Financial Crisis

[cloudhopper]

interesting questions and opinion based answers:

Who is supplying these answers? Sounds like a US government policy wonk.

a couple of my bank's anals.

No wonder - the two genres have been joined at the hip for some time now it would seem.

[BlackJack]

interesting questions and opinion based answers:

Who is supplying these answers? Sounds like a US government policy wonk.

a couple of my bank's anals.

Quark is the Ferengi bartender is one of your bankers???

[AlexLah]

Hi Naam,

Knowing you are a guy that is knowledgeable in this financial stuff, what where/are your thoughts about this Q and A session that you posted?

Why did you post it, and what do you think about the answers given?

Just curious and no pun intended.

Alex

[12DrinkMore]

Sometimes I think I beginning to understand a few basics about economy and then suddenly "gazonk" a couple of figures wander across the lcd screen and I think, "jeeze, what is all this about?".

So to the point in case, taken from

http://www.marketoracle.co.uk/Article11088.html

which draws the ominous conclusion that Brown is persuing a "scorched earth" to create a little credit induced growth before the elections are held, so that Labour manage to save a few seats, but leave the Tories with a bleak and barren landscape, allowing the possible reelection of Labour in the next General Election 2014-15. Surely our elected representatives would not screw us all, just so they can park their <deleted> on a bench in the House of Charlatans?

But back to the numbers...

Alistair Darling also surprised many analysts by forecasting that the UK Economy would grow by 1.25% in 2010 and 3.5% in 2011. However we need to consider the following in that 1.25% growth on the annual GDP of £1.2 trillion equates to growth of just £15 billion and for 2011; 3.5% growth equates to just £42 billion. Therefore the government is borrowing a net £175 billion for 2009 and £175 billion for 2010 to generate £15 billion of growth, and then a further £140 billion for 2011 for £42 billion of growth. Thus total net borrowing of £490 billion to grow the economy by just £67 billion

1.25% growth on the annual GDP of £1.2 trillion equates to growth of just £15 billion

Which will cost the taxpayer 350 Billion.

Surely he could save us all a chunk of cash, around 335 Billion, and just give us all 300 Quid to spend in the UK on UK produced stuff. There we go, 15,000,000,000 increase in gdp and we all have 300 Quids worth of stuff, or most probably beer in my case.

But where is this 350 Billion going? Surely it doesn't indicate that without this humongous stimulus the gdp will crash around our ears by 15% in 2009 and also 2010? Or maybe it does. I don't know.

But one thing seems clear to me, and possibly the only thing, and that is government spending and statistics are a seething mass of jiggery pokery, fronted by smoke and mirrors and covered in a cape.

[jcon]

Um.... didn't know where to put this...

but i just found an old account of mine from waaaay back in the day. i didn't remember I even had it, I thought I had closed it when I left the floor...

here are some trades I made in the internet heyday: (good god <deleted> was I doing, I was making these trades while 22 years old and I was clerking.... hahaha... in between running sheets for the traders - nuts - check out the prices.. QCOM <deleted>??? 118 grand for 300 shares?!?!? AMAT? LU? hahahaha)

BOUGHT 300 QCOM $0.00 $118,225.75 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

SOLD 100 QCOM $0.00 -$38,830.45 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

SOLD 200 QCOM $391.00 -$78,185.39 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

SOLD 100 LU $0.00 -$7,330.25 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

SOLD 100 AMAT $0.00 -$10,617.64 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

BOUGHT 100 DELL $0.00 $4,138.25 x0000xx SHORT 11/12/1999 12:00:00 AM 11/17/1999

SOLD 100 BEOS $0.00 -$1,167.96 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

SOLD 100 QCOM $0.00 -$36,130.54 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/1999

SOLD 100 ATHM $0.00 -$4,142.86 x0000xx MARGIN 11/12/1999 12:00:00 AM 11/17/199

Now that is some serious comedy for today. Now I even remember that week... one day the trader in the QCOM pit came back to the office completely white in the face... I thought he had blown out the company or something. Then he said, "jcon, check my p&l, I think I just made a million dollars." He did.

Ain't bubbles grand??!?! Short memories, I tell you. Short memories....

