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#31 LeeWhee

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Posted 24 August 2007 - 06:04 PM

Still a little early in the game to make judgments on where this is going. Spooz still hasn't even hit my original rally target of 1485, so I guess we'll have to wait and see what next week brings.

But in looking over da chartz from 1998, it sure doesn't look like this is a 1998 redux. At least not at this point. Or a 1990 redux either. Back then, the U.S. markets broke down in mid-July, like 2007, and fell to an Aug low, then a rally, then a re-test at a minor lower low in Oct and we were off to the races.

In 1998, Greenprint cut rates for the first time on Sept 29. Then again on Oct 15 and Nov 17. In 1990, Greenie cut rates for the first time on Oct 29, well after the low was in. Then he cut again on Nov 13, Dec 7 and Dec 18.

So there are some similarities, but I still don't see a duplicate resolution.

As far as 1998 goes, as I posted earlier today, the similarities (hedge funds, Fed intervention, etc) have a superficial rhyme. But the funnymental and sentiment backdrops are far different.

The Cheat Streeters were pretty bearish heading into the 1998 decline, as opposed to the "best economy in the world" stuff we were reading in July. Then when the market cracked in 1998, Cheat Streeters turned from cautious to psycho-bearish almost instantaneously, including such leading lights as Jimbo Krammer and Barton Biggs. Just the opposite today.

In addition, back in 1998, the big fear was that the Asian Contagion would infect the U.S. The Asian Currency Crisis of 1997 (and earlier submerging crises in the 1990s) were fresh in people's minds.

This year, the hope (as opposed to fear) is that global growth (particularly Asia) will lift all boats, including that of the leaky U.S.

Strikes me that the fear in 1998 and the hope in 2007 were/are both somewhat misplaced.

Back in 1998, U.S. GDP was something like 8x that of all the Asian nations (ex-Japan) put together. As long as the U.S. economy held together, the Asian Contagion wasn't going to derail the global economy, largely because the U.S. was the global economy.

Now in 2007, the hope is that Asian growth will offset any weakness in the U.S. But even now, the U.S. and Japan still represent almost 45% of world GDP, while the rest of Asia (ex-Japan, incl-India) represent about 15%. So the U.S/Japan juggernaut is still 3x the size of Asia. It would take a helluva lot of Asian growth to offset weakness in the U.S.

Combined, US/Japan GDP is still greater than Germany, China, UK, France, Italy, Canada, Spain, Brazil, India, Korea, Mexico, Australia, Netherlands, Russia, Argentina, Sweden, Switzerland, Turkey, Belgium, Saudi Arabia, Hong Kong, Taiwan, Indonesia, Austria, Poland, Norway, Denmark, South Africa put together.

So there are more reasons to be fearful today than in 1998, yet the reaction appears just the opposite. If the U.S. economy weakens, it will be a big problem for us and the rest of the world as well. In fact, the Asian countries have a bigger right to be fearful of a U.S. slowdown in 20007-2008 than the U.S. had a right to be fearful of an Asian Contagion in 1998.

The notion that Asia, and the rest of Submergia, can escape unscathed from a U.S. recession will likely be true someday, but that day likely isn't today.

Maybe that's why the Chinese gubermint (rumor has it) was in the Spoozpitz this week scooping up "bargains".

As far as the notion of a recession goes, we mention it on these pages all the time. And the bear bloggers bring it up too. But the economist polls are showing no such fear, only something like 13% predict a recession within the next 12 months. And those online betting board, which Pigmen™ and Krudlow like to tout, are only showing 9-12% predicting a recession. Of course, those are the same folks who were betting odds-on that the Republicans would hold control of the House and Senate in 2006 as well.

So the backstory of 2007 is far different than 1998, yet everyone expects the same resolution. Maybe they'll get it. Maybe they won't.
"I'm not a real estate bum. I wear diamonds and Rolexes. I'm a classy Realtor™."--- Liz "Flaming Orange" Seither, Clearwater, FL, who owes lenders millions of dollars in debts.

