The ongoing financial turmoil and financial discussion thread

[jammies]

Originally Posted by Claeren

America does not produce anything anympre. After Boeing, Caterpillar and arms sales it starts to get pretty lean. Service Industry is the only area creating meaningful jobs now that the (false) job producing finance industry has collapsed. Not sure how long one stays a super power when burgar flippers and coffee pourers are your top new jobs?

I agree with your long-term pessimism, but I just have to say that America is #1 in producing soft goods like entertainment (movies/television/music), business software and video games, as well as engineering many of the hard goods produced elsewhere. They also lead the world in education and scientific research.

Lastly, while their industrial capacity is declining in relative terms, they are still #1 in the world in manufacturing and have made huge gains in productivity in the last couple decades. Certainly there are huge challenges ahead, but it isn't exactly a nation of proles just yet.

[Doctordestiny]

I was glad that Obama was elected but I never thought he deserved quite the fan favour he got. I think he'll be a good president but he's no god and no miracle worker. He was winning people over like he was a god, however. We'll need some time to work our way through this mess. Give him time.

[Nancy]

Do Hutterite Colonies accept new applicants? I'm beginning to think I need some sort of backup plan.

[Slava]

Originally Posted by Nancy

Do Hutterite Colonies accept new applicants? I'm beginning to think I need some sort of backup plan.

I've heard that you could help with the gene-pool and maybe make a little cash at the same time! Maybe this belongs in the looking for work thread?

[Azure]

Originally Posted by Slava

I've heard that you could help with the gene-pool and maybe make a little cash at the same time! Maybe this belongs in the looking for work thread?

Yeah, no.

I have no idea where that rumor comes from, but its crap.

Anyone who knows the hutterites will tell you that.

[macker]

Originally Posted by Doctordestiny

I was glad that Obama was elected but I never thought he deserved quite the fan favour he got. I think he'll be a good president but he's no god and no miracle worker. He was winning people over like he was a god, however. We'll need some time to work our way through this mess. Give him time.

March 15th
http://www.obamadeception.net/

[Phanuthier]

For those who might own tech stocks, and not that this is entirely unexpected but still bad news, Spansion (world's largest NOR memory) filed for bankrupcy yesterday. Of coarse, a month ago, Qimonda (second largest DRAM producer) filed for bankrupcy a month ago, and Micron (DRAM, SDRAM, flash memory) has been burning through cash, but have quite a war chest reserved and have been buying up some competition as the memory market has been flooded although they did close their fab in Boise.

Semiconductors still taking a beating - one of the industries that as far as design houses go, is one of "America's industries."

[Claeren]

Originally Posted by Slava

I must have missed the post where you predicted 7500-7700? Mine was in another thread and while its foolish to try to predict its fun and entertaining.

The main premise doesn't change though. We are low in the market, no question. You will be happy to have bought now in 4-5 years.

Actually I posted that we would hit 7300 before we hit 9000.

I was actually wrong though, just slightly, as we dropped to 7500 then had a dead-cat bounce to just over 9000 before plummiting back below 7300. But I think my point of view was still well validated.

I also more recently posted I had told a friend we would see the 6000's before a recovery happened.

And perhaps most telling, I predicted that this debt deflation would start to track Japan's debt deflation all the way back late last summer -- before virtually anyone else was saying it. And one of you, I am guessing you (?), told me I was way off the mark (which I was not).

EDIT: It was 'Flames in 07' who attacked it:
http://forum.calgarypuck.com/showthr...en#post1414122
You were busy in the thread telling people in August how they should/could start leveraging their homes to get into the stock market, and how they would almost never have to worry about a margin call....

In looking for that Japan reference I also found many examples of myself warning about unbalanced world trade/currency flows and exploding American credit/debt and what it was doing to the world economy all through 2005 and 2006 - and that is without digging further. I believe I have used it as a central theme on various webforums since Bush invaded Iraq -- something I deemed a huge waste of money and the tipping point in America's fortunes.



And as a larger point, my main prediction has been from before this even really started (when the market was more like 14,000 -- although more related to my real estate postings back then) that most people were best off being in cash with low liabilities as opportunities would surface for such prudent people after the bubble burst, because the bubble was going to burst.

I stand by the fact that it has been better to be in cash, and that anyone who has stayed in cash over the period I have said to has outperformed the market by a wide margin.

Far more importantly, and the entire point behind my original predictions, is that those in all cash are very liquid and best prepared to whether the rest of this depression (<and that is wht it has become). In scenarios like the one playing out people are better off protecting their families than they are worrying about the first 10% of a recovery.


