Metals & Commodities down. Real estate down. Stocks down. Bonds down. Dollar down. - Page 3 - Mercedes-Benz Forum

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post #21 of 67 (permalink) Old 09-10-2008, 09:03 PM
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I have been going through reams of charts over the past week. Your thread is dead on. We have stagflation at best and I really would not be surprised if deflation does not become a serious potential.

It is very frustrating right now looking at the numbers. Lehman is likely to go to a foreign investor who can scoop it up now with little resistance. Anybody with a white hat [or white turban]. What is really going to be interesting is just what exposure they have in the leveraged market. Some of that stuff was at 35:1 2007Q3. That means if they hold $10Billion in leveraged paper, there is a potential for $350Billion of investments at very HIGH risk. Unfortunately many pension funds and institutional funds decided to fluff up their portfolios with some of these cherries a couple of years ago and have been unable to dump them once the shit hit the fan.

The dollar is picking up a bit, but if we note that OPEC said today that it is going to cut production, that will negatively affect the buck again. Also bring gas/oil back up to the $4.00 range just in time for the Heating Oil season for the Northeast. THAT will cause some inflationary stress.

So to me, it is Stagflation for the short term. I doubt we will see any real change until after the election. Folks on Wall Street are waiting. They would like to see biz as usual as the churn helps them keep the bonuses coming. Biz as usual doesn't do JACK for the 83% of Americans who don't, or have reason to care what Wall Street does on a daily basis.

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post #22 of 67 (permalink) Old 09-10-2008, 09:48 PM Thread Starter
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Thanks for your perpective Bear. You've a very strong grip on this slippery economic status quo. Stagflation is definitely with us already, but just look at the metals and commodities crash. The market is pricing in deflation. And it makes sense, given that unemployment is just now beginning to climb dramatically, and consumer spending has only just begun to contract. With consumer credit maxed out and/or widely rescinded, those consumers who are the generative power behind the U.S. economy are about to change their ways with a vengeance.

So, the principal haven in the face of deflation has always been cash. But cash is still being roundly punished by inflation and low rates. It really is scary, even scarier than Sarah Palin, because monetary authorities (central bankers) really have no way to attack deflation. Especially, as noted, with rates already extremely low. The possibility of a death spiral is here. I think the Fed would prefer hyperinflation, if it can create it, but I really don't know. Fun huh!
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post #23 of 67 (permalink) Old 09-10-2008, 10:05 PM
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Thanks for your perpective Bear. You've a very strong grip on this slippery economic status quo. Stagflation is definitely with us already, but just look at the metals and commodities crash. The market is pricing in deflation. And it makes sense, given that unemployment is just now beginning to climb dramatically, and consumer spending has only just begun to contract. With consumer credit maxed out and/or widely rescinded, those consumers who are the generative power behind the U.S. economy are about to change their ways with a vengeance.

So, the principal haven in the face of deflation has always been cash. But cash is still being roundly punished by inflation and low rates. It really is scary, even scarier than Sarah Palin, because monetary authorities (central bankers) really have no way to attack deflation. Especially, as noted, with rates already extremely low. The possibility of a death spiral is here. I think the Fed would prefer hyperinflation, if it can create it, but I really don't know. Fun huh!
I asked my friend who is credit manager at Chase what the credit borrowed to credit line was on their credit cards and she said they were seeing about 78-84% right now being CARRIED. What that means is consumers have less than 20% of their credit card line of credit available for purchases or emergencies. That number was, in the past 40%. At this threshold, consumer spending, as you say is getting ready to slam to a halt.

Most folks, about this time of the year will do one of two things. They will either ramp up their Credit Card spending knowing that, come January they would get an equity line of credit to payoff all Credit Cards at a lower rate OR they would get the equity line NOW on previous balances and have the cards ready for Christmas. Much less of that is happening this year. Fewer Equity Loans will translate into less LoC on Credit Cards which will mean less Christmas shopping on Credit.

Solutions will have to be another Stimulus Check about November [I'm guessing it would be announced by Bushie the Friday before the Election] as a bailout for Christmas.

Now, as for commodities, there usually is a lag in durables this time of year as folks by their little snowflakes a shitpot full of toys instead of replacing the washer and dryer. Priorities. Those drops in commodity prices will allow small businesses to actually keep their head above water. I know two of our guys are printers and I bet they could use cheaper prices on ink, paper and plastic to help the bottom line. And lower shipping costs would also make them more competitive and keep cash flow positive. For the consumer it would mean that prices for their services don't have to go up and their customers don't have to raise prices to the consumers.

