Author Topic: Back to the mattress  (Read 28238 times)

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Offline nacho

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Back to the mattress
« on: February 27, 2007, 05:37:45 PM »
So we have some doomsayers on here but, when the global economy takes a nosedive, there are no apocalypse threads?  I'm disappointed.

So China...they fucked up.  The rest of the world reacted with a little bit of a dip and all that did was put the larger fears on the horizon into focus.

My assessment:  Why are we taking China seriously?  That's just wishful thinking.  Hell, it's White Man's Guilt is what it is.  China can't hold anything together.  Putting any legitimacy into China at all is ignorant and insane.


Quote
NEW YORK (AP) -- The Dow Jones industrials plunged more than 200 points Tuesday as Wall Street joined a global stock decline sparked by growing concerns that the U.S. and Chinese economies are cooling and that U.S. stocks are embarking on a major correction. In early afternoon trading, the Dow Jones industrial average dropped 209.25, or 1.66 percent, to 12,433.01.
The last time the index saw a one-day decline of more than 200 points was May 17, 2006. The Dow is now 2.8 percent below its record high close of 12,786.64, reached just a week ago.

 

Broader stock indicators also fell sharply. The Standard & Poor's 500 index plummeted 28.16, or 1.83 percent, at 1,422.80, and the Nasdaq composite index dropped 64.79, or 2.59 percent, at 2,439.73.

A 9 percent slide in Chinese stocks earlier set the tone for U.S. trading, a day after investors sent Shanghai's benchmark index to a record high close.

Investors' confidence has been knocked down by a slew of data showing that the economy may be decelerating more than anticipated. A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the U.S. economy, which were raised a day earlier when former Federal Reserve Chairman Alan Greenspan said the economy may be headed for a recession.

"It looks more and more like the economy is a slow growth economy," said Michael Strauss, chief economist at Commonfund. "Moderate economic growth is good _ an abrupt stop in economic growth scares people."

The market had been expecting the government on Wednesday to revise its estimate of fourth-quarter GDP growth down to an annual rate of about 2.3 percent from an initial forecast of 3.5 percent, and grew increasingly nervous on Tuesday that the figure could come in even lower.

The housing market, which the Street had been hoping had bottomed out, also looked far from recovery after a Standard & Poor's index indicated that single-family home prices across the nation were flat in December. A later report from the National Association of Realtors said existing home sales climbed in January by the largest amount in two years, but the data didn't erase housing-related concerns, as median home prices fell for a sixth straight month.

A suicide bomber attack on the main U.S. military base in Afghanistan where Vice President Dick Cheney was visiting also rattled the market.

China's stock market plummeted Tuesday from record highs as investors took profits when concerns arose that the Chinese government may try to temper its ballooning economy by raising interest rates again or reducing more of the money available for lending.

"Corrections usually happen because of a catalyst, and this may be it," said Ed Peters, chief investment officer at PanAgora Asset Management. "The move in China was a surprise, and when a major market has a shock it ripples through the rest of the market. With all the trade that goes on with China, there tends to be a knee-jerk reaction with that kind of drop."

The Shanghai Composite Index tumbled 8.8 percent to close at 2,771.79, its biggest decline since it fell 8.9 percent on Feb. 18, 1997. Since Chinese share prices doubled last year as investors poured money into the market after the completion of shareholding reforms, trading in Shanghai has been very volatile.

Hong Kong's benchmark Hang Seng Index dropped 1.8 percent, and Malaysia's Kuala Lumpur Composite Index fell 2.8 percent. Japan's Nikkei stock average fell a more moderate 0.52 percent, but European markets were rattled _ Britain's FTSE 100 lost 2.31 percent, Germany's DAX index dropped 2.96 percent, and France's CAC-40 fell 3.02 percent.

Bond prices rose as investors bought into the safe-haven Treasury market, pushing the yield on the benchmark 10-year Treasury note down to 4.56 percent, its lowest level so far this year, from 4.63 percent late Monday. The bond buying was sparked primarily by the durable goods orders, which the Commerce Department said fell 7.8 percent, much more than what the market expected.

The durable goods drop raised the chance of the Federal Reserve easing interest rates later in the year _ a possibility that makes the bond market an attractive place to be right now.

