HOLY SMOKES : Did i read this right? Dow below 10,000 S&P;1,100 Nasdaq 1500. Is this possible by October?

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[quote author="awgee" date=1220673118]Muzie - I have to agree with just about, if not everything, you just wrote. But, there is another scenario in addition to the deflation or inflation scenario: Asset and credit deflation combined with cost of living price increases, (price inflation).
</blockquote>


Well wouldn't be that a party pooper huh? :-) I'm not sure yet where the cost of living increases would come from however - if, say, China doesn't decouple (I don't think it will) then we're not forced so much to compete with them on price of goods.



[quote author="awgee" date=1220673118]I would also add that the price of gold is not so dependent on the value of the dollar, the price of other commodities, credit deflation or inflation, or any other myriad of possibilities, but is rather mostly dependent on people's psychology and how they feel about their particular currency.</blockquote>


Lately gold's been coupling with all commodities and corrected along with them. I don't know what to expect with commodities (goods) at this point. Oil has gone way too high in a couple of months and now it seems to be going way too low (I mean we haven't even actually verified yet if all the oil refineries in the Gulf are OK after Gustav and oil/gas is still crashing).



I guess I've been a bit... miffed by gold's reaction amidst all this :-P. Lots of weak hands holding the golden metal. I thought that the gold component of my portfolio was going to be un-correlated with the rest and I've been completely wrong there.



I also have a bit of trouble valueing the stuff. I can infer a logical process by which some/many banks should have some ways to go before they are cheap enough to justify their mortgage blunder. It's all tied to how many people default on their mortgages (IHB being a prime source for that kind of info) and how hard banks get kicked in the nuts as a result. Kick hard enough, or give it several kicks (ya that'd hurt more!) and eventually the bank will fall on its knees.



But gold's value being mostly psychological, it's hard for me to see a floor for it. Basically if the number of "goldbugs" increases, you're ok, but eventually the last goldbug has to be left holding the bag (unless the currency is permanently destroyed, but we're far from there at this point).
 
[quote author="awgee" date=1220670752]Is it Panda who is annoying, or is it the questions he is asking? I would venture than some of Panda's questions and the possible answers may make folks uncomfortable.</blockquote>
No, Awgee, Panda's questions don't make me uncomfortable.

It's the quantity of questions.

Sometimes I think he asks a question just so he can up his posting number.
 
Ya well I wasn't too impressed about the part where he basically asks for a bailout:



"Over <strong>$400 billion in bank </strong>- and finance-related capital has been raised during the past year, <strong>a decent amount </strong>of it, by the way, <strong>having been bought by yours truly and my associates at PIMCO</strong>. <strong>Too bad for us </strong>and for everyone else who bought too soon. "



...



"And now, while some will compare current government bailouts to Slick Willie, citing moral hazard, near criminal regulatory neglect, and further bailouts for Wall Street and the rich, common sense can lead to no other conclusion: if we are to prevent a continuing asset and debt liquidation of near historic proportions, <strong>we will require policies that open up the balance sheet of the U.S. Treasury ? not only to Freddie and Fannie but to Mom and Pop on Main Street U.S.A., via subsidized home loans issued by the FHA and other government institutions. </strong>A 21st century housing-related version of the RTC such as advocated by Larry Summers amongst others could be another example of the government wallet or balance sheet that is required during rare periods when the private sector is unable or unwilling to step forward.

"







He's basically asking to prop up house prices. Not to forget we already need to bail out Fanie & Freddie, with GM next inline and then we have to watch for some states with large property tax shortfalls.....
 
Speaking of bailout, Fannie & Freedie are both down 20% in after-hours on speculation/news from WSJ that the government would bail them out in the next few weeks but potentially wipe out shareholders (same old, same old).



In other news, somehow the banks had rallied 3% today.



Short or long, market not fun right now. It's like a yo-yo attached with a rubber band, shaken violently. Until the band snaps, up or down.
 
[quote author="muzie" date=1220677798]Ya well I wasn't too impressed about the part where he basically asks for a bailout:



"Over <strong>$400 billion in bank </strong>- and finance-related capital has been raised during the past year, <strong>a decent amount </strong>of it, by the way, <strong>having been bought by yours truly and my associates at PIMCO</strong>. <strong>Too bad for us </strong>and for everyone else who bought too soon. "



...



