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2005 and Beyond:The BEAR is BACK?

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Re: 2005 and Beyond:The BEAR is BACK ?

From a speech given by Hon. Ron Paul, a US congressman....

"....We face a coming financial crisis. Our current account deficit is more than $600 billion annually. Our foreign debt is more than $3 trillion. Foreigners now own over $1.4 trillion of our Treasury and mortgage debt. We must borrow $3 billion from foreigners every business day to maintain our extravagant spending. Our national debt now is increasing $600 billion per year, and guess what, we print over $600 billion per year to keep the charade going. But there is a limit and I’m fearful we’re fast approaching it....."

http://www.house.gov/paul/congrec/congrec2005/cr091505.htm
 
Re: 2005 and Beyond:The BEAR is BACK ?

Hurricane Rita looks poised to strike Texas. With high temps in the gulf, watch for her to increase in intensity. There's a lot of oil and gas resources in her path too apparently.

Short USD, long gold and resources (obviously not with assets in the gulf) IMO.
 
Re: 2005 and Beyond:The BEAR is BACK ?

French claim Fed chairman admits US has lost control of budget

By Philip Thornton, Economics Correspondent in Washington
Published: 26 September 2005

Bitter disagreements over global economic policy broke out into the open yesterday as the French Finance Minister claimed that Alan Greenspan had admitted America had "lost control" of its budget while China warned the US to drop demands for radical economic policy changes.

In an extraordinary revelation after a meeting between Thierry Breton and Mr Greenspan, M. Breton told reporters: "'We have lost control,' that was his [Mr Greenspan's] expression.

"The US has lost control of their budget at a time when racking up deficits has been authorised without any control [from Congress]," M. Breton said.

"We were both disappointed that the management of debt is not a political priority today. The situation that is creating tension today on the currency market ... is clearly the American deficit.".......

http://news.independent.co.uk/business/news/article315144.ece
 
Re: 2005 and Beyond:The BEAR is BACK ?

31st of Jan is a date to mark down on your calendar - its the Date that US Fed Alan Greenspan retires.

When Greenspan first tookover in August 1987, within two months the stockmarkets crashed. He was lucky, at that time fundamentals were on the improve after two decades of intermittent recessions so a recovery was on the cards. Bernanke is not in the same position - the US has only experienced 1 recession in the last 20 years (1991), and there are many factors which point to the good times fundamentally coming to an end.

Some exerpts from an author I read a lot of;

Bernanke will inherit all the problems created by Greenspan's 18-year legacy of loose money, problems that are finally building toward some kind of crisis. But what he won't inherit is Wall Street's overwhelming faith that Greenspan will defuse any potential market bomb before it blows up. The financial markets, while wishing Bernanke success, will be nervously waiting for him to foul up. Nervous markets, of course, have a tendency to turn a minor blip into a major crisis of confidence.

.............

The Greenspan put

There is another way of looking at this record. Greenspan is handing over to Bernanke a problem that the financial markets jokingly call the Greenspan put. In the options market, a put is the right to sell a stock or other financial instrument at a specific price. It has a value if the current price of that asset falls below the selling price guaranteed by the put. And when the current price falls through the floor, a put can suddenly become very valuable. Think how much you'd pay for the right to sell a stock at $75 when it has fallen to $40.

The Greenspan put is the market's name for a belief, based on all those market interventions by Greenspan's Fed, that the Federal Reserve will always act as the buyer of last resort. If prices fall fast and hard enough, the Fed will supply cash to prop up the market.

The Greenspan put has two long-term effects. First, in the short term, it calms the markets; there's less need to panic if Wall Street and its counterparts around the globe believe the Fed will ride to the rescue. And, second, it encourages careless risk taking. If the Fed will bail out the market, why worry about the consequences of very risky financial behavior? If the Federal Reserve will intervene to prevent the failure of Long-Term Capital Management, why not make risky bets in very volatile markets? If the Federal Reserve will intervene to limit the exposure of other financial companies to the bankruptcy of commodities brokerage Refco, why bother to perform careful due diligence on the companies that you do business with?

