Market crash: are we there yet ?

[Rickm505]

Well, I was bowing out of this thread, but Cam deleted my "bowing out post", so I guess he still wants me to post in this thread. Thanks Cam

The nice thing about facts is that you can't change them


U.S. Economy: Consumer Sentiment Drops to 26-Year Low (Update2)

By Courtney Schlisserman

April 11 (Bloomberg) -- Confidence among U.S. consumers fell to a 26-year low after employers fired workers and gasoline prices surged, threatening the spending that accounts for more than two thirds of the economy.

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2 this month, the weakest level since 1982, when the jobless rate approached 11 percent, the worst since the Great Depression. In other figures released today, the Labor Department reported that the cost of imported goods climbed 14.8 percent in March from a year ago, led by oil.

The reports validate concern among Federal Reserve officials that the economy will shrink in the first half of the year, (sic.... shrink? and what's that called?... anyone?) ...and traders now anticipate the central bank will lower its benchmark interest rate by another half point on April 30. General Electric Co., the world's third-largest company by market value, also said today that its profit fell for the first time since 2003.
``The pocketbook issues are striking home,'' Richard DeKaser, chief economist at National City Corp., said in an interview with Bloomberg Television in Washington. ``People seemed here to be more focused on things like the rising unemployment rate, persistently high gas prices.''

Americans are confronting the loss of 232,000 jobs so far this year, along with higher food and energy costs and overall weakening in the economy. Consumer spending in the first half will advance at the weakest rate in 17 years, according to economists surveyed by Bloomberg News.

The economy will not expand at all the first six months of this year, according to the Bloomberg survey taken from April 2 to April 8. A majority of those polled also projected the world's largest economy is, or will soon be, in a recession.

There's much more in the article but I figured you guys already stopped reading..

Bloomberg.com: Worldwide

[Sailormann]

Wait a minute there Sailormann...can you hold off on that till my boat sells!!??

Wondering if it might not be a good idea to list it with some brokers in Canada/Europe ???

[xort]

ricky; AKA Chicken Little

it's you that stopped reading; as in parts of your own post...

"From the last paragraph of the "impending doom" Bloomberg article...

"The number of lenders on the FDIC's ``problem'' bank list rose to 76 on Dec. 31 from 50 a year earlier. In 1990, the total reached 1,500. Three FDIC-insured banks failed in 2007, the first since June 2004"

You love the part that says problem banks rose from 50 to 76, but you love to ignore that last part about 1990 having 1500. And we certainly suffered mightily throughout the 1990's because of that, eh?

how many times are you going to tell us you are through with this thread?

The sky is falling, the sky is falling

[chris_gee]

Okay it is true a limited number of banks are on the official watch list. However, it is also true that steps have been taken because of concern over the whole banking system.
Perhaps Xort could explain why non-borrowed reserves of Fed depositary institutions fell from roughly an average of 43 billion in 2007 up to July, and since then have steadily fallen to -1.5 in January and now -101 as at April 9 2008. Talking whole billions only.

.
The source is http://www.federalreserve.gov/releases/h3/Current/. Now the notional reserves remain much the same except that instead of actually having 43 billion they now have -101 billion. So they had to borrow 144 B. This came from 100 B term loan auctions, and the rest from other credit facilities.

Now quite possibly I don’t understand this. A billion sounds a lot to me. Let’s say last year I had 43 thousand nett and I now owe nett 101 thousand. What the hell, make it millions – it is only paper. What do you think your chances are of hitting me up for a loan? Sorry mate, it has been a bad year and every month it gets worse. I don’t actually have anything to lend you unless I borrow it. Oh what about that million you lent me last year? You want it back? Well umm. No problem mate, safe as houses. We have a capital issue coming up - how about buying some shares?

It looks to me that the banking system is skint. Sure, within the thousands of banks some are and some are not. Which are, and which are not, is a question they cannot answer themselves, so they are reluctant to lend to each other. It is very unlikely to be just 76. More importantly, unlike the small banks folding in the 90s this is the big boys.

So what do you do? Borrow more by issuing treasuries at a low yield in a depreciating currency? Print more? Nationalise the banks? Still as confident?

The January situation is discussed at http://globaleconomicanalysis.blogsp...-negative.html. He calls the graph unprecedented. Unfortunately as of today it has not been updated - http://research.stlouisfed.org/fred2/series/NFORBRES. It appears to have deteriorated markedly in the last month. That is without considering extending cheap Fed credit to non-banks to prop up the brokers and hedge funds. In the wider scheme of things it may be closer to an acorn than to the sky, however, I daresay there are already some saying some acorn.

[xort]

why is it so easy for me to qualify for a boat loan at 5.75%?
I don't have billions altho I do have a decent credit rating.

Why is it the market is only down about 10%? If this was a really big crisis the market would be down 30 to 50% and maybe more. Lots of really smart people are long, not short. Cautiously long, but long nonetheless.

[chris_gee]

Because 1. Lots of people prefer to believe there was only one cockroach. 2. The Fed has put out 100s of billions and the Government is about to put out another 150 B in efforts to prop it up and they think that will work. 3. Markets often bounce. 4. Interest rates are manipulated to prop things up. If you can borrow at less than the rate of inflation you can lend at very cheap rates roughly half what it would cost here. 5. Some sectors are up eg oil, mining, food related; some are down, financials, builders. Some prosper, some suffer, some are unaffected. 6 Employment is a lagging indicator. 7 Those who have the cash to speculate in the market may well both be relatively unaffected, traders in on a short term basis, and there is a selection bias operating in favour of being positive - anything else is unpatriotic. 8. The fed opened its facilities to non banks to provide cheap money to stop forced selling on margin calls on the highly leveraged.

[Rickm505]

Chris, save your fingers. He'll never get it. He calls me chicken little when my scenerio is now 1/2 what Greenspan and Bernacke have gone public with. He doesn't read and therefor can't absorb facts and has no idea of how a banking system works despite everyone posting the nuts and bolts here in this thread.

Hmmm... who else does this remind you of?

[sailaway21]

Some interesting observations from Mr. Will.
http://www.unionleader.com/columns.a...8-f7fd566ace11

[chris_gee]

Oh for a moment I thought Sailaway had switched camps and was taking the ordinary workers' side. Seems not. What does Walmart pay old people to be greeters?

[xort]

ricky
are you predicting a recession or an all out collapse? sounds like the latter