Stock Market Meltdown

[Arctec]

08/04/07 "ICH " — --- It’s a Bloodbath. That’s the only way to describe it.

On Friday the Dow Jones took a 280 point nosedive on fears that that losses in the subprime market will spill over into the broader economy and cut into GDP. Ever since the two Bears Sterns hedge funds folded a couple weeks ago the stock market has been writhing like a drug-addict in a detox-cell. Yesterday’s sell-off added to last week’s plunge that wiped out $2.1 trillion in value from global equity markets. New York investment guru, Jim Rogers said that the real market is “one of the biggest bubbles we’ve ever had in credit” and that the subprime rout “has a long way to go.”

We are now beginning to feel the first tremors from the massive credit expansion which began 6 years ago at the Federal Reserve. The trillions of dollars which were pumped into the global economy via low interest rates and increased money supply have raised the nominal value of equities, but at great cost. Now, stocks will fall sharply and businesses will fail as volatility increases and liquidity dries up. Stagnant wages and a declining dollar have thrust the country into a deflationary cycle which has---up to this point---been concealed by Greenspan’s “cheap money” policy. Those days are over. Economic fundamentals are taking hold. The market swings will get deeper and more violent as the Fed’s massive credit bubble continues to unwind. Trillions of dollars of market value will vanish overnight. The stock market will go into a long-term swoon.






http://www.iraq-war.ru/article/137254

[AAD]

Interesting read, thanks for that info Arctec...

[Arctec]

Interesting read, thanks for that info Arctec...


Could have a lot to do with why no one is rushing into the ISX.

[AAD]

Well maybe, but it could probably be more on the lines that not many may know about the ISX to start with...

[irons]

I had read about this happening a while ago, is this the mortgage/real estate bubble? People using thier houses like ATM machines drawing out equity that really isn't there?

[lance]

It is worse than they 1st told us, sub prime market is a bad deal getting worse. That what I have been reading the last couple days, they are lending more money instead of less to high risk individuals. This is the general sentiment from what I've been able to find on the net.

[irons]

I have a few friends in real estate who all said pretty much the same thing.People want to buy a new house but don't realize they owe 25% or more than they could ever sell thier house for.Dumb move.
I dont know what the national average is for this but in Michigan 27 or 28% of homeowners have done this. sad...:no:

[Sponson]

I've always opined that the only reason people tolerated Clinton was because of the perceived notion that the economy was doing well, when in fact the increased liquidity (compliments of Greenspan) was slowly but surely undermining our economy.

Things are more expesive today not because they're inherently more valuable, but because the value of the dollar has (rapidly) declined.

Just my take...

:)

[MrAustin]

I love weeks like last week in the dow, thats when I make my money w00t!

[Gluphus]

the source of our woes is Wall Street.

Here's the way the scam goes, anyone else tries something like this, they go to jail but on Wall Street you get a Ferrari:

1. Purchase a huge amount of subprime loans.
2. Package, slice and dice these as what are called "collateral debt obligation".
3. Sell these CDO's like stocks* to hedge funds at marked up prices.
4. These CDO's are attractive due to their junk bond (high rates), their price to market (when you cannot set a price (ie: no buyers) you "model" it and price it based on the model) and the ability of banks to both run a hedge fund (ie: avoid many of the bank and SEC regs) and use their credit rating (reserve ratios are now at historic lows) AND use the Yen carry trade to , in essence, make hugh amounts of free money.

The kicker is once CDO's are priced to market (and no buyers mean the real value is NOT what the model said) the leverage effect quickly acts negative.
Where once $10M would allow a bank to own/use perhaps $100M+, once the CDO is adjusted down a few percent, the hedge fund/bank now must liquidate HUGH amounts of assets to cover their losses. Then those assets (due to supply -vs- demand) are priced lower, accelerating the cycle....

Goldman Sachs actually had NO buyers for their recent CDOs, meaning their NPV was ..... : $0, not $85BN... now, using reserves...that could force a pullback of far greater than $2 Trillion from the market...

Not a good thing at all. These people are building our grave. (or at least NYCs).

One more thing...look who is now getting into hedge funds: http://www.npr.org/templates/story/story.php?storyId=10305714 .
Remember, they have $1 TR in cash...image what that can do when leveraged X10, X20, X50...

[RotaryRevn]

It is much worse than they are telling us. We were predicting this at the housing bubble blog over a year ago. The only place to really get the truth is http://www.thehousingbubbleblog.com

That site is just as addictive as this site. I really enjoy reading the replies.

[Rving]

Interesting read, thanks for that info Arctec...

I wouldn't say interesting ... Scary is more like it!!

My father said people have been saying this sort of things for years but, after reading this and seeing the numbers, banks, and creditors going belly up ...it could very well be possible!!!

This would not only effect the US but the entire world, stock markets everywhere will plummet!! You said you thought investors are uninformed about the iraqi stock market but I think it's more than that... even now they are feeling our pain so to speak... but something like this, there would be serious repercussins worldwide!!

I'm not really sure there is a way to prepare for something like this.. most people are consumed with debt and others are just oblivious to the fact from being in their own bubble!! My only suggestion is if/when the Dinar RV's buy currencies other than US.

[Ialdoboath]

After university I spent 15 years living in scummy dives and crappy apartments so I could save up the cash to buy my house outright. At 41 I now own it... 100%. Been fixing it up nice for 2 years now. THAT is the only way around this. If you use credit, STOP. If you are in debt, sell anything you need to sell to get out of the debt.

No one wants to "lose their standard of living". The problem is, you will lose it one way or the other. Best to do it in a controlled way that allows you to work your way back up.



I wouldn't say interesting ... Scary is more like it!!