The increase in risky behavior as a result of the Greenspan put would be dangerous enough by itself. But its effects are exacerbated by the growth of the derivatives markets. Much of the explosive growth of the derivatives market -- and the market for credit derivatives had grown, as of June 2005, by 128% in 12 months -- is a result of banks, pension funds, insurance companies, hedge funds and other financial institutions seeking a way to insure themselves against the riskier investments that they've been making. Like the Greenspan put, the derivatives market encourages investors not to worry about risk. Instead of avoiding credit-quality problems, for instance, by not buying the bundles of riskier interest-only mortgages now flooding the market, insurance companies and pension funds can load up on the higher yields of these mortgages and insure themselves against the risk by buying a derivative insurance product.

...........

A looming crisis
As we learned earlier this year when the downgrades of General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) took the bond markets by surprise, derivatives work just fine until they don't. And the more volatile the financial markets are, the higher chance that some asset class will zig when the financial models used to create derivatives are predicting they zag. And then Bernanke will be facing his first financial crisis. All of Wall Street will, of course, be watching to see if he's really up to filling Greenspan's shoes.

I think the odds are that this crisis isn't too far down the road.

I think we'll see the turning point of three long-term trends in the next 12 to 18 months:

* The era of rapidly rising housing prices that sustain consumer spending and economic growth seems to be ending, either with a whimper or a bang.

* The era of cheap money is ending: Not only the Federal Reserve, but also the Bank of Japan and the European Central Bank are likely to raise rates in 2006.

* And the era of controlled inflation seems to be ending: The annual inflation rate isn't really 4.7%, because September's numbers reflect a post-hurricane spike in oil, but higher energy prices are spilling over into higher prices for just about everything.
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Full article http://moneycentral.msn.com/content/P133283.asp

After finishing my assignment on Global Markets yesterday I am coming to the conclusion that there is just too much risk out there to the downside.

Either way, the next 6 months are going to be crucial
 
Re: 2005 and Beyond:The BEAR is BACK ?

Just had to post this one :D
 

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Re: 2005 and Beyond:The BEAR is BACK ?

Aust looking to open trade with India.

Bears are overlooking opportunity.
Fortunately the Govt isnt.
Aust is in the fortunate position of becoming an economic leader in the region with its wealth in Commodities.

The US may crash in Australia it will eventually be a matter of "Who cares".
Watch the investment pour in as companies fall over themselves to get a piece of the action.

Now only Asia and China to go.
 
Re: 2005 and Beyond:The BEAR is BACK ?

tech/a said:
The US may crash in Australia it will eventually be a matter of "Who cares".
Click to expand...

If the US crashes, it will hurt. Make no mistake.

The US crashing will be felt far and wide. Here, India, China, Timbuktu.

Cheers
 
Re: 2005 and Beyond:The BEAR is BACK ?

Agree with you Tech in the long trerm the changes will come.

Meanwhile in the short term there will be some pain to go thru, with the US trying to hold on with all it's got. As Wayne says we are all linked, we can't avoid it.
 
Re: 2005 and Beyond:The BEAR is BACK ?

Wayne.

While I agree,in the initial short term have you actually considered the positive effects a crash in the US of A could have (actually a solid downturn prolonged would be enough) on not only emerging economies but Australias while everyone falls over themselves to fill holes the US will leave.

Any crash in the US $ will have Aus looking pretty good for investment.
 
Re: 2005 and Beyond:The BEAR is BACK ?

tech/a said:
Wayne.

While I agree,in the initial short term have you actually considered the positive effects a crash in the US of A could have (actually a solid downturn prolonged would be enough) on not only emerging economies but Australias while everyone falls over themselves to fill holes the US will leave.

Any crash in the US $ will have Aus looking pretty good for investment.
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Absolutely Tech. A good cleansing recession would be a fantastic thing long term.

I look at it this way: the bush is overgrown diseased and struggling against itself. It needs a bloody good pruning. Chop off all the dead wood, trim it back hard AND WATCH IT GROW THEN. :)

It' nature....we need a recession .... a good one!
 
