Perspectives on the global economic meltdown

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Jan 2010 03:59

Eerie shades of IPL snub to the Pakis - "We love you and respect you and all that but not enough to buy into our own love and respect for you.... :mrgreen: "

Goldman’s O’Neill, Lifelong Manchester United Fan, Spurns Man U Bonds
Jan. 25 (Bloomberg) -- Goldman Sachs Group Inc. Chief Global Economist Jim O’Neill, a former shareholder and board member of Manchester United, said the club has too much debt and its bonds are unattractive.

“There’s too much leverage going on with Manchester United,” O’Neill, a lifelong supporter of the 18-time English soccer champions, said in a Jan. 23 interview. “It’s not a good thing. I’m not a buyer of the bond.”

The club issued more than 500 million pounds ($807 million) of seven-year bonds in pounds and dollars last week to refinance a similar amount of bank borrowing. The club took on the debt after the U.S. Glazer family bought it in a leveraged buyout in 2005.

“I value my long-term support for Manchester United better than anything else,” {Jhoot bole kauwa kaate, O Sri O'neill.... :lol: } said O’Neill, who held 1.66 million pounds of the club’s shares in 2005 when he stepped down from the board as the Glazers took the club private.

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Jan 2010 04:09

TAE tweets for the Day. And Happy Republic day, janta. Moi plans to attend a local flag hoisting function, just to reaffirm my appreciation for having been born into the right to hold the right passport only. Jai Hind and Jai ho.

Corporate Sales Cut in Half by Widening Spreads - http://bit.ly/4S7wpb (From $99.8Bn to $48Bn).

Let's see, now techical stock analysts are already calling amarket top with a 10-20% fall forecast. But hey, dont take my word for it. IMHO, the stock rally will continue for as long as the Fed wants it to since they're ultimately doing the rallying behind the rally so far, only.

Moody's: Ratings for 279 state & local- govt tax-backed bonds were reduced in 09, up from 81 the previous yr, as recession cuts tax revenues.

States’ Fiscal Agony: No End In Sight? - http://bit.ly/4o74CA, $350 Bn shortfall for 2010 and 2011.

December home sales down nearly 17 percent!, largest monthly drop in more than 40 years - http://bit.ly/8WX9Sk


Falling home sales --> propped up home prices --> market freeze --> fin asset toxicity --> waves of bankruptices --> plunging tax revenues and soaring unemployment, pension and health costs eating into local gubmint budget balances --> more bailouts expected and inevitable --> widening bond spreads --> etc etc all tied in only.

London GS squidployees rather angry that their bonuses are to capped of at $1Mn per person. (Awww, there goes the house in the Riviera dear)

^Aw, what a shame! Such cutie-pies the goldmanites be....moi heart bleeds at this gross injustice..... :((

Signs Of The Apocalypse: The Return Of The Layoff - http://bit.ly/7KKWwB, Walmart axing 12,000, Xerox 2,500 staff & Oracle.


Above news has been posted here before I think.

SEC mulled national security status for AIG details - http://bit.ly/7mpEcv (For 'national security', firms can fudge accounts if required)

Fraud watch. And so on.

paramu
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Re: Perspectives on the global economic meltdown

Postby paramu » 26 Jan 2010 07:21

Hari,

Don't close this thread. Either let this continue or make sure that it is archived.
This thread will be worth looking back, say, after 10 years.

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Re: Perspectives on the global economic meltdown

Postby Neshant » 26 Jan 2010 08:03

An Insider's View of the Real Estate Train Wreck

http://www.investorsinsight.com/blogs/j ... reck2.aspx

No one has been more right on the housing market in recent years. So, what's coming next? Some of the housing numbers in the last few months look a little less ugly. Could housing be getting ready to get well?

MILLER: I don't think so.

For all intents and purposes, the United States home mortgage market has been nationalized without anybody noticing. Last September, reportedly over 95% of all new loans for single-family homes in the U.S. were made with federal assistance, either through Fannie Mae and the implied guarantee, or Freddie Mac, or through the FHA.

If it's true that most of the financing in the single-family home market is being facilitated by government guarantees, that should make everybody very, very concerned. If government support goes away, and it will go away, where will that leave the home market? It leaves you with a catastrophe, because private lenders for single-family homes are nervous. Lenders that are still lending are reverting to 75% to 80% loan to value. But that doesn't help a homeowner whose property is worth less than the mortgage. So when the supply of government-facilitated loans dries up, it's going to put the home market in a very, very bad place.

Right now there are an awful lot of banks that do an awful lot of commercial real estate lending, and for about a year now you've been telling me that you saw the first and second quarter of 2010 as being particularly risky for commercial real estate. Why this year, and what do you see happening with these loans and the banks holding them?

