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Post by natsalilfly on Nov 8, 2011 12:29:24 GMT -5
If only our fed believed in stable prices You expect them to instead let prices fall off a cliff and send us into the stone age? I find the bearish position troubling, personally. Brosin, do you believe in the De Ja Vu scenario indicated by the charts? Or do you think it will be avoided?
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Post by novice08 on Nov 8, 2011 12:37:37 GMT -5
Price stability is good for the economy...rising energy prices cannot possibly be pro-growth.
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Post by trading4dough on Nov 8, 2011 12:45:07 GMT -5
You expect them to instead let prices fall off a cliff and send us into the stone age? I find the bearish position troubling, personally. I guess it is better to inflate everything to insurmountable amounts and drive everybody broke that they have no choice but to go live in caves...........sort of like the stone age......... I find THAT position rather troubling, personally If things end up failing the spx will go to 200 and I dont think anyone around here wants that to happen. Kick that can boys
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Post by Clinton SPX on Nov 8, 2011 13:05:24 GMT -5
Theres nothing bearish about stable prices. The dollar was pretty much worth a dollar for the first 100 years of our country. Do you find that disturbing?
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Post by Clinton SPX on Nov 8, 2011 13:08:23 GMT -5
people used to save for retirement. Now if you do that inflation eats away your ability to survive
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Post by novice08 on Nov 8, 2011 13:10:33 GMT -5
people used to save for retirement. Now if you do that inflation eats away your ability to survive Inflation + zero rates of return=falling standard of living.
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Post by Clinton SPX on Nov 8, 2011 13:12:12 GMT -5
Im bearish because I see a system that has been inflated to the point where many are being priced out. Its a self correcting mechanism. It will correct itself one way or another
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Post by Clinton SPX on Nov 8, 2011 13:13:18 GMT -5
people used to save for retirement. Now if you do that inflation eats away your ability to survive Inflation + zero rates of return=falling standard of living. and thats why housing will not recover
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Post by Rich on Nov 8, 2011 13:14:36 GMT -5
fundamentals don't always drive the market.
We've seen it before.
I've sent out a search beacon for the broccoli man.
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Post by Clinton SPX on Nov 8, 2011 13:18:47 GMT -5
fundamentals don't always drive the market. We've seen it before. I've sent out a search beacon for the broccoli man. over time they do
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Post by herceg1967 on Nov 8, 2011 13:40:47 GMT -5
I guess it is better to inflate everything to insurmountable amounts and drive everybody broke that they have no choice but to go live in caves...........sort of like the stone age......... I find THAT position rather troubling, personally If things end up failing the spx will go to 200 and I dont think anyone around here wants that to happen. Kick that can boys You mean the Bulls don't want that to happen.........Bears do.........On the flip side every day people want things back to normal where they can have a future.........not just the corrupt Political / Wall Street cronies................ You must not have children I guess as you would rather kick the can as you say and have others children and grand children suffer...........real nice.................I guess the "ME" attitude still lives on.................
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Post by Clinton SPX on Nov 8, 2011 13:52:48 GMT -5
BERLUSCONI TO RESIGN AFTER APPROVAL OF AUSTERITY LAWS Submitted by Tyler Durden on 11/08/2011 - 13:49 Just out from Bloomberg:
BERLUSCONI TO RESIGN AFTER APPROVAL OF AUSTERITY LAWS More as we get it.
look Italy less broke already
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Post by Clinton SPX on Nov 8, 2011 13:56:39 GMT -5
funny from ZH
Dr. Engali
3:00 rumor came early. I wonder which fed tool they will put in as a replacement. Is this what the Bernank means when he says the fed still has plenty of tools?
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Post by Clinton SPX on Nov 8, 2011 13:57:48 GMT -5
whew with berlusconi gone now we can take oil to 98.
Damn that guy was holding us back
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Post by Clinton SPX on Nov 8, 2011 14:41:23 GMT -5
Ha ha, this is too much
Not So Fast: Berlusconi Says Only Option Is Early Elections Submitted by Tyler Durden on 11/08/2011 - 14:28 Well that rumor lastest all of 30 minutes:
BERLUSCONI: `ONLY POSSIBILITY' IS EARLY ELECTIONS -Bloomberg BERLUSCONI: PRESIDENT WILL DECIDE HOW TO RESOLVE CRISIS -Bloomberg ITALY'S BERLUSCONI SAYS IMPORTANT TO ACT IN COUNTRY'S INTEREST -Bloomberg In other news, G-Pap is still Greek PM. But any minute now. Aaaaaaany minute...
