Bulls, Bears & Bucks #56: Geithner's plan in werking

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Op woensdag 8 april 2009 13:27 schreef simmu het volgende:
heeheehee! geen commentaar op 30+ vrouwen he! en zekers niet op wijven met hersens in plaats van sperma in hun hoofd!

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Op woensdag 8 april 2009 13:37 schreef Lemmeb het volgende:

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Zijn die er ook dan?

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Op woensdag 8 april 2009 13:38 schreef sitting_elfling het volgende:

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simmu zal wel de enige zijn dan eh ?

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Op woensdag 8 april 2009 13:38 schreef sitting_elfling het volgende:

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simmu zal wel de enige zijn dan eh ?

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Op woensdag 8 april 2009 13:45 schreef pberends het volgende:
Een notoire anti-inflatiehavik bij de Fed is ook om:

[ afbeelding ]

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Op woensdag 8 april 2009 14:12 schreef Lemmeb het volgende:

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Wat bedoel je met "anti-inflatiehavik"? Was dit iemand die altijd op het gevaar van inflatie zat te hameren, of juist iemand die altijd tegen dat gevaar in ging?

Afijn, ik ben blij dat hij er hetzelfde over denkt als ik. De enige inflatie die in de VS zou kunnen ontstaan is hyperinflatie, als de dollar valt. Maar dat heeft met 'normale' inflatie weinig meer te maken.

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Op woensdag 8 april 2009 17:16 schreef waht het volgende:
En met 'War' wordt WOII bedoeld neem ik aan?

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Op woensdag 8 april 2009 18:35 schreef Basp1 het volgende:
Wat zijn de stippellijntjes bij de boventste grafiek?

Ongelofelijk om te zien trouwens dat tjdens de grote depressie de industriele productie met 60% terug viel. De grote vraag zal alleen wel zijn was de vroegere industie vergelijkbaar met de huidige industrie. Tijdens de grote depressie werkten bijvoorbeeld veel mensen op het land, en tegenwoordig kunnen we zelfs de landbouw al als een industrie beschouwen. En qau diensten kan ik me niet voorstellen dat die al zoveel in overvloed aanwezig waren tijden de grote depressie.

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Huizenmarkt
Een grote transactie bij de Amerikaanse huizenbouwers: Pulte Homes (-10,5%) neemt sectorgenoot Centex (+18,9%) over voor $ 1,3 miljard in aandelen, op het moment van bieden een premie van 32,6%. Maar of de huizenmarkt de bodem heeft gezien is nog maar de vraag. Uit de notulen van de Fed FOMC vergadering van 18 maart bleek dat de leden niet verwachten dat de verbetering van de huizenmarktcijfers in februari het begin is van een nieuwe trend.

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Investors beware, 'tis a sucker's rally

Friday, April 10, 2009 3:25 IST

"The more I think about it, the more interesting it becomes that sentiment has turned bullish so quickly. When bear markets really bottom, sentiment is so negative that it really feels like the blood is not only in the streets, but that we are haemorrhaging from every orifice with nary a tourniquet in sight. That hasn't happened yet." --Richard Russell, one of the world's most revered investment letter writers, who has been publishing Dow Theory Letters since 1958

"You have become a scaremonger," she said.

"Yeah. But isn't one man's scaremonger another man's realist?" I asked.

"I was looking at some numbers and realised that most stock markets around the world have rallied big time since the beginning of March. Take the Bombay Stock Exchange Sensex, which has risen by more than 20%. The Dow Jones Industrial Average, the oldest stock index in the world, has given a return of 11% since the beginning of March. And here you are, going on and on as if the world is about to come to an end."

"Ever heard of a term called 'dead cat bounce'?" I asked.

"I thought we are discussing the stock market. Why are we suddenly talking about cats?"

