When will the downward spiral in the stockmarket end?

inflation = second-round effects = pay rises = inflation
A rather circular argument?
 
Best thing to do with your spare cash now is to leave it in the bank. If you are in the market stay - no point in selling but these are scary times. I moved a large chunk of my investments a few months ago out of the UK and the US thinking it was sensible --- until yesterday. Don't mind the pundits - I think the worst has yet to come.
 
OK nobody knows, markets are on the way up .... whats they view will they tumble again, is this what they mean by dead cat bounce
 
barryl said:
=pay rises,=no argument =fact
Click to expand...
Try it on anyone who lived in England during the nineties. Or in Germany since the unification. Or in Japan since the event. Or in the US since Bush took office.

Or even in Ireland.

Don't mistake an increase in disposable income due to tax cuts with an increase in wages. One may put scarcity pressure on prices, but the other is inflationary as it increases input costs.
 
Markets plummeted due to nerves surrounding bonds markets last week, which came to a head. Think what a mess a $2.3 trillion multi-party bail-out will become compared to the Northern Rock saga going on and on since September, and it was only tens of billions for a single institution.

http://www.marketwatch.com/news/story/bond...p;dist=hplatest
SAN FRANCISCO (MarketWatch) -- Bond insurers fell Thursday after New York's top insurance regulator sounded a cautious note on any bailout of the ailing $2.3 trillion industry.

Security Capital Assurance (SCA 3.08, -0.71, -18.7%) was the worst hit after the bond insurer lost its AAA rating from Fitch Ratings.

New York Insurance Superintendent Eric Dinallo issued cautious remarks Thursday on the possibility of a bond-insurer bailout, saying that any plan would be complex and take time. "These are complicated issues involving a number of parties, and any effective plan will take some time to finalize," he said in a statement emailed to MarketWatch.

Rumours too are circulating that

1) they knew SocGen was in trouble and needed a capital infusion
2) the "rogue trader" is just a cover story, to make it appear a problem confined to a single bank

http://www.reuters.com/article/rbssFinanci...lBrandChannel=0
SocGen style fraud could strike again, but bigger
Thu Jan 24, 2008 11:12am EST

ZURICH, Jan 24 (Reuters) - French bank Societe Generale's (SOGN.PA: Quote, Profile, Research) 4.9 billion euro ($7.1 billion) loss, blamed on a single employee, is a stark reminder that rogue traders can elude the most sophisticated security systems until it is too late.

Many other banks could be exposed, no matter how much they have invested in security dragnets and advanced fail-safe procedures, and fraudulent losses are likely to grow in size.

"Banks are making a lot more money and taking much bigger trading positions, so you can expect the size of scandals to get bigger," said Simon Maughan at MF Global. The CEO and Chairman of Lehman, Richard Fuld, told Reuters at the annual gathering of the World Economic Forum in Davos that the loss uncovered at SocGen was "everyone's worst nightmare" -- tacit admission that no bank should consider itself entirely immune from such a calamity.


The mess is getting worse and the spin with it.
 
The biggest derivatives players are

1 JPMORGAN CHASE BANK NA
2 BANK OF AMERICA NA
3 CITIBANK NATIONAL ASSN
4 WACHOVIA BANK NATIONAL ASSN

All of them are borrowing money heavily from the FED. These four banks alone are on the hook for more than 120 Trillion USD. If the FED monetise a small fraction of that much money, which unfortunately they are doing, inflation will quickly result. My economics is fairly rusty, but if these credit derivatives are used as collateral against the loans and the Fed puts the printing press into overdrive, same as the BoE then that’s major trouble? Or is it relative if all central banks are at the same game? How much money can the system handle before the computer says “No”? Money will be meaningless if too much is pumped? ...and when the credit default instruments default its game over.

I strongly urge any thinking of investing in the markets to go to Page 23, table 1 for a clear picture on the amount of credit derivatives these banks are holding and think what will happen to the markets if these, along with bonds start to go wrong?

http://www.occ.treas.gov/ftp/deriv/dq406.pdf

On the story of Societe Generale

Nobody Believes That Lone "Lone Trader" Brought Down France's Second-Largest Bank

.http://www.larouchepac.com/news/2008/01/24...ces-second.html

January 24, 2008 (LPAC)--Societe Generale, France's No. 2 bank, announced $10 billion in losses today, blaming the bulk of it on one "rogue trader" -- a story which not even the press corps buys.

This morning, the bank's top leadership had to respond to nearly two hours of aggressive questioning from some 100 journalists who attended a press conference called to explain their claim that a lone trader managed to cause the bank to lose 4.9 billion euros ($7.2 bn). Additionally, the bank reported another $3 billion in losses from subprime mortgages and from the U.S. bond insurer Ambac Financial, which had insured all the toxic CDOs held by the bank.

The assembled press was especially eager to hear all about the lone (assassin) trader theory which the bank is pushing. With a straight face, bank officials tried to explain that, on Friday evening, Jan. 18, they had discovered that a small trader had fraudulently taken very high futures trading positions. One of the journalists of a leading economic daily noted that "They take us for real idiots!" It was announced later that prosecutors in Paris had opened an investigation of the trader, identified as Jerome Kerviel.