"Men do not desire to be rich, but to be richer than other men."---John Stuart Mill (1806-1873)

"When the music stops, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing..."---Citigroup CEO Chucky "Master of Timing" Prince, 7/9/07

"Wall Street is a graveyard of geniuses."---Chriss Street, Treasurer, Orange County, CA, 7/27/07

"It was never my thinking that made big money for me. It was my sitting. Men who can be both right and sit tight are uncommon. I found it one of the hardest things to learn."---Jesse Livermore

"You can kill a sheep just once, but you can fleece him 100 times."---Jeff Macke

"Stocks are no longer the weather glass of fortune, but a part of the mask employed to disguise the nation's own face to itself." ---Horace Walpole, 1782

#32 FauxCaster

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Posted 24 August 2007 - 06:04 PM

it's no wonder the panic selling & volatility stopped

(as pointed out by crazy_ate earlier)

Fed bends rules to help Citigroup

An Aug. 20 letter from the Fed to Citigroup states that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt Citigroup from rules that effectively limit the amount of lending that its federally-insured bank can do with its brokerage affiliate. The exemption, which is temporary, means that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup requested the exemption, according to the letter.


Fortune

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I wonder if the Citi default swaps traders get to trade their books with help from mom.
"WE ARE BEING KEPT ALIVE by the Entropic movement of Dark Matter(Sino-Nippo-dollar purchasing of $UST)---as soon as there is a ringing sound,a sign of an clogged artriosclerotic wormhole on the emergency fiat-meter it will end--dynamic equilibrium,will have been achieved;better known as death" -- beardrech (Mar 15 2006, 01:17 AM)

"There's a good chance he was drunk or drugged. Only an idiot would jump into the bear cage." -- Belgrade Zoo Director Vuk Bojovic (August 20, 2007).

It's like you're dreamin' about Gorgonzola cheese when it's clearly Brie time, baby. -- Hitchhiker (S.A.M. 1998)

Mar 28 2003: July 2003 is the time I have identified as the low of the bear move...then the first leg of the bear is over ...many will be caught by surprise to see the market near it's all time high again within 3-4 years [2007] ..."depression" similar to 1932 doesn't come until 2010. -- blackbelt (Mar 28 2003, 10:05 PM)

#33 try2win

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Posted 24 August 2007 - 06:20 PM

Between this Citicorpse news and the Discount commercial paper crap, I'm about to get pissed off enough to kick something.

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thats why i cant get really bearish right now. of course we will have these 500 point down days but they are buying opps for some good trades. of course now that i said that maybe you will all get your black and blue monday

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There's nothing quite as refreshing as getting lectured & baited by a character best known for crashing through 1970s-era walls uninvited to offer cooled liquid relief from summer thirst....

:lol: :lol: :lol:

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true, true !!

#34 patents

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Posted 24 August 2007 - 06:21 PM

. . .

So there are more reasons to be fearful today than in 1998, yet the reaction appears just the opposite. If the U.S. economy weakens, it will be a big problem for us and the rest of the world as well. In fact, the Asian countries have a bigger right to be fearful of a U.S. slowdown in 20007-2008 than the U.S. had a right to be fearful of an Asian Contagion in 1998.

The notion that Asia, and the rest of Submergia, can escape unscathed from a U.S. recession will likely be true someday, but that day likely isn't today.

Maybe that's why the Chinese gubermint (rumor has it) was in the Spoozpitz this week scooping up "bargains".

As far as the notion of a recession goes, we mention it on these pages all the time. And the bear bloggers bring it up too. But the economist polls are showing no such fear, only something like 13% predict a recession within the next 12 months. And those online betting board, which Pigmen™ and Krudlow like to tout, are only showing 9-12% predicting a recession. Of course, those are the same folks who were betting odds-on that the Republicans would hold control of the House and Senate in 2006 as well.

So the backstory of 2007 is far different than 1998, yet everyone expects the same resolution. Maybe they'll get it. Maybe they won't.

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Two questions -

First, IF (note the hypothetical) the Chinese government were in the SPU pits, do they have to pony up margin like the rest of us, or are they treated like the major market players, who I believe do not need margin to trade (otherwise how could the PPT work when needed)?

Second, are you assuming that there are rational/"reasonong" people in sufficient numbers that they can make an impact? "What, me worry?" (A E Neuman)

#35 beardrech

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Posted 24 August 2007 - 06:26 PM

it's no wonder the panic selling & volatility stopped

(as pointed out by crazy_ate earlier)

Fed bends rules to help Citigroup

An Aug. 20 letter from the Fed to Citigroup states that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt Citigroup from rules that effectively limit the amount of lending that its federally-insured bank can do with its brokerage affiliate. The exemption, which is temporary, means that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup requested the exemption, according to the letter.