"Let me explain. A dead cat bounce is a term used to describe rallies in a bear market. It comes from the notion that even a dead cat bounces if its falls from a great height. Most bear markets are characterised by these dead cat bounces. Take the Great Crash of the stock market that happened in October 1929 and which ultimately led to the Great Depression. Between 1929 and 1932, Dow fell by around 90%. But during that period, there were six rallies in which the stock market gave a return of more than 20%. Every time there was a renewed sense of optimism among the investors, but each time the rally went kaput and the market touched new lows."

"Rather interesting. But what makes investors get back into the market time and again?" she asked.

"I think it is a matter of hope. When everything was rallying, investors believed nothing could go wrong. That is why the world over stock markets went up and so did property prices. Over the last 15 months, the process has reversed. Stock markets have fallen with a thud, and so have property prices. But investors still have an iota of hope left in them. So every time stock prices go up a little, investors come up with stories that they tell themselves, to convince themselves that everything will be fine, and that the good old days will be back. The business media picks this up, and builds on it. If you have realised, anchors of business news channels have been smiling a lot more in the last few days."

"So what is the story investors are telling themselves this time around?"

"That combined government action will save the world, and its financial markets. The latest episode in this story is the meeting of the leaders of the Group of Twenty (G-20) which happened last week. They announced a $1.1 trillion stimulus for the International Monetary Fund (IMF) and other international institutions. This has made investors across the world happy. They don't realise that the financial meltdown has destroyed investment capital of around $50 trillion. So what difference is a little over a trillion dollars going to make? Also, as one journalist put it, 20 leaders of G-20 spent 220 minutes in London, discussing the crisis, which means each leader had precisely 11 minutes to put across his point of view."

"Eleven minutes?" she interrupted.

"Actually, it was much lesser, considering there were ten other leaders from organisations like the IMF, Association of South East Asian Nations and the Financial Stability Forum, etc also attending the meeting. So, there were thirty leaders and a total of 220 minutes to discuss the entire issue, which means a little over seven minutes per leader. Not a huge amount of time. Hence, expecting them to come out with anything substantial in such a short period of time would be outright foolish."

"What of the economy? Isn't that supposed to recover in the days to come?"
"Ultimately everything recovers; the question is --- when? That nobody really knows, and at best, the so-called experts are guessing. Let me give you the example of Japan. Exports for March are down 49% from the same time a year back. Exports to the US, Japan's largest trading partner, collapsed by 58.4%. Industrial production was down 9.4% in February and the economy contracted 12.1% in the first three months of the year. All this is forcing companies to cut jobs and salaries. Salaries have come down by 3.5% from a year back. Investors in Japan have ignored all the negative news and the Nikkei-225 index has rallied 17.8% since the beginning of March. They are betting on an export-led recovery in the second half of the year. The Japanese economy may be an extreme example, but the situation is no different in other parts of the world as well, with the economy contracting and massive job losses."

"You are scaring me even more now."

"Maybe, but that is the way I see it. Also, a point to remember is that as more and more people lose their jobs all over the world, there will be more loan defaults, and a further slowdown in spending, which will impact corporate profits. This, in turn, will lead to more job losses and a further slowdown in spending. An important point to remember is that till now, the United States has the main source of demand for the world economy. And the American consumer is clearly not in a mood to buy either goods or services right now."

"What are you hinting at?" she asked.

"Stock market performance ultimately rests on hopes of future corporate performance. And if investors don't buy goods and services, companies can't make profits. Meanwhile, investors are stuck with delusional optimism. By the time they come out of it, they would have lost a few dollars more. Or should I say rupees? P T Barnum, an American showman, once famously said, "There's a sucker born every minute." Rallies in bear markets are sucker's rallies. Now can you tell me what people who invest only on the basis of such rallies are called?"

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Swiss slide into deflation signals the next chapter of this global crisis
Watch Switzerland closely. It is tipping into deflation, the first Western country to succumb to Japan's disease.


By Ambrose Evans-Pritchard
Last Updated: 7:17PM BST 05 Apr 2009

Swiss consumer prices fell 0.4pc in March (year-on-year). Swiss CPI will be minus 1pc at least by July, nearing the level where spending psychology changes. By the time you have a self-feeding spiral, it is too late.

