Financial Crisis

[Abrak]

But since different properties are sold how can the indices truly reflect what is happening?

The indices do tackle this problem. For instance the Land Registry only includes data on properties that have previously been sold before but it does use a simple average. That means if say condos are falling more than houses and a lot of condos are sold in any given month the price fall will have an artificial bias downwards.

Nationwide uses a mix adjusted method whereby units are weighted so this bias is taken out. Unfortunately their data source is far weaker.

I guess at the end of the day you should probably look at all three and take an average. They all point to about 15% yoy decline but stabilisation over the last 3 or 4 months - something that is clearly not believed by either the stockmarket or the futures market.

[flying]

Chinese students laugh at Geithner's assurances

http://www.reuters.com/article/companyNews...K14475620090601

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

[Abrak]

Although it would be hugely unpopular, the introduction of capital gains tax on property early in the next government's term could, in fact, be a positive stabilising factor. An economy based on rapidly rising asset prices and expanding credit is simply unsustainable. Wealth has to be generated through WORK and PRODUCTION, not sitting on your arse and looking at a property portfolio. Yes, sure it can work for a few, that has always been the case with the wealthy landowners through history, but there is no way it can form the basis of a sound economy, with everybody thinking they can do the same.

Introducing property taxes is exceedingly difficult - if you do it at the bottom of the cycle you dampen the market you are trying to support to minimize your bailouts and if you do it at the top it is so unpopular you put yourself out of business. While trading property portfolios is not the basis for a sound economy, this whole concept was apparently missed by the USA that racked up a remarkable negative savings rate of 8% between 2000 and 2008. Without mortgage equity withdrawals there would have been no growth at all in the USA beyond 2000.

[midas]

Chinese students laugh at Geithner's assurances

http://www.reuters.com/article/companyNews...K14475620090601

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

Trading and Living in a Cesspool of Lies

" One of the saddest lessons of history is this: If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle. The bamboozle has captured us. Once you give a charlatan power over you, you almost never get it back…Carl Sagan "

http://www.financialsense.com/fsu/editoria.../2009/0409.html

[midas]

I wonder how many skeletons in the cupboard this could / would reveal-

I hope it passes

Text of H.R. 1207: Federal Reserve Transparency Act of 2009

http://www.govtrack.us/congress/billtext.xpd?bill=h111-1207

Excerpt from Ron Paul’s 3/5/2009 appearance on Judge Andrew Napolitano’s Freedom Watch:

Judge Napolitano: Before we switch gears, Congressman Paul, how did Ben Bernanke react to the legislation that you introduced calling for an audit of the Fed. Did he give you a call on the phone?

Ron Paul: Oh yes, he called me, wanted to congratulate me and he wanted to support my bill. You know, interestingly, just recently, I cannot name his name but I was talking to a former member of the Federal Reserve board and told him about the bill and he was friendly enough.

I said, “What do you think of that?” He said, “I think it’s not a very good idea”. And I said, “Do the people at the Federal Reserve ever talk about, are concerned about the dollar”. I said, you know, I’m always talking about the dollar and what this is going to do to the dollar. And I said, “Do they know that all this debt and inflation could hurt the dollar?” He says, “Yes, they do.” He confirmed it. He said, “They absolutely do.” He says, “But they can’t answer your questions in public because it would cause panic.”

Edited June 2, 2009 by midas

[12DrinkMore]

Without mortgage equity withdrawals there would have been no growth at all in the USA beyond 2000.

I can't find the same analysis for the UK, but is certain to be the same or worse. I did read a report mentioning it sometime ago, but can't find it anymore.

And this leads to the big issue that I cannot see a solution for. Where on earth do the UK/US governments expect economic growth to come from if the releasing equity from house prices is taken out of the equation, as indeed it surely will be over the next decade?

[Abrak]

Without mortgage equity withdrawals there would have been no growth at all in the USA beyond 2000.

I can't find the same analysis for the UK, but is certain to be the same or worse. I did read a report mentioning it sometime ago, but can't find it anymore.

And this leads to the big issue that I cannot see a solution for. Where on earth do the UK/US governments expect economic growth to come from if the releasing equity from house prices is taken out of the equation, as indeed it surely will be over the next decade?

I think you will find that the UK is marginally better off.

Mortgage equity withdrawals is actually only half the story. Obviously many people were refinancing their mortgages so they could spend more. More importantly though people were spending more because they believed they were saving through the rise in house prices. That is how the US got to the absurd figure of negative savings of 8% between 2000 and 2008. (Incidentally when the Japanese bubble burst their savings rate was around 30%). The UK at least has a positive savings rate 6% in 2006 (although it did fall to 1% in 2008 - the lowest level in 60 years.)

