top that off with the welfare folks slipping & hurting their backs on the job etc & we know where it goes.

So yes I agree all the welfare & UE is a burden but....it WILL run out & when it does....there will be a lot of angry folks about.

Sadly many who had no hand in any of the making got hurt the worse & continue to. These folks are getting angrier & angrier too.

But carry on because they still can. Albeit their future is uncertain as they see their saved funds reduced.

They played by the rules & now see the so called dream slipping away when their turn to enjoy the fruits of their labors was to be next.

I would love to discuss the higher possibilities but the repair has to start with the cause.

There is no use in treating the symptoms...They need to treat the cause.

That is not as yet happening. Nothing I say is going to change that.

Trust me if I see it I will cheer it. Until then all I can do is prep & look where I will go if need be. Now THAT is sad.

Edited October 14, 2010 by flying