Popping Bubbles: 2009

[11]

We have reached a bit of a plateau for now, stocks trying to stabilise, USD looks to have topped out for now, and the aggressive interest rate cycle is coming to an end with US 3 month T-Bill yileds going negative .... so whats to look out for in 2009??

Top on the radar is the rapidly deteriorating situation in both Russia and Korea - both currencies are taking a massive beating and the central banks have taken massive hits on their currency reserves:-

Russia:

Bloomberg.com: Exclusive

Korea:

Bloomberg.com: Worldwide

China itself is also hitting strong headwinds with exports falling last month and USD/CNY reversing course sharply.

This may have a THB impact - if KRW does collapse - it may well trigger a run on SE Asian currencies in general as seen in 1997 when the THB tiggered a region wide fall out.

In the US:-

US auto-industry bailout running into trouble, and why spend money bailing out these useless business models defies belief, Ford should survive, GM 50:50 but Chrysler is doomed - now suppliers demanding COD so writing deservedly on the wall for them. 20+ years to adapt and move into the 21st Century - letting them go bankrupt and allowing take over by Asian management is about the best possible outcome.

Boeing - nice job boys! Following path Aibus made with 380, coming out and admitting Dreamliner will not roll off production line until 2010 at the earliest and if you look into reasons why, any faith in high quality US manufacturing would be surely shaken!

Also on the radar is worsening finacial sitsuation of many states. As unemployment and repossesions soar in tandem with falling tax receipts - states are heading into deep trouble raising funds. This may well get critical for some (populous) states (CA, NJ NY and GA).

California faces financial meltdown as debt grows by $1.7m an hour - Times Online

Europe - increasing tension between France (Sarkozy) and Germany (Merkal) about scope and scale of stimulus is building, and EU Stability Pact guidelines are getting tossed out the window ... the tension in the EU could well seee much darker days ahead.

UK - hard hit and worsening Main St recession and no sign of recovery yet, but expect recovery in UK before mainland Europe.

So this stock rally maybe tempting but see it merely as a bear market rally. With the USD - with interest rates so low, its hardly sttractive, so that could be it for a while for USD strength - the next stock plunge will see further repatriation flows so longer term I'm not too bearish for USD.

Commodities - Oil trying to hold $40, with USD declining again this may well hold, but back up to $70 anytime soon is a tall order without a blow up in Middle East. Gold (& silver) amidst rumours of COMEX irregularities (I'm sure LiL will happily expand upon) coupled with currency fears (Russia/Korea) and general horror at unbelievable global Government spending splurge is holding strong into year end. I'm not entirely sold on monster PM rally as deflationary envirnoments are not good for precious metals.

Good luck - wishing you fellow BM's a Happy and (hopefully) Prosperous New Year.

[LivinLOS]

Stealing my thunder !!!

Cut and paste news posts for the morning

Switzerland may have to print money to stave off deflation - Telegraph

Switzerland may have to print money to stave off deflation
The Swiss National Bank has cut interest rates to 0.5pc and opened the door for emergency stimulus, becoming the first country in Europe to flirt with zero policy rates.


By Ambrose Evans-Pritchard
Last Updated: 7:47PM GMT 11 Dec 2008

South Korea cut to 3pc and Taiwan cut to 2pc, the lowest in 30 years. Both countries are facing a collapse in exports to China and traditional markets in the West.

Thomas Jordan, a board member of the SNB, said the bank was mulling extreme measures to stabilise the financial system and cushion the economy as it falls into recession next year.

"We could engage in quantitative easing and we could intervene in foreign exchange markets or we could buy up bonds and try to influence long-term interest rates. All these options are open and we're not limited in any way in choosing from among these instruments," he said.

Quantitative easing is the tool pioneered by the Bank of Japan to stave off deflation. It is tantamount to printing money.

David Bloom, currency chief at HSBC, said the shift in policy was breathtaking. "The SNB are the hard men of central banking; they are even harder than European Central Bank. What they are saying is that inflation is no longer a problem, it's the solution. They want stimulus any way they can get it."

The banking sector makes up 20pc of Swiss GDP, leaving the country extremely exposed to the credit crisis. The liabilities of Credit Suisse and UBS are equal to seven times national GDP. This has echoes of the situation in Iceland before the country collapsed, although Swiss banks have a much better mix of assets.

