Financial Crisis

[flying]

I cant see the video

Look at the page & see a tab reads video

Right above the title Faber Doesn't See New Stock Market Lows;

Good video

See if this works?

http://www.bloomberg.com/avp/avp.htm?N=vid...zu1.nj16I1g.asf

Edited June 29, 2009 by flying

[midas]

Warning: Britain faces new recession

Economy set to relapse into dreaded 'double-dip' downturn, say world's central bankers

The world's central bankers have warned that the British economy faces relapsing into another recession – the much-feared "double dip" downturn.

A continuing drought in bank lending, evidenced in the latest figures from the Bank of England, and the threat that spiralling public borrowing will feed through to higher interest rates and inflation, are judged by international economists to be mortal dangers to a sustained recovery.

http://www.independent.co.uk/news/business...on-1724447.html

Edited June 30, 2009 by midas

[AlexLah]

I have mentioned that in a few years there will be two classes, rich and poor. The lady in below clip is explaining something similar is going to happen if not already. I just finished watching it and it is very informative, yes it is about an hour but well worth it.

You can skip the first 5 minutes as it is only introduction bla bla.

Edited June 30, 2009 by AlexLah

[Abrak]

I have mentioned that in a few years there will be two classes, rich and poor. The lady in below clip is explaining something similar is going to happen if not already. I just finished watching it and it is very informative, yes it is about an hour but well worth it.

You can skip the first 5 minutes as it is only introduction bla bla.

Elizabeth Warren is one of my heroes. She really should be President.

And you really should see this interview between Jon Stewart and her over the bank bailout - very funny.

[teletiger]

The reason I dont really buy the hyperinflation argument (although its a possibility) is just looking at M2 in the last 2 months. The Fed has still been active in QE and yet M2 has actually fallen. To assume QE must lead to hyperinflation is a massive extrapolation. Still equally others assume it will lead to no inflation at all which I find equally hard to fathom.

"M2 (narrow) "money" supply increased $15.7 billion to a record $8.369 trillion (week of 6/14). Narrow "money" has expanded at a 4.6% rate y-t-d and 9.5% over the past year."

http://www.atimes.com/atimes/Global_Economy/KF30Dj02.html

Regards.

[Abrak]

"M2 (narrow) "money" supply increased $15.7 billion to a record $8.369 trillion (week of 6/14). Narrow "money" has expanded at a 4.6% rate y-t-d and 9.5% over the past year."

http://www.atimes.com/atimes/Global_Economy/KF30Dj02.html

Regards.

Teletiger, those numbers are indeed correct (certainly the 9.5% one) but they mask what has actually happened. M2 grew at an extraordinary rate of 16% annualised in the 6 months September to March and then fell in April and May (it was 8364 end March).

You can see it in the Fed Res's June release.

Speaking of which they very handerly publish the US household balance sheet on a quarterly basis. I think this is interesting because if you look at it, it sheds a very different light on the US consumer debt situation. Consider if you looked at household debt not as it is usually looked at - namely relative to GDP - where it is as high if not higher than the 1930s but relative to equity.

Here we have it in 2002 after the equity bubble but before the housing bubble really took off in 2006 at the peak and as of 1Q 2009. If you look at it from an aggregated debt to equity to problem then the US doesnt have much of one.

Total assets (US$trn)....49.3......75.6......64.5

Total Laibilities...............8.8......13.4......14.1

Total Equity..................40.5......62.2......50.4

E/disp inc (%)..............517....... 645.......467

E/Home value (%).........58..........55.........41

You can perhaps see why Greenspan wasnt too worried about lowering interest ratest rates in 2002 when household debt to equity was only 20% and unemployment was rising. Should you be too worried about a general lack of saving if average household wealth is 5 times income? In fact at no point has either the Fed or the Government said that the consumer over borrowed, I suspect they believe the financial crisis was caused by simply bad lending and they are probably right.

This really begs the question of how so much bad debt was created by a balance sheet that essentially looks like this. One of the answers must be correctly pointed out in Alexjah's posting and Elizabeth Warren's video, which is the US consists of a few very rich, a middle class with not much and the poor with nothing at all. The very rich who own 2/3rds of those assets simply have no need to borrow at all.

