The ongoing financial turmoil and financial discussion thread

[Phanuthier]

Originally Posted by mykalberta

They had an interesting 60 minutes show. Apparently some Hedge Fund Managers made out very good in the Credit Default Swaps as in the multi billion in profits kind of good. They listed some names and companies that I havent heard of.

After watching a few of the last 60 minutes programs, the whole mess is making a little bit more sense - not a lot but a little.

I didn't watch the program, but just reading a summary on the net ... thats not the worst stor(ies) I've read. If you really are interested, read Burton Makial's "A Random Walk Down Wall Street" - some of these stories, you will laugh, cry and shake your head all at the same time.

[Nancy]

Unless I missed it, nobody has brought up, in this thread, the fact that the Canadian government has now slipped into a deficit position as of August.

You want depressing... the Nikkei has just hit a 26 year low.

[mykalberta]

Originally Posted by fotze

Ya those are the ones I was talking about. I guess they did nothing "wrong" yet I hate them.

Now that I have been converted to socialism because of all of this, why doesn't he goverment just reverse these transactions. Sorry, these guys took these bets when they couldn't cover them at the expense of the public good so we are seizing your assets for the good of the collective.

The problem seems to be that the Credit Default Swaps are a 60+ trillion industry with no regulation whatsoever (bill was receeded in 2000 not sure by Bush or Clinton - I think Clinton as 60 minutes showed him and Grienspan). With the problem being some of these companies dont know their exact exposure to these things. I find that hard to believe but...

I dont feel sorry one bit for these companies tanking one bit. Bear Sterns - too bad so sad.

[V]

Originally Posted by FanIn80

Does anyone know the latest dollar projections? I'm waiting for it to come back up, but it appears we keep going lower and lower... I have a buddy that wants to buy something from the US but he refuses to pay the current exchange.

Needless to say, he and I got into a discussion about the dollar and trends.

I've got money (literally) on the USD/CAD hitting 1.33. That's the first real bit of resistance I see on the charts.

MoneyGuy's right, though. No one really knows. But the chart tells me we're going to see a 0.75 CAD.

[arsenal]

Originally Posted by mykalberta

The problem seems to be that the Credit Default Swaps are a 60+ trillion industry with no regulation whatsoever (bill was receeded in 2000 not sure by Bush or Clinton - I think Clinton as 60 minutes showed him and Grienspan). With the problem being some of these companies dont know their exact exposure to these things. I find that hard to believe but...

I dont feel sorry one bit for these companies tanking one bit. Bear Sterns - too bad so sad.

Yah, that law was receeded in 1999, was passed in 1933 during the great depression. Clinton signed it, and the Republican congress (maybe? can't remember) passed it.
Not trying to play the blame game.
Just history repeating itself.

[Bend it like Bourgeois]

Originally Posted by Claeren

as I keep saying, the world is in the middle of a solvency problem not a liquidity problem. The volatility between present and future is irrelevant (for most people) though.


Claeren.

I don't get either of those statements but they sound smart. What do you mean?

There very much is a liquidity problem, though I suppose the underlying cause was a few trillion in debt that can't be repaid, which is maybe what you mean.

[Nancy]

Originally Posted by Bend it like Bourgeois

I don't get either of those statements but they sound smart. What do you mean?

There very much is a liquidity problem, though I suppose the underlying cause was a few trillion in debt that can't be repaid, which is maybe what you mean.

SOLVENCY: Ability to pay debts.
LIQUIDITY: Ability to convert assets into cash.

What does most businesses in is cash flow issues. You can have a money losing business, but so long as you are able to make you current obligations, you can continue operating. On the other hand, you can have a very profitable business, but if you aren't able to pay all of your current obligations, your creditors will shut you down. There is a famous B-school case of a department store chain that went bankrupt in the early '70s even though they had a positive income statement. Problem was all of their money was tied up in inventory and they got caught in a situation of not being able to pay their short term debts.

[Wookie]

NIKKEI up 6% so far. Another useless green day that'll be taken back wednesday?

[Burninator]

GM wants 10 billion to support a merger with Chrysler. 3 billion of that would be preferred stock owned by the government.

http://www.canada.com/calgaryherald/...0-10a7d55aa177

[Bend it like Bourgeois]

Originally Posted by Nancy

SOLVENCY: Ability to pay debts.
LIQUIDITY: Ability to convert assets into cash.

Thanks, but I should have been more specific.

I get the distinction, just not sure what he meant by it.

[Table 5]

A pretty good day so far, Dow up 667 at the moment....the pessimist in me is waiting for the usual drop off in the last few minutes again.

[Table 5]

damn, make that 892! Up almost 11%.

[Wookie]

Hmm, was just coming to post that.
TSX up 600

[Wookie]

Nice start to the day,
TSX + 122
Oil up $4.00 to $66.75
CDN $0.80USD

[Phanuthier]

Again, go make lunch, markets are at +200, I come back 10 minutes later, down to -150. Heh.

[MoneyGuy]

I have done this research on past bear markets and the recoveries for some clients of mine. I thought this info might be useful.