"The crucial difference is that the Swiss own half a trillion dollars of external assets. They have a current account surplus of 16pc of GDP. This is their ace in the hole. If push ever comes to shove, the Swiss taxpayers have the money to pay," said Mr Bloom

Switzerland, Sweden, Britain, and Canada are all now following the US Federal Reserve in taking revolutionary action to head off a slump next year, while the ECB has moved with much greater caution. It is unclear whether this reflects a rift in doctrinal policy, or whether the ECB is less able to respond to crises because of its treaty-bound institutional structure. The ECB's chief theorist, Lorenzo Bini-Smaghi, said it was hazardous for central banks to cut rates too low and risk using up ammunition.

[LivinLOS]

GM Retains Bankruptcy Counsel; Tentative Pact Reached on Bailout - WSJ.com

Closer.. Ever closer..

[LivinLOS]

Jim Rogers calls most big U.S. banks bankrupt | Industry Summits | Reuters

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

[Hobbsy]

you seem to revel in this LiL 5555

you'll only be happy when its gone completely MAD MAX! (youve got the haircut) hehe

[LivinLOS]

Bloomberg.com: Worldwide

I dont know about revel in it.. But do think theres much more down the pipe..

When LiL gets bullish... Thats when you gotta worry..

[Coolhand]

how will the economy fare in 2009?
The Union of Miners said: "It will fall into a big black hole."

The Musicians' Association said: "After a slow start, it will rise to a major crescendo."

The Union of Lumberjacks said: "Successive cuts will weaken the structure, and it will fall slowly to the ground with a loud crash."

Flight Engineers' Union: "Recovery will undergo a short delay for technical reasons."

The Interpreters' Club: "The economy will fall, tomber, vallen, jatuh, cadere, falle or cair."

The Financial Analysts' Society said: "It may go up, it may go down, or it may stay the same. Can I have my bonus now please?"

The Marine Biologists' Institute said: "It's heading underwater."

The Meteorologists' Association said: "Gloomy spells interspersed with sunny periods will lead to major storms."

The Motorists' Club said: "It'll race along for a while, then run out of gas."

The Nanotechnology Institute said: "There will be improvements, but they will be very very very VERY small."

The Nuclear Scientists' Union said: "Don't worry, nothing can go wrong. Just keep repeating that."

The Union of Nurses said: "It's going to be a bitter pill to swallow."

The Oceanographers' Institute said: "Trouble is coming, wave after wave of it."

The Opthalmologists' Union said: "It's hard to forecast as the top is clear, but the bottom is a bit blurry."

The Piling Contractors' Association said: "The most important thing is to lay a firm foundation."

The Pilots' Union said: "Doors to manual. We will shortly be beginning our descent."

The Property Sales Association said: "Why worry? It's as safe as houses."

The Expectant Mothers' Society said: "You're laboring under a misconception."

The Society of Public Relations Officers said: "There's going to be another massive fall, or what we prefer to call a `negative rise."'

The Psychiatrists' Union said: "You're all bonkers."

The Association of Quality Control Inspectors said: "Next year? A reject."

The International Union of Sales Representatives said:

"We see the year ahead as a wonderful buying opportunity, as indeed was the past 12 months, and every year before that."

The Unlicensed Bus Drivers' Union said: "Hold tight, it's going to be a wild ride."

The Skaters' Association said: "We suspect it's on thin ice."

The Singers' Club said: "It will stay between doh and ray for a while, before shooting through me, and ending up between fah and so."

The Society of X-Ray Technicians said: "We can see right through this one."

The Storytellers' Society said: "It will grow like Topsy."

The Taxidermists' Union said: "It's totally stuffed."

The Teachers' Union said: "Fail. Retake. Must try harder."

The Union of Time Signal Announcers said: "At the next long beep, the economy will go from recession to depression: Bip. Bip. Bip. Beeeeep."

The Urologists' Conference said: "The notion of recovery just doesn't hold water."

The Veterinary Surgeons' Union said: "Anyone expecting good news is barking mad."

The World Council of Churches said: "Heaven only knows."