Edited June 30, 2009 by Abrak

[teletiger]

Mar 2009 1562.3 8316.6 1576.2 8363.5

Apr 2009 1592.3 8264.0 1607.8 8358.2

May 2009 1596.0 8327.9 1598.7 8331.3

So the increase in M2 for the first 2 weeks in June wiped out and surpassed the previous 2 months contractions.

Any logic for this?

Regards.

[BlackJack]

Mar 2009 1562.3 8316.6 1576.2 8363.5

Apr 2009 1592.3 8264.0 1607.8 8358.2

May 2009 1596.0 8327.9 1598.7 8331.3

So the increase in M2 for the first 2 weeks in June wiped out and surpassed the previous 2 months contractions.

Any logic for this?

Regards.

smoke and mirrors

creative accounting

etc etc

[Datsun240Z]

I have mentioned that in a few years there will be two classes, rich and poor. The lady in below clip is explaining something similar is going to happen if not already. I just finished watching it and it is very informative, yes it is about an hour but well worth it.

You can skip the first 5 minutes as it is only introduction bla bla.

That is exactly what is going to happen. The middle class will dissapear. We will starting to see the same as Bangkok: Skycrapers amongst junkyards.

[Abrak]

Mar 2009 1562.3 8316.6 1576.2 8363.5

Apr 2009 1592.3 8264.0 1607.8 8358.2

May 2009 1596.0 8327.9 1598.7 8331.3

So the increase in M2 for the first 2 weeks in June wiped out and surpassed the previous 2 months contractions.

Any logic for this?

Regards.

Actually what we see is flat M2 - ya know US$15bn here or there doesnt mean anything - this is what you would expect under normal circumstances given say 2-4% contraction of GDP and 2-4% inflation. What is surprising is that we dont see M2 growth while the Fed is still supposedly embarking on substantial QE (in other words creation of M2). It may be for instance that TARP distorts underlying growth of M2 (that is simply a wild guess.) But trying to equate M2 growth Sept to March and then March to Mid Jun with nominal GDP is dam_n difficult and the latter part doesnt support the ides of QE creating hyperinflation.

[teletiger]

Haha. Half full half empty. A $38 billion spike in 2 weeks maybe more than "not here nor there".

Good news for 12D at last.

“The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one,” the Harvard University professor says.

Andrew Bosomworth, a fund manager in Munich at Pacific Investment Management Co., agrees with Ferguson that a weakening of the pound is likely. “In a worst-case scenario, there could be a run on the currency,” he says.

The price of credit-default swaps on U.K. sovereign debt has surged as investors try to protect against a deterioration in creditworthiness. The cost of the five-year contract rose to 81 cents per $100 of insured debt on June 26 from 14 cents a year earlier.

“This kind of red ink implies both spending cuts and tax hikes that could make the 1980s look like a teddy bear’s picnic.”

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

Regards.

[lannarebirth]

Hmmmm

http://www.bloomberg.com/apps/news?pid=new...id=azdWynpwVWN0

Faber Doesn't See New Stock Market Lows; Favors Gold: Video

I cant see the video but I can imagine what he is saying from his commentaries. First he envisages a hyperinflationary end game so while he might not see new market lows in stocks in nominal terms he is not that bullish. He has a mixed view on stocks.... On the one hand there are some big cash calls coming through caused by the market bounce and high interest rates...

...as well as insider selling...

But on the other sentiment is decidely bearish pointing the fact we havent hit a major high yet...

He just likes equities better than bonds because of charts like this which will only improve with inflation...

Obviously he likes commodities best of all and those least affected by short term slow/negative growth i.e. gold best (also likes sugar). Apologies for over simplification (cant post a link.)

The reason I dont really buy the hyperinflation argument (although its a possibility) is just looking at M2 in the last 2 months. The Fed has still been active in QE and yet M2 has actually fallen. To assume QE must lead to hyperinflation is a massive extrapolation. Still equally others assume it will lead to no inflation at all which I find equally hard to fathom.

How's he feel about corn? Ugly month producing an ugly candle.