MILLER: It's an educated guess, and it hasn't changed. I still think that it's second quarter 2010.

The current volume of defaults is already alarming. And the volume of commercial real estate defaults is growing every month. That can only keep going for so long, and then you hit a breaking point, which I believe will come sometime in 2010. When you hit that breaking point, unless there's some alternative in place, it's going to be a very hideous picture for the bond market and the banking system.
------

Read it all. And don't buy real estate now. We are headed for another downleg by 2010-12.

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Re: Perspectives on the global economic meltdown

Postby Pulikeshi » 26 Jan 2010 10:49

SwamyG wrote:So here goes my understanding of the birth and evolution of the organism called Corporation. It was born in Europe, matured in USA and now has been globalized.


SwamyG,

Good write up...
Another angle to consider - It has become fashionable now to blame 'Corporations'.
Perhaps, a case could be made that they carry more weight than many countries.
Their influence on local and global politics is on the rise and will continue to do so.

Net-net: yes, they could be considered similar to super impact individuals. So what?
Even the most powerful corporations are at the mercy of activist groups...
Further, the charitable and beneficial contributions of corporations (other than providing jobs)
cannot be understated.
Finally, if Corporations are so bad, what is the alternative?

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Jan 2010 11:55

The Minds Behind the Meltdown

Entertaining read. Nothing 400% new per se but ties it all together in a story whose plot makes sense.

Excerpts:
The rapid selling scrambled the models that quants used to buy and sell stocks, forcing them to unload their own holdings. By early August, the selling had taken on a life of its own, leading to billions in losses. The meltdown also revealed dangerous links in the financial system few had previously realized—that losses in the U.S. housing market could trigger losses in huge stock portfolios that had nothing to do with housing. It was utter chaos driven by pure fear. Nothing like it had ever been seen before. This wasn't supposed to happen!

The quants did their best to contain the damage, but they were like firefighters trying to douse a raging inferno with gasoline—the more they tried to fight the flames by selling, the worse the selling became. Quant funds everywhere were scrambling to figure out what was going on.


Reads like a Forsyth piece, eh? Or Dan Brown for sheer pacing.

The carnage revealed a dangerous lack of transparency in the market. No one knew which fund was behind the meltdown. Nervous managers traded rumors by email and phone in a frantic hunt for patient zero, the sickly hedge fund that had triggered the contagion. Many were fingering Goldman Sachs's Global Alpha, the quant fund founded by Mr. Asness in the 1990s that had grown to massive proportions. But no one knew for sure.

At PDT on Tuesday, Mr. Muller kept ringing up managers, trying to gauge who was selling and who wasn't. But few were talking. In ways, Mr. Muller thought, it was like poker. No one knew who was holding what. Some might be bluffing, putting on a brave face while massively dumping positions. Some might be holding out, hoping to ride through the storm. And the decision facing Mr. Muller was the same one he confronted all the time at the poker table, but on a much larger order of magnitude: whether to throw in more chips and hope for the best or to fold his hand and walk away.


Wow. heady only. Read it all.

Hari Seldon
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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Jan 2010 11:58

paramu wrote:Hari,

Don't close this thread. Either let this continue or make sure that it is archived.
This thread will be worth looking back, say, after 10 years.


How does one archive a thread?

Suraj
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Re: Perspectives on the global economic meltdown

Postby Suraj » 26 Jan 2010 12:05

Hari Seldon: One of us moderators can lock this thread and move it to the strat archive. If this thread is ready to be locked, just post a note to the effect.

Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 26 Jan 2010 12:17

stock market is way overvalued. its a mystery to me how it has gotten to where it is in the first place. Its been climbing all throughout job losses and bankruptcies.

The US government is definately using the stock market to launder monetized debt into the economy via the croney banks of the federal reserve. That's the only source of money for the stock market these days.

-------------------

Stock market on alert over commercial real-estate exposures

http://www.marketwatch.com/story/sto...oes-2010-01-25

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock-market analysts are pointing to a growing divide between banks, with regional players especially vulnerable to blow-ups in commercial real estate, as illustrated by the latest round of bank failures.

Regulators on Friday shut down five more banks in New Mexico, Oregon, Washington, Florida and Missouri, bringing to nine the count of U.S. bank failures so far this year.
TODAY'S TOP MARKET STORIES

Commercial real-estate losses were responsible for a majority of those nine banking failures, according to the Federal Deposit Insurance Corp., which insures deposits at nearly 8,200 institutions.

"A lot of them were saddled with commercial real estate loans that went sour. You couple that with weak regional market conditions, and that was a recipe for failure for many of those banks," said Greg Hernandez, an FDIC spokesman.