Edited June 5, 2009 by jcon

[flying]

Um.... didn't know where to put this...

but i just found an old account of mine from waaaay back in the day. i didn't remember I even had it

Ain't bubbles grand??!?! Short memories, I tell you. Short memories....

Made me remember mine when you said Qualcomm.

I also had a lot of QCOM & TLGD too

Also JDSU & of course all the chips

At the end of the day I did not make much at all.

I was not as savy I guess as your pal. It was fun & stressful though

[Naam]

Hi Naam, Knowing you are a guy that is knowledgeable in this financial stuff, what where/are your thoughts about this Q and A session that you posted?

1. Why did you post it,

2. and what do you think about the answers given?

Just curious and no pun intended.

Alex

1. i posted the Q&A because all topics in them are related to the main problem which is discussed in this thread, namely "increasing efficiency of gasturbines by injecting liquid nitrogen in an environment without gravity and suction drag"

2. no doubt that all of the questions are valid and i think all the answers are interesting although my opinion does not 100% tally with all of them. my [not so] humble view is that any and all answers (from anybody) to these questions are and will be biased, depending mainly on the individual perception how the present crisis will develop in future. interesting too is that the answers contain a number of undeniable existing facts or factual and quantified assumptions which can be easily verified.

bottom line: basically and in essence i agree with the answers, notwithstanding the fact that the resident experts disagree

[cloudhopper]

Here's yet another theory of how it's going to go down

http://www.financialsense.com/fsu/editoria.../2009/0605.html

[Naam]

Here's yet another theory of how it's going to go down

http://www.financialsense.com/fsu/editoria.../2009/0605.html

written by another goldbug who has survived 23 frustrating years and is concentrating on the last six.

quote: "What does it matter if the FT thinks me nuts? But I find I'm irritated, both for myself and on the collective behalf of successful gold investors. I don't think we deserve to be called "nuts" after our gold has for 6 years so consistently outperformed all those other serious investment classes so diligently analysed on Wall Street and in the City."

[midas]

Here's yet another theory of how it's going to go down

http://www.financialsense.com/fsu/editoria.../2009/0605.html

this is very useful and it helps explain Marc Faber's view

because he never mentioned these things on his interviews.

[flying]

FDIC Deposit Insurance increase to $250,000 Extended through 2013

http://www.msnbc.msn.com/id/31090531/

No surprise there

Here is a nice article

http://rense.com/general86/auto.htm

The FDIC says there are 350 banks on the problem list. Bob Chapman asks, "Why can't they be bailed out like the 19 money center banks?" Good question. It is clearly meant to allow the favored, most insolvent banks, to buy up the others using taxpayer funds. "The treasury will inject a fresh $50 billion in support of GM. GM debt will drop from 170 billion to 12. US treasury is bailing out Jp Morgan Chase and Citgroup of 100% of their GM debt by paying off all of the CDS they placed on GM bankruptcy. This is selective sheltering." Indeed it is, and it is a violation of every principle of law the US has known for 200 years.

[12DrinkMore]

Bernanke, the lunatic game player? Is it all one grotesque experiment on us to prove his theories?

Now, what do we do if life get's a bit boring and mundane? We try and liven it up a bit. The brain starts meandering away from the task in hand and thinks up interesting ideas. Maybe it's as benign as hiding a book, and we take some pleasure in watching someone look for it. Or, if playing cards, we start wondering how to better our odds and maybe a little cheating might help. Or we tease the kids and enjoy their embasrassment. I see this every day and believe it is some universal human trait.

Now, what happens when an extremely clever person in an extremely powerful position gets a bit bored and starts wondering what would happen if....? I have just read this speech from Bernanke from way back in 2002.

http://www.federalreserve.gov/BOARDDOCS/SP...121/default.htm

I have read through this paper a couple of times, he starts off with a quick discussion about inflation

"Despite widespread "inflation pessimism," however, during the 1980s and 1990s most industrial-country central banks were able to cage, if not entirely tame, the inflation dragon"

OK, so the bankers have that under control, and it is becoming quite boring

"l is that inflation has recently been not only low but quite stable, with one result being that inflation expectations seem well anchored. For example, according to the University of Michigan survey that underlies the index of consumer sentiment, the median expected rate of inflation during the next five to ten years among those interviewed was 2.9 percent in October 2002, as compared with 2.7 percent a year earlier and 3.0 percent two years earlier--a stable record indeed"

Indeed, very boring in that case. It looked like Bernanke's job will simply be acting as a Nanny over another decade of benign inflation. To a man like Bernanke there is surely no worse fate than not having a real job to do, a challenge to meet?