The three I worry about this winter are heating oil, transportation [gas and commercial diesel] and wholesale food. Those three will either make or break any recovery.

Oh, and the FED CAN build inflation if they want. All they need to do is raise bond rates and move folks to bonds and start the ball rolling. Nice 10-12% treasuries would do nicely to start the pattern.

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post #24 of 67 (permalink) Old 09-10-2008, 11:33 PM
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...
Solutions will have to be another Stimulus Check about November [I'm guessing it would be announced by Bushie the Friday before the Election] as a bailout for Christmas.
...
Oh, and the FED CAN build inflation if they want. All they need to do is raise bond rates and move folks to bonds and start the ball rolling. Nice 10-12% treasuries would do nicely to start the pattern.
Definitely an opportunity for another short term boost using stimulus checks given that the US$$ is in a sweet spot now which allows inflationary policies with no pain.

But disagree about the affect on inflation of bond rates. High rates dampen inflation or have you forgotten then post Carter years ?
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post #25 of 67 (permalink) Old 09-10-2008, 11:38 PM
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...I really would not be surprised if deflation does not become a serious potential.
The double negative is giving me a headache. Please refrain from using it as far as possible.

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So to me, it is Stagflation for the short term...
You make this statement but the rest of your post does not support your premise.
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post #26 of 67 (permalink) Old 09-11-2008, 01:04 PM Thread Starter
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This is why they get paid the big bucks

THE RATINGS GAME
Analysts hit Lehman when it's down
By Sam Mamudi, MarketWatch
Last update: 1:21 p.m. EDT Sept. 11, 2008

NEW YORK (MarketWatch) -- Analysts at several leading Wall Street banks decided Thursday that it's time for their clients to stop buying shares of Lehman Bros. Holdings -- finally.

Citigroup, Deutsche Bank and Goldman Sachs all downgraded their ratings on the troubled investment bank from buy to hold, according to research notes published Thursday.

Goldman removed Lehman (LEH: 4.29, -2.96, -40.8%) from its "Americas Buy" List, nearly six months after its addition to the list. In that time, Lehman's stock has plunged 84%. But not everyone thinks it's time to bail.

Ladenburg Thalmann analyst Richard Bove still rates Lehman as a buy, saying in a report Thursday: "I still believe that this is one of the best companies on Wall Street and that it has value well beyond its current stock price."
Meredith Whitney, analyst with Oppenheimer & Co., also kept her rating high, ranking Lehman as a perform in a report published late Wednesday. Whitney noted that the stock is trading well below its current book value, which she pegged at $27.29 a share.

One area of agreement among analysts: None really knows what's going to happen to Lehman.

Analysts hit Lehman when it's down - MarketWatch
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post #27 of 67 (permalink) Old 09-11-2008, 03:00 PM
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Hard to believe housing prices in Kali/New York went down from 1990-2000 inflation adjusted whereas Kentucky/Arkansas/Al increased.
The massive Kali increase in 70-80 has to be due partly to unadjusted hyperinflation. The NKal PC boom was mainly in the 80's so could not account for the increase.
Given the size of the current bubble, the current housing slowdown might have another decade to go.
Can the government really be the mortgage lender for all and I mean all not just in the US ? Has there been any precedent anywhere ? Japan went (and still is) through a similar phase of govt control and that resulted in decades of torture by slow bleeding.
However, the US govt is basically pegging mortgage rates to the current low sub 6% and taking on all the default risk. As long as the dollar holds up (which it is with the medium term bottom I predicted couple months back, to its halfway point), there is no negative consequences of such market manipulation for now. Will the fish bite again ?

Historical Census of Housing Tables - Home Values
------------------------------------------------------------------
Median Home Values

2000 1990 1980 1970 1960 1950 1940

Adjusted to 2000 dollars
United States $119,600 $101,100 $93,400 $65,300 $58,600 $44,600 $30,600

