US Economic Outlook from the Financial Times 02.19.08 - Page 5 - Mercedes-Benz Forum

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post #41 of 83 (permalink) Old 02-26-2008, 09:26 AM
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Originally Posted by mlfun View Post
Once bitten, twice shy.
Let's hope that's true for the ratings agencies
Once shy, twice bitten, may also apply...

The credibility of the rating's agencies, and the bonds they rate, are on the line; and I believe they are going to er on the side of caution--not the other way around. As proof, I suggest you look at all the major equity markets yesterday: They were all up substantially--the DOW 190 alone. This is what I call putting their money where their mouths are...

Don't believe everything you think
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post #42 of 83 (permalink) Old 03-23-2008, 12:00 AM
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Step 9 does not apply anymore.
=====================================

Step nine would be a meltdown in the "shadow financial system". Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
^^^^ Not anymore.


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My comments below..

===========================
Prof Roubini is even fonder of lists than I am. Here are his 12 - yes, 12 - steps to financial disaster.

Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.
^^^^^^^Err... this is old news.

Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had "reckless or toxic features", argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks' ability to offer credit.
^^^^^^^Ditto

Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The "credit crunch" would then spread from mortgages to a wide range of consumer credit.
^^^^^^^I am sorry. You can't list the steps AFTER the fact.

Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends.
^^^^^^ Ditto

Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.
^^^^^ OK this is the first real prediction

Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.
^^^^^ Old news.

Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a "fat tail" of companies has low profitability and heavy debt. Such defaults would spread losses in "credit default swaps", which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.
^^^^^ Where is the "fat tail" data ?

Step nine would be a meltdown in the "shadow financial system". Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
^^^^ SIV trouble is old news.

Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.
^^^ OK "could" and "would" are the key weasel words.

Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.

Step 12 would be "a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices".
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post #43 of 83 (permalink) Old 03-23-2008, 12:02 AM
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Wait a minute, is this a new step (9) ?
==================================
Step 9 of the Financial Meltdown: "one or two large and systemically important broker dealers" will "go belly up"
Nouriel Roubini | Mar 14, 2008

In my February 5th piece on 12 Steps to a Financial Disaster I predicted - as Step 9 of the meltdown - that "one or two large and systemically important broker dealers" will "go belly up" and that other members of the "shadow financial system" - i.e. non-bank financial institutions that look like banks in terms of liquidity/rollover risk - will also go bankrupt. As I put it then:
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post #44 of 83 (permalink) Old 03-23-2008, 04:34 PM Thread Starter
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ML, are you just chatting with yourself? The differences is that on March 14 he pointed out one of the shadow financial brokers that did go under and rephrased his original #9. Amazing how that number keeps coming up.

So whether we use his original or new version it covers the same piece of the pie.

Quote:
Originally Posted by February 2008
Step nine would be a meltdown in the "shadow financial system". Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.
Quote:
Originally Posted by March 2008
In my February 5th piece on 12 Steps to a Financial Disaster I predicted - as Step 9 of the meltdown - that "one or two large and systemically important broker dealers" will "go belly up" and that other members of the "shadow financial system" - i.e. non-bank financial institutions that look like banks in terms of liquidity/rollover risk - will also go bankrupt. As I put it then...
As for "doesn't apply anymore". Guess again. That $415 Trillion Market has had exactly 1 shoe fall. Even the FED, with ALL its cash could not put that market back together again if it starts to completely come apart.

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Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.

Last edited by mcbear; 03-23-2008 at 06:06 PM.
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post #45 of 83 (permalink) Old 03-23-2008, 05:39 PM
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Heh-heh, there's no problem. Heh-heh. I shifted my 401K to a guaranteed gov bond fund just for laughs. Heh-heh.

The biggest problems we are facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all and thatís what I intend to reverse.

~ Senator Barack H. Obama
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post #46 of 83 (permalink) Old 03-23-2008, 05:41 PM
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Originally Posted by mcbear View Post
ML, are you just chatting with yourself? The differences is that on March 14 he pointed out one of the shadow financial brokers that did go under and rephrased his original #9. Amazing how that number keeps coming up.

So whether we use his original or new version it covers the same piece of the pie.
I will list my predictions now.
1) The market will be down within 6 months.
2) The market will be bad within a year and some banks and hedge funds will go under within the same timeframe.
3) But the market will recover within a few years.

BTW I can rephrase these at any time depending on actual events.
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post #47 of 83 (permalink) Old 03-23-2008, 05:43 PM
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Originally Posted by mlfun View Post
==================================

Nouriel Roubini | Mar 14, 2008

... I predicted - as Step 9 of the meltdown - that "one or two large and systemically important broker dealers" will "go belly up" ...
This is a pure lie in my book.
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post #48 of 83 (permalink) Old 03-23-2008, 06:01 PM
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Originally Posted by mlfun View Post
I will list my predictions now.
1) The market will be down within 6 months.
2) The market will be bad within a year and some banks and hedge funds will go under within the same timeframe.
3) But the market will recover within a few years.

BTW I can rephrase these at any time depending on actual events.
Shoot, I can do even better than that for a far longer term.

Here are my two rules.

#1 The market will always go up before it goes down.
#2 The market will always go down before it goes up.

On these two commandments hang all of the Law and the Prophets.

The biggest problems we are facing right now have to do with George Bush trying to bring more and more power into the executive branch and not go through Congress at all and thatís what I intend to reverse.

~ Senator Barack H. Obama
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post #49 of 83 (permalink) Old 03-23-2008, 06:11 PM Thread Starter
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This is a pure lie in my book.
How is that a pure lie? You can take what he WROTE in February which was "Step nine would be a meltdown in the "shadow financial system" and what he SAID in many of his interviews, attach that to the Bear Stearns meltdown and it is just about as concise as is possible.

If you just take the one phrase, from that one article then you might be able to cobble together a case but if you listen to his interviews with all the talking heads, read other interviews he has done over the past year on the subject, your argument can't hold water.

McBear,
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post #50 of 83 (permalink) Old 03-23-2008, 06:16 PM
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Grrrrrrrrrr.........

Quote:
Originally Posted by mcbear View Post
How is that a pure lie? You can take what he WROTE in February which was "Step nine would be a meltdown in the "shadow financial system" and what he SAID in many of his interviews, attach that to the Bear Stearns meltdown and it is just about as concise as is possible.

If you just take the one phrase, from that one article then you might be able to cobble together a case but if you listen to his interviews with all the talking heads, read other interviews he has done over the past year on the subject, your argument can't hold water.
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