[Rex7777]

Hmmmm. I'm going to have to look into the Korean Won. A trip to Korea might be in order. Korean girls can be good.

Rex

[LivinLOS]

Platinum finally drop under gold.. Dont think I have ever seen that before !!

Obviously just happened on the bailout talks falling through.

[JayBee]

Originally Posted by LivinLOS;

Platinum finally drop under gold.. Dont think I have ever seen that before !!

"Must be the season of the witch!" - Donovan Leitch.

[11]

The US auto industry wish you a Happy Christmas and will rob you next year! ...

[The Loop]

US money supply jumps a whopping 73% in Nov..

Is this start of the hyper inflation??

[11]

Originally Posted by The Loop

US money supply jumps a whopping 73% in Nov..

Is this start of the hyper inflation??

Would say the plot was lost in September .... I wouldnt sleep well at night if I was Paulson or Bernenke!!

http://www.cumber.com/home/Factors.pdf

[sting]

Originally Posted by 11

The US auto industry wish you a Happy Christmas and will rob you next year! ...

US auto industry wish you a Happy Christmas

[Bello Uomo]

Its been a great year to be away from home, having cashed in my chips back in February.

Good luck to everyone with their investments in 2009...

Me, I'm eyeing a new car with some of the cheap credit on offer!

[The Loop]

Any estimates for job losses if the whole industry shuts down??

With all the peripheral parts suppliers and servicing workshops etc...

[Nam Pla]

I ate at this sidewalk eatery on Suk Soi 13 once, and I was pooping bubbles for a week!

... Huh?



Oh... sorry.......

[11]

Originally Posted by The Loop

Any estimates for job losses if the whole industry shuts down??

With all the peripheral parts suppliers and servicing workshops etc...

>1.5 million

Absent a merger or bailout, he said, the Detroit auto industry would likely collapse, taking with it at least 1.4 million jobs within 12 months.

Without bailout, huge job loss seen at GM | Freep.com | Detroit Free Press

[Oggy]

Compelling argument for reducing troops in Iraq, it costs too much to keep them there. How much have we spent in keeping troops out there since this all started.

[11]

Originally Posted by Oggy

Compelling argument for reducing troops in Iraq, it costs too much to keep them there. How much have we spent in keeping troops out there since this all started.

Depends whos doing the counting: US - between $700 billion and $3 trillion.

The Iraq War Will Cost Us $3 Trillion, and Much More - washingtonpost.com

BBC NEWS | Business | The Iraq war: Counting the cost

[11]

Alas NOT:

Bloomberg.com: Exclusive

While rates on everything from four-week Treasury bills to 30-year bonds fall to all-time lows, companies are paying an average 10.8 percent on their debt, up from 6.53 percent in January.

...and new rules fro US credit card holders likely...

Banks and consumers brace for new credit card rules | U.S. | Reuters

The new rules, which were proposed earlier this year, are expected to total some 1,000 pages. They need approval of the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration, which all are expected to act on Thursday.

Thats a feck of lot of small print!

[LivinLOS]

From one of the guys I read.

In fact, I was pondering the US debt increases alone. If you only look at the treasury and like bond indebtedness of the US, starting around July of 07 it was around $9 trillion. Now, in a mere year and a half, the US has added another $8 plus trillion to it with all the various bailout mechanisms. These numbers are added up in an LA Times article last week.

So, the US accumulates $9 trillion of national debt in 240 years, and in a mere year and a half, adds another $ 8 trillion? And for what? The credit markets are still frozen solid.

[So-cal]

Originally Posted by 11

Alas NOT:

Bloomberg.com: Exclusive



...and new rules fro US credit card holders likely...

Banks and consumers brace for new credit card rules | U.S. | Reuters



Thats a feck of lot of small print!

This really makes me wonder. Does ultra low intrest rates and low bond yields not make real money worth less? I would think the logical thing to do is to raise rates slightly. If people in the 80s could afford 9-12% intrest then why cant people handle them now?

[Dupree00]

Originally Posted by So-cal

This really makes me wonder. Does ultra low intrest rates and low bond yields not make real money worth less? I would think the logical thing to do is to raise rates slightly. If people in the 80s could afford 9-12% intrest then why cant people handle them now?