Re: 2005 and Beyond:The BEAR is BACK ?

wayneL said:
Absolutely Tech. A good cleansing recession would be a fantastic thing long term.

I look at it this way: the bush is overgrown diseased and struggling against itself. It needs a bloody good pruning. Chop off all the dead wood, trim it back hard AND WATCH IT GROW THEN. :)

It' nature....we need a recession .... a good one!
Click to expand...

Guys 2008 after Beijing Olympics, thats when the Big Recession starts imo...
 
Re: 2005 and Beyond:The BEAR is BACK ?

michael_selway said:
Guys 2008 after Beijing Olympics, thats when the Big Recession starts imo...
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what makes u think that a recession would wait for the olympics...??

metals and DOW looking shaky at the moment...
 
Re: 2005 and Beyond:The BEAR is BACK ?

nizar said:
what makes u think that a recession would wait for the olympics...??

metals and DOW looking shaky at the moment...
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We are talking about a big recession bear market

not a short term "correction" which happens anytime and more frequently

Why Beijing Olympics? Because the huge China Demand currently is driven by that atm imo, so after that it may slow alot, while supply is increasing as everyone trying to increase production to cash in on the high commodity/energy prices.

Btw an interesting article

http://www.gold.org/value/news/article/3474

Value News
China hungry for gold
14:25:23 GMT, 14 February, 2006
Shanghai Gold Exchange president Wang Zhe believes that China could become one of the world's biggest gold importers.

The country's gold trading volume increased by 36 per cent in 2005, and Mr Zhe said China "has the potential to be one of the biggest gold markets in the world," according to the Financial Times.

His views are supported by recent consumer spending in the world's most populous country.

The Old Phoenix jewellery store in Shanghai has been selling a large number of $2,000 gold bars embossed with the Beijing Olympics logo.

A salesman said that "there will be a new bar every year until 2008 and many people want the complete set".

The situation is vastly different from even a few years ago – up to 1982, individuals in the country were not allowed to own gold.

However, the country is now poised to become a significant gold importer.

"Commodities will have a strong investment case in the year ahead because of the strong Asian growth," said Michael Hartnett of Merrill Lynch.

Gold in particular has a strong case as global growth gains momentum in the second half of 2006.
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So I wonder what happens to GOLD after Beijing Olympics in 2008?
 
Re: 2005 and Beyond:The BEAR is BACK ?

wayneL said:
Absolutely Tech. A good cleansing recession would be a fantastic thing long term.

I look at it this way: the bush is overgrown diseased and struggling against itself. It needs a bloody good pruning. Chop off all the dead wood, trim it back hard AND WATCH IT GROW THEN. :)

It' nature....we need a recession .... a good one!
Click to expand...

I agree with you 100% wayne. Sometimes in order to move forward we need to move back first. As you say it is natural law. A classic example was Keatings "recession we had to have " although IMO we would have had it irrespective of what keating said or did.

The All Ordinaries has traditionally correlated well to Wall St movents in the past 100 years. Why should it be any different this time? The simple answer is that it won't.
 
Re: 2005 and Beyond:The BEAR is BACK ?

Again I agree wayne.

However I feel there are enough growth factors within the region directly affecting our economy that a duplicate longterm following of any strong down turn in the US wont occur.
Sure there will be reaction but not to the same extent as would be expected had there not been extended continuing growth in the three majors (India,China,Asia).

Olympics--China is bigger than Bejing.

I still believe the influence of these expanding economies has been way underestimated.
When China wanted Steel a year or so ago supplies in Australia ran out!

Demand from these 3 hasnt even registered on the Richer scale!
 
Re: 2005 and Beyond:The BEAR is BACK ?

G'day tech/a

I agree with you in that we will be tied to and should be looking at the CIA in the long term.

However, I think we are still very influenced by the US market and if and when it goes down then we will hurt for the same time that it does, but hopefully not to the same degree (because of our CIA markets).