"And now, while some will compare current government bailouts to Slick Willie, citing moral hazard, near criminal regulatory neglect, and further bailouts for Wall Street and the rich, common sense can lead to no other conclusion: if we are to prevent a continuing asset and debt liquidation of near historic proportions, <strong>we will require policies that open up the balance sheet of the U.S. Treasury ? not only to Freddie and Fannie but to Mom and Pop on Main Street U.S.A., via subsidized home loans issued by the FHA and other government institutions. </strong>A 21st century housing-related version of the RTC such as advocated by Larry Summers amongst others could be another example of the government wallet or balance sheet that is required during rare periods when the private sector is unable or unwilling to step forward.

"







He's basically asking to prop up house prices. Not to forget we already need to bail out Fanie & Freddie, with GM next inline and then we have to watch for some states with large property tax shortfalls.....</blockquote>


And it must be coincidence that in the last month or so, Pimco bought gobs of Fannie and Freddie preferred debt? I do not trust Bill Gross any farther than I can throw Hank Paulson.
 
[quote author="awgee" date=1220680590]And it must be coincidence that in the last month or so, Pimco bought gobs of Fannie and Freddie preferred debt? I do not trust Bill Gross any farther than I can throw Hank Paulson.</blockquote>


With your bad knee, [strike]<a href="http://www.imdb.com/title/tt0091042/">Ed</a>[/strike] Awgee, you shouldn't throw anyone. It's true. - Grace
 
This one's for Panda:



<a href="http://www.nytimes.com/2008/09/05/business/worldbusiness/05yuan.html?_r=1&oref=slogin">Main Bank of China Is in Need of Capital</a>



1. Asia's not a safe haven.

2. From the article: "For one, it makes it less likely that China will allow the yuan to continue rising against the dollar". Asian currencies are not necessarily wealth preserving.



I don't know if the yuan will go back down as they say. Currencies are complicated.
 
[quote author="muzie" date=1220694903]This one's for Panda:



<a href="http://www.nytimes.com/2008/09/05/business/worldbusiness/05yuan.html?_r=1&oref=slogin">Main Bank of China Is in Need of Capital</a>



1. Asia's not a safe haven.

2. From the article: "For one, it makes it less likely that China will allow the yuan to continue rising against the dollar". Asian currencies are not necessarily wealth preserving.



I don't know if the yuan will go back down as they say. Currencies are complicated.</blockquote>


I read that article a couple of hours ago and oddly, I did not think "Asia's not a safe haven." I thought, the Chinese CB has about $1 trillion worth of US treasuries that it can sell on the open market whenever it deems advantageous and it also holds a ton of Fannie and Freddie preferred debt which it can put on the market. I did not think this article spoke to the Chinese central bank being in any sort of trouble, but rather the Chinese CB may very well let loose the dogs of financial hell. IMO, China is in control and the US is on the lousy end of the leash. If I were Paulson, I would not piss off the Chinese right now.




Have y'all read about Silver State Bank, Downey Savings and Loan, and BankUnited? I guess Sheila will not be making to her son's soccer game this weekend.
 
[quote author="awgee" date=1220695997][quote author="muzie" date=1220694903]This one's for Panda:



<a href="http://www.nytimes.com/2008/09/05/business/worldbusiness/05yuan.html?_r=1&oref=slogin">Main Bank of China Is in Need of Capital</a>



1. Asia's not a safe haven.

2. From the article: "For one, it makes it less likely that China will allow the yuan to continue rising against the dollar". Asian currencies are not necessarily wealth preserving.



I don't know if the yuan will go back down as they say. Currencies are complicated.</blockquote>


I read that article a couple of hours ago and oddly, I did not think "Asia's not a safe haven." I thought, the Chinese CB has about $1 trillion worth of US treasuries that it can sell on the open market whenever it deems advantageous and it also holds a ton of Fannie and Freddie preferred debt which it put on the market. I did not think this article spoke to the Chinese central bank being in any sort of trouble, but rather the Chinese CB may very well let loose the dogs of financial hell. IMO, China is in control and the US is on the lousy end of the leash. If I were Paulson, I would not piss off the Chinese right now.