The hope for slowing inflation could be dashed, though, if energy costs keep rising. Oil prices initially fell Tuesday on worries that Chinese demand could be dampened should its economy slow down, but later rose on escalating tensions in the Middle East. Crude rose 39 cents to $61.78 a barrel on the New York Mercantile Exchange.

The dollar slipped against other major currencies, while gold also fell.

The Dow has been climbing at a steady rate since last summer, but over the past few trading sessions, stocks have pulled back on the worry that the market is due for a correction. Many analysts have noted that the Dow hasn't seen a 2 percent decline in more than 120 sessions.

Data indicating a slower economy had recently been giving stocks a boost on the hopes that the Fed will lower interest rates, which could reinvigorate consumer spending and the struggling housing market. But the market may fall further before that happens, analysts said.

"If in a week or two, the psychology in the U.S. market turns to the realization that we're in a modest growth economy of 2 to 3 percent growth, that will help temper inflation pressures going forward. If that perception evolves, there's an increase in the likelihood that the Fed will be lowering rates rather than raising rates. Structurally, it's a development that should be good for the equity market, but it might be an event that unfolds after prices are lower," Strauss said.

Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 1.08 billion shares.

No sector was left unscathed by Tuesday's sell-off, and all of the 30 Dow components were lower in early afternoon trading.

The Russell 2000 index of smaller companies was down 17.10, or 2.08 percent, at 806.59.

NYSE-listed shares of Chinese companies plunged. China Mobile Ltd. tumbled $3.39, or 6.9 percent, to $45.89. Mindray Medical International Ltd. dropped $3.69, or 12.85 percent, to $25.02. China Eastern Airlines Corp. fell $4.435, or 13.14 percent, to $29.315.

On the Nasdaq, Internet company Baidu.com Inc. fell $4.44, or 4 percent, to $107.27. Shanda Interactive Entertainment
Ltd., which develops online games, fell $1.42, or 5.7 percent, to $23.50.

« Last Edit: August 06, 2007, 10:10:32 AM by nacho »

Offline fajwat

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Re: Back to the mattress
« Reply #1 on: February 27, 2007, 06:55:18 PM »
so far, only one of my 401k funds has returned a price for today.. -3.51 %
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline fajwat

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Re: Back to the mattress
« Reply #2 on: February 27, 2007, 07:40:56 PM »
all my 401k's funds reported in today's price........  Combined, my retirement fund lost 3.82%; NASDAQ lost 3.86%, S&P 500 lost 3.47%, DJI lost 3.29% (400 points, down to 12,216).

"Biggest 1 day drop in 3 years!!!!"  Still, YTD I think I'm up around 3.5% while the DJI is only up around 1.25% YTD.

Of course, this is only the beginning and soon all currency will be worthless and we'll all default to a utopian trade society which bucks the history by not including any slavery.

"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline nacho

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Re: Back to the mattress
« Reply #3 on: February 27, 2007, 08:03:46 PM »


Of course, this is only the beginning and soon all currency will be worthless and we'll all default to a utopian trade society which bucks the history by not including any slavery.



Quote from: tyler durden
Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium.

Quote from: tyler durden
In the world I see - you are stalking elk through the damp canyon forests around the ruins of Rockefeller Center. You'll wear leather clothes that will last you the rest of your life. You'll climb the wrist-thick kudzu vines that wrap the Sears Tower. And when you look down, you'll see tiny figures pounding corn, laying strips of venison on the empty car pool lane of some abandoned superhighway.



Offline fajwat

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Re: Back to the mattress
« Reply #4 on: February 27, 2007, 08:19:04 PM »
hahaha, nice. I don't remember quotes like that when I already believe them.
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline fajwat

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Re: Back to the mattress
« Reply #5 on: February 27, 2007, 08:27:30 PM »
I already heavily suspect that the US market is stuck in the wrong direction.  What bothers me about today's movement is that all my international funds (except one, FISMX, which lost 2.94%) lost more than the US market indices.  (FF doesn't know the word indices?  WTHF?)
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline fajwat

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Re: Back to the mattress
« Reply #6 on: February 27, 2007, 08:31:11 PM »
on the other hand, i'm thinking that this week should be a great time to finally open and max out a pair of IRA's (2006 and 2007), putting it into temporarily deflated stocks -- looks like I could squeeze in a couple shares of BRK.B (Buffet's company, owns GEICO, etc.)
« Last Edit: February 27, 2007, 08:34:22 PM by fajwat »
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline Cassander

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Re: Back to the mattress
« Reply #7 on: February 27, 2007, 08:35:35 PM »
Tune in next week to "Fajwat's Ongoing Conversations with Himself" when Fajwat takes on Fajwat in a lively face-off concerning mortgage rates!
You ain't a has been if you never was.

