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are we headed to another big crash?

nottyboi

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May 14, 2008
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Look to me like a Greek default is gonna happen...probably within 6 months. Germany and France have said they will support their banks.. but who owns all the credit default swaps for Greek bonds? How far will the contagion spread? Will interbank lending freeze up like it did after Lehmann? (probably)
 

fmahovalich

Active member
Aug 21, 2009
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I have said it beofere...months ago..and will say it again....

The economy has not nearly bottomed out!!!
 

oil&gas

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Apr 16, 2002
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Ghawar
A big crash in the stock market like the one from 2008?
Not likely IMO although I expect market volatility to escalate
and contraction of major indexes as devastating as 10--20%
is possible.
 

Rockslinger

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Apr 24, 2005
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A big crash in the stock market like the one from 2008?
Not likely IMO
I was watching the talking heads on BNN and they said that our corporations and banks are much stronger than in 2008. They are lean and sitting on $1trillion in cash.
 

nottyboi

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May 14, 2008
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I was watching the talking heads on BNN and they said that our corporations and banks are much stronger than in 2008. They are lean and sitting on $1trillion in cash.
Corps have a lot of cash, because they fear another freeze up of credit markets. Banks capitalization is barely adequate only if you use the "new" accounting rules.. if you used mark to market, (the old rules) many would be insolvent. Also, there are a pile of credit default swaps written against PIIGS bonds, no one knows who holds what and that alone could freeze interbank lending.
 

oil&gas

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Apr 16, 2002
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Ghawar
I was watching the talking heads on BNN and they said that our corporations and banks are much stronger than in 2008. They are lean and sitting on $1trillion in cash.
The 2007--8 financial crisis was a debt crisis in the private sectors. What
we are facing now is a sovereign debt crisis. Corporations and banks as you
said are loaded with cash. They will find every opportunity to deploy their cash.
One tactic is to engineer market crash on small scale so they can snatch from
weak investors profitable stocks at good prices. I agree with the other post that
the economy has yet to bottom out. But inflation (or stagflation) will lend support
to stock prices in general.
 

nottyboi

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May 14, 2008
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The 2007--8 financial crisis was a debt crisis in the private sectors. What
we are facing now is a sovereign debt crisis. Corporations and banks as you
said are loaded with cash. They will find every opportunity to deploy their cash.
One tactic is to engineer market crash on small scale so they can snatch from
weak investors profitable stocks at good prices. I agree with the other post that
the economy has yet to bottom out. But inflation (or stagflation) will lend support
to stock prices in general.
the amount of cash the private sector has compared to sovereign debt is minuscule. The ONLY way to increase the amount of cash in the economy substantially is more lending to consumers and small businesses, and that just ain't happening. I suspect at the next fed meeting they will yank interest payments on excess reserves for banks...
 

nottyboi

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May 14, 2008
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Isn't the interest rate already at or close to zero?
That is the borrowing rate, what they did is agree to pay interest on deposits in at the fed in excess of their required reserves.... (I suppose to help them recapitalize and to hide the fact they have a great deal of overvalued assets on their books). Problem with this is it gives them zero incentive to lend. Why lend to joe blow when the fed will pay you 0.25%?

http://www.pbs.org/newshour/rundown/2011/09/are-interest-on-excess-reserves-outrageous.html

Now you may think... what is the big deal of .25%? Well when banks can get money for essentially zero ... what is easier?
 

shai

Member
Apr 11, 2002
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Probably

The americans and the europeans have not faced their structural challenges that caused the 2008 crash and were exacerbated by their actions since. The Japanese have had their heads similarly in the sand but their high rate of savings means that the debt is held internally and interest payments remain in their economy to sustain aggregate demand.

If the USA thinks that they can fight or have fought 4 wars in the last 10 years (drugs, terror, Iraq & Afghanistan), That they want all the public goods provided by a government (pensions, medical care, armies, police, prisons and schools), that they can maintain 3.2 million in the military and 3 million in jail, and not raise taxes, then they're going to remain a structurally weak economy.

If Europe will not cut free their weakest links and pull back the eurozone, they remain in danger as well.

All this will drag us and everyone else down as well.
 

nottyboi

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May 14, 2008
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Either way, rough roads for stock markets are also buying opportunities.

Not when the Nasdaq fell from 5000 to 4000...lol...or the Nikkei from 39000 to 30000.....why do you think most Japanese still keep their money at the post office to this day..
 

oil&gas

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Apr 16, 2002
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Ghawar
Three economic views

None of the views presented in Gordon Pape's latest article
from G&M really suggests 2011 to be a good entry point to the
stock market. But if you subscribe to those views have your
capital ready for any great buying opportunity that may come
up in 2012.

------------------------------------------------------
Gordon Pape
Sep 12, 2011

No one knows what lies ahead for the world economy and global stock
markets. But there are a lot of opinions out there, as those attending
last week's Toronto World Money Show quickly discovered. We could be
headed for economic Armageddon according to some. Or maybe not.

Overall, the cautious optimists appeared to outnumber the pessimists
among those making presentations. But then you have to bear in mind that
many of these people have a vested interest in encouraging investors to
buy stocks.

Three of the most interesting presentations I sat in on were given by
the keynote speakers at Thursday's opening ceremonies. Here's a summary
of what they had to say.