On Monday, the Societe spokesman said, the bank began to unwind the lone-trader's positions -- which are not only supposed to explain Societe Generale's losses, but also the worldwide stock market collapse at the beginning of this week!

For many months, it was widely rumored that, among French banks, Société Général was probably the worst off. So nobody believes the fairy tale of the loan trader.

Stay away from the markets, IMO the credit derivative fall out is only beginning to unwind.
 
barryl said:
I dont believe you can compare what happened in Japan to the property correction we are experiencing at present. The ratios between average income and average house price in Ireland is closing which would suggest that affordability is close in the ftb market as incomes keep rising.
Click to expand...

I don't get the point you are trying to make.
It is well accepted that there is a bubble in the USA and the average house price/average income is about 6.
The ratio in Ireland is about 9!
 
yoganmahew said:
Try it on anyone who lived in England during the nineties. Or in Germany since the unification. Or in Japan since the event. Or in the US since Bush took office.

Or even in Ireland.

Don't mistake an increase in disposable income due to tax cuts with an increase in wages. One may put scarcity pressure on prices, but the other is inflationary as it increases input costs.
Click to expand...

try what? are you saying that inflation and wage increases dont exist in these countries
 
barryl said:
try what? are you saying that inflation and wage increases dont exist in these countries
Click to expand...
No I'm saying that wage increase over the recent past have not matched consumer price inflation.
 
Thomas22 said:
I don't get the point you are trying to make.
It is well accepted that there is a bubble in the USA and the average house price/average income is about 6.
The ratio in Ireland is about 9!
Click to expand...

Personally I don't think taking average wages vs average house prices is a good indicator of whether proices are too high/low.

I don't even think it's useful as a rule of thumb.

The market is made up of many sub-markets.
i.e. lower end,middle,upper end etc.
 
qwertyuiop said:
Personally I don't think taking average wages vs average house prices is a good indicator
Click to expand...

Rubbish - ofcourse it's relevant. How else is afforability in its purest form to be measured?

But lets stay on topic here? Please??

Markets are in the middle of a major bear IMO and once financial reports from banks etc come out in Feburary, then and only then will the fun really begin. Central banks are washing too much money through the system in an attempt to fix something that's badly broken. It's fuel to the fire. Given all the information, other than Gold - I'm sitting tight.
 
Thomas22 said:
I don't get the point you are trying to make.
It is well accepted that there is a bubble in the USA and the average house price/average income is about 6.
The ratio in Ireland is about 9!
Click to expand...
check out first active approval in principle, single income of 33000 pa Ltv 92% 2415pm after tax=loan 224,340. joint app. 30,000 and25,000 Ltv 92% nett 4022 after tax loan 344000
 
qwertyuiop said:
Personally I don't think taking average wages vs average house prices is a good indicator of whether proices are too high/low.

I don't even think it's useful as a rule of thumb.

The market is made up of many sub-markets.
i.e. lower end,middle,upper end etc.
Click to expand...

well lets stick to the facts,average house prices/income are an average of these sub markets/incomes
 
Calico said:
rubbish!!!!!!!
Click to expand...

still rubbish???? money back from US govt to consumers will boost confidence. mortgage rates falling to 4 year low. markets will start to move substantially higher after earnings season.
 
qwertyuiop said:
Personally I don't think taking average wages vs average house prices is a good indicator of whether proices are too high/low.

I don't even think it's useful as a rule of thumb.

The market is made up of many sub-markets.
i.e. lower end,middle,upper end etc.
Click to expand...

MichaelDes said:
Rubbish - ofcourse it's relevant. How else is afforability in its purest form to be measured?

But lets stay on topic here? Please??

Markets are in the middle of a major bear IMO and once financial reports from banks etc come out in Feburary, then and only then will the fun really begin. Central banks are washing too much money through the system in an attempt to fix something that's badly broken. It's fuel to the fire. Given all the information, other than Gold - I'm sitting tight.
Click to expand...
do you not see opportunity in this market,ask yourself whats the best/worst thing that could happen and then what is the most likely thing that could happen.
 
MichaelDes. You are 100% correct. Central Banks started approx 10 years ago to throw money at economies to accelerate growth. Now its so badly broken, they are lost, and by throwing money at it this time ain't gonna fix it. It will take harsh reality over the next six months to waken us all. And to answer the question on the original OP, a hard six months will place us all on the reality track.
 
barryl said:
do you not see opportunity in this market,ask yourself whats the best/worst thing that could happen and then what is the most likely thing that could happen.
Click to expand...

The worst thing that could happen is the whole financial system could be in serious jeopardy? What will a 2.3Trillion USD bond market default cause? What affect will that have on markets? Also as mentioned, American banks are sitting on 120Trillion USD of credit derivatives, if any of these default - Can the Fed just keeping printing its way out of trouble, and rollover and rollover on loans? No, it can’t!

Markets have low p/e valuations, that's the only upside. But until these credit derivative issues have washed themselves thoroughly - I'm sticking to safe haven plays of Gold. It keeps rising as America keeps going down the toilet and is a defensive play/position. The downside is utterly compelling, as credit and recession problems are going hand in hand. Study the facts and face reality, long term things aren't going to be pretty.
 
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