Offline fajwat

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Re: Back to the mattress
« Reply #8 on: February 27, 2007, 09:01:16 PM »
i spend a lot of time alone.

and y'all aren't posting enough!  We need fresh blood!
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline nacho

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Re: Back to the mattress
« Reply #9 on: February 27, 2007, 09:28:40 PM »
If there's a crash, last man standing will be the US.  We know how to cowboy up.  Everyone who lost faith in the dollar and drifted away will die a nasty death because artificial currencies like the Euro aren't really designed for a crash and burn.

And though, supposedly, the global economy will never again see the likes of a major recession/depression, we all know that's not true. 

Offline fajwat

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Re: Back to the mattress
« Reply #10 on: February 27, 2007, 09:48:22 PM »
If there's a crash, last man standing will be the US.  We know how to cowboy up.  Everyone who lost faith in the dollar and drifted away will die a nasty death because artificial currencies like the Euro aren't really designed for a crash and burn.

um.  wtf are you talking about?  Not because I know better but because I really don't know.
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline nacho

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Re: Back to the mattress
« Reply #11 on: February 27, 2007, 10:50:02 PM »
I'm making broad statements I can't back up about how, if there's a major global collapse, currencies that have been forced will have a hard time.  The Euro is only as strong as the nations that back it and, right now, you have a handful of western/northern countries backing it up with a whole truckload of weaker eastern/southern countries living only thanks to subsidies from the former countries and struggling to get moving. 

Where the Euro's problem may come is if there's a California screw-up.  Each country is responsible for their own debt, but it's a Euro debt.  So what happens if one of the lynchpin countries supporting all of these smaller countries and the Euro itself hits a major economic downturn and, like California, goes bankrupt?

What if each State was 100%, fix it or die, responsible for their own debt?  If West Virginia was supported thanks only to subsidies from Maryland and PA?  If, like, going bankrupt meant total collapse. 

Then the dollar takes a major downturn and MD goes into debt, then might go bankrupt?  And the downturn is wide-reaching and other states start going bankrupt.  And all the poor states that had been propped up by the richer states are left to spiral into a natural collapse.  And some states have a currency before the dollar and, seeing the writing on the wall, switch back to that currency before the collapse can get them.

Then the world -- also seeing the writing on the wall -- suddenly dumps everything and switches their faith back to an older and proven currency elsewhere.  In a worst case scenario (global financial collapse/depression) the Euro is extinct by the end of one week.

The Chinese economic powerhouse has a similar problem -- a somewhat artificially boosted and very new currency, globally speaking, may be the future today, but if shit hits the fan (which it just did), you see what happens.  When the dollar fucks up, the world is okay.  China?  One hiccup and the world shivers.  With the dollar on its knees, what happens if China simply falls apart? A global economy from a country with no real middle class and a government whose days are numbered?  In order for a global economy to work, China needs a full on political and social shift.  And doing that will blow them out of the water.  They're in full on Catch 22 mode. 

The dollar has staying power.  It doesn't look like it but, when we're all up against the wall, things will change.

The Depression is the lesson.  The dollar dominating and, bang, a depression hits and the world collapses.  And it's not even funny how quickly it collapses. And the world doesn't recover, either.  It never, really, recovered (in the form it was in as of 1929).  But the US came back.  The NRA is formed when FDR gets in and, for all intents and purposes, the worst of the depression was over within two years of FDR taking office.  The economy was naturally recovering and on the rise in 33.  What made things bad was a second recession in 37, which was thanks to FDR futzing around and our sort of passive involvement in the war over in yonder Pacific/Asia.  (So the US walks away after three years with recovery in sight, but the world is on the floor until it starts to burn in 39.)