Have y'all read about Silver State Bank, Downey Savings and Loan, and BankUnited? I guess Sheila will not be making to her son's soccer game this weekend.</blockquote>


OK, Panda woke up from hybernation.



To simplify what Mr. Awgee is trying to say is that Chinese has got United States's balls to the wall.



Go into any store, or look through everything that you own, practically all of it is made from China. And it's not all the result of cheap labor. There are plenty of areas in the world where labor is much cheaper than in China, but that export nothing. The key to China's success is economic freedom.



China is communist in name only. People who are true communists are not productive. Did we import and manufactured goods from the former Soviet Union? Not that Panda can remember. China is set to overtake Japan as America's largest creditor. Did we borrow any money from the Russians? Heck no! In fact we lent money to the Soviet Union every year. We had to give Russia credits just to buy our grain. China exports their own grain.



Once China allows the dollar to collapse, its domestic purchasing power will surge and its economy will quickly overtake the U.S. economy as the world's largest economic power house. Freeing themselves from the burden of subsidizing the United States, the rest of Asia will eventually boom as well.



As it now stands, the United States is the beneficiary of a reverse Marshall Plan, which costs Asian economies a fortune to fund. When the Asians pull the plug (which I think they will in the near future), the U.S. economy will go down the drain, and Asian economies will see explosive growth and properity. Investing in Asia at the bottom of the market is the place where real fortunes will be made in the next 5-10 years.



Long term, Panda recommends growth oriented investments to be targeted in Asia. Investing there now is like investing in America in the late nineteenth century. I've got my eyes on the Chinese ETF : FXI. I am placing my long term bets on China. When FXI starts getting down to the low to mid 30 level range is the time when Panda will start loading them up.
 
Any bank that "needs a capital infusion" is not a good sign. I don't know the details and haven't studied their central bank - and I don't know what particular variation of "democracy/capitalism" the Chinese adhere to so I don't know the details. But it says there they have a teeeny 3.2B$ in capital, and 1T$ in bond and mortgage debt. That is 1:300 leverage. And that 1T$ is the cost basis, not the current value, which because of all the level 3 asset crap on banks means nobody knows what it's worth because you can't sell it. That seems to be a problem to me.



The credit crunch is global, and it affects the weak and the strong alike.



As for Panda's reply... Well, I've tried. Are you quoting from the Jim Rogers book? Because you sound, word for word, exactly like him. Heck I'm sure I read the 19th century quote in his book. Thing is, I read that book four years ago.This stuff is old old old. And that's great; I doubled my money on FXI. Would I double my money again? Yes, sure, maybe, the same way I'd probably double my money on banks over a few years eventually if I time it with some luck.



Listen, the stuff you're saying, it's just.... everybody knows about this! - and we knew it two years ago - it's ALREADY HAPPENED. Everybody knows Chinese should rule someday, everybody knows gold and commodities should rise, everybody knows solar will kick ass one day, agriculture should go up. All this stuff about the Chinese being productive people and Americans being the lazy consumers, etc, etc, that is all well propagated knowledge and I'm sure bkshopper could write encyclopedias about the Asian historical values and society traits why the Chinese should kick ass. But you're painting in such broad strokes, I just can't figure out how you can coaslesce an investment theory out of all this. It's like you take all these mushy undefinable things and add them up in your head and it somehow becomes dollar signs when it comes out! You sound like the living embodiment of the national Chinese dream of gripping America by the balls and telling it righteously that it's been baaad and that it needs China and China will rule the show from now on. Sounds great, but I wouldn't base my investments around a nationalistic ideal.



I specifically gave factual information that contradicts your thesis that the yuan would appreciate vs. the us dollar, but your reply doesn't suggest that you've actually read it.





I for one am not too sure what you look for when you start one of these treads. You always start with a question, but later in these treads you always end up with statements like "Well Panda recommends..." so looks like you're not really asking for advice, but are trying to give some. Maybe you seek debate? Fact is, you generally start with a well-entrenched position when you begin these treads and the treads often ends up circling around irreconciliable world views because the investment ideas are so broad and vague that there's really nothing to logically refute or argue against. So I'm kind of left scratching my head as to what was the point of the tread at the end of it.
 
Muzie - Forget for a minute anything the author is saying are the options for the CCB. What do <strong>YOU</strong> think the CCB will do if it needs cash/capital? What would you do?