Fortune

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This does a total injustice to the concept of "rules."

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There is only one rule as far as the Fed is concerned:

Rule # 1: Ponzi scheme must be preserved at all costs.

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Rule # 2: Rules are made to be broken.

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Remember: The Lawmakers are the Lawbreakers

and just like the above The Rulemakers are the Rulebreakers--

If Moses were like them when he found his fellow Israelites worshipping the Golden Calf he would have broken the tablets of the Commandments in half and declared that the even numbered ones were to be deleted and only the Odd ones would prevail.....

beardrech :ph34r: :ph34r: (The operative term above is "worshipped")

#36 Black Prince

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Posted 24 August 2007 - 06:31 PM

Good to see phat back with his most excellent thoughts. When i am bored I love to stare at his avatar.
Current holdings.

#37 fxfox

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Posted 24 August 2007 - 06:57 PM

Combined, US/Japan GDP is still greater than Germany, China, UK, France, Italy, Canada, Spain, Brazil, India, Korea, Mexico, Australia, Netherlands, Russia, Argentina, Sweden, Switzerland, Turkey, Belgium, Saudi Arabia, Hong Kong, Taiwan, Indonesia, Austria, Poland, Norway, Denmark, South Africa put together.

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wishfull thinking? :lol:

US and Japan combined is 17,6 trillions

European Union and China combined is 17,2 trillions

thats nearly the same, but WITHOUT Canada, Switzerland, Saudi Arabia, Hong Kong, Taiwan, Indonesia, South Africa, Australia, Korea, India, Brazil, Mexico, Russia

a big difference i would say

source: IMF (World Bank figures almost the same)
'patriot' is formed with 'patria' and 'idiot'

#38 DrStool

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Posted 24 August 2007 - 07:01 PM

Doc: Is this part of the money problem you were discussing last night?

from a thread on CR:

OHN PARTRIDGE and BOYD ERMAN
Thursday, August 23, 2007
The freeze-up in short-term lending that is battering Canada's Coventree Inc. is spreading fast in the U.S. and Europe, raising concerns about slower economic growth and the strain on banks that have agreed to back the commercial paper that suddenly nobody wants to buy.

Thursday, the list of Canadian companies that have said they can't get the money they are owed after purchasing so-called asset-backed commercial paper (ABCP) from Coventree and other sources again got longer.

Among those that revealed exposure were the Greater Toronto Airports Authority, which has about $249-million of ABCP, some run by Coventree. Société générale de financement du Québec, the investment arm of the Quebec government, said it holds $137-million of non-bank ABCP, about 40 per cent of its cash, sold to it by National Bank. As well, Air Canada said it had $37-million of ABCP, out of $1.4-billion in total cash, and Russel Metals Inc. said it is owed $11-million.

The concern now is that companies whose cash balances are locked up in Coventree investments may be forced to delay spending, slowing economic growth. The problem would be compounded if companies that borrow directly in the commercial paper market to fund day-to-day operations are unable to find buyers. But bond salesmen say well-regarded borrowers are able to find takers for their short-term IOUs, though at a higher interest rate than a few weeks ago.

“It doesn't take much of a hesitation on the part of businesses and spending or hiring to begin to show up in the economic data,” Ted Carmichael of J.P. Morgan Securities Canada Inc. warned in an interview. “As long as the commercial paper market remains seized up, the risks that the economy could slow down quite sharply are rising in both the U.S. and Canada.”

So far companies caught with Coventree paper have said they have access to cash to keep operating, either through banks or what's available elsewhere on their balance sheets.

The crisis, which began to spread in mid-July when Coventree customers started to balk at buying paper backed in part by U.S. mortgages amid a housing slump there, has become a global problem. Issuers similar to Coventree have found buyers have vanished, with the Federal Reserve reporting that outstanding U.S. commercial paper fell 4.2 per cent in the past week, the biggest drop since 2000.