My father said people have been saying this sort of things for years but, after reading this and seeing the numbers, banks, and creditors going belly up ...it could very well be possible!!!

This would not only effect the US but the entire world, stock markets everywhere will plummet!! You said you thought investors are uninformed about the iraqi stock market but I think it's more than that... even now they are feeling our pain so to speak... but something like this, there would be serious repercussins worldwide!!

I'm not really sure there is a way to prepare for something like this.. most people are consumed with debt and others are just oblivious to the fact from being in their own bubble!! My only suggestion is if/when the Dinar RV's buy currencies other than US.

[harpua]

I hear whore houses are a good investment.

[MR32SLIM]

I've always opined that the only reason people tolerated Clinton was because of the perceived notion that the economy was doing well, when in fact the increased liquidity (compliments of Greenspan) was slowly but surely undermining our economy.

Things are more expesive today not because they're inherently more valuable, but because the value of the dollar has (rapidly) declined.

Just my take...

:)

Hate to rain on your conservative parade, but Clinton didn't appoint Greenspan, who you claim to be the reason for the crumbling economy. Neither did Bush, Sr. Read a history book and maybe you'll learn that it was Reagan, the neocon God, who appointed Alan to run the Fed.

The economy prospered because Clinton didn't waste hundreds of billions of dollars fighting a war in the wrong country. He didn't let his cronies (ie: Cheney) rape the taxpayers by paying private soldiers and hiring private contractors to fight a war that will ultimately profit his family's oil business.

Yeah, Clinton was a sleazeball. But he wasn't the sole reason that the economy is in the crapper these days.

[WCinThai]

Hate to rain on your conservative parade, but Clinton didn't appoint Greenspan, who you claim to be the reason for the crumbling economy. Neither did Bush, Sr. Read a history book and maybe you'll learn that it was Reagan, the neocon God, who appointed Alan to run the Fed.

The economy prospered because Clinton didn't waste hundreds of billions of dollars fighting a war in the wrong country. He didn't let his cronies (ie: Cheney) rape the taxpayers by paying private soldiers and hiring private contractors to fight a war that will ultimately profit his family's oil business.

Yeah, Clinton was a sleazeball. But he wasn't the sole reason that the economy is in the crapper these days.

Truth be known! How can anyone put the current economy back on Clinton eight years back, this is Bush all the way. This is how the economy has continued to look so good, when we should have had a correction a year and a half ago!

[Sponson]

Hate to rain on your conservative parade, but Clinton didn't appoint Greenspan, who you claim to be the reason for the crumbling economy. Neither did Bush, Sr. Read a history book and maybe you'll learn that it was Reagan, the neocon God, who appointed Alan to run the Fed.

The economy prospered because Clinton didn't waste hundreds of billions of dollars fighting a war in the wrong country. He didn't let his cronies (ie: Cheney) rape the taxpayers by paying private soldiers and hiring private contractors to fight a war that will ultimately profit his family's oil business.

Yeah, Clinton was a sleazeball. But he wasn't the sole reason that the economy is in the crapper these days.

Perhaps I should have explained better...

The point I was trying to make was that Greenspan increased the liquidity of whom Clinton was able to benefit, and so yes I realize that Clinton didn't appoint Greenspan, but he certainly benefited from it which also served as a good cover for his "misdeeds" because of the perception that all was well economically, and people being people, when there's money in their pocket, seem to have an easier time not being concerned over other issues.

I have conservative tendencies, but I'm not Conservative per se. The United States will fall, of that I am sure. So it doesn't really matter who or what party is in Office.

:wave:

[Ryan Express]

After university I spent 15 years living in scummy dives and crappy apartments so I could save up the cash to buy my house outright. At 41 I now own it... 100%. Been fixing it up nice for 2 years now. THAT is the only way around this. If you use credit, STOP. If you are in debt, sell anything you need to sell to get out of the debt.

No one wants to "lose their standard of living". The problem is, you will lose it one way or the other. Best to do it in a controlled way that allows you to work your way back up.



Laudable approach, ialdoboth. Zero debt is the answer for all. The problem in the states is that most folks in the "middle class" are effectively insolvent, as their debts exceed their owned assets. We should rename the middle class to the "indentured servant class" whereby the majority of folks work just to pay the monthly minimums on their debt service, without actually paying down their debt levels.

The remaining assets of the middle class are in large part stuck in retirement funds that are subject to the whims of the stock market, where short sellers literally steal said funds by lowering stock prices via the short trade. The short trade, IMHO, is a true fraud in that stock traders sell stocks they don't own-they "borrow stocks' from unsuspecting stock owners and flood the market with sales, thus creating an imbalance on the supply side of the supply/demand equation. The resultant effect of said trade is of course, a removal of asset values from the middle class retirement to the hands of the stock traders.

The US is in the early stages of a 15 year real estate market decline, caused in large part by bogus low interest rates that inflated, artificially, the price of housing. The US real estate market will see, over time, a 41% decline in real estate costs-just to put prices in line historically with monthly incomes.

[Mosul Mortar Dodger]

Perhaps I should have explained better...

The point I was trying to make was that Greenspan increased the liquidity of whom Clinton was able to benefit, and so yes I realize that Clinton didn't appoint Greenspan, but he certainly benefited from it which also served as a good cover for his "misdeeds" because of the perception that all was well economically, and people being people, when there's money in their pocket, seem to have an easier time not being concerned over other issues.

I have conservative tendencies, but I'm not Conservative per se. The United States will fall, of that I am sure. So it doesn't really matter who or what party is in Office.

:wave:

Link please!!!

[Sponson]

Link please!!!

lol...