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Post by brosin on Nov 8, 2011 14:52:42 GMT -5
You expect them to instead let prices fall off a cliff and send us into the stone age? I find the bearish position troubling, personally. I guess it is better to inflate everything to insurmountable amounts and drive everybody broke that they have no choice but to go live in caves...........sort of like the stone age......... I find THAT position rather troubling, personally It's a matter of what is the lesser evil: Deflation or Inflation. Bears are basically arguing that the Fed should step back and do nothing so that their bearish positions pay off at the expense of everyone else. That would bring on another deflationary spiral and end the global system as we know it. So that's what you guys want, huh? The Fed is simply postponing the day of reckoning for the global system, just as it and global leaders have been doing for *decades.* To say that they should stop doing that now and let the Trillions upon Trillions of dollars they have printed in the last two years to stimulate the global economy is pretty ridiculous. That's what I mean when I say the bearish position is troubling because it doesn't make much sense.
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Post by brosin on Nov 8, 2011 14:57:57 GMT -5
You expect them to instead let prices fall off a cliff and send us into the stone age? I find the bearish position troubling, personally. Brosin, do you believe in the De Ja Vu scenario indicated by the charts? Or do you think it will be avoided? I do not think the Deja Vu pattern will play out identically if lending markets improve (they haven't yet). I think the Deja Vu is the market's way of trying to further convince everyone that this is 2008 all over again. Yet when the market is really trying to convince of something, it's typically the opposite that's true. That's why I don't really expect it to play out to the ultimate bottom. There are a lot of things different compared to 2008, something I personally have been coming to terms with over the last couple months. I'm still in the double dip camp (my odds are around 55/45 or 60/40 of recession), but I've been progressively leaving it as GDP and earnings growth hasn't at all shown the type of the decline that the market was expecting if a huge recession really is here already. My odds were certainly 80/20 or 90/10 up through the Summer of this year. The market showed some great resiliency though and sentiment got bad FAST. That's a good sign in my book.
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Post by herceg1967 on Nov 8, 2011 15:00:54 GMT -5
I guess it is better to inflate everything to insurmountable amounts and drive everybody broke that they have no choice but to go live in caves...........sort of like the stone age......... I find THAT position rather troubling, personally It's a matter of what is the lesser evil: Deflation or Inflation. Bears are basically arguing that the Fed should step back and do nothing so that their bearish positions pay off at the expense of everyone else. That would bring on another deflationary spiral and end the global system as we know it. So that's what you guys want, huh? The Fed is simply postponing the day of reckoning for the global system, just as it and global leaders have been doing for *decades.* To say that they should stop doing that now and let the Trillions upon Trillions of dollars they have printed in the last two years to stimulate the global economy is pretty ridiculous. That's what I mean when I say the bearish position is troubling because it doesn't make much sense. How come it is troubling to say that when they prop up the mkt. but when the mkt. is down, then everybody screams that they should just get out of the way and let the markets and businesses work there way through it so it is not an artificial sense of stability...................... seems kind of funny and one cannot have it both ways...........
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Post by natsalilfly on Nov 8, 2011 15:06:18 GMT -5
Brosin, do you believe in the De Ja Vu scenario indicated by the charts? Or do you think it will be avoided? I do not think the Deja Vu pattern will play out identically if lending markets improve (they haven't yet). I think the Deja Vu is the market's way of trying to further convince everyone that this is 2008 all over again. Yet when the market is really trying to convince of something, it's typically the opposite that's true. That's why I don't really expect it to play out to the ultimate bottom. There are a lot of things different compared to 2008, something I personally have been coming to terms with over the last couple months. I'm still in the double dip camp (my odds are around 55/45 or 60/40 of recession), but I've been progressively leaving it as GDP and earnings growth hasn't at all shown the type of the decline that the market was expecting if a huge recession really is here already. My odds were certainly 80/20 or 90/10 up through the Summer of this year. The market showed some great resiliency though and sentiment got bad FAST. That's a good sign in my book. Reverse psychology? Market slight of hand? Well, I'm keeping an eye on it too. I think the odds of a power move up are good since so many see the resemblence and are skeptical, but implosion does happen and we cannot ignore the possibility.