This is why I cant believe the CBO put out such shoddy forecasts for the US based on the output gap (when a lot of US output may well prove uncompetitive.) What they should be looking at is the demand gap - namely the difference between actual demand and sustainable demand which Bridgewater estimates is at least US$1.2trn or 10% of GDP. To the extent it is unsustainable large fiscal deficits that simply support it are only transferring money (you dont have) from one pocket into another.

And by the way, it is easy to point the finger at the UK and US but everyone has been playing this game (how else do you think Thailand achieved its 8% growth rates between '85 to '95?). There's been no economic miracle in Eastern Europe, simply an asset bubble. I would like to think there is a little more to China's (or India's) growth story than an asset bubble but sometimes I fear not - believing that the Chinese are simply the ultimate American sub-prime consumer recycling potentially declining export earnings.

[Abrak]

“But they can’t answer your questions in public because it would cause panic.”

Actually Bernanke has clearly stated in say his speech to the Fed in 2002 (available at the Fed web site) that a weak dollar is absolutely key to tackling deflation. He states that the threat to print new money (already done) should cause a weakened dollar, printing new money should weaken the dollar and if this doesnt work you can guarantee to weaken the dollar by buying foreign assets with newly printed money (the guarantee being based on your ability to print at no cost being unlimited and the size of foreign assets being extremely large.)

Bernanke has a huge reputation as an economist but not a great one as Chairman of the Fed. If he fails to engineer a devaluation of the dollar I suspect his credibility as both will be ruined.

[churchill]

Commoditity price rises in the last month

http://ftalphaville.ft.com/blog/2009/06/02...may/?source=rss

[churchill]

Good interview from CNBC Europe - The only section worth watching !

Saying amongst other things that the UK Real Estate market is in a better position than the US

There is a lot of opportunity in commercial real-estate by addressing the credit freeze and putting up new loans. Philip Blumberg, chairman of Blumberg Capital Partners, told CNBC Tuesday.

http://www.cnbc.com/id/15840232?video=1138962682&play=1

[AlexLah]

Good for them!

Commodity's up look at how oil has been creeping up and there is not much media attention for that, it has risen a 100% in just a few months.

Opec said a while ago they needed oil around 70-90 USD and they will get it and perhaps again some more. But has it not a lot to do with a

currency that has been loosing it's value for a great part of this decade. Have a look at USD index.

Found a nice piece on the web about the "No Problem thinking"

(Maybe you have read it already so I post just a snip here).

NO PROBLEM!

Look back at the economy in October 2007. The Dow was at 14,000. The banks were booming. Real estate was down a little, but the experts gave no warning. They were wrong. All of them.

The U.S. government is running a $1.8 trillion deficit this year. Federal tax receipts are down 34%, which means that the deficit will go above $2 trillion. No one cares. No one says, "This is the end. The American economy will never again be what it was."

Think "2007." Would you have believed that Chrysler and GM were both headed for bankruptcy? In October 2007 GM shares were at $43. Now they are at $1. There was an industry called investment banking. Bear Stearns, Lehman Brothers, and Goldman Sachs were not part of the commercial banking system. To survive, a few made the transition in September 2008. Some did not make the cut.

Merrill Lynch is gone. Bank of America and Citigroup were bailed out by the government. They would have gone under. They sell for a fraction of what they did in 2007.

And what do most people say? "No problem."

There is no problem for which their answer is not "no problem."

Medicare will go bust. Social Security will go bust. "No problem."

The unemployment rate keeps rising. "No problem."

When people refuse to face reality, because reality is going to be more painful than anything they have experienced, they look for signs that the problems they cannot avoid without changing are really not that bad. They look for offsetting good news.

You can find it here: http://www.lewrockwell.com/north/north718.html

So are we just looking for some offsetting good news and just ignore what has been told to us by the media, or might it be a good thought to take in consideration that there could not be a recovery coming soon, and in fact a worsening situation?

The IT bubble will not be repeated as well as the housing blub, so what else can be inflated to create (artificial) growth?

[Abrak]

Mind you if you look at that graph you can see the dollar is about 10% below its average of the last 20 years (say 90).

Given how the US fundamentals have deteriorated it probably has further to fall.

[12DrinkMore]

And what do most people say? "No problem."

There is no problem for which their answer is not "no problem."