From a biblical perspective, all Gentile governments will eventually come against Israel and all will subsequently be destroyed - that was my angle with that comment. That, and the fact that "democratic" governments aren't biblical.

But before people start bashing me, please note that my oldest son is in the military (Army) and he entered into the military with my blessing - so I am not anti-American, but I am a Christian which "forces" me to accept the biblical reality of the situation.

On the more immediate practical level, the economy, illegal immigration, "entitlements," legal system, etc., are all pointing to our downfall...


:)

[Mosul Mortar Dodger]

lol...

From a biblical perspective, all Gentile governments will eventually come against Israel and all will subsequently be destroyed - that was my angle with that comment. That, and the fact that "democratic" governments aren't biblical.

But before people start bashing me, please note that my oldest son is in the military (Army) and he entered into the military with my blessing - so I am not anti-American, but I am a Christian which "forces" me to accept the biblical reality of the situation.

On the more immediate practical level, the economy, illegal immigration, "entitlements," legal system, etc., are all pointing to our downfall...


:)

In my opinion: People with their hands out are what is ruining the USA. Cut welfare for those that do not contribute to society. Close the borders to just anyone - lets get only the best and brightest that want to be Americans. Send US prisoners to Prison - not summer camp. The next time any Islamofascists harm any individual - Bomb Medina, Mecca is next. Start hammering every country that treats its people like the stick attached to a bottle rocket. Quit blaming the Government for your personal unhappiness. Get an education. Quit breaking US laws. Think for yourself. Make your parents and/or children proud of you. Do the right thing.

And one more thing..................Quit Whining

[MrAustin]

amazing how we have all these economic majors.. lmao

[nosocsecinmyfuture]

In my opinion: People with their hands out are what is ruining the USA. Cut welfare for those that do not contribute to society. Close the borders to just anyone - lets get only the best and brightest that want to be Americans. Send US prisoners to Prison - not summer camp. The next time any Islamofascists harm any individual - Bomb Medina, Mecca is next. Start hammering every country that treats its people like the stick attached to a bottle rocket. Quit blaming the Government for your personal unhappiness. Get an education. Quit breaking US laws. Think for yourself. Make your parents and/or children proud of you. Do the right thing.



Beautiful!

[Mazin-Man]

After reading this I need a beer..several beers..and I don't even drink....:eek: :eek:

[MrAustin]

after reading this I just laff. like ha.

[richsoon]

Market meltdown? What you talking G??? All my stocks are up today, and for the month (minus a couple of slackers) and for the year. And my mutual funds are doing better than ever so far this year. YUMMY YUMMY YUM - Ill take some of those beers off your hands..

[MrAustin]

Market meltdown? What you talking G??? All my stocks are up today, and for the month (minus a couple of slackers) and for the year. And my mutual funds are doing better than ever so far this year. YUMMY YUMMY YUM - Ill take some of those beers off your hands..

Im with you, I've made more money this year so far than the last 5! :happy64:

[stinkydinarcrazedidiot]

Hate to rain on your conservative parade, but Clinton didn't appoint Greenspan, who you claim to be the reason for the crumbling economy. Neither did Bush, Sr. Read a history book and maybe you'll learn that it was Reagan, the neocon God, who appointed Alan to run the Fed.

The economy prospered because Clinton didn't waste hundreds of billions of dollars fighting a war in the wrong country. He didn't let his cronies (ie: Cheney) rape the taxpayers by paying private soldiers and hiring private contractors to fight a war that will ultimately profit his family's oil business.

Yeah, Clinton was a sleazeball. But he wasn't the sole reason that the economy is in the crapper these days.Clinton killed the military. So billions had to be put back into it to bring it up to snuff. I was in the military in the Clinton era. Let me tell you supplies and training were in very short supply during that reign. So that is why we go into debt everytime a Republican gets in office after a dem. They have to undo all the damage!

[petedakis]

After university I spent 15 years living in scummy dives and crappy apartments so I could save up the cash to buy my house outright. At 41 I now own it... 100%. Been fixing it up nice for 2 years now. THAT is the only way around this. If you use credit, STOP. If you are in debt, sell anything you need to sell to get out of the debt.

No one wants to "lose their standard of living". The problem is, you will lose it one way or the other. Best to do it in a controlled way that allows you to work your way back up.

Im a bit new to this sight. But I wanted to let you know ILDOBOTH that I love reading your post. You are a very wise man. Keep up the good work!!!:huge:

[richsoon]

Im a bit new to this sight. But I wanted to let you know ILDOBOTH that I love reading your post. You are a very wise man. Keep up the good work!!!:huge:


Guy writes a damn good book too. Im half way through it now.

[jaudude]

[quote=Arctec;446423]08/04/07 "ICH " — --- It’s a Bloodbath. That’s the only way to describe it.

On Friday the Dow Jones took a 280 point nosedive on fears that that losses in the subprime market will spill over into the broader economy and cut into GDP. Ever since the two Bears Sterns hedge funds folded a couple weeks ago the stock market has been writhing like a drug-addict in a detox-cell. Yesterday’s sell-off added to last week’s plunge that wiped out $2.1 trillion in value from global equity markets. New York investment guru, Jim Rogers said that the real market is “one of the biggest bubbles we’ve ever had in credit” and that the subprime rout “has a long way to go.”

We are now beginning to feel the first tremors from the massive credit expansion which began 6 years ago at the Federal Reserve. The trillions of dollars which were pumped into the global economy via low interest rates and increased money supply have raised the nominal value of equities, but at great cost. Now, stocks will fall sharply and businesses will fail as volatility increases and liquidity dries up. Stagnant wages and a declining dollar have thrust the country into a deflationary cycle which has---up to this point---been concealed by Greenspan’s “cheap money” policy. Those days are over. Economic fundamentals are taking hold. The market swings will get deeper and more violent as the Fed’s massive credit bubble continues to unwind. Trillions of dollars of market value will vanish overnight. The stock market will go into a long-term swoon.