I think many financial writers interject opinion and accepted idea as fact, and it is important to sift out the fact from the lore or projections.




The CCB came right out and publicly told Paulson the other day that there would be hell to pay if the someone did not make good on Fannie and Freddie debt held by China. Americans like to think that we are the center of the universe and we have the power and no one can screw with us, but the CCB is holding our paper. Who is in control? What did Paulson do today?




I think the article is misleading when it says the CCB only has $3.2 billion in capital. The CCB holds $1 trillion in US treasuries. That does not sound to me like the CCB is hurting for capital. Maybe capital in terms of yuan, but I can think of an expedient solution to that. Am I misunderstanding?
 
I just remembered that China has been unloading much of it's Fannie and Freddie paper for the last month or so. Which means China helped cause the sinking of F&F. Now, who out there still thinks that China won't bury the US in the game to save it's own hide? Don't be so sure the CCB won't sell as much US note as it feels like.
 
[quote author="awgee" date=1220704998]Muzie - Forget for a minute anything the author is saying are the options for the CCB. What do <strong>YOU</strong> think the CCB will do if it needs cash/capital? What would you do?




I think many financial writers interject opinion and accepted idea as fact, and it is important to sift out the fact from the lore or projections.




The CCB came right out and publicly told Paulson the other day that there would be hell to pay if the someone did not make good on Fannie and Freddie debt held by China. Americans like to think that we are the center of the universe and we have the power and no one can screw with us, but the CCB is holding our paper. Who is in control? What did Paulson do today?




I think the article is misleading when it says the CCB only has $3.2 billion in capital. The CCB holds $1 trillion in US treasuries. That does not sound to me like the CCB is hurting for capital. Maybe capital in terms of yuan, but I can think of an expedient solution to that. Am I misunderstanding?</blockquote>


The article mentions 1T$ in US Securities AND mortgage securities. It doesn't specify how much of each, but it's not 1T$ of US securities alone. US treasuries are fine, but mortgage securities are not. If it's 90% treasuries, then good, but if it's 50/50 not so good. Are these mortgage securities worth 5 cents on the dollar like the ones Merryl sold recently? Nobody knows - except right now it's hard to find a buyer for these things. A central bank isn't necessarily going to go bankrupt, but having an impaired balance sheet reduces their options as far as protecting their economy against inflation, for instance.



I doubt China and foreign nations were really on Paulson's mind for the bailout. If the GSEs fail, then an "easier" path to recovery for banks disappears as nobody can take on the mortgage loans. The bailout will be expensive - but an outright GSE bankruptcy probably would be too - though I'm thinking the bailout will still be more expensive in the end. It's like the creditor who comes and asks you you can pay me 5000$ now or you can pay me 1000$ every year for the next twenty years with interest. Paulson chose the second option.
 
[quote author="awgee" date=1220706932]I just remembered that China has been unloading much of it's Fannie and Freddie paper for the last month or so. Which means China helped cause the sinking of F&F. Now, who out there still thinks that China won't bury the US in the game to save it's own hide? Don't be so sure the CCB won't sell as much US note as it feels like.</blockquote>


That's a good point, but who wants to buy those notes now? Nobody wants the mortgage notes. The US notes they can get rid of, but the US government is likely to emit a whole bunch for the bailout the market will be saturated with them. America needs to sell its own new notes more than China needs to get right of its own right now.
 
[quote author="muzie" date=1220702001]Any bank that "needs a capital infusion" is not a good sign. I don't know the details and haven't studied their central bank - and I don't know what particular variation of "democracy/capitalism" the Chinese adhere to so I don't know the details. But it says there they have a teeeny 3.2B$ in capital, and 1T$ in bond and mortgage debt. That is 1:300 leverage. And that 1T$ is the cost basis, not the current value, which because of all the level 3 asset crap on banks means nobody knows what it's worth because you can't sell it. That seems to be a problem to me.



The credit crunch is global, and it affects the weak and the strong alike.



As for Panda's reply... Well, I've tried. Are you quoting from the Jim Rogers book? Because you sound, word for word, exactly like him. Heck I'm sure I read the 19th century quote in his book. Thing is, I read that book four years ago.This stuff is old old old. And that's great; I doubled my money on FXI. Would I double my money again? Yes, sure, maybe, the same way I'd probably double my money on banks over a few years eventually if I time it with some luck.