As a result, commercial paper investors who are due money are looking to banks to bail them out in accordance with backup agreements. Fitch Ratings estimates that banks have $891-billion (U.S.) of commitments to commercial paper investors who bought asset-backed commercial paper.

The problem for holders of Coventree paper is that banks balked at backing the securities, citing an out available only in Canada, and now under the so-called “Montreal proposal” the market has been effectively brought to a stand

http://calculatedrisk.blogspot.com/

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That's it. They still are nowhere near the order of magnitude of the numbers that I know for a fact for one very large holder. They are still grossly understating the extent of the exposure.

Sorry to be gone for a couple years.  I was, er, busy.  :blink:

Anyway, following in no particular order is an attempt to fine tune the crinkles in the peak of my tin foil hat:

-The 4 year cycle low is due this fall.  I'd take 1250 on the SPX.  Second choice is 1160.  Third choice is Col Mustard in the library with the candlestick.


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The 4 year cycle low is due 2011-2012. This fall the market will either still be building a top, or in the first downleg. Right now, I think the former, but it depends on what happens Monday and Tuesday. Tune in to this weekend's WSE Pro for all the gory details, and brilliant anal peristalsis.

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#39 fxfox

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Posted 24 August 2007 - 07:09 PM

Please could someone post a chart with the 4-year cycle? Im confused right now, after reading phat's and doc's posts.

Wasnt 2002 a low, 04 top, 06 low, 08 top and so on?
'patriot' is formed with 'patria' and 'idiot'

#40 LeeWhee

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Posted 24 August 2007 - 07:15 PM


Combined, US/Japan GDP is still greater than Germany, China, UK, France, Italy, Canada, Spain, Brazil, India, Korea, Mexico, Australia, Netherlands, Russia, Argentina, Sweden, Switzerland, Turkey, Belgium, Saudi Arabia, Hong Kong, Taiwan, Indonesia, Austria, Poland, Norway, Denmark, South Africa put together.

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wishfull thinking? :lol:

US and Japan combined is 17,6 trillions

European Union and China combined is 17,2 trillions

thats nearly the same, but WITHOUT Canada, Switzerland, Saudi Arabia, Hong Kong, Taiwan, Indonesia, South Africa, Australia, Korea, India, Brazil, Mexico, Russia

a big difference i would say

source: IMF (World Bank figures almost the same)

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Looks like I was using the 2005 figures, not 2006.

According to the World Bank, the US/Japan GDP for 2006 was 17.6 trillion. They guesstimate world GDP at 46 trillion. So the US/Japan accounts for 38% of world GDP, if you believe their numbers.

So the US/Japan GDP is the equivalent of Germany, China, UK, France, Italy, Canada, Spain, Brazil, Russia, India, Korea combined...as of 2006.

As far as the combo of China and EU goes, the World Bank shows China at 2.6 trillion and the European Monetary Union at 10.5 trillion. So that's 13.1 trillion, not 17.2 trillion.

The point remains the same. The U.S., while not as dominant a global economic force as in 1998 in terms of relative GDP weighting, it is still big enough to cause plenty of pain to its trade partners should it fall into recession.

The U.S. economy remains over 3x bigger than any other economy in the world and we spend everything we have and then some.

If the U.S. takes a dirt nap, I don't see Europe picking up the slack.

http://siteresources...sources/GDP.pdf
"I'm not a real estate bum. I wear diamonds and Rolexes. I'm a classy Realtor™."--- Liz "Flaming Orange" Seither, Clearwater, FL, who owes lenders millions of dollars in debts.

"Men do not desire to be rich, but to be richer than other men."---John Stuart Mill (1806-1873)

"When the music stops, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing..."---Citigroup CEO Chucky "Master of Timing" Prince, 7/9/07

"Wall Street is a graveyard of geniuses."---Chriss Street, Treasurer, Orange County, CA, 7/27/07

"It was never my thinking that made big money for me. It was my sitting. Men who can be both right and sit tight are uncommon. I found it one of the hardest things to learn."---Jesse Livermore

"You can kill a sheep just once, but you can fleece him 100 times."---Jeff Macke

"Stocks are no longer the weather glass of fortune, but a part of the mask employed to disguise the nation's own face to itself." ---Horace Walpole, 1782

#41 shorty

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Posted 24 August 2007 - 07:18 PM

some dummy at Merrill got duped, gonna git fired over this

Merrill Suckered into EmbarraSSing $Billion SubPrime Blunder

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#42 fxfox

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Posted 24 August 2007 - 07:24 PM


Combined, US/Japan GDP is still greater than Germany, China, UK, France, Italy, Canada, Spain, Brazil, India, Korea, Mexico, Australia, Netherlands, Russia, Argentina, Sweden, Switzerland, Turkey, Belgium, Saudi Arabia, Hong Kong, Taiwan, Indonesia, Austria, Poland, Norway, Denmark, South Africa put together.