SUB PRIME IS 10% OF R.E. MARKET AT BEST - it will not take anything down with it except a few companies that were beyond the pale to begin with. is there a correction coming on credit ? you bet. if you live on credit that's a problem. if you don't, it is not so much of a problem. better credit/lending habits will be better for USA in the end.

[Ialdoboath]

Thanks...


In the interest of making money I am currently working on a fiction... my first big fiction book (I've done a couple novellas and a small fiction... this one is 300 pages or so,)

The premise: What would happen if all the end-of-the-world prophesies from all the religions happened at the same time? Set in modern day. Any takers on a plot like this? Worth putting out there?

(FYI... I assume you are reading the Heathen's Guide. The sequel is sitting in front of me... Heathen's Guide to Holidays (Xmas). Should be out for Christmas.)


Guy writes a damn good book too. Im half way through it now.

[stinkydinarcrazedidiot]

Thanks...


In the interest of making money I am currently working on a fiction... my first big fiction book (I've done a couple novellas and a small fiction... this one is 300 pages or so,)

The premise: What would happen if all the end-of-the-world prophesies from all the religions happened at the same time? Set in modern day. Any takers on a plot like this? Worth putting out there?

(FYI... I assume you are reading the Heathen's Guide. The sequel is sitting in front of me... Heathen's Guide to Holidays (Xmas). Should be out for Christmas.)If all of the doomsday prophesies happened at once? Seems to me it would be a very short book. "BLAMMO!!!!!!!!! The end.

[Midnight Tide]

[quote=Arctec;446423]08/04/07 "ICH " — --- It’s a Bloodbath. That’s the only way to describe it.

On Friday the Dow Jones took a 280 point nosedive on fears that that losses in the subprime market will spill over into the broader economy and cut into GDP. Ever since the two Bears Sterns hedge funds folded a couple weeks ago the stock market has been writhing like a drug-addict in a detox-cell. Yesterday’s sell-off added to last week’s plunge that wiped out $2.1 trillion in value from global equity markets. New York investment guru, Jim Rogers said that the real market is “one of the biggest bubbles we’ve ever had in credit” and that the subprime rout “has a long way to go.”

We are now beginning to feel the first tremors from the massive credit expansion which began 6 years ago at the Federal Reserve. The trillions of dollars which were pumped into the global economy via low interest rates and increased money supply have raised the nominal value of equities, but at great cost. Now, stocks will fall sharply and businesses will fail as volatility increases and liquidity dries up. Stagnant wages and a declining dollar have thrust the country into a deflationary cycle which has---up to this point---been concealed by Greenspan’s “cheap money” policy. Those days are over. Economic fundamentals are taking hold. The market swings will get deeper and more violent as the Fed’s massive credit bubble continues to unwind. Trillions of dollars of market value will vanish overnight. The stock market will go into a long-term swoon.


SUB PRIME IS 10% OF R.E. MARKET AT BEST - it will not take anything down with it except a few companies that were beyond the pale to begin with. is there a correction coming on credit ? you bet. if you live on credit that's a problem. if you don't, it is not so much of a problem. better credit/lending habits will be better for USA in the end.

Except for a few, most people these days are living on credit. Not a good thing, but interest rates and the willingness of banks to give out credit - this correction is going to hurt the vast majority of people.

Thank god I pay in cash, have next to no debt. But if people don't think this is going to hurt the economy (as people become overwhelmed with debt) your dreaming.

[RotaryRevn]

I'm waiting for the big price cuts on big ticket items like LCD TV's. I expect they should have some nice discounts after ThanksGiving. The days of people using thier homes as ATM machines are rapidly coming to an end.

[richsoon]

Thanks...


In the interest of making money I am currently working on a fiction... my first big fiction book (I've done a couple novellas and a small fiction... this one is 300 pages or so,)

The premise: What would happen if all the end-of-the-world prophesies from all the religions happened at the same time? Set in modern day. Any takers on a plot like this? Worth putting out there?

(FYI... I assume you are reading the Heathen's Guide. The sequel is sitting in front of me... Heathen's Guide to Holidays (Xmas). Should be out for Christmas.)


This time I want a SIGNED edition. :lmao: :wave:

[JohnnyR]

Thanks...


In the interest of making money I am currently working on a fiction... my first big fiction book (I've done a couple novellas and a small fiction... this one is 300 pages or so,)

The premise: What would happen if all the end-of-the-world prophesies from all the religions happened at the same time? Set in modern day. Any takers on a plot like this? Worth putting out there?

(FYI... I assume you are reading the Heathen's Guide. The sequel is sitting in front of me... Heathen's Guide to Holidays (Xmas). Should be out for Christmas.)


Hahahah nice I, only thing is, I'm not so sure it will be fiction...LOL

[Ialdoboath]

Yeah... having a bit of a problem working in Mohammed and hte last imam showing up with Jesus already in Jerusalem. He's SUPPOSED to arrive with Mohammed according to Islam, and with Ezekiel in Christianity.

All in all this is gonna be one "hell" of a time writing. Hope to have first draft by October/early November.

Hahahah nice I, only thing is, I'm not so sure it will be fiction...LOL

[JohnnyR]

Can't help but be reminded of a video I watched where they talked about money changers, Federal Reserve....