Medicare will go bust. Social Security will go bust. "No problem."

The unemployment rate keeps rising. "No problem."

When people refuse to face reality, because reality is going to be more painful than anything they have experienced, they look for signs that the problems they cannot avoid without changing are really not that bad. They look for offsetting good news.

Maybe this will help....

:D :D

[AlexLah]

That is always a good song to listen to, reminds me of a guy I knew on Jamaica. If he made enough money on one day to have fun for a week, he closed his shop and went to the beach the rest of the week, have some chick and drink rum.

Should do the same.........

[teletiger]

Here's the IMF's take on where the world is going in 2009:

http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/c1.pdf

Data tables and predictions up to 2014:

http://www.imf.org/external/pubs/ft/weo/20.../pdf/tables.pdf

Blows Darlings' hysterical (over by Christmas) rantings out of the water. Shows UK contracting 0.4% through 2010

Regards.

[AlexLah]

So far banks have only recognised less then one-third of their losses uh oh!

Don't worry........be happy.....(Music playing in background)

Edited June 2, 2009 by AlexLah

[Abrak]

Here's the IMF's take on where the world is going in 2009:

http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/c1.pdf

Data tables and predictions up to 2014:

http://www.imf.org/external/pubs/ft/weo/20.../pdf/tables.pdf

Blows Darlings' hysterical (over by Christmas) rantings out of the water. Shows UK contracting 0.4% through 2010

Regards.

Also it is quite amusing (or horrific) to look at the quality and reasoning behind the IMF's work compared to the shambles that are the Obama Government's forecasts (i.e. the CBO's) which are just plain embarrassing. Why Obama would wish to release such figures which will only make him look foolish in the future I have no idea.

http://www.cbo.gov/doc.cfm?index=10014

Apart from assuming an absolutely best case scenario for the US - ave 3.5% real growth to 2014 excluding this year (with an incredibly unviable argument) - their numbers dont even add up in that they assume the public will absorb US$2trn of USTs while consumption will rise 1% this year (even though the mps in the US is currently 0).

[AlexLah]

No Problem!

[midas]

No Problem!

Lies, Lies, Lies: Why "Recovery" is Bogus and the Worst is Yet to Come

It doesn't matter whether they tell us the truth or not (I think we know they're full of it anyway) because we're still suffering. That should be proof enough that this rally is a lie, this recovery line is a lie, and all these rainbows and unicorns are manufactured to keep "crowd control" from becoming a national security concern.

Could you imagine what would happen if America collectively woke up one morning and realized that their "wealth" was really just worthless paper?

There's your recovery. Shove it directly up your ass, do not pass Go, do not collect $200. Besides, even if you did collect $200, it'll be worth $0.00002 by the time the game is over. You're welcome!

http://www.jrdeputyaccountant.com/2009/05/...y-is-bogus.html

Edited June 2, 2009 by midas

[AlexLah]

Come on Midas, we need a positive mindset here!

The US is the greatest country in the world! They won't go down you know. Governments around the world are working hard to get over this recession. Have a bit of faith!

Look at Gordon Brown, he is strong and will not give up (his seat) now that is a true fighting spirit!

Obama showing he is as flexible as a snake, is able to change his policy from whatever he promised to whatever is needed or takes.

Now that is the spirit!

[12DrinkMore]

Dum de dum dum, don't worry, be happy, da da dum dum de de

Well take this on China

http://www.telegraph.co.uk/comment/5424112...or-America.html

This paragraph really hit home.

In short, it may be time to start believing the projections made by Jim O'Neill and his colleagues at Goldman Sachs, who predicted just a few years ago that China's gross domestic product could equal that of the United States by 2027. Three years ago, China did not have a single bank among the world's top 20, measured by market capitalisation. Today the top three are all Chinese. In 2006, the United States had seven of the top 20 banks, including the top two; today it has three, and the biggest, JP Morgan Chase, is rated fifth.

Where is the future?

You still think the US and the UK debtors still have the means to develop their economies?

Dum de dum dum, don't worry, be happy, da da dum dum de de

:D :D

[flying]

Where is the future?

Peter Schiff & others has been saying for quite some time

They may be proven right.

[AlexLah]

Guys come on we have insider info and direct reporting straight from the states and reporting back to us from floor 63, as well as direct reports from the housing market in the UK.

Things are not as bad as they want us to believe, Telegraph is just a propaganda paper trying to spread fear.