[Abrak]

Haha. Half full half empty. A $38 billion spike in 2 weeks maybe more than "not here nor there".

Well to be honest not even hardened monetarists wouldnt consider a US$38bn move on a US$8.36trn total (which is less than half a percent) statistically significant over a two week period. Consider between August and Match M2 averaged a rise of US$46bn every 2 weeks over the whole 7 month period and then rose just US$4bn over the next 15 weeks. Rather remarkably while M2 was rising asset and commodity markets were falling and while M2 was flat asset and commodity prices were rising.

Friedman liked to consider M as a coincidental indicator of PQ which it probably is when PQ is creating causality but when you use the cart to push the horse strange things start to happen. Most analysts simply use it as a lead indicator usually for asset inflation while Faber has taken it to its logical conclusion that it that the US will simply inflate away its excesses. Never has broad money seen the monetary growth experienced at the end of last year so why not? The Fed has been opaque in its QE. So I dont know whether it has stopped, is continuing and seeing monetary destruction elsewhere or has taken it off balance sheet.

If you want to know why everyone gave up on all this some time ago just take a look at this graph below. Policy used to be based on M3 targets (now they are not even published). And narrow money and broader money are travelling in opposite directions.

Note it is easiest to influence narrower money cos it is smallest but it doesnt necessarily help....

[AlexLah]

Alex, shall we "recheck" and compare our portfolios to find out what different results alleged old age dementia and young vigorous brain cells (like yours) provide during a crisis? ph34r.gif

Dear Naam, I have never said that I am into the trading bizz and to be honest I know nothing about it as I do not earned my money placing bets. This financial crisis topic is not about how to trade smartly. You can start a new topic how to be a smart trader or even smarter start a website where you share your secrets once subscribed.

by the way, my question was directed at 12DMChang. i am sure that he can answer for himself and does not need your assistance. how the crisis affected you is besides the point. whistling.gif

Again I am just a bit surprised as why you posted that question. If you really are following this and other threads you would know.

p.s. keep on observing, watch out for UFOs, falling skies and global conspiracies. the Bilderbergs and Illuminati are out to get you! YOUTUBE IS YOUR FRIEND!

Whatever Naam, there is a lot of good stuff there ignored my MSM.

[Abrak]

How's he feel about corn? Ugly month producing an ugly candle.

To be honest he is one of those irritating guys who will write 10 pages say telling you why the dollar is going to go down and then he will give you a list of 10 stocks to buy without a single reason at all. The only reason I remember him mentioning sugar is because I think it is an interesting idea and he has mentioned it 3 times as being his favourite commodity after gold (his reasons for liking are bleeding obvious given his macro view) and has never given one reason (well apart from it appears to be breaking out).

He is basically bullish on agribusiness commodities though.

P.S. Maybe your chart explains why he likes sugar....

Edited June 30, 2009 by Abrak

[MJP]

Haha. Half full half empty. A $38 billion spike in 2 weeks maybe more than "not here nor there".

Good news for 12D at last.

"The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one," the Harvard University professor says.

Andrew Bosomworth, a fund manager in Munich at Pacific Investment Management Co., agrees with Ferguson that a weakening of the pound is likely. "In a worst-case scenario, there could be a run on the currency," he says.

The price of credit-default swaps on U.K. sovereign debt has surged as investors try to protect against a deterioration in creditworthiness. The cost of the five-year contract rose to 81 cents per $100 of insured debt on June 26 from 14 cents a year earlier.

"This kind of red ink implies both spending cuts and tax hikes that could make the 1980s look like a teddy bear's picnic."

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

Regards.

Have a look a this . . . graph!

[Abrak]

Have a look a this . . . graph!

Well the graph doesnt have a heading but I assume it is UK GDP QOQ.

Now have a look at this graph and you will see why some people are quite optimistic about the UK in the short term.