Watch the video (http://video.google.com/videoplay?docid=-515319560256183936&q=money+changers%2C+federal+reserve&total=17&start=0&num=10&so=0&type=search&plindex=0)

Sounds like they are consolidating assets. Flood the market with money (cheap loans) then pinch off the money supply (near impossible to refinance home). People foreclose on their house cause they can't afford them and just like that the banks have the past 5 years of payments and interest plus the property....:wave:

Just sayin....

[Ialdoboath]

Yeah... sounds a lot like how CitiBank was founded after the Depression.


Can't help but be reminded of a video I watched where they talked about money changers, Federal Reserve....

Watch the video (http://video.google.com/videoplay?docid=-515319560256183936&q=money+changers%2C+federal+reserve&total=17&start=0&num=10&so=0&type=search&plindex=0)

Sounds like they are consolidating assets. Flood the market with money (cheap loans) then pinch off the money supply (near impossible to refinance home). People foreclose on their house cause they can't afford them and just like that the banks have the past 5 years of payments and interest plus the property....:wave:

Just sayin....

[irons]

Asian Stocks Plummet Over U.S. Credit Fears

Friday, August 10, 2007

TOKYO —
Asian stocks plunged Friday as fallout spread from global market turmoil set off by concerns about credit weakness in the U.S. The Bank of Japan joined its U.S. and European counterparts in pouring cash into money markets to calm growing jitters.

The Nikkei 225 (javascript:siteSearch('Nikkei 225');) index dropped 406.51 points, or 2.37 percent, to close at 16,764.09 points on the Tokyo Stock Exchange (javascript:siteSearch('Tokyo Stock Exchange');). The broader Topix index of all shares on the exchange's first section sank 49.88 points, or 2.96 percent, to 1,633.93 points.
The Korea Composite Stock Price Index (javascript:siteSearch('Korea Composite Stock Price Index');) fell 80.19 points, or 4.2 percent, to 1,828.49, with issues falling across the board, especially financial stocks. The Kospi fell as much as 5 percent in intraday trade.
Asian markets across the region followed the general slump.
Hong Kong's blue chip Hang Seng Index (javascript:siteSearch('Hang Seng Index');) was down 3 percent midday at 21,771.94. Singapore's Straits Times Index was down 2.89 percent by midday at 3,314.37. The Phillipine benchmark index was also off 3 percent, and the standard market measure in Australia finished down 3.7 percent.
The plunge came after the Dow Jones (javascript:siteSearch('Dow Jones');) industrial average fell 387.18, or 2.83 percent, to 13,270.68 in New York on Thursday after a French bank announced it was freezing funds that invested in U.S. subprime mortgages, deepening fears of a credit crunch.
Amid Friday's decline, the Bank of Japan said it injected 1 trillion yen ($8.39 billion) into money markets to curb rises in a key overnight interest rate.
The injection followed similar moves by its European and U.S. counterparts overnight.
The European Central Bank provided more than $130 billion to money markets, the bank's biggest infusion ever.
The U.S. Federal Reserve (javascript:siteSearch('U.S. Federal Reserve');) also added a larger-than-normal $24 billion in temporary reserves to the U.S. banking system.
In South Korea early Friday, blue chip stocks Samsung Electronics Co., the country's largest corporation, and Posco, the world's fourth-largest steelmaker, were down 2.6 percent and 3.6 percent, respectively.
Moves in international markets affect the Korean index, said Kang Moon-sung, a strategist at Korea Investment and Securities Co.
"So no one is confident this level is (the) bottom," Kang said.
The index has been on a tear for most of this year, rising as much as 40 percent. Last month, the benchmark closed past 2,000 for the first time.
Japan's government spokesman Yasuhisa Shiozaki tried to play down the fears about the fallout on the world's second largest economy.
"Our economy is recovering smoothly, spurred by private sector demand," Shiozaki told reporters Friday. "The government will continue to closely watch share prices and overall economic indicators," he said.

[fms]

Fed Takes Emergency Action, Pumps
Money into Banking System
The Dow Jones fell sharply early Friday as the Federal Reserve took a dramatic step to stave off a collapse of global credit markets by pumping $24 billion into the U.S. banking system. In apparent coordination, the European Central Bank responded to the credit panic by pumping $130 billion into their banking system.

http://www.newsmax.com/money/archives/articles/2007/8/10/105826.cfm

The Fed added a total of $68.5 billion to its reserves this week, compared with a total of $50.25 billion last week.

[zimbu]

Fed Takes Emergency Action, Pumps
Money into Banking System
The Dow Jones fell sharply early Friday as the Federal Reserve took a dramatic step to stave off a collapse of global credit markets by pumping $24 billion into the U.S. banking system. In apparent coordination, the European Central Bank responded to the credit panic by pumping $130 billion into their banking system.

http://www.newsmax.com/money/archives/articles/2007/8/10/105826.cfm

The Fed added a total of $68.5 billion to its reserves this week, compared with a total of $50.25 billion last week.

24 billion of what?
Paper?
It's not backed by anything, we went off the gold standard years ago.

Zimmer

[Pimpmaximus]

24 billion of what?
Paper?
It's not backed by anything, we went off the gold standard years ago.

Zimmer

Market Psycology at work......

It's coming from the Fed, so it MUST be ok. As long as the average consumer doesn't realize this inconvienent truth (or more to the point, act like they know) then these sorts of schemes will work.

It's only a matter of time however. I hope everyone has got some commodities in their back pocket.......

[nosocsecinmyfuture]

24 billion of what?
Paper?
It's not backed by anything, we went off the gold standard years ago.

Zimmer


oil reserves? :confused:
(727 million barrels @ 42 gal bbl= 30 billion gallons)

We're screwed, I better buy my land now and learn how to farm. The country is going to hit a depression in the next ten yrs.

[Wellington]

http://jsmineset.com/

Sample...