Sounds good to me. Then your blue chip stocks could make higher dividend returns.

[ub2yoo]

So today I had the great idea to get my savings away from $ to Euro...since the pound is out of question anyway ...

Called HSBC..they offered a 7% p.a. interest on off-shore couple of month ago....today they offer max. 2.4% for a Euro account.

Called Lloyds...they offered a 1.6% p.a. for a Euro off-shore account...

From what I gathered, returns from the low term savings/off-shore accounts from oversea banks are close to nihil...can't get credit...can't put money
...difficult times!

[Sirgezza]

Originally Posted by So-cal

This really makes me wonder. Does ultra low intrest rates and low bond yields not make real money worth less? I would think the logical thing to do is to raise rates slightly. If people in the 80s could afford 9-12% intrest then why cant people handle them now?

Probably becase the ratio of debt to earnings is a lot higher. Banks have lent at silly multiples in recent years - all part of why they ran out of cash.

[Coolhand]

NEW STOCKMARKET TERMS

BULL MARKET-A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET-A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING-The art of buying low and selling lower.
P/E RATIO-The percentage of investors wetting their pants as the market keeps crashing.
BROKER-What my broker has made me.
STANDARD & POOR-Your life in a nutshell.
STOCK ANALYST-Idiot who just downgraded your stock.
STOCK SPLIT-When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER-A guy whose phone has been disconnected.
MARKET CORRECTION-The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
YAHOO-What you yell after selling it to some poor sucker for $240 per share.
WINDOWS-What you jump out of when you're the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR-Past year investor who's now locked up in a nuthouse.
PROFIT-An archaic word no longer in use.

[LivinLOS]

The definition of a recession, when your neighbour loses his job.
The definition of a depression, when you lose yours !!

[dennisinkamala]

After a financial suffering over the last year or so I have decided to put the biggest majority of my liquid assets ( ) into (sic.) BG's and go go dancers. Split will be 50-50 and returns (of a sort) are guaranteed regardless of the world economy.

Anybody else doing the same??

[11]

FED chops interests rates to a target range of 0.00% - 0.25%

What a shocker .... also they are aiming at quantitative easing ... dunno about popping bubbles - this is fuel to create the mother of all bubbles!

And thats it for the USD ... expect USD decline to begin in earnest!

[Rex7777]

Originally Posted by 11

FED chops interests rates to a target range of 0.00% - 0.25%

What a shocker .... also they are aiming at quantitative easing ... dunno about popping bubbles - this is fuel to create the mother of all bubbles!

And thats it for the USD ... expect USD decline to begin in earnest!

I hope the dollar doesn't decline too much. Then again, it's all relative. As long as it stays close to where it's at vs the Thai Baht, I'll be happy. Still, I can see why it would decline, given the recent fed actions.

Rex

[nelsonone]

Its been held artificially high by other country's who use it to trade (futures + current)

I can see it becoming less relevant in the foreseable future as these countries move to use other currencies like the Yen + Euro (and further out the Yuan) for this purpose

[LivinLOS]

Money fight !!! So the cause of the problem was old Bibbles Greenspan and his 1% rates and thier solution is .25% rates ??

Crazy way to solve the aftermath of total fiscal irresponsibility.. More fiscal irresponsibility...

[marc26]

Originally Posted by LivinLOS

Money fight !!! So the cause of the problem was old Bibbles Greenspan and his 1% rates and thier solution is .25% rates ??

Crazy way to solve the aftermath of total fiscal irresponsibility.. More fiscal irresponsibility...

and the market shoots right up...unbelievable(sure some is short covering, but still)
with the note after that the extra cut shows that we are worse off than people think but the market flies up

[marc26]

Originally Posted by nelsonone

Its been held artificially high by other country's who use it to trade (futures + current)

I can see it becoming less relevant in the foreseable future as these countries move to use other currencies like the Yen + Euro (and further out the Yuan) for this purpose

but that was before this mess, it has even jumped higher because of all the money going into treasuries
USD/CAD went from 1.10 to 1.30, not trickling back down to 1.20

although it always seems to find a way to shoot right back to 1.30 the 4-5 days im down south 5555