And now begins the interesting part where he moves onto the topic of deflation, although he starts off with

"The second bulwark against deflation in the United States, and the one that will be the focus of my remarks today, is the Federal Reserve System itself. The Congress has given the Fed the responsibility of preserving price stability (among other objectives), which most definitely implies avoiding deflation as well as inflation. I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States and, moreover, that the U.S. central bank, in cooperation with other parts of the government as needed, has sufficient policy instruments to ensure that any deflation that might occur would be both mild and brief"

So he has the weapons in his hand to stop deflation dead in it's tracks, at least according to him. Moving on to the situation, which we in fact arrived at recently

" It is true that once the policy rate has been driven down to zero, a central bank can no longer use its traditional means of stimulating aggregate demand and thus will be operating in less familiar territory"

This must sound a LOT more interesting to a man of intelligence, moving the battle into the realm of "non traditional" medicine in "unfamiliar territory". WOW, now maybe his imagine begins to get fired up.

"One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies."

By this point has Bernanke perked up and is now thinking, "well, maybe I am the man to try this"?

There then follows a long list of various means of preventing deflation to end with the statement

"Fortunately, for the foreseeable future, the chances of a serious deflation in the United States appear remote indeed".

But what if the great Bernanke Brain started working on how he could be a little "creative" with the economy, and engineer a massive asset boom, pulling in the banks and eventually dragging everything down, resulting in the dreadful situation we find ourselves today, just so that he can prove his point?

"we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation"

Far fetched, very possibly, but how many wars have been engineered to relieve the boredom of Our Leaders?

[midas]

It is clearly meant to allow the favored, most insolvent banks, to buy up the others using taxpayer funds. "The treasury will inject a fresh $50 billion in support of GM. GM debt will drop from 170 billion to 12. US treasury is bailing out Jp Morgan Chase and Citgroup of 100% of their GM debt by paying off all of the CDS they placed on GM bankruptcy. This is selective sheltering." Indeed it is, and it is a violation of every principle of law the US has known for 200 years.

flying

Did you see the Chrysler bondholders lost their appeal yesterday - against the argument

that its unconstitutional what has been done to them so its now to the Supreme

Court...........this should be very interesting to watch . I cant believe the Supreme

Court would rule against the bondholders - if they do then USA has truly taken a new direction

for the worst...what do you think ?

[flying]

flying

Did you see the Chrysler bondholders lost their appeal yesterday - against the argument

that its unconstitutional what has been done to them so its now to the Supreme

Court...........this should be very interesting to watch . I cant believe the Supreme

Court would rule against the bondholders - if they do then USA has truly taken a new direction

for the worst...what do you think ?

I think they better be very careful with what they rule. Their credibility is getting very thin. It is getting so blatantly obvious to more than a few.

Edited June 6, 2009 by flying

[flying]

http://www.newsfrettir.com/alive/

Iceland is still in deep

Here is a post from a resident posted on another forum....

Today the newly elected left-wing government is discussing about raising income tax to whopping 50%. I'll be lucky to be able to buy just 1 ounce of gold for all my pay. But first they want to create a new sugar tax, yes, they need to save the children teeth from sugar cane damage, and subsidize dentists with the new tax. Not even thinking that sugar is also used in dairy products, bread, and other life necessities such as chocolate

They also want to nationalize the fishing quotas, which individual fishing corporations privately own now, and redistribute them. This will mean certain bankruptcy to all those big fishing corporations that dominate our our largest export industry, not something we need right now.

Thankfully I'm without a burden to carry, no debt, I've saved cash and gold, I rent at a low cost and I have a good job (still), and even despite all my monthly expenditures, which haven't changed a lot since the crash, I STILL have a surplus! Don't get me wrong, prices have gone up, 30-60% of some products, and I've had to stay away from those overly expensive products. For instance, I need new jogging shoes, but oh boy they've gone up. Good jogging shoes cost me around 1/5 of my monthly pay. Although I have the money, excuse my french, no fcking way I'll pay that much.