And lastly, I have conceeded numerous times that the wealthy, those with both large cash and stock positions, could well be served to stay partially invested -- but that is not the typical audience at Cpuck. As I have again said numerous times, I would hope people that wealthy are not getting their financial advice here....


I would be happy to go back in this thread head to head with anyone elses predictions.


In fairness though, I have been in the minority view for about 8 years now. It is only in the last 2 months that people have started to get on board....



Claeren.

[Slava]

^ I think that the predictions are fun and entertaining. Like I've been saying for a while, its a fools game though; you're trying to predict something that is entirely unpredictable and not rational (particularly when you're forecasting particular numbers!).

Generally most of your predictions are on the DJIA which I don't watch too closely. I do like the S&P 500 as well as the TSX (where most of my predictions are concerning).

I just can't believe that with all of your predictions so far in advance that you have the time to post here...clearly you have been shorting all along?

[Claeren]

Originally Posted by macker

__________________________________________________ _______________

70% of their economy depends on consumer spending. Right now it is like the consumer is hung over and the government is trying to think of ways to get them to go out and party again. It is fun for awhile but it is not sustainable. http://www.bea.gov/briefrm/saving.htm = The consumer has found AA.

I posted about the same thing 6 weeks ago:
http://forum.calgarypuck.com/showthr...le#post1622315
AND
http://business.theglobeandmail.com/...drecovery/home

It is amazing what a small change in the savings rate can mean when multiplied by hundreds of millions of people.



Claeren.

[Claeren]

Originally Posted by Slava

^ I think that the predictions are fun and entertaining. Like I've been saying for a while, its a fools game though; you're trying to predict something that is entirely unpredictable and not rational (particularly when you're forecasting particular numbers!).

Generally most of your predictions are on the DJIA which I don't watch too closely. I do like the S&P 500 as well as the TSX (where most of my predictions are concerning).

I just can't believe that with all of your predictions so far in advance that you have the time to post here...clearly you have been shorting all along?

I wish that I would have had some money to invest back then! lol

On the otherhand I credit my accuracy to not having money on the line, now that I have a bit of savings it is far more stressful and harder to keep clear headed when looking at the market.



Claeren.

[Slava]

Originally Posted by Claeren

I wish that I would have had money back then! lol

On the otherhand I credit my accuracy to not having money on the line, now that I have a bit it is far more stressful and harder to keep clear headed.



Claeren.

That's what margin accounts are for!

I do think that there is an interesting dynamic here. I can make all kinds of calls in this forum and its just entertainment, but its a different world when you have skin in the game, and different again when you are managing other peoples life savings.

[Wookie]

Got a question.
I know how hedging works. On a small scale. However, looking at a company like MFC, they sold 85 billion of their income plus product that is now causing them total grief. Last I heard, every 80 point drop in the S&P requires them to put $1 billion in reserves.

Now this is because they deemed the "hedge program" to be too expensive.

How would this be hedged against? Something this large? I understand as an individual using options (calls/puts) to hedge against losses. As well as Gold as a hedge vs. USD investments. But with my little brain can't fathom how something this large would be hedged or who would they hedge it through, and who's taking on the risk.... OWWww my head!

Thanks

Any links/tutorials etc. would be great!

[Azure]

Originally Posted by macker

March 15th
http://www.obamadeception.net/

Wow, sure didn't take long for him to make a movie about it.

[macker]

People are saving more now which is a good thing and they are also paying closer attention to how they are investing and many people are now taking greater control. The widespread market sell-off's have caused people to realize that even under the control of a professional money manager their investments aren't protected from risk. I am not saying that everyone should become a do it yourself investor but I think investor awareness is a good thing for the entire system and this should help the good advisors seperate themselves and be able to justify the fee's etc.

Below taken from Investment Executive :
"As disgruntled investors assess the recent damage to their portfolio's they are grabbing control over their finances - and discount brokerages are reaping the benefits. In the fourth quarter of 2008 new account openings soared by 80% over the number of accounts launched the previous quarter according to estimates from Toronto based Investor Economics Inc. Year-over-year, new accounts were up by 50%, to 3.4 million accounts in Canada's retail online brokerage channel. That trend has continued into 2009. In January, Toronto-based Questrade inc. experienced 65% growth in new account openings from the previous month.

[macker]

Originally Posted by Wookie

Got a question.
I know how hedging works. On a small scale. However, looking at a company like MFC, they sold 85 billion of their income plus product that is now causing them total grief. Last I heard, every 80 point drop in the S&P requires them to put $1 billion in reserves.