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Post by brosin on Nov 8, 2011 15:17:51 GMT -5
Agreed Nat - the one difference I see is that since 2008, the Fed has created the means to not allow a Lehman event to occur. They did not have the means to prevent it then, but now they do. Without this credit event that starts the write-down/deleveraging process, there can be no implosion.
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Post by herceg1967 on Nov 8, 2011 18:09:42 GMT -5
Bears are basically arguing that the Fed should step back and do nothing so that their bearish positions pay off at the expense of everyone else. That would bring on another deflationary spiral and end the global system as we know it. So that's what you guys want, huh? Bulls are basically arguing that the Fed should continue to inflate the market so their bullish positions pay off at the expense of the MILLIONS and MILLIONS of individuals losing their homes and struggling to put food on their table to feed their families due to inflation. That will bring on the end of a normal society where nobody will be safe as we know it. So that's what you guys want, huh?
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Post by herceg1967 on Nov 8, 2011 18:18:34 GMT -5
Bears are basically arguing that the Fed should step back and do nothing so that their bearish positions pay off at the expense of everyone else. "Everyone Else" - Bros.............surely you are trying to bust my balls..............who is everyone else............I'm sure it's not the individuals who have lost all their life belongings due this corruption.............the "everyone else" you are referring to is the Corp Greed Mongers who are benefiting from the inflated markets..........Most individuals that I know of have lost too much in their 401k's or other investments and have used what they can to try and salvage their lives before there savings run out............
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Post by Clinton SPX on Nov 8, 2011 21:18:04 GMT -5
Euphoria may have returned briefly courtesy of yet another promise for a resignation that will likely not be effectuated for weeks or months, if at all, and already someone has done the math on what the events in the past several days reveal for Italy. That someone is Barcalys, the math is not pretty, and the conclusion is that "Italy is now mathematically beyond point of no return."
Summary from Barclays Capital inst sales:
1) At this point, it seems Italy is now mathematically beyond point of no return 2) While reforms are necessary, in and of itself not be enough to prevent crisis 3) Reason? Simple math--growth and austerity not enough to offset cost of debt 4) On our ests, yields above 5.5% is inflection point where game is over 5) The danger:high rates reinforce stability concerns, leading to higher rates 6) and deeper conviction of a self sustaining credit event and eventual default 7) We think decisions at eurozone summit is step forward but EFSF not adequate 8) Time has run out--policy reforms not sufficient to break neg mkt dynamics 9) Investors do not have the patience to wait for austerity, growth to work 10) And rate of change in negatives not enuff to offset slow drip of positives 11) Conclusion: We think ECB needs to step up to the plate, print and buy bonds 12) At the moment ECB remains unwilling to be lender last resort on scale needed 13) But frankly will have hand forced by market given massive systemic risk
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Post by Clinton SPX on Nov 8, 2011 21:44:29 GMT -5
The problem for Italy now is that, once set in motion, these self-reinforcing negative dynamics are very difficult to break. At this point, Italy may be beyond the point of no return. Prompt and effective policy action from Rome may be necessary to remove Italy from the downward spiral that threatens it, but we doubt that it is sufficient. Can the circle be squared? With a public debt of 120% of GDP, a plausible non-interest budget surplus no higher than about 3% of GDP, and a slow rate of economic growth, the Italian debt dynamics do not add up unless interest rates are lower than about 5.5% (Italy: Time to act, 21 June 2011). Higher interest rates lead to a debt that continues to grow faster than GDP, eventually requiring a debt restructuring. At this point, Italy may be beyond the point of no return Barclays Capital | Euro Themes: Can Italy save itself? 7 November 2011 3 The problem is that an interest rate of 5.5% only compensates investors for perceived credit risk if investors’ assessment of the probability of default is very low. To make this concrete, it may be useful to remember that: Fair yield = risk free rate + P*(1-R) + risk premium Where P is the yearly default probability and R is the recovery value in the event of default. 