[Naam]

Alex, shall we "recheck" and compare our portfolios to find out what different results alleged old age dementia and young vigorous brain cells (like yours) provide during a crisis? ph34r.gif

Dear Naam, I have never said that I am into the trading bizz and to be honest I know nothing about it as I do not earned my money placing bets. This financial crisis topic is not about how to trade smartly. You can start a new topic how to be a smart trader or even smarter start a website where you share your secrets once subscribed.

i asked a valid question, mainly directed at 12DM. the side question for you was only a rhetoric one as everybody knows that you are "the one that knows", have flooded this thread with dozens of bullshit gloom&doom "prophesies", bragging when "something happened" like the DOW falling 90 points, blaming the crisis for your personal failures and then have the impertinence to talk of my "old age dementia".

perhaps i'd accept that from somebody who was and is really successful pointing out to mistakes i made. but i don't accept presented by a poor little boy who brags with a picure of his peanuts holding of gold bars valued perhaps at 100k dollars and boasts prophetic powers over and over again.

however, the fact that your shitty and enigmatic prophesies have become nowadays more and more scarce and your UFO sightings less frequent are good signs and perhaps an indication that you are finally growing up and leave cloud cuckoo home.

[flying]

Now have a look at this graph and you will see why some people are quite optimistic about the UK in the short term.

Yes but you could also lay your graph on these & it would overlay a few spots nicely

[flying]

Given the current state of the economy, it seems frighteningly apparent that a threefold

increase in debt purchases by the account holders listed above is a mathematical

impossibility. There is simply not enough money in the present economy to support a tripling

bond issue in the normal course of business. To confirm this, we have grouped together

similar debt holders in order to assess their potential buying capability for fiscal 2009, which

ends on September 30th.

http://www.sprott.com/Docs/MarketsataGlance/June_2009.pdf

From page 3......

Along with Social Security, Medicare is one of the trust funds that should be posting surpluses right now in anticipation of the massive future commitments the retiring Baby Boomers will require. As it stands, Medicare is in an operating deficit in 2009 with premiums coming in at $14 billion and outlays totaling $348 billion.8 The difference will be

supplemented by sales of its IOU bonds, which will ultimately add to the amount of new government debt that must be sold in fiscal 2009. We won’t speculate on what would happen to the Social Security program if new buyers for US debt disappeared, but we should all bear in mind that in that scenario the special-issue ‘IOU’s’ in the “Intragovernmental Holdings” account would be rendered worthless, and the US Government’s social ‘safety net’ would vanish.

Edited July 1, 2009 by flying

[MJP]

Have a look a this . . . graph!

Well the graph doesnt have a heading but I assume it is UK GDP QOQ.

Now have a look at this graph and you will see why some people are quite optimistic about the UK in the short term.

In the short term yes, but read this. Last time round in the 1990's, North Sea oil and manufacturing pulled the UK out of it's isolated recession. As well as a fiscally realistic Tory government. The last month that country traded in the black was in 1997.

http://europe.theoildrum.com/node/4188

If you've lived there in the past decade you'll know how much that country has deteriorated in terms of, well . . . just about everything, including social attitudes amongst all classes.

[MJP]

Have a look a this . . . graph!

Well the graph doesnt have a heading but I assume it is UK GDP QOQ.

Now have a look at this graph and you will see why some people are quite optimistic about the UK in the short term.

Hmmmm . . . . something just crossed my mind about this.

Who are the consumers, the purchasing managers? Could this be rampant government spending off the back of unsustainable borrowing?

[flying]

Hmmmm . . . . something just crossed my mind about this.

Who are the consumers, the purchasing managers? Could this be rampant government spending off the back of unsustainable borrowing?

hahah ya think?

[Abrak]

Hmmmm . . . . something just crossed my mind about this.

Who are the consumers, the purchasing managers? Could this be rampant government spending off the back of unsustainable borrowing?

You are just a born optimist.

My rather cynical thought given my impression of UK output was that an increase of something very little is not very much at all.

[Abrak]

I saw this table of unemployment figures for the US that sort of indicates that US unemployment numbers are being fudged on a monthly basis.