"You can't say commercial real estate loans were the reason for all nine bank failures thus far this year, but it was responsible for a majority of them," Hernandez said.
Last edited by Neshant on 26 Jan 2010 12:41, edited 2 times in total.

Neshant
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Re: Perspectives on the global economic meltdown

Postby Neshant » 26 Jan 2010 12:39

the pimps at pimco have been right so far.

PIMCO Calls For A Hyperinflationary Collapse In Japan

http://market-ticker.denninger.net/arch ... Japan.html

But when you commit to the raw printing of money borrowing for productive investment is an idiotic premise as each of your dollars (or yen in this case) that you EARN with that investment will be worth less than the yen before! You thus must outrun not only the borrowing cost but also the intentional devaluation of your earnings with that investment, and this, when faced with a government apparatus that has explicitly announced that it will not stop until it achieves some goal you have no control over or input toward, is a dangerous game indeed

PIMCO's Bill Gross in fact just identified this same feedback loop in the United States, although he doesn't realize it. In point of fact fully $500 billion of the deficit from last year was spent directly and indirectly on handouts to an increasingly unemployed population, thereby increasing the incentives to be unemployed as opposed to seeking employment. This in turn is reflected in the participation rate which has fallen in this recession thus far to levels last seen in 1983, destroying twenty five years of labor force progress in less than 18 months!

This in turn has raised the specter that the $500 billion in outlays via these "handouts" has become structural, and thus will mutate into a similar demand that The Fed either "print more or we deflate hard", exactly as happened in Japan.

The problem is that eventually you deflate anyway as it is not possible to couple your reflationary attempt with any sort of parity (or better) into personal income. The ultimate outcome is thus certain - the economy will deflate anyway but you will destroy the purchasing power of every saver in the nation along with everyone's ability to earn a living first!

When nobody is left with a job due to the destruction of purchasing power up the wage and income scale asset prices in real terms collapse no matter how much money you print!

There is only one way out of a liquidity trap that does not involve impoverishing everyone: you force those who are overlevered, no matter who they are, through bankruptcy and by doing so you default the insoluble debt, removing it from the system.

This often causes severe asset price deflation as assets are forced into liquidation, but it restores balance between asset prices and earnings while at the same time allowing those who have been prudent and did not take on excessive leverage to survive and even prosper during the necessary period of adjustment.

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Re: Perspectives on the global economic meltdown

Postby Chinmayanand » 26 Jan 2010 15:16

Britain Exits Recession as Economy Expands Just 0.1%, Trailing Forecasts

Even the Islamic republic of Londonistan is out of recession ... :P madarsa math across the world gaining popularity ... :mrgreen:

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Re: Perspectives on the global economic meltdown

Postby kmkraoind » 26 Jan 2010 17:14

Obama to Seek 3-year Freeze on US Domestic Spending

Khan is starting to hold his purse.

Existing-home sales take a big fall in December

Steroid affects are loosing out.

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Re: Perspectives on the global economic meltdown

Postby Hari Seldon » 26 Jan 2010 21:10

Sob story in the NYT unfolds.... kindly keep your hanky-pankys ready only. Tenku tenku.

As China Rises, Economic Conflict With West Rises Too :(( :((

DAVOS, SWITZERLAND — As recently as 2008, when China was still an emerging economy eager to put its best foot forward for Western consumers, it lifted censorship on several Web sites before the Beijing Olympics. At the same time, it responded to entreaties from U.S. and European politicians, allowing its currency to appreciate against the dollar.

China is no longer emerging. It has emerged :lol: — sooner and more assertively than had been expected before the wrenching global financial crisis, which badly damaged all the established industrial powers, from the United States to Europe and Japan.


Yup. And the nyt joined the cnbc-ish mob in cheerleading PRC's harmonious rise only. Short term quarterly profits beckoned, I reckoned.

China is the West’s greatest hope and greatest fear,” said Kristin Forbes, a former member of the White House Council of Economic Advisers and one of hundreds of top officials and executives flocking to this winter resort for the annual World Economic Forum, which is taking place Wednesday through Sunday.

No one was quite ready for how fast China has emerged,” said Ms. Forbes, a professor at the Massachusetts Institute of Technology. “Now everyone is trying to understand what sort of China they will be dealing with.


'no one could have foreseen it' sounds too much like the bromides and half-lies Umreeki Fed, regulators and economystics often tell themselves about the current meltdown. Truth is the inevitable was staring these worthies in the effing face all along and they were blind to it - just like they're being blind to TSPian perfidity again.