But I'm not a typical individual. Although, relatively here in Iceland, I do have a good salary. Many people have lower salary than myself and much heavier burdens, student loans, lots of children, car loans, credit card loans, mortgage, and less of a chance to postpone buying of stuff. Honestly, and sadly, they're walking a futile road. For many that road has already ended, as they've simply stopped paying off their debt and are just waiting for the authorities to throw them out, if they ever will.

Debt protesters, or debt strikers, they're called, people who simply stop paying because they can't, or believe it's unfair to pay, and keep on living in their homes and drive their cars to whatever work they have. Monthly there are interviews with these people on the TV. Just ordinary people, with children, in ordinary homes, that have lost their job.

Weekly there are news about the new banks (the nationalized bankrupt banks now run by the government) nationalizing some fairly large companies and even international companies, with thousands of employees. This seems to be becoming the nationalization of the week moment, and is surely happening faster than in Venezuela, and without much effort really. No military forces to invade the companies headquarters and nationalize at gunpoint, the companies themselves seek refuge in nationalization, they're bankrupt after all.

I still work at a privately owned corporation. In fact, our main competitor went bust the other way. Needless to say the bank took it over, nationalized. It's debt has been reduced, and it now has a less debt burden and an advantage over my corporation. So much for fair competition.

Many simply shrug their shoulders, not caring anymore about free markets. There are a few voices here and there that say this is wrong. This is all done in the name of saving valuable companies and saving jobs, perhaps at the cost of my own company and my own job.

Everywhere I look the numbers don't add up, so I've stopped looking. If we ever get to see the actual numbers, because the government doesn't even know the real numbers. The deficits, the debt, the unemployment, the economy is bleeding out big time. How on earth is this going to work.

I suddenly feel like I've awakened in a post-capitalistic world where everyone are bankrupt, the government owns everything and the communists are taking over in a fascist style, bringing along the living standards of a 1930's Soviet Union.

All I'm saying, America, we're just 1 year ahead of you.

Best regards from the People's Socialist Democratic Republic of the Northern Atlantic Island of Iceland.

[midas]

All I'm saying, America, we're just 1 year ahead of you.

Best regards from the People's Socialist Democratic Republic of the Northern Atlantic Island of Iceland.

But Icelandic people have a fairly placid temperament and don't have guns

[flying]

All I'm saying, America, we're just 1 year ahead of you.

Best regards from the People's Socialist Democratic Republic of the Northern Atlantic Island of Iceland.

But Icelandic people have a fairly placid temperament and don't have guns

Hahah that same sentance of course caught my eye.

Take a look at these food prices & note the dates......

http://www.newsfrettir.com/alive/dairy-products

[flying]

Bankruptcy filings rise to 6,000 a day as job losses take toll

As always the comments at the bottom were the best part for me

http://www.usatoday.com/money/economy/2009...mployment_N.htm

[AlexLah]

I'd say milk is very cheap in Iceland, just 25 THB for 1L, I pay 43 THB here in BKK.

And look what happened to me last night while wanting to buy some basic food needs.

Is the crisis finally hitting?

Have a good Sunday all.

[12DrinkMore]

And look what happened to me last night while wanting to buy some basic food needs.

Wasn't that just after you loaded up your cart?

:D

[AlexLah]

Massive protests here 12, it is insane!

Look what's happening in the US, chicks with guns!

Fly or any other person in the US at the moment, can above trend be confirmed?

[flying]

The Economy Is Still at the Brink

http://www.nytimes.com/2009/06/07/opinion/...anWEB.html?_r=3

Couple of quotes from this article...................

Why is so much effort being put into propping up those at the top of the economic pyramid — the money-center banks, the insurance companies, the hedge funds and so forth — when during a period of deflation like the one we are in, any recovery will come only by restoring the confidence of the people down at the bottom of the pyramid?