August 2008: Initially 84,000, revised to 175,000

September 2008: Initially 159,000, revised to 321,000

October 2008: Initially 240,000, revised to 380,000

November 2008: Initially 533,000, revised to 597,000

December 2008: Initially 524,000, revised to 681,000

January 2009: Initially 598,000, revised to 655,000

So I went to the BLS website to see what they were actually revising and found this page...

http://www.bls.gov/web/cesbmart.htm#6

...which shows a very nice table how they underestimate unemployment EVERY month due to a calculation of births/deaths in total employment. In other words they 'estimate' the number of new people entering the job market and leaving and get it wrong on the high side every single month.

The net result is for the nine months (shown on the table) the ACTUAL unemployment numbers (or revised numbers) were 50% higher than the 'AS REPORTED' numbers. (This is the increase not the total amount.)

So they either have a deliberately faulty model for estimating birth/death rates or simply an out of date one. It may well be the model is out of date - what you see in the employment numbers is that the over 60s (who have had their wealth destroyed) are delaying retirement, coming back to work and sometimes taking on a second job. Interestingly enough their last data release, shows them revising DOWN April figures, so it could be that their model simply doesnt catch the business cycle.

Edited July 1, 2009 by Abrak

[teletiger]

Some good news and some bad news from the last few days.

First the good news.....

“Prices rose by 0.9 per cent during the month, adding nearly £2,500 to the value of an average property, figures from Nationwide showed.”

Great......'Ahh....but

“However, questions remain about whether the rally in prices, also reflected in recent house price data from Halifax, can be sustained. Analysts said that a lack of houses for sale was propping up prices as buyers competed for fewer properties.

Martin Gahbauer, Nationwide’s chief economist, said: “There continues to be a relentless drop in the stock of property available for sale, as potential sellers and builders have responded to depressed demand conditions.”

There are fears that, as sellers become more confident, there could be a flood of new properties on the market, sending prices down.”

http://www.timesonline.co.uk/tol/money/pro...icle6613166.ece

“Marks & Spencer (M&S) today reported better than expected sales for the first quarter and said consumer spending appears to be stabilising.”

Ahh, but.....

“The 125-year-old retailer said sales at its UK stores fell by 1.4 per cent in the 13 weeks to June 27, after a fourth quarter drop of 4.2 per cent.”

http://business.timesonline.co.uk/tol/busi...icle6615104.ece

Right,....so we're just settling into the silt.

'And how are we going to pay for all that guff you spewed out last week Gordon”, says Allister

A record sell-off of UK government debt by overseas investors is fuelling City anxieties over the Treasury’s ability to fund soaring public borrowing that is set to top £150 billion over this year and next.

http://business.timesonline.co.uk/tol/busi...icle6605502.ece

A bit closer to Home......

“China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.”

http://www.telegraph.co.uk/finance/comment...-one-of-us.html

So thats where the $600 billion stimulus has gone to. Did they mention the Macau casinos?

Not to forget the Eurozone......

“The eurozone region has tipped into deflation for the first time since modern records began half a century ago. The M3 money supply has contracted over the last three months, flashing warning signs of potential trouble in six to nine months' time.

Julian Callow, of Barclays Capital, said the eurozone's "output gap" has reached a record 4pc to 5pc, putting a powerful lid on inflation. "House prices are falling sharply and there is concern about the rising rate of non-performing loans. If the euro were to appreciate sharply, the ECB would face a much bigger risk of deflation," he said.

http://www.telegraph.co.uk/finance/economi...ly-shrinks.html

I'll leave the USA to “Flying”, as he's doing a wonderful job there.

Regards.

[Abrak]

“Prices rose by 0.9 per cent during the month, adding nearly £2,500 to the value of an average property, figures from Nationwide showed.”

Great......'Ahh....but

“However, questions remain about whether the rally in prices, also reflected in recent house price data from Halifax, can be sustained. Analysts said that a lack of houses for sale was propping up prices as buyers competed for fewer properties.

Martin Gahbauer, Nationwide’s chief economist, said: “There continues to be a relentless drop in the stock of property available for sale, as potential sellers and builders have responded to depressed demand conditions.”

There are fears that, as sellers become more confident, there could be a flood of new properties on the market, sending prices down.”

http://www.timesonline.co.uk/tol/money/pro...icle6613166.ece

The UK housing market does seem to be on the mend. Apparently, the lack of sellers in Central London is more to do with sellers withdrawing because they think prices are on the rebound. Here are some more bullish stats on UK property.