1 Suppose that the risk-free rate of interest is 2%, that the recovery value is 35 cents on the euro, and that the risk premium is one-third the default probability. On these assumptions, a 5.5% interest rate would require a yearly default probability no higher than about 3.5%. Even if the recovery value were 50 cents on the euro, which seems optimistically high to us, the default probability would need to be lower than about 4.2% to justify a fair yield of the same 5.5%. For reasons that we will discuss in more detail below, we consider it unlikely that Italian reforms alone will be able promptly to secure a reduction in perceived default probabilities to such low levels. But before we turn to this, it’s important to recognize that, because of its high debt level, Italy is quite likely at a point where higher yields do not make bonds more attractive to investors, at least to those investors with reasonably long investment horizons. This is because the higher yields are not compatible with debt sustainability and therefore require an upward adjustment of perceived default probabilities, which makes the debt less, not more attractive. Higher yields also cast doubt on the economic outlook, which not only intensifies doubts about the debt dynamics but also raises the prospect of political tensions that may undermine the policy framework going forward. 2 In short, the problem is not only that doubts about sustainability are transformed into correspondingly high interest rates. If that were the end of the story, it may be thought feasible for a country in Italy’s position to withstand those high rates until policy adjustments gradually restore market confidence. The danger is that high interest rates may reinforce investors’ concerns about sustainability, leading to yet higher rates, deeper conviction that the fiscal arithmetic does not add up, even higher rates and an eventual run from the public debt that can, in the absence of last-resort lending, generate a self-fulfilling credit event. It is not the high rates alone, but the potential instability of the market dynamics that create the real danger for vulnerable sovereigns like Italy.
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Post by erxtrader on Nov 8, 2011 21:49:56 GMT -5
Market Hiccups ...
We all know that eventually Greece will default. Since Greek citizens are against austerity measures and the troika insists that Greece meet their austerity demands, we will see replays of Greece v. the troika cat-and-mouse game.
This will probably recur once every month, before each tranche due Greece is doled out. Each time Greece and the troika replay the game, the market will have major hiccups. So, I think there will be opportunities for bears to exit short positions, with less damage.
When Greece defaults, the damage from Greek default is likely to have far less impact on the financial markets than what bears are hoping for. Because, by then, most of the banks will have limited exposure to Greece.
IMO, Italy is most likely to get fixed (at the moment).
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Post by Clinton SPX on Nov 8, 2011 21:54:03 GMT -5
ECB is going to have to print to fix Italy. No way around it.
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Post by erxtrader on Nov 8, 2011 21:57:16 GMT -5
ECB is going to have to print to fix Italy. No way around it. It is unclear how much help ECB has to give. At the moment, ECB has been helping a lot. When Italy has a new government and implements an austerity plan, the yields are likely to fall and Italy will need less help. One thing to note: although ECB's official policy is not to save anyone, that is precisely what ECB has been doing. Looking at their actions and not what they say. At this rate, ECB will end up bailing out the eurozone banks.
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Post by Clinton SPX on Nov 8, 2011 22:03:25 GMT -5
Mike "Mish" Shedlock
Comments from Copenhagen
Steen Jakobsen, chief economist from Saxo Bank pinged me with these comments earlier today:
Italy has 37 billion EUR of maturing debt this year alone, and 347 billion EUR next year. The average funding rate is 4.5% ish, versus the 10-year now trading at 6.77%.
Time is running out. However, we as market players tend to underestimate the political process ability to “buy time”.
If Italy makes a credible plan or short-term swaps Berlusconi for a technocrat government, they can buy some more time to put their house in order. So don’t expect this week to be the final chapter in neither Italy or Greece.
Don’t worry, there are plenty more chapters to come.
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Post by erxtrader on Nov 8, 2011 22:08:50 GMT -5
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Post by rjboni on Nov 9, 2011 3:38:33 GMT -5
Agreed Nat - the one difference I see is that since 2008, the Fed has created the means to not allow a Lehman event to occur. They did not have the means to prevent it then, but now they do. Without this credit event that starts the write-down/deleveraging process, there can be no implosion. How has the fed done that? With that impotent ability to take over a bank and sell it off? How will they do that given the current accumulation of derivative risk? 4 banks are currently counter-party to 98% of the derivatives in the U.S., 40% world wide. The risk, in total, is spread through only 14 entities WORLD wide. I agree an implosion would be more difficult now. But I doubt it will take a major event. Especially if the concentration becomes worse (Which it has continually done so). It should only take time and a bad dip.
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