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  1. #1
    watterinja
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    Is the world heading into recession?

    I've been watching the way the US economy is beginning to slide rather rapidly, coupled with various declining currencies - USD, GBP amongst others...

    Is the world heading into a period of recession?

    What fallout can we expect here in Asia?

    Perhaps the USD-EUR, USD-Baht, GBP-Baht & other currency cross rates could be revisited? Where do folks now expect these to head?
    Last edited by watterinja; 09-01-2008 at 10:08 PM.

  2. #2
    My kind of town
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    I have to disagree with you. Not a recession, but a depression. We are way over due for it. The pendulum is going to swing so far the other way, that the Great Depression will look like a picnic. What goes up, must come down.

    I hate to say it and will really hate to see it.........

  3. #3
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    ^ agree, sadly.

    My thoughts......
    World commodity prices are rising at a crazy rate.
    Productivity is already maxed out in the west. So there's going to be less money in people's pockets.
    Banks in west are practically insolvent, so much of their balance sheets consisting of doubtful debt.
    Assets are increasingly worth their break up value alone. There's not alot of optimism out there.

    Liquidity crisis in banks will hit middle classes hardest.
    Worldwide inflation and decreasing buying power of western currencies (esp USD) will hit the poorest hardest as food prices and general commidity prices go up.
    - not a good look if it starts to bite in Thailand. Having the over financed Bangkokians getting stressed out at the same time as the peasants on the farms was never a good idea.

    Then again, I'm hopefully wrong and we're all gonna buy new yachts next year.

  4. #4
    watterinja
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    Thanks Chitown & Zavier38.

  5. #5
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    Said it before, all the idicators point towards a big recession.
    US balance of trade, and debt
    Price of oil unstable due to Iraq, and other conflicts or government ruses (Venezuala)
    International banks propping up debt
    Australian banks covering foreign investment by raising local interest rates while petrol hits $1.50
    Housing markets world wide not good (glimmer of hope in AUssie), but abovementioned interest rates won't help
    Most share prices for commodities overpriced and dependent on export, oil prices will devastate this balance of trade
    Food prices already starting to bite in Aussie, Uk, and US
    Unemployment in the US rising
    All you an do is reduce personal debt and cash up if you can.
    But what would Iknow I'm an Engineer, not an economist.

  6. #6
    watterinja
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    I often wonder at the effect of all the years of low-cost outsourcing.

    In tough times, there is little way to bring your assets home & hold them close until better times emerge. China, India etc may seem inexpensive up front, but it is during tough times that lack of homegrown capacity comes to the fore.

    I wonder if the US is kicking itself over this issue?

  7. #7
    ding ding ding
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    Quote Originally Posted by watterinja
    Is the world heading into recession?
    I think so, the future looks bleak. In the US right now the markets are falling as they price in the chaos that kicks off in a couple of days when Q4 reporting starts. I can see the DOW at 11500 with 2 weeks.

    100,000 ARMs resetting every month for the next 3 years, house prices falling like farangs from the 38th floor.

    Its a proper mess and its gonna be around for at least 5 years.

    Quote Originally Posted by Zavier38
    Banks in west are practically insolvent
    They certainly are!......
    PIMCO Bonds - Investment Outlook- January 2008 "Pyramids Crumbling"

  8. #8
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    ^^Australia is definitely suffering from lack of manufacturing industries, and the knock on is a lack of tradespeople.
    Makes the unemployment look good with plenty of vacancies, but the truth is there are no tradespeople to do the jobs.
    While the liberals sold our resources they also ran down our capacity to add valur to these natural resources.
    They will pay a big price soon enough, just like the US

  9. #9
    watterinja
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    Quote Originally Posted by Spin View Post
    A very enlightening article. Thanks for that.

    Pyramid schemes indeed.

  10. #10
    bkkandrew
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    Indeed. A massive depression in US, followed closely by UK, albeit cushioned by reduced dependance on hitherto cheap fuel costs.

    What does it mean here?