I'll get on my old hobbyhorse now and stress that we should keep control of our commodities and not sell them off to the Chinese etc for a short term gain.

The Chinese are smart in that they see that if they own the companies that mine our countries assets they can control the prices.

At the moment these assets are the best thing Australia has got going for itself, especially since we will never compete in manufacturing.

Demand for all raw materials will be greater than the available supply in the long run and Australia should postion itself to maximise the gains from the ensuing higher prices.

We don't need to mine all our raw materials now. The longer they stay in the ground the more valuable they become in the future.

We should do just as the Chinese do - plan for the long, long term and not waste what we have for short term gains.

Ahhhh - that's better!

Cheers

Dutchie
 
Re: 2005 and Beyond:The BEAR is BACK ?

dutchie said:
G'day tech/a

I agree with you in that we will be tied to and should be looking at the CIA in the long term.

However, I think we are still very influenced by the US market and if and when it goes down then we will hurt for the same time that it does, but hopefully not to the same degree (because of our CIA markets).

I'll get on my old hobbyhorse now and stress that we should keep control of our commodities and not sell them off to the Chinese etc for a short term gain.

The Chinese are smart in that they see that if they own the companies that mine our countries assets they can control the prices.

At the moment these assets are the best thing Australia has got going for itself, especially since we will never compete in manufacturing.

Demand for all raw materials will be greater than the available supply in the long run and Australia should postion itself to maximise the gains from the ensuing higher prices.

We don't need to mine all our raw materials now. The longer they stay in the ground the more valuable they become in the future.

We should do just as the Chinese do - plan for the long, long term and not waste what we have for short term gains.

Ahhhh - that's better!

Cheers

Dutchie
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well said dutchie. couldn't agree more.

problem with western governments though- that will never happen. Furthest out any Australian govt cares is the next election in my opinion :(
hopefully that will eventually change, but I wouldn't hold my breath waiting for it!
 
Re: 2005 and Beyond:The BEAR is BACK ?

It amazes me how shortsighted we are when it comes to commodities.

For example, natural gas. We've got plenty at the moment but seem determined to sell virtually the whole lot over the next few decades at relatively low prices. Then around 2030 it's expected that Australian gas production will enter its' terminal decline with even much of the post-peak production being exported. Dumb. Absolutely dumb. Gas is already seriously depleted in North America, Western Europe (except Norway) and New Zealand. So we're determined to end up the same within the lifetime of most on this forum.

North-West Shelf - mostly for export apart from a 25 year supply reserved for current rates of use in WA.

Timor Sea - practically all for export.

Cooper basin - already in decline.

Bass Strait - already about half depleted (gas) and 90% depleted for oil.

Meanwhile we'll need more gas in future than now as a replacement for oil. Already we're planning to import it from PNG but that hasn't stopped us from moving to waste it generating electricity for which alternatives (coal, renewables) are cheaper anyway (Queensland has what amounts to a subsidised (by consumers) scheme to encourage more gas use for electricity generation) whilst NSW has other policies which encourage a very similar outcome. Hmm... :(

There are several commodities I could have chosen to make the point, not just gas although that's one of the more immediate problems.
 
Re: 2005 and Beyond:The BEAR is BACK ?

Dutchie.

Make a commodity rare enough and there will be an alternative (Not the commodity) found by those needing it.

If Oil became as rare as RHourseS then you bet they would find a way to run on water (been done I think).
Sure be tactical but dont let opportunity pass you by.Find the balance.

With so much Nuclear waste I'm supprised a recycling alternative hasnt been found---when it is those who have stored it will be Extremely wealthy in and out!
 
Re: 2005 and Beyond:The BEAR is BACK ?

wavepicker said:
The All Ordinaries has traditionally correlated well to Wall St movents in the past 100 years. Why should it be any different this time? The simple answer is that it won't.
Click to expand...

this may be so...
but look at dow and s&p500 for the last 2 years and compare to asx200 and all ords...

that said... the 4 most dangerous words in investing are: "Its different this time"
 
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