For the first quarter 2009...

22,609 mortgage possession claims were issued on a seasonally adjusted basis, 42% lower than in the first quarter of 2008 and 13% lower than in the fourth quarter of 2008.

17,054 mortgage possession orders were made on a seasonally adjusted basis, 39% lower than in the first quarter of 2008 and 43% lower than in the fourth quarter of 2008.

47% of mortgage possession orders were suspended, broadly the same as in the first quarter of 2008 and 45% in the fourth quarter of 2008.

The absolute numbers are important here in that they are fairly low. Mortgage possession orders even at their peak were well below those in the 1990 recession which was relatively mild by comparison. The US market looks a nightmare compared to this. In that 'reflating the bubble' is the answer to problems caused by an 'asset bubble' I think the UK looks like it will score close to top marks.

[Abrak]

I dont know if anyone read my post about how the US housholds shouldnt have had a bad debt problem based on their average household balance sheet where by Equity was 645% of disposable income at its peak and debt to equity no more than 35%.

Obviously it pointed to massive inequality in wealth.

Well someone has taken the triannual Fed consumer finance numbers which looks at the distribution of wealth and taken a look at the median income US family. Median being the 50th percentile. The average would be somewhat higher because Oprah Winfreh earning US$300m a year distorts an average more than an unemployed person. A bit like a hooker distorts the number of sexual contacts that the average female has.

http://baselinescenario.com/2009/02/15/hou...reserve-survey/

Anyway if you look at the median income family they dont look too good (and that is taking an optimistic approach to what their house might be worth - have house prices fallen less than 18% in the last 2 years?).

Debt is 2x income. Current liabilities (which are high because of education and car loans) excluded debt is 3x income. Debt is 200% of equity compared to 100% 5 years ago. Net worth is down 35% from 5 years ago. Disposable income after current liabilities is down 5%. It aint a pretty picture....

And there is a very simply solution...

[teletiger]

Everybody default? Top tax rate goes to 97.5%?.....both? Kill everybody over 55? War?

Regards.

Edit: thought of a few more.

Edited July 1, 2009 by teletiger

[AlexLah]

For those that are interested in statistics and all kinds of surveys regarding the US situation a good place to start is here: http://www.census.gov

You can also extract some specific data with help of the Data Tools software available for download on that site.

Some of the stuff that Miss Warren talked about in her presentation can also be found there, very interesting stuff to play around with.

So yes Abrak the unemployment numbers from government (what they tell the public) are not that reliable and the stock market is manipulated.

They say lending is up but forget to mention it is not lending to the consumer that is up. There is no significant manufacturing base anymore in the US as either companies sold their patents and/or outsourced and the economy changed to a service based one where about 70% is based on consumer spending.

With more and more people loosing jobs, tax income will reduce dramatically and will force the government to increase taxes (see latest cap and trade bill). Those that still have a job will try to pay off their debt and cut the spending which can be witnessed when looking (for example) at the amount of shopping malls closed. (I used to have a link to a site with a nice overview, will post later). Then an enormous amount of foreclosures and now even in the prime market. This does not look good and plenty of people are "Under Water".

I have asked Fly what happens to those that run out of their unemployment benefits, are they kept on the list of unemployed or simply taken off like those that stopped looking for a job because they just cannot find one?

A stimulus bill that partly has been used to pay off obligations abroad and the rest used mainly to prop up balance sheets of those to big to fail.

A stress test where the conditions where set by those too big to fail. A new proposed health insurance but does it guarantee free health care?

I see a downward spiral and I believe it is only going to get worse.

What does the US have to do to get out of this mess it created?

Oops I almost forgot to reply to Naam.

Naam you mentioned I predicted a 90 point drop, please look at chart below.

And the week of 11 May I said would see some bad weather.

And I am sure that your house with pool (That you so proudly presented and mentioning having some servants) is worth a lot more than my small stash of Gold.

Combine that with your claim of being a scientist and making a lot of money buying and selling debt, shows who is bragging.

Have a nice day.