Now this is because they deemed the "hedge program" to be too expensive.

How would this be hedged against? Something this large? I understand as an individual using options (calls/puts) to hedge against losses. As well as Gold as a hedge vs. USD investments. But with my little brain can't fathom how something this large would be hedged or who would they hedge it through, and who's taking on the risk.... OWWww my head!

Thanks

Any links/tutorials etc. would be great!

__________________________________________________ _____________

I really don't know the answer here either and would be curious to know! What I do know is that they have been able to raise capital from private sharholders and they are projected to grow by 5% this year and this is obviously going to be a rough year. The dividend is at about 8.3% and they are the third largest insurer in China so theres your growth plan. I don't think they are in anywhere near the trouble that AIG is and I think they will come out of this ok. The income plus product was designed for much different market conditions then we are in now but if they can weather this storm the appeal of this type of product could take on renewed interest from baby boomers etc. who want a guaranteed product even if it is expensive. Also the share price doesn't lie so maybe your question is a good one!

[Cowperson]

One of the primary problems faced by equity markets the last nine months is that they represent one of the few places on the planet right now where you can push a button and make billions of dollars appear in 30 seconds.

You can't say that about real estate, private equity, as well as lines of credit, etc. The world was awash with liquidity, artificially as it turns out, and now it isn't. Very abruptly.

Thousands of institutions are finding they have to generate liquidity somewhere to offset bad hedge decisions, redemptions, etc and, while they may be holding their noses while they do it, global equity markets are the desperate place they can at least make it happen.

That was the case with Caisse, the giant pension fund in Quebec in mid-November as an example when they needed to raise about $10 billion in a week and a half or thereabouts.

In events like this, it seems there is always leverage involved somewhere.

Cowperson

[Azure]

Interesting 'opinion' from the WSJ.

As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.

....

So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.


What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest. His Treasury has been making a similar mistake with its financial bailout plans. The banking system needs to work through its losses, and one necessary use of public capital is to assist in burning down those bad assets as fast as possible. Yet most of Team Obama's ministrations so far have gone toward triage and life support, rather than repair and recovery. AIG yesterday received its fourth "rescue," including $70 billion in Troubled Asset Relief Program cash, without any clear business direction. (See here.) Citigroup's restructuring last week added not a dollar of new capital, and also no clear direction. Perhaps the imminent Treasury "stress tests" will clear the decks, but until they do the banks are all living in fear of becoming the next AIG. All of this squanders public money that could better go toward burning down bank debt.


The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.


Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.


Listening to Mr. Obama and his chief of staff, Rahm Emanuel, on the weekend, we couldn't help but wonder if they appreciate any of this. They seem preoccupied with going to the barricades against Republicans who wield little power, or picking a fight with Rush Limbaugh, as if this is the kind of economic leadership Americans want.


Perhaps they're reading the polls and figure they have two or three years before voters stop blaming Republicans and Mr. Bush for the economy. Even if that's right in the long run, in the meantime their assault on business and investors is delaying a recovery and ensuring that the expansion will be weaker than it should be when it finally does arrive.

Emphasis added.

http://online.wsj.com/article/SB123604419092515347.html

Like I said, big time failure by someone who trumped 'hope' as a campaign slogan for 2 years. According to the polls, the number of people who strongly disagree with him are rising, and his approval rating is starting to dip.

Might mean nothing, might mean something.

Doesn't mean Obama is fixing anything.

[Slava]

^ Really interesting, but no one really knows for sure. These "shapes" in the market are not uncommon. (i.e. where the market comes up for a bit, re-tests and goes through the previous low). It could be as a result of the poor reception of his stimulus plan, or could be the market ebbing and flowing.

[Ronald Pagan]

The temptation to leverage reverberated through most major private financial actors.

Bernanke's comments on AIG are perhaps the most incisive yet:

Such was the case yesterday when Mr. Bernanke, appearing before a Senate panel, railed against American International Group Inc., the floundering insurance giant that has sucked in billions of dollars in U.S. federal assistance and may need billions more to stay afloat. "If there is a single episode in this entire 18 months that has made me more angry, I can't think of one, other than AIG," Mr. Bernanke said in response to a question about the latest government bailout Monday after the company announced a whopping fourth-quarter loss of $61.7-billion (U.S.), mainly because of writedowns.
"AIG exploited a huge gap in the regulatory system, there was no oversight of the financial products division," Mr. Bernanke said. "This was a hedge fund basically that was attached to a large and stable insurance company."

http://www.theglobeandmail.com/servl...Story/Business