1. The market usually leads the economy into recovery by six to eight months because investors make their decisions in anticipation of what they expect to happen, and those decisions are what drives the market. Therefore, if we expect an economic recovery mid way through 2009, it stands to reason that you should begin considering moving into the market gradually maybe starting early in 2009.
2. History shows that investors tend to make up 80% of bear market losses within the first year of the recovery, according to Standard & Poor’s Equity Research. This is American but it’s much the same in Canada.
3. Also from S&P: equities typically recoup a third of what they lost in a bear market in the first 40 days of the recovery.
4. Stock prices are low. This is not to say they’ve bottomed, but prices are lower than they were at the start of 2000.
5. For investors whose faith in equities are wavering, consider the last time they performed so poorly: the 1930s. Investors who may have concluded that stocks were not the place to be would have lost out on decades of bull markets.
6. So far this year, investors have pulled more money out of stock funds than they’ve put in. This is the third time in recent memory that this has been the case. The other two were in 2002, just before a five-year bull market, and in 1988, the start of a 12-year bull. Investors who refuse to get into the market usually don’t make it back in time to enjoy the recovery.
7. Whenever the bottom is reached (whenever that is), you’ll never see those prices again. Yes there will be market crashes, but the next one will not bring prices to these levels. Remember that the best time to invest is when things are their bleakest. I don’t know if this is as bleak as it gets. J

Bottom line: The recoveries happen when you least expect. They're quick and dramatic. They're spring loaded. Don't miss the recovery.

[Nancy]

There are some interesting charts here:
http://www.stockcharts.com/charts/historical/

Particularly this chart:
http://www.stockcharts.com/charts/hi.../djia1900.html

[arsenal]

One thing I noticed is that every 3 or 4 years (from 1900 to about 1980) in regards to this chart: http://www.stockcharts.com/charts/hi.../djia1900.html was the market would rise for a 3 to 4 year period, then go back to almost the level it was 3 or 4 years prior.
IE: 1904 to 1908. Just before 1904 it was 30, then just before 1908 it was at 38.
The 40s to 60s was pretty much all up, not many downturns.
60s to 80s you see the rise and fail pattern every few years.

Now is this just mainly people who had bought into the market at the low, cashing out their stocks and taking the money?

So one could expect in about 3 to 5 years another market downturn just due to people who had bought in the market 3 to 5 years go, now selling?

[troutman]

Originally Posted by MoneyGuy

I have done this research on past bear markets and the recoveries for some clients of mind. I thought this info might be useful.

1. The market usually leads the economy into recovery by six to eight months because investors make their decisions in anticipation of what they expect to happen, and those decisions are what drives the market. Therefore, if we expect an economic recovery mid way through 2009, it stands to reason that you should begin considering moving into the market gradually maybe starting early in 2009.
2. History shows that investors tend to make up 80% of bear market losses within the first year of the recovery, according to Standard & Poor’s Equity Research. This is American but it’s much the same in Canada.
3. Also from S&P: equities typically recoup a third of what they lost in a bear market in the first 40 days of the recovery.
4. Stock prices are low. This is not to say they’ve bottomed, but prices are lower than they were at the start of 2000.
5. For investors whose faith in equities are wavering, consider the last time they performed so poorly: the 1930s. Investors who may have concluded that stocks were not the place to be would have lost out on decades of bull markets.
6. So far this year, investors have pulled more money out of stock funds than they’ve put in. This is the third time in recent memory that this has been the case. The other two were in 2002, just before a five-year bull market, and in 1988, the start of a 12-year bull. Investors who refuse to get into the market usually don’t make it back in time to enjoy the recovery.
7. Whenever the bottom is reached (whenever that is), you’ll never see those prices again. Yes there will be market crashes, but the next one will not bring prices to these levels. Remember that the best time to invest is when things are their bleakest. I don’t know if this is as bleak as it gets. J

Bottom line: The recoveries happen when you least expect. They're quick and dramatic. They're spring loaded. Don't miss the recovery.

Thank you very much. That is the type of analysis I have been looking for.

[Dion]

Originally Posted by MoneyGuy

I have done this research on past bear markets and the recoveries for some clients of mind. I thought this info might be useful.

1. The market usually leads the economy into recovery by six to eight months because investors make their decisions in anticipation of what they expect to happen, and those decisions are what drives the market. Therefore, if we expect an economic recovery mid way through 2009, it stands to reason that you should begin considering moving into the market gradually maybe starting early in 2009.
2. History shows that investors tend to make up 80% of bear market losses within the first year of the recovery, according to Standard & Poor’s Equity Research. This is American but it’s much the same in Canada.
3. Also from S&P: equities typically recoup a third of what they lost in a bear market in the first 40 days of the recovery.
4. Stock prices are low. This is not to say they’ve bottomed, but prices are lower than they were at the start of 2000.
5. For investors whose faith in equities are wavering, consider the last time they performed so poorly: the 1930s. Investors who may have concluded that stocks were not the place to be would have lost out on decades of bull markets.
6. So far this year, investors have pulled more money out of stock funds than they’ve put in. This is the third time in recent memory that this has been the case. The other two were in 2002, just before a five-year bull market, and in 1988, the start of a 12-year bull. Investors who refuse to get into the market usually don’t make it back in time to enjoy the recovery.
7. Whenever the bottom is reached (whenever that is), you’ll never see those prices again. Yes there will be market crashes, but the next one will not bring prices to these levels. Remember that the best time to invest is when things are their bleakest. I don’t know if this is as bleak as it gets. J

Bottom line: The recoveries happen when you least expect. They're quick and dramatic. They're spring loaded. Don't miss the recovery.

I got a similar response from my investment guru just after the crash. It's one of many reasons that i've had him handling my investments for so many years. Good solid reasoning.