"This is something that we must prevent at all costs. The current situation is extraordinarily serious," said Philipp Hildebrand, a governor of the Swiss National Bank.

The SNB is not easily spooked. It is the world's benchmark bank, the keeper of the monetary flame. Yet even the SNB's hard men have thrown away the rule book, taking emergency action to force down the exchange rate of the Swiss franc.

Here lies the danger. If other countries try to export deflation by this means, we will face a second phase of the global crisis. Taiwan is already devaluing. Korea, Singapore, and Sweden all seem tempted to follow. Japan is chomping at the bit.

"We don't fully realise in the West what a catastrophic collapse Japan has suffered," says Albert Edwards, global strategist at Société Générale. "The West has dumped a large part of its economic downturn onto Japan by devaluing against the yen."

This is about to go into reverse as Tokyo hits the ping-pong ball back across the net. "As the unfolding collapse in the yen gathers pace, the West will see its green shoots incinerated to dust," he said.

Japan's industrial output fell 38pc in February (year-on-year), mostly concentrated into the last four months. No major economy imploded at this speed in the 1930s. The country has been hit by a double shock. As an export power it has taken the brunt of Anglo-Saxon belt-tightening: as the world's top creditor it is cursed by a "safe-haven" currency that soars in moments of danger – largely because the Japanese bring home their wealth till the storm passes. Normally, Japan can cope. This time, the yen's rise has pushed the economy over a cliff.

The yen must come back down to earth, and soon, or Japanese society will start to disintegrate. If necessary, the Bank of Japan will force it down by intervention, as occurred in 2003-2004.

Will China stand idly by as Japanese unleashes a shock to the global system through competitive devaluation? That depends whether you think China's spring recovery is the real thing, or an inventory build-up before the next downward slide. The Communist Party says 20m jobs have been lost since the bubble burst. This cannot be tolerated for long.

It is remarkable that China's fall into deflation has attracted so little notice. China's CPI was minus 1.6pc in February. The country has built too many factories producing goods that the world cannot absorb. The temptation is to shunt this excess capacity abroad. A faction of the politburo is already itching to devalue the yuan.

Of course, Britain has already played the currency card. That is different. The pound's fall, though welcome, is a side-effect of the Bank of England efforts to stem the credit crunch. There has been no currency intervention.

Crucially, Britain has a current account deficit. Many countries toying with devaluation are exporters with surpluses – 15.4pc of GDP for Singapore, 8.4pc for Switzerland, and 6.1pc for China. If these countries refuse to let their imbalances correct, world demand must implode.

Mr Hildebrand denies that the SNB is pursuing a "beggar-thy-neighbour' strategy. Like the yen, the franc suffers from the safe-haven curse: everybody buys it in a storm. This tightens monetary conditions. The SNB cannot easily offset this. It has already cut interest rates to near zero. There are not enough Swiss government bonds in the market to rely on the sort of "QE" asset purchases being carried out by the Bank.

Ultimately, I suspect this crisis may mark the moment when the Swiss franc loses its safe-haven role. Credit default swaps (CDS) measuring risk on five-year government debt have reached 127 for Switzerland, higher than Britain at 118. Norway has the world's lowest CDS at 48, reflecting its status as a petro-democracy.

Switzerland's banks are over-leveraged. Loans to emerging markets equal 50pc of GDP (half to Eastern Europe). Banking secrecy is dying. Fortunately for the Swiss, they have built up $700bn in net foreign assets for a rainy day. Improvident Britons are less lucky. But that is another story. What we risk now is a game of deflation "pass-the-parcel" worldwide. The economic establishment was caught off guard from 2003 to 2007 because it overlooked the way that Asia's unbalanced relationship with the West was feeding a credit bubble.

It may be caught again as the same warped structure leads to a chain of (panicked) devaluations.

Enjoy the "bear-trap" rally on global bourses this spring. But remember, we have only just begun to see the mass lay-offs and hardship caused by this slump. The politicians will act to save their skins. Markets may not like the result.