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wishfull thinking? :lol:

US and Japan combined is 17,6 trillions

European Union and China combined is 17,2 trillions

thats nearly the same, but WITHOUT Canada, Switzerland, Saudi Arabia, Hong Kong, Taiwan, Indonesia, South Africa, Australia, Korea, India, Brazil, Mexico, Russia

a big difference i would say

source: IMF (World Bank figures almost the same)

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I used the same World Bank figures. I guess it depends on how you slice them.

I don't count the Europeon Onion as one country.

Either way, if the U.S. falters, so does China. I don't see Europe taking up the slack.

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of course not. When the US goes down it drags the rest of the world with it, no doubt about that.
'patriot' is formed with 'patria' and 'idiot'

#43 beardrech

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Posted 24 August 2007 - 07:25 PM

Sorry to be gone for a couple years.  I was, er, busy.  :blink:

Anyway, following in no particular order is an attempt to fine tune the crinkles in the peak of my tin foil hat:

-The 4 year cycle low is due this fall.  I'd take 1250 on the SPX.  Second choice is 1160.  Third choice is Col Mustard in the library with the candlestick.

-Everyone knows the housing market is doomed.  If I ran the zoo, I'd be working overtime to arrange workouts and silent bailouts and other financial rejiggering fairly dripping with moral hazard.  Be careful what you wish for, a global depression would be likely to usher in a period of global conflict greater than what already might be on the table with Peak Oil.  Would say we're in for 2-3 years of Ugly Paper.

-Everyone knows the dollar is doomed.  I am compulsively scratching an itchy discomfort that we might see a powerful countertrend USD rally beginning Soon, or Already, and lasting Quite A While.

-The dollar rally could go hand in hand with a US equity rally which, after the 4 year bottom is in, takes the all the US indices to new nominal highs.  Provided too much technical damage isn't done in the near term, this should be an inflationary extravaganza for PM stocks too.

-Next year we're likely to see the most viable Independent bid for the US Presidency since Perot won 19% of the popular vote in 1992.

-I am foaming boolish on alt energy for the next 2 years.

-In a price context, 2009 may be a good time to go shopping for a home.  Caveat: a wheel will come off the corporate banking system in 2009-2011.  I'm unclear what this does to housing, but anyway.  This may be when potatohead's big boys become unable to continue getting away with it.  Change is coming.  Big time.

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Phat

If my memory serves me correctly didn't you have a life endangering medical incident involving your vascular system.....correct me if Im wrong....and your Latton motto: does it translate into "Let justice be served" idiomatically???

Anyway, nice seeing youur back---well said

Beardreck :ph34r: :ph34r:

#44 Sudaca

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Posted 24 August 2007 - 07:25 PM

What's been accomplished so far in the "rescue" and "normalization" of the financial system is the equivalent of fixing a flat tire on this baby:

wreck.jpg

Stocks going up doesn't help the banks offload the warehoused junk that they have yet to pass on to some poor sucker.

And what we can read from the bank balance sheets about exposure to the toxic waste is minimal.

The two banks that had to be bailed out in Germany didn't show squat on their books and yet they had to be rescued.

Stocks going up is good for a trade, and I'm playing it . But we are far from out of the woods on the core issue.
Thanks, David

#45 Brick Stoolhouse

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Posted 24 August 2007 - 07:36 PM

Enjoy it while it lasts. Gonna be a helluva hangover when it ends.

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Doc- Was gold up early this morning or did it wait until afternoon to go up?The COT
report released today appeared boolish.Of course I had no exposure to the sector so I missed todays upside. Love, Rosie
“A million seconds is 11.5 days. A billion seconds is about 32 years. A trillion seconds is 32,000 years."





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