"Dear CIGAs,
What fueled both the post 2002 bull market to its heights and provided the fuel for all the bubbles we have experienced was the Bernanke Helicopter Drop of Liquidity, made in Japan.
The technique provided the largest liquidity injection in the shortest period of time. The mechanism was Japan’s intervention in the yen by selling yen and therefore acquiring dollars. The dollars acquired were bank wired to the New York Federal Reserve Bank multiple times a day for deposit in the Japanese Float Account. The manager of the Japanese Float Account is the New York Federal Reserve Bank. The New York Federal Reserve Manager of the Japanese Float Account invested these funds as many times as received, each day, by buying US Treasury instruments across all maturities in the international markets. Since the Japanese intervention at that time was so large, the result was a tremendous (by previous comparisons) growth in international liquidity and a bull market in US treasury instruments resulting in constantly lower interest rates. That bulled the stock market and all the bubbles we have witnessed. There is no practical way to drain that liquidity, but that is another essay in itself. Believe me, I am totally correct in that.
To put Thursday and Friday in proper perspective, consider that the total stimulus provided by this liquidity injection was an average of 70 billion per month. The source of that is past TIC reports covering that period of time. Yes, that was month after month.
If you add to the publicly given figures of both the Federal Reserve and European Central Bank concerning their injection of liquidity on two days, Thursday and Friday of this week, your number will reach approximately 200 billion dollars. That figure does not take into consideration that both the Fed and ECB says they will buy collateralized bonds and instruments thereon (derivatives) in an unlimited amount. We will never know what that numbers is so add whatever it is to the total. It could double or triple that number in a heartbeat. This also provides no practical way to drain the liquidity as reversing the transaction is impossible for the foreseeable future. Both central banks showing a willingness to buy all and every offering of these market-less mortgage collateralized instruments and derivatives thereon have, by definition, no market into which the Fed can sell. This is why there is no practical method of draining this now largest amount of liquidity ever injected into the international monetary system in the shortest amount of time.
Therefore on Thursday and Friday of this week you have witnessed the largest injection of liquidity in the history of man in but two days.
This is as close as you will get in an alarm-less financial world (no crisis is a crisis because you cannot see it) to absolute proof that the financial system has a major challenge. That challenge may have been sparked by sub prime madness, but is now firing all across the interest sensitive credit derivative market that is absolutely ENORMOUS in terms of replacement value. Should this paper giant implode as a weapon of financial mass destruction, then replacement value is a true value. This brand of un-financed, unregulated, paper garbage special performance contracts dependent on the balance sheet of the loser for viability, without standards and therefore without markets, valued as cartoons by mark to model is larger that the entire National Debt of the US (Source: IMF monthly report on derivative numbers).
Injection of massive liquidity on an unprecedented level may well calm emotions, it may not. One thing is for sure: the problems are not going away and it is the Big Kahuna that the Fed and the ECB are trying to stave off.
There are conclusions that are evident from the events and reactions to events of Thursday and Friday.

Anything and everything at an unlimited amount will be done in terms of creating more paper money in order to keep the financial system liquid to hopefully prevent a meltdown in Over the Counter Derivatives on debt.
That puts the last nail in the dollar coffin, most certainly when you know earnings are not going to keep up and less taxes will be paid, the Federal budget will balloon and we will have a negative TIC report.
Since it is axiomatic that the dollar rules gold and logical that the Formula rules the dollar, gold will go to and through all the angels.
The US dollar, for starters, is headed to .7200.
The equity markets are anyone’s guess as liquidity historically is the grease of the wheels of stocks. Give the perma-bulls liquidity and guess where it goes. In the Weimar Republic as there currency went to zero their stock market went to infinity.History is being made yesterday and today. It may well not be over even in this time span. The actions of Thursday and Friday are greater even than the Bernanke Helicopter Drop in the two day time period. This event will reverberate through the world financial market for years to come. This is only an indication of what will happen as all this economic sin, instant gratification, profit at any cost economy begins to unwind in the form of the Over The Counter Derivative implosion. Be careful here."

[Wellington]

Posted On: Friday, August 10, 2007, 11:56:00 AM EST
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Market Rescue Will Hurt Dollar
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Author: Jim Sinclair
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Dear CIGAs,
Believe me, I know what I am talking about when it comes to markets

Everything required will be done to save the world's equity markets.
Liquidity will be supplied without limit.
The US Fed is buying what basically has no market and are therefore worthless mortgage bonds.
This is not only a crisis in collaterized bonds but infinitely more so in credit derivatives.
The size of the credit derivative market is beyond your wildest imagination.
The unlimited liquidity being supplied in Euro Land and the so far admitted billions in the US by the Fed would never have occurred unless there are major financial entities in trouble. Those big boys that were the major entities in credit and bankruptcy guarantee of derivatives are falling like stones. This is a rescue of the good old boys at any cost to the US dollar.
Gold derivatives are not insulated by some magic buffer. If the entities who have granted these and who have immense profits are threatened with their own bankruptcy, they will find a way to take that profit which is in the billions.The combination of all this is that the US dollar will go to .7200. Gold will go to and through all the angels.

The problem was initiated by the major supplying of liquidity in 2002-2003 and you cannot cure the problem by adding infinitely more liquidity.

You should now be in Canadian Dollars, Swiss Francs, PM and base metal shares in my opinion.

[PapaPark]

Someone wrote this on a board I frequent and I want to get everyone's opinions on it whether you agree or disagree ..etc..

*WARNING* LONG READ *WARNING*

First off, this is all my work except for the chart which I found via a google search. I have a similar thread in the investments section but they're all about P/E ratios, trading charts, etc which are nice and useful to an extent, but they're not so much about fundamentals and economics (see: reality), plus no one really posts in there too much so I decided to stir the pot in here.