Robert Gorman: moderate growth

First up was Robert Gorman, chief portfolio strategist for TD Waterhouse
who offered his investment outlook for 2012. On the whole, he struck a
positive note.

On the key issue of whether we are headed for a double-dip recession,
he told the audience that while the odds are shortening, he still puts
the probability of that happening at only 35 per cent. The more likely
scenario, he believes, is a period of moderate growth and moderate
inflation, which would be good for stocks.

He pointed out that the key S&P 500 Index is only trading at 12.5 times
earnings, "a pretty reasonable valuation". With inflation expected
to remain low, that ratio is not likely to contract significantly, he
said. "Stocks are much less expensive than bonds and are good value at
this level," he added.

He predicted a fall rally in the stock market and forecast an advance
in the upper single digit range for the S&P 500 in 2012. The best bets
will be large-cap, dividend-paying stocks like Johnson & Johnson (NYSE:
JNJ), PepsiCo (NYSE: PEP), IBM (NYSE: IBM), and Oracle (NDQ: ORCL).

Mr. Gorman said he expects the TSX to follow the same pattern with a
rally this fall and single digit gains in 2012. His picks included Power
Corp. (TSX: POW), Shaw Communications (TSX: SJR.B, NYSE: SJR), Royal Bank
(TSX, NYSE: RY), and Scotiabank (TSX, NYSE: BNS).

As for bonds, he suggested they have a role to play in generating income
and for capital preservation but predicted total returns in 2012 would
only be in the 1 per cent to 3 per cent range.

Jim Jubak: trouble ahead

Next up was Jim Jubak, a widely-followed U.S. investment columnist and
senior markets editor for Moneyshow.com. He chose to look past 2012, in
part because he expects the political gridlock in the U.S. to prevent
any meaningful action by the government until after the presidential
election. Instead, he focused on 2013 and beyond and doesn't like what
he sees. Most of the "solutions" being applied today are really just
"delays" that will start to take their toll at that point, he said.

Looking at Europe, he thinks it is inevitable that Greece will eventually
default on its debt, perhaps bringing down at least one large French
bank in the process. By 2013-14, "the yield on the Greek two-year note
will be somewhere north of infinite," he quipped, noting that it is now
over 50 per cent. "There is not enough money in the pockets of German,
Dutch, and Finnish taxpayers to continue to fund that debt."

In the U.S., the failure of government to act decisively will mean
the problems plaguing the real estate market will continue while the
unemployment situation will worsen because the skills of those out of
work for a prolonged time will become increasingly obsolete.

Among emerging markets, Brazil is facing a serious inflation problem
while China has to deal with a growing issue of bad loans at all levels
of the economy.

Mr. Jubak's safe havens: gold, strong currency bonds, and dividend-paying
stocks.

Dennis Gartman: opportunities in food, fuel, gold

Dennis Gartman is perhaps the most influential investment newsletter
publisher in the U.S. His views are widely quoted and closely followed
by financial professionals. He is also a compelling speaker with a very
strong point of view and his presentation was one of the highlights of
the Money Show.

Unlike Mr. Gorman, he does not want to own stocks right now. "They may
be inexpensive but I think they may get a lot more inexpensive," he
said. There will be a time to buy aggressively but that will only come
after the markets turn around and start moving back up. "Don't try to
catch a falling knife," he told the audience. "You'll just cut yourself."

He does like gold, although he stressed that he is not a gold bug saying
"I don't believe the world is coming to an end." Rather, he described
himself as a trader and a pragmatist: "I'm willing to go with any team
that is winning." Gold is winning and will keep going up "until it
stops". It should not be considered a safe haven, however. "Safe havens
don't lose 8 per cent in one day," he noted, referring to gold's recent
one-day loss of more than $200 an ounce.

As for other opportunities, he encouraged the audience to look at food
and fuel for long-term gains. World demand for food is going to continue
to grow, he said, as people in Asia and Latin America move from lower
to middle class and change eating habits. "Food is going to get a lot
tighter in the next 20-30 years."

Investment opportunities include fertilizer companies, agriculture-related
ETFs, and, down the road, dry bulk shippers, whose shares have been
hammered in recent years.

Turning to fuel, he debunked the whole concept of peak oil saying new
discoveries and technologies will give us access to a virtually unlimited
supply of oil and natural gas. But high-quality, sweet oil will be tight
– much of the world's supply is "junk" including Saudi oil. "It contains
too much sulphur and it's too expensive to refine – no one wants it,"
he contended.

This explains why Brent crude, which is sweet light oil produced in the
North Sea, is trading at a significant premium to West Texas Intermediate
crude (WTI) which is the North American benchmark, he suggested. The
spread between the two is likely to continue to widen.

(Although Mr. Gartman didn't mention it, there is an ETF that tracks
Brent crude. It's called the U.S. Brent Crude Fund and it trades on the
New York Stock Exchange as BNO.)

As for natural gas, he described supplies as "vast and getting
vaster". There is no way we are going to see a significant increase in
gas prices as a result, he said. "If you're bullish on natural gas prices,
take a deep breath," he suggested.
 

Rockslinger

Banned
Apr 24, 2005
32,783
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I don't want to start a new thread. looks like Garth Drabinsky is finally going to jail. Great showman, lousy businessman and terrible accountant. Might lose his Order of Canada.
 
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