Another depression is unlikely, but the Euro is not as stable as it seems.  It won't take a dramatic collapse to send it spinning.
« Last Edit: February 27, 2007, 10:56:08 PM by nacho »

Offline fajwat

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Re: Back to the mattress
« Reply #12 on: February 28, 2007, 09:41:09 AM »
It'd take more than a year to break the euro up.  minimum of a few months to just get one country to leave, and they wouldn't start to leave until the damage was blatant.

As far as I know, the Euro is still primarily used by themselves and is only starting to take over the Dollar's current role as the world's currency.  Unlike the dollar, the non-EU world hasn't switched to Euros so there'd be no backlash from them dumping wads of reserve Euro currency and T bills.

I get what you're saying about the history and the resilience, at least partly psychological, of the dollar.  But we don't have FDR, I wonder if we'll ever be able to get an FDR again, and we are being lead by fucking monkeys (sorry monkey!) into hell.  It's hard to be a world currency when you're bankrupt and hated.  Sure, worst case, currently I think you're right.  If the world collapses dramatically (five nukes go off) this year, the strongest, if any, currency left could be the dollar.  If it happens ten years from now?  Someone else's currency.
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell

Offline nacho

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Re: Back to the mattress
« Reply #13 on: February 28, 2007, 12:27:22 PM »
If there's one thing American history has proven:  Extraordinary leaders emerge for extraordinary circumstances (and, strangely, they always die as soon as the threat is over).  When the depression hit, we had a fucker worse than Bush on board.  But we sure fucking woke up in a hurry.  We're led by monkeys now because we're happy and calm and warm.  So who cares?  Do you really think things will fall apart like in Tipping Point?  You start to take away our toy truck and we're going to scream. 

Hating America is everyone's favorite pasttime, but the world isn't as stupid as we are.  A large amount of the hatred is still centered on Bush.  The question you'll be asked in every bar in every country isn't "What's wrong with you" or "What's wrong with your foreign policy" it's "What's wrong with Bush?"  Once he's gone, things will begin to soften.  And once the Democrats begin what will be a hideous and insane withdrawl from Iraq, we'll start to improve in the world's eyes.  The sad dog with its tail between its legs.  Just like after Vietnam.   Except, this time, we won't have the Soviets to kick around.  The next ten years will see the true shift of America into the world, as opposed to the strange, alien creature we've always been

And it's not a question of nukes.  It's a question of people investing in a country that is, essentially, run by slaves.  And slaves don't stay slaves forever.  China's fall is inevitable.  When it does, it'll be an economic nuke, because everyone thinks China is the big, cool emerging market.

The Chinese Syndrome is something we've done before.  The Brits did it in the imperial days and we did it with Chiang.   In those days, they were little puppy dogs.  Now we're playing an even worse game -- we're balancing economies on this great, golden opportunity. We're moving in, like the west has always done.  And we'll get burnt, as has always happened with China.  Except, this time, it'll launch us into a horrific recession, or worse.  And when that comes, funny money like the Euro will struggle.

And the non-EU world IS switching to the Euro.  That's all the talk, isn't it?  The dollar is dying -- go Euro, go Euro, go Euro!  Even you're thinking about it, and so are many other people.  I have been.  Other countries are.  It's going to be the coming thing.

The Euro can get as strong as it wants.  The EU is over-extending and the basic flaws of the Euro detailed above will still exist.  There's no foresight applied to the formula.  America will always have her resources and infrastructure, and a stronger industry than western Europe.  When the world gets fucked, a modern day version of the NRA will be to warm up the industry.  Employment, trade, investment, confidence. 

Offline fajwat

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Re: Back to the mattress
« Reply #14 on: February 28, 2007, 02:27:12 PM »
The original EU has better infrastructure than we do.  I agree that their rapid expansion introduces risk.

Most countries still use dollars.  Oil countries still use dollars.  No one outside of Europe that I know of has switched yet, but Venezuela and Indonesia are considering it.  Whenever a country switches it can be expected to nudge the balance of strength farther away from Dollars to Euros.
"If it were up to me I would close Guantánamo not tomorrow but this afternoon... Essentially, we have shaken the belief that the world had in America's justice system... and it's causing us far more damage than any good we get from it."

-Colin Powell