Also, don't trust anyone who is currently working in the real estate or lending industry who says their will be a recovery soon in the real estate market, this is NOT going to happen. They are trying to make a buck before they go out of business/get laid off as the market collapses (comissions based salespeople never work in your true best interest, as always).

One more preface, this is NOT a left vs right debate, keep the partisan crap out of here please. Bill Clinton (NAFTA) and Bush (Budget defecits, pressuring greenspan to drop the fed rate so low) are both somewhat to blame with their various economic policies, as are lenders, and to an extent the average american consumer, but the MAIN culprit is Alan Greenspan and the fed.

Now wait you say, Alan Greenspan? The Fed King who presided for years over our economy, which has done, on the surface at least, very well for nearly his entire tenure.

However, in the early 2000s, the fed and greenspan decided that to stave off the 2001 recession that was started as a result of the september 11th attack. The dot com bubble burst and terrorist attacks occuring in such a short time frame (relatively speaking) were a lot for any economy to handle, so the fed made the fatal mistake of cutting interest rates to near zero. (interesting sidenote, many people funneled their profits from the dot com bubble into the real estate bubble, preventing the true effects from the 99 market crash from hurting the economy as much as they could/should have.)

Debt was inexpensive, and people and corporations started taking out loans all over the place. So now armed with cheap money, people could afford to pay more for a house without having a huge increase in payments due to the interest rates. Housing boomed all over the country, and people began to have issues buying a house with a traditional 30 year fixed mortgage. Interest rates had began to rise slowly now (2004), due to a fear of inflation after two years of very very low rates, rates not seen in 50 years. So now the rising housing prices combined with a modest uptick in interest rates made housing more expensive. The boom should have ended there, but it did not.

Enter in the adjustable rate mortgage, the interest only mortgage, 2/28s and 3/27s (2 years of a teaser rate, 28 years of variable, 3/27 is the same thing but with 3 years of a teaser rate etc., these are important) and other exotic loans. Suddenly people can afford to spend even more on housing, so prices continue to go up, and up, and up, investors get involved, as do speculators, driving up prices even further. Many of these 2/27 and 3/28 and other exotic mortgages originated between the spring of 2005 and the late summer of 2006 (also important).

It was also during this run up, which started in 99 but really gained speed in 2002, that lenders started abandoning lending standards, and going predatory. No down payment? No problem. Bad credit? No problem! No job or insuffecient income? No problem!!!!! Enter in a number of new homeowners driving up prices and demand even more. Lending institutions were banking (literally) on real estate continuing to boom, with the theory that as these loans reset and people couldn't afford the payments and were forced out of their homes, the bank could swoop in and sell the property at a profit over the original loan plus interest collected in the interim. They would loan to anyone for any property, why not, wait a few years, collect interest, foreclose, sell property at a profit, or if people could afford the loans the banks would make a killing on the payments anyway.

Prices went up and up and up and up, and an interesting thing began to happen, people began to feel wealthy as their house appreciated in value, so they began to cash out some of their newfound equity through home equity loans, a loan against the value of your house exceeding what you owe on a mortgage. This money was funneled into consumer spending (which accounts for 70% of our economy) which was a boon to growth. Lots of retail companies did incredibly well, prosperity rippled across the economy due to influxes of spending from the home equity loans and other debt which had been made cheap by the fed. Not only this, but the housing boom was fueling huge profits in REITs (real estate investment trusts, almost like a mutual fund based off of real estate, and yes I know thats a basic summary of how REITs work), and at homebuilders, and places that did business with homebuilders like home depot and lowes (more stock bubble build up). Profits went up, stock prices went up, mutual funds went up, everyone was happy.

Which brings me to the corporate and investing side of the bubble: leveraged buy outs (LBOs), merger and aquisitions (M&A) and collateralized debt obligations (CDOs).

Quick explanation of the 3 acronyms. LBOs are where a company will take out a loan (cheaply due to the low interest rates) and buy back outstanding issues of stock, as it was cheaper to pay interest than it was to pay dividends, plus it drives stock prices up which is great for those who have options (CEOs, etc, no conflict of interests there). So this drove the stock market up artifically, as did M&As.

M&As were made cheaper because hey, loans were cheap, interest rates were low, just issue some corporate bonds and buy or merge however you want, this, once again, has been driving stock prices sky high.

So now we have a real estate bubble, and a stock market bubble. Enter in hedge funds and mutual funds and the CDOs. CDOs are debt obligations made up of several buckets of loans of varying qualities, the idea behind them being they could increase profitability by bundling risky subprime mortgages and other exotic financing in with prime (less risky) loans of the variable and fixed type. Higher profits from the higher interest payments from the subprime loans, no increase in risk as the majority of the loans in a CDO are prime, sounds perfect right? Not only this, but the banks who created these securities made a killing selling them, driving up their stock prices as well!

In theory this is perfect, which is of course how the sellers and buyers of these loan packs have priced them until recently (more on that later). Hedge funds and mutual funds have bought several TRILLION dollars worth of these securities. Hedge funds and mutual funds that lots of people are invested in directly or indirectly. As the subprime loans go bad, they start to eat into the other parts of the security, damaging the value. How badly? Bear Stern recently had two hedge funds worth 9 billion dollars become essentially worthless as the subprime tranches of their CDOs made them unsellable. Creditors called looking for money and Bear couldn't sell the securities on the market, their theoretical price for the security, which they paid in actual money, was completely irrelevant. 9 billion out of several trillion, a tip of the iceberg.