Confidence will return only when jobs can be found and mortgage payments are made. Even if Mr. Obama’s claim is true that his $780 billion stimulus package “saved or created” some 150,000 jobs, we seem a long way away from the point where those struggling to get by will feel like spending again. What happens when people buy a car once every 10 years instead of once every two or three, especially now that we taxpayers own such a big percentage of the American auto industry?

Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo? Nearly every new program emanating these days from the Treasury Department — the Term Asset-Backed Securities Loan Facility, the Public Private Investment Program, the “stress tests” of major banks — appears to have been designed to either paper over or to prop up a system that has clearly failed.

Instead of hauling out the new drywall to cover up the existing studs, let’s seriously consider ripping down the entire structure, dynamiting the foundation and building a new system that rewards taking prudent risks, allocates capital where it is needed, allows all investors to get accurate and timely financial information and increases value to shareholders and creditors.

Edited June 8, 2009 by flying

[midas]

Bank Profits From Accounting Rules Masking Looming Loan Losses

‘Bogus’ Profit

Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”

The Federal Reserve, which designed the stress tests, used a 21 percent to 28 percent loss rate for subprime mortgages as a worst-case assumption. Already, almost 40 percent of such loans are 30 days or more overdue, according to Tavakoli, who is the author of three primers on structured debt. Defaults might reach 55 percent, she predicts.

http://www.bloomberg.com/apps/news?pid=206...id=alC3LxSjomZ8

[flying]

I would like to ask a question of the board members following this thread.............

Most of us think the Stock Market will once again take a tumble & that this is in fact a Bear Market Rally.

If so do you think that

1) Like last time folks will run to the USD when the money comes out of the Stock Market?

Feeling that no matter what the USD will always be the last man standing so represents a safe haven?

Or

2) Has too much happened since last time the market tanked? That folks perceive the USD as being less bullet proof than before & will look for alternatives?

Edited June 8, 2009 by flying

[SoCal]

Or...

How long does the rally have to continue, before people stop calling it a bear market rally?

[Abrak]

Or...

How long does the rally have to continue, before people stop calling it a bear market rally?

As someone who trades the SET which has been in a bear market for about 16 years, I would generally define a bear market rally as a 50% retracement of the peak to the low, which the SET experienced in several forms (or quite close to several times) for instance in 2007 some 14 years after the peak at about 940. The first 50% retracement occurred nearer 1350.

Anyways back to the question at hand, a 50% retracement would imply a peak S&P recovery price of about 10250. At that price I guess it would be so overbought (and overvalued imho) that a pull back would be expected anyways even if you were bullish longer term.

[teletiger]

Is that S&P or the Dow?

Regards.

[Abrak]

Is that S&P or the Dow?

Regards.

Yeah sorry that's the Dow. 50% retracement on the S&P is 1120.

So having given you one bumb number how about a couple of interesting numbers based on www2.standardandpoors.com/. The rolling annual S&P500 operating EPS number is US$43.0 - this never means much because it is adjusted for ever increasing one off items. If you look at 'as reported EPS' the earnings figure is 6.93. This is forecast to decline over the next couple of quarters with the annual eps bottoming out in 3Q on a very low figure (S&P on a PE of 3814x). Again I dont think these figures are very meaningful on the basis that at the bottom of the cycle companies dont make much money.

This figure I do find more meaningful. If you take the 10 year moving average of as reported earnings you find they current stand at US$54.7 putting the S&P500 on a current PE of 17.4x. The 10 year MVA is obviously going down. This compares with an average PE of 13x times over the last 100 years or so. People like Shiller etc have also pointed that when stocks are overvalued they have normally have reverted below their long term mean before a bull market has resumed. With unprecedented fiscal and monetary stimulus this time may well prove different. But you would have to be very brave or be big gambler to jump in now.

[Naam]

Or... How long does the rally have to continue, before people stop calling it a bear market rally?

a strong increase of value which happens after a considerable drop of any asset is quite often called a bear market rally by pussy-footing investors who missed the boat or by gloom&doom gurus who's timing was bad. in rare cases the call "bear market rally!" originates from frustrated investors who check several times a day whether one of their Krüger Rands will buy a bakery.

[teletiger]

.... who missed the boat......

All aboard....Last call.....All aboard.....the Titanic.

I'm on (in) dry land.

Regards.