Listen, the stuff you're saying, it's just.... everybody knows about this! - and we knew it two years ago - it's ALREADY HAPPENED. Everybody knows Chinese should rule someday, everybody knows gold and commodities should rise, everybody knows solar will kick ass one day, agriculture should go up. All this stuff about the Chinese being productive people and Americans being the lazy consumers, etc, etc, that is all well propagated knowledge and I'm sure bkshopper could write encyclopedias about the Asian historical values and society traits why the Chinese should kick ass. But you're painting in such broad strokes, I just can't figure out how you can coaslesce an investment theory out of all this. It's like you take all these mushy undefinable things and add them up in your head and it somehow becomes dollar signs when it comes out! You sound like the living embodiment of the national Chinese dream of gripping America by the balls and telling it righteously that it's been baaad and that it needs China and China will rule the show from now on. Sounds great, but I wouldn't base my investments around a nationalistic ideal.



I specifically gave factual information that contradicts your thesis that the yuan would appreciate vs. the us dollar, but your reply doesn't suggest that you've actually read it.





I for one am not too sure what you look for when you start one of these treads. You always start with a question, but later in these treads you always end up with statements like "Well Panda recommends..." so looks like you're not really asking for advice, but are trying to give some. Maybe you seek debate? Fact is, you generally start with a well-entrenched position when you begin these treads and the treads often ends up circling around irreconciliable world views because the investment ideas are so broad and vague that there's really nothing to logically refute or argue against. So I'm kind of left scratching my head as to what was the point of the tread at the end of it.</blockquote>


Muzie,



I have never read or heard of Jim Roger's books, but i have been heavily influenced on what i read in newpapers, media ,and different authors on this topic. Is he very bullish on China and commodities as well? What are some of the titles of his books?



Sorry if there is any confusion. The main purpose of this thread was to have a debate between the Bulls and Bears on the future outlook of our economy. I would like also like hear from the bulls who can poke holes to the things that have been said on this thread. I guess that was the purpose of this thread.



Panda
 
[quote author="awgee" date=1220704998]Muzie - Forget for a minute anything the author is saying are the options for the CCB. What do <strong>YOU</strong> think the CCB will do if it needs cash/capital? What would you do?




I think many financial writers interject opinion and accepted idea as fact, and it is important to sift out the fact from the lore or projections.




The CCB came right out and publicly told Paulson the other day that there would be hell to pay if the someone did not make good on Fannie and Freddie debt held by China. Americans like to think that we are the center of the universe and we have the power and no one can screw with us, but the CCB is holding our paper. Who is in control? What did Paulson do today?




I think the article is misleading when it says the CCB only has $3.2 billion in capital. The CCB holds $1 trillion in US treasuries. That does not sound to me like the CCB is hurting for capital. Maybe capital in terms of yuan, but I can think of an expedient solution to that. Am I misunderstanding?</blockquote>


Awgee, I totally with what you are saying. Many Americans feel that since China is our largest trade partner they must be our friends, but they are only our "fake friends with no loyalty". If the dollar continues to decline, the Chinese will need to continue to print the Yuan because their currency is pegged to the dollar, which will result in an even greater inflation in China. They will look out for their needs over the needs of the United States. The Chinese want the same things that the Americans have enjoyed in the past century: nice clothes, nice cars, nice homes, natural resources. What will kill the U.S. is when the Chinese feel that they are no longer dependent on the U.S. they will sell off all their treasuries and bonds and start buying these goods with they hungry appetitite to consume. Once the Yuan gets unpegged with the U.S. dollar, which I also think will happen in the future, the Chinese Yuan will sore over all other currencies. You are currently able to buy the Chinese Yuan at dirt cheap prices right now Ticker Symbol :CNY.



Some may argue well that is impossible because China needs us and are dependent on us. You'll be suprised to see how much the domestic consumer base has grown in China. It is not so uncommon now that a China man goes business with another China man. As early as 2012 - 2015, their domestic base may be large enough where they may cut dependency with the U.S. I sort of feel that the Chinese are preparing for this to wreck when the United States is at its most vulnerable point. Can you call this a real friend?



"The borrower will always be the servant to the person who lent the money" The borrower is the United States in this case.
 
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