Edited June 2, 2009 by AlexLah

[Abrak]

Dum de dum dum, don't worry, be happy, da da dum dum de de

Well take this on China

http://www.telegraph.co.uk/comment/5424112...or-America.html

This paragraph really hit home.

In short, it may be time to start believing the projections made by Jim O'Neill and his colleagues at Goldman Sachs, who predicted just a few years ago that China's gross domestic product could equal that of the United States by 2027. Three years ago, China did not have a single bank among the world's top 20, measured by market capitalisation. Today the top three are all Chinese. In 2006, the United States had seven of the top 20 banks, including the top two; today it has three, and the biggest, JP Morgan Chase, is rated fifth.

Where is the future?

You still think the US and the UK debtors still have the means to develop their economies?

Dum de dum dum, don't worry, be happy, da da dum dum de de

:D :D

If you were to rank market capitalization as an indicator of bank 'importance' or 'strength' you would be sadly mistaken. It is usually an indicator of where the next bubble is about to burst. In 1990 all of the top 12 banks ranked by market cap. were Japanese. The top 6 being...

Ind. Bank of Japan 67.6

Sumitomo 55.8

Fuji Bank 53.2

Mitsui Bank 49.8

Dai-ichi Bank 49.5

Mitsubishi Bank 47.2

Ten tears later we find that in the year 2000 that 5 out of the top 6 banks by market cap. are from the USA...

Citigroup 209.9

Bank of America 94.9

HSBC 93.3

Morgan Stanley 81.4

Wells Fargo 74.9

Chase Manhattan 61.6

So it is easier to conclude from this that if China currently has the 3 top market cap. banks in the world despite being the worlds about 5th biggest economy, it is probably because it has 3 of the most overpriced banks in the world. In fact you might even think worse, and conclude that China is simply just another asset bubble waiting to implode. Incidentally I know absolutely nothing about Chinese banks or their fundamentals nor do I know much about the Chinese economy.

Incidentally I just looked up the highest market cap. companies in the world and got a list date at some random point in 2009. 3 of the top 4 companies in the world were from China. Now given that some of their names I hardly heard of like I & C Bank of China although I know nothing about them, I suspect that their valuation has more to do with overvaluation rather than fundamentals.

Edited June 2, 2009 by Abrak

[Chaimai]

Guys come on we have insider info and direct reporting straight from the states and reporting back to us from floor 63, as well as direct reports from the housing market in the UK.

Things are not as bad as they want us to believe, Telegraph is just a propaganda paper trying to spread fear.

Thanks for your continuing valuable contributions Alex - keep up the good work.

(I hope that didn't come across as sounding sarcastic )

[cloudhopper]

Clusterfubar?

http://dailyreckoning.com/the-fiat-currenc...omsday-machine/

[midas]

Come on Midas, we need a positive mindset here!

The US is the greatest country in the world! They won't go down you know. Governments around the world are working hard to get over this recession. Have a bit of faith!

" And how about this for nerve? This is unbelievable. The porn industry is now asking for a $5 billion federal bailout. The porn industry. Talk about a stimulus package. "

Edited June 3, 2009 by midas

[midas]

Clusterfubar?

http://dailyreckoning.com/the-fiat-currenc...omsday-machine/

good article CH

I hope Turbo-Tax-Cheat-Tim-Geithner gets it

[midas]

Chaimai.

What effects ( if any ) will this have on your mortgage broking business ?

'Five building societies to fail within a year'

Ralph Silva of TowerGroup, the leading financial services research firm, said that up to 15 building societies could be forced to merge within the next year or so but that at least five others would fail on the lines of Dunfermline Building Society.

http://www.telegraph.co.uk/finance/persona...hin-a-year.html

[Naam]

excerpts from "dailyreckoning.com experts" who only criticise but cannot present a single fàcking alternative how to tackle the variety of existing problems. in other words: "big mouths, all hats, no cattle but a rusty weed-whacker in the shed with whom they try to attack Obama, Bernanke, Geithner et al".

"And that puts the Fed on the spot. Do they choose to cap Treasury yields by explicitly stepping up QE operations and buying more Treasury bonds in the open market (or possibly more mortgage-backed securities, to thereby decouple mortgage rates from rising Treasury yields)? Or do they just let Treasuries find their own equilibrium, accepting the risk the economy may relapse again as 10-year US Treasury yields sail through 4%?"

-based on prevailing facts there is no way to avoid 10y-UST climbing to 4% or most probably above.

-there is no real reason why that should cause a relapse of the economy. the potential reasons which might endanger a recovery are numerous. interest rates play a small part only.