And here's exactly what I've been talking about - the challenger to the prevailing establishment consensus/conventional wisdom in very real terms:

And as developing countries everywhere look for a recipe for faster growth and greater stability than that offered by the now-tattered “Washington consensus” of open markets, floating currencies and free elections, there is growing talk about a “Beijing consensus.”


And that talk could well translate to belief and then, bhakti, who knows? Just like Marx was all talk in 1890 but soon became belief amongst this Bolshevik fringe and soon, bhakti for the second world, eh?

When the United States was snapping at the heels of the British empire, the global hegemon of the early 20th century, the situation caused plenty of friction, even though both countries spoke the same language, shared similar cultures and were liberal democracies.

China, in contrast, is a Confucian- Communist-capitalist hybrid under the umbrella of a one-party state {IOW, PRC is a fascist state. KIndly call a spade a spade, please!} that has so far resisted giving greater political freedom to a growing middle class. Now its ascendancy is about to set off what many officials and experts see as a backlash on both sides of the Pacific.{Why would there be any backlashes in prc, I wonder??}


Aah. But the business lobby will veto any tough action against PRC by the west, won't it?? Well, maybe. Maybe not.
Several foreign companies already complain that doing business in China has become more difficult. Lured until a few years ago by tax rates less than half of those applying to Chinese companies, executives now cite an increase in red tape and a growing number of “buy China” mandates from government procurement offices.

The standoff with Google has illustrated the difficulties foreign business faces in China. It has also starkly raised the question of who will have the upper hand in future negotiations.

“The operating environment is tougher than ever for Western companies,” said James McGregor, head of the government relations committee of the American Chamber of Commerce in China. “But unlike Google, most Western companies also need China more than ever.”

China is the biggest recipient of foreign direct investment in the world: 450 of the Fortune 500 companies have business presences there, and many of those still reeling at home are doing brisk business in China. “G.M. is hurting anywhere else, but here things are quite profitable,” Mr. McGregor said.

Business interests in China could make it harder for Western politicians to lash out. “It’s a situation the U.S. was in for a long time,” said Ms. Forbes, the M.I.T. professor. “Many people didn’t like U.S. policy, but you had to be in the U.S. market.”

If business executives are looking to China for its low manufacturing costs and sizable market, political leaders are studying a state perceived to have found a recipe for lifting millions out of poverty with fast growth, even if that means a stiff measure of domestic repression. “You hear more and more people talking about a Beijing consensus,” Ms. Forbes said.


And so it is set, the 'Beijing consensus' is then upon us. Hello, brave new world.
But what exactly is the Beijing consensus? Some see it as a form of economic management with greater government involvement that is on the rise across the world. Others interpret it to mean more strictly controlled capital markets, which have made a re-appearance even in previously open countries like Brazil. Policy makers in Malaysia and Dubai focus on replicating China’s special economic zones, which afford generous terms to foreign investors in manageable geographic areas.

Some suggest that China’s lack of democracy is an advantage in making unpopular but necessary changes. “It is more challenging for democratic systems because every day they come under public pressure and every short period they have to go back to the polls,” said Victor Chu, chairman of First Eastern Investment Group in Hong Kong, the largest direct investment firm in China. “China is lucky to have the ability to make long-term strategic decisions and then execute them clinically.”


And no, its not like asset bubble pops will undercut the PRC rise story, seems like...
Kenneth Rogoff, an economics professor at Harvard University who just spent two weeks in China, warns that the country will face its share of economic troubles in the years ahead. But that will not change the underlying trend, he said.
...
According to Mr. Rogoff, over the next four decades or so, the Chinese renminbi will gradually come to rival the dollar as the world’s leading reserve currency, making China’s response to its increasingly central role in the global economy critical.

The risk, Mr. Shambaugh of George Washington University said, is that “the world will be asking more and more of China but getting less and less in return.”{As if it isn't already}


A tad premature to celebrate the end of the dominant Western era perhaps but I can see that sunset happening in my lifetime, if I'm lucky. Nothing like a kick up the musharrafs of every neta and babu in what we call the 'free world' (yup that includes Yindia too) and PRC represents that kick in all its nastiness to shake things up a bit, eh?

ramana
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Re: Perspectives on the global economic meltdown

Postby ramana » 26 Jan 2010 21:59

One thing to ponder is what is more important for India rise of China or collapse of West?
And while at it read K.M. Pannicker's "Asia and Western Dominance"

SOURCE

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Re: Perspectives on the global economic meltdown

Postby Satya_anveshi » 27 Jan 2010 00:55

Folks..tomorrow Hank Paulson will be attending a congressional hearing. Now that dust is settled, some level of control established, it will be interesting to watch congressmen questioning the guy who secured himself, at gun point, almost dictatorial powers during global economic meltdown.


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