So now we have a housing bubble, a stock market bubble, and trillions of dollars of securities in the hands of hedge funds and mutual funds that are becoming nearly worthless.

Enter in higher interest rates (starting in 2005 the rates went back above 3% and plateu'd at 5.25% in mid 2006 and has remained there since, also aprox 18 month lag for full effect to be felt economically in normal times without the housing mess) and the impending crash.

The higher interest rates were called into play by ben bernake to attempt to fight off inflation from rising oil and food prices, he had to do this, things were beginning to spiral out of control as the dollar weakened significantly.

The effects? We'll start with the adjustable mortgages, which are playing a big part in whats going on. These mortgages have become significantly more expensive as payments go WAY WAY up with the rising interest rate, and this is just with normal prime adjustable rate mortgages. People with 2/28s and 3/27s are in an even worse situation, remember how I mentioned the peak of hte housing boom being spring 2005 through late summer 2006 . . . . thats when tons of these loans were made, so now they are all resetting with an even greater price shock than an adjustable rate ARM. 2005 + 2 = 2007, 2006 + 3 = 2009 . . . . 2007 through 2009, thats how long this housing crash is going to last, 3 years at a minimum. The below chart shows only the subprime arm resets, not the prime, which are "safer" and "less likely" to go into default ("" denotes heavy sarcasm). It may last even longer than this as the higher interest rates, tighter lending standards and regulations and millions with ruined credit histories will place even more downard pressure on demand.

http://www.belowthecrowd.com/photos/ackman.jpg

So suddenly, large numbers of people are going into foreclosure because they can't afford their loan payment resets, houses are flooding the market, pushing prices down. This flood of homes onto the market has been exacerbated by home builders building huge number of homes to ride what they incorrectly assumed as an almost never ending housing boom. Making this even worse is now interest rates are higher, people can't afford to pay as much for a home. And housing begins to unwidn at the end of 2006. As 2007 begins loans reset and people begin to miss payments and foreclose, dozens of lending companies have been wiped out, with more to come. The result of this has been a huge tightening of lending standards as lenders realize they've royally fucked up, causing even fewer people to be able to afford a house. Prices begin to plummet, houses are vacant, people who can afford their mortgages are suddenly upside down on their loans, i.e. they owe more than their house is worth (due to the price drop, or due to the price drop and a home equity loan). This is a widespread issue, not localized to socal or florida, a national collapse of housing prices. Not only does the huge reduction in prospective buyers hurt prices, but the vacant and foreclosed properties severely damage the value of surrounding homes as well.

A much less mentioned side effect of this collapse is people have been using credit cards more and more often to try and stay afloat as their mortgages reset, and when they default on those payments as well the credit card companies are going to take a biggggggg hit, yet another stock market bubble popper.

Now on to how the rising interest rates and defaults hurt corporate america and the stock market. So housing collapses, and people can no longer take out home equity loans, people feel much less wealthy, tons of people go bankrupt, and consumer spending, the biggest factor in our economy, and economies around the world who export to the united states, sees a HUGE reduction. Corporate profits, GDP, employment, are ALL going to suffer as people tighten their belts through choice or by bankruptcy. Losses are on the horizon for lots of companies, and its going to cause the stock market to come crashing down (as it has already sort of), causing people to be even more fearful of spending money (vicious cycle). All you have to do is look at the earnings forecasts and guidances being put out by retailers, things are not looking rosy and we're not even fully into the housing crash yet. People have gotten leveraged to get into the market as well, more bankruptcies! weeeeee!

The M&A and LBO activity has also really dropped off as a result of the interest rate hikes and tighter lending standards. Deals can sour for corporations too, and lenders are starting to be fearful of defaults at higher levels. So M&A and LBO activity which has driven stock prices sky high over the past 3 years is now almost dead, bye bye stock bubble.

And the banks, god, the banks, oh man, the banks the banks the banks. Banks are going to disapear, big well known banks and investment houses WILL be wiped out by the foreclosures on mortgages, Credit Card losses, CDOs going bad, etc. Rates and standards are going to be high for years, putting even more of a damper on growth and recovery.

This is not an instance where the gov't can step in and bail people out, trillions of dollars in actual obligations are at risk, we can barely pay for a war costing 100 billion a year.

This economic collapse is going to lead to big time layoffs, which is going to just make things even worse in housing, which gives us yet another vicious cycle on the whole.

I can go on and on and on, but basically, we're at the spring that feeds creek and we don't even have a boat, let alone a paddle. The crash is going to be ugly, and the recovery could take a decade or more. If people want me to expand upon specifics or ask me questions about other effects this will all have let me know.

cliffs: We're about to see a collapse in the housing market, stock market, a bank crisis and an economic/credit crisis all at the same time. Think 1929 style but worse.

[makebigbuckswithme]

Should we invest in gold and silver bars and certificates. Should we be betting PUTS on the stock market? You are well versed and I thank you for your information.

[Sponson]

Should we invest in gold and silver bars and certificates. Should we be betting PUTS on the stock market? You are well versed and I thank you for your information.

I have the strong tendency to be a bear. A thousand point drop and I missed it (PUTS). Drat!

[AAD]

24 billion of what?
Paper?
It's not backed by anything, we went off the gold standard years ago.

Zimmer

More like decades ago...

[RotaryRevn]

Thanks for posting that PapaPark! Very good info to inform some of the readers hear that may not follow housing too closely. That chart is downright scary :eek: . For those that don't already own a home, save your downpayment, it's going to be the best buyers market of our lifetime in the next couple of years..

[irons]

Thanks everybody for the info,I just wish it wasn't such bad news.
Do you think the majority of people are paying attention to this and are getting prepared for it?Naaaaa, not until it affects them.