Alabama $85,100 $68,600 $67,100 $46,900 $42,400 $27,100 $16,800
Alaska $144,200 $120,600 $151,000 $87,200 $44,800 $21,100 NA
Arizona $121,300 $102,300 $108,500 $62,600 $54,700 $36,000 $14,600
Arkansas $72,800 $59,200 $61,600 $40,300 $33,000 $24,800 $11,400
California $211,500 $249,800 $167,300 $88,700 $74,400 $57,900 $36,700
Kentucky $86,700 $64,500 $67,700 $48,400 $43,400 $32,000 $21,600
Louisiana $85,000 $74,700 $85,100 $56,100 $52,700 $31,100 $14,700
...
New York $148,700 $168,100 $90,300 $86,400 $75,400 $61,500 $45,700
-------------------------------------------------------
HOUSING BOOM GOES BUST IN LOS ANGELES
By BENJAMIN J. STEIN
Published: August 17, 1981

A word to the wise: The great Los Angeles housing boom is over. The real estate price explosion in southern California, which sparked a national boom still continuing elsewhere, has stopped. ...
...
Even when mortgage interest rates shot up to 13 and 14 percent, the houses were still going up 20 percent a year, so who cared? The end came when Paul A. Volcker, the chairman of the Federal Reserve Board, decided he was going to fight inflation in a major way. By relentless pressure, the mortgage rates were driven up to 18 percent. Sounds came out of Washington that a new Administration meant business about keeping money tight for a long time and bringing down inflation. Little by little, the idea circulated that maybe if interest rates stayed high for a long time, housing would no longer be such a great buy. After all, if an investor can get 18 percent on his money with no risk, why should he take a chance on real estate, which is already very high, which costs money out of pocket and is historically not a very good investment when disinflation sets in?
--------------------------------
The dollar is ``on course to test'' $1.3840, a 50 percent retracement of the euro's rise from the November 2005 low of $1.1640 to the all-time high of $1.6038 set in July, based on a series of numbers known as the Fibonacci sequence, currency strategists led by Ray Farris at Credit Suisse Group AG wrote in a note today. If the dollar breaks that level, it may strengthen to $1.34, the strategists wrote.
http://www.bloomberg.com/apps/news?p...d=aQRxcc9yI11U

http://query.nytimes.com/gst/fullpag...5BC0A967948260

Last edited by mlfun; 09-11-2008 at 03:36 PM.
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post #28 of 67 (permalink) Old 09-11-2008, 03:37 PM
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OOTO we have Wells which has to be sitting on tons of depreciating mortgages.
How is that possible ?
-----------------------------------------------------------------------------
Wells Fargo & Co. rose 6.8 percent to $33.85, the highest since Jan. 31. The biggest U.S. bank on the West Coast extended its gain this year to 12 percent, the second-best performance among S&P 500 banks this year.

Quote:
Originally Posted by Marsden View Post
THE RATINGS GAME
Analysts hit Lehman when it's down
By Sam Mamudi, MarketWatch
Last update: 1:21 p.m. EDT Sept. 11, 2008

NEW YORK (MarketWatch) -- Analysts at several leading Wall Street banks decided Thursday that it's time for their clients to stop buying shares of Lehman Bros. Holdings -- finally.

Citigroup, Deutsche Bank and Goldman Sachs all downgraded their ratings on the troubled investment bank from buy to hold, according to research notes published Thursday.

Goldman removed Lehman (LEH: 4.29, -2.96, -40.8%) from its "Americas Buy" List, nearly six months after its addition to the list. In that time, Lehman's stock has plunged 84%. But not everyone thinks it's time to bail.

Ladenburg Thalmann analyst Richard Bove still rates Lehman as a buy, saying in a report Thursday: "I still believe that this is one of the best companies on Wall Street and that it has value well beyond its current stock price."
Meredith Whitney, analyst with Oppenheimer & Co., also kept her rating high, ranking Lehman as a perform in a report published late Wednesday. Whitney noted that the stock is trading well below its current book value, which she pegged at $27.29 a share.

One area of agreement among analysts: None really knows what's going to happen to Lehman.

Analysts hit Lehman when it's down - MarketWatch
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post #29 of 67 (permalink) Old 09-11-2008, 04:09 PM
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What is wrong with people? Are that many Americans really at 80% of their credit limits? That's insane! Why? What the heck did they buy? I honestly can't figure it out.

Oh, and if metals are down why is the price of scrap soaring?
post #30 of 67 (permalink) Old 09-11-2008, 04:15 PM
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What is wrong with people? Are that many Americans really at 80% of their credit limits? That's insane! Why? What the heck did they buy? I honestly can't figure it out.

Oh, and if metals are down why is the price of scrap soaring?
SUVs and whatever gave one the image that he's a patriot.
Scrap is high alright no wonder yosey stole my copper gutters
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