    The big one is a rerun of '97 in the financial sector. No-one has thus far investigated the exposure of the CDO crisis on Thai banks and its related issues. One thorny issue that surely exists is over-exposure is debt relating to the overheated (literally in the case of the 52-story tower next to me on Ratchada the day before yeasterday) domestic and commercial property sector. Now, whatever the extent of this, one must consider that the capital base that the main Thai banks started from (pre-June 07) is significantly less than that enjoyed by such paragons of virtue, such as Northern Crock and Cnutrywide Financial.

    Once the numbers get crunched on the Thai Financial Sector (a low priority, compared to the trilions being fretted about in US/UK/EU) then there maybe a corresponding correction in the Thai economy/THB etc.

  11. #11
    ding ding ding
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    Quote Originally Posted by bkkandrew
    No-one has thus far investigated the exposure of the CDO crisis on Thai banks
    Found a little bit of info:

    Thailand: Siam Commercial Bank (SCB) and Kasikornbank (KBank) reported no exposures to CDOs, while Bangkok Bank (BBL), Krung Thai Bank (KTB) and Bank of Ayudhya (BAY) reported some exposure, mostly to higher rated tranches ('A' and above).

    The level of exposure ranges up to 6% of equity so that a loss on the portfolio could impact annual earnings but should not threaten solvency.

    BankThai has more substantial CDO investments including 1.7billion baht of US subprime-related (21% of equity) against which it has already taken a 0.3 billion baht writedown.

    from here Fitch Ratings: Subprime exposure low among AP banks

  12. #12
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    Things still don't look too good in the markets. Gold is flying high. I wonder when people will start getting worried and sell their gold?

  13. #13
    The Cat
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    You mean when people will start selling their shares and buying gold?

  14. #14
    I am in Jail
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    Stagflation is more likely,

  15. #15
    The Cat
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    Inflation is around the corner if not here yet.
    What kept prices under control is the cheap manufacturing in China.
    And more goods coming from China.
    But the Chinese unlimited pool of workers is not that unlimited after all.
    Not with a one child policy and everybody wanting the one child to be educated, whatever the cost.
    So no more workers at cheap price.
    And well, inflation coming your way...
    Discussion is an exchange of knowledge, argument is an exchange of ignorance

  16. #16
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    Well, I did hear gold at 1,200 somewhere!

    How low can things go? A lot of the old timers who have their money in stocks might be panicky thinking that they had better go to cash in case things get bad. If they do get bad and people lose their retirement to the markets, a lot of people will be working until death.


    One day things go up and the next there's more bad news. But George Bush will get his comfy retirement money of a few hundred thousand a year. And he wanted everyone to put their retirement money in the markets!

  17. #17
    Mid
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    more bad news ........

    Wholesale prices rose by 6.3 percent in 2007
    Year-over-year gain was largest in 26 years

    best take in another notch in the belt .

  18. #18
    I am in Jail
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    Every 25 years, there is an inflation reset cycle, and I think we are starting one, everyone is increasing their prices, inflation becomes real, no longer hidden or "virtual" by some tricky statistics from official organizations,

    it's even worse in Europe, and they have the strong Euro that will slow them down,

    Once again, stagflation has been triggered by an energy crisis, once it starts, it can be very costly to stop, everyone wants to be compensated.

    This is starting to sound more like the 70s again, once again with Oil making the first move,

  19. #19
    I am in Jail
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    market is getting beat up badly, inflation (PPI up 6&#37 and a recession in the making (housing slump and poor sales)

    In the meantime, Citigroup is reporting massive losses, another 17 Billions, they can't stop the bleeding, selling out to anyone with cash,


    Citigroup, Merrill Line Up New Capital Amid Turmoil

    Citigroup announced plans to sell another $14.5 billion in preferred stock, as it posted a huge net loss, hit by $17.4 billion in subprime-related write-downs. The bank slashed its dividend by 41%. Merrill Lynch received a $6.6 billion infusion from Korean and Kuwaiti sovereign-wealth funds and Japanese bank Mizuho. 10:44 a.m.

  20. #20
    Thailand Expat
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    ^ even the the once mighty butterfly is reduced to selling his wife's LV bags...

  21. #21
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    I don't believe this an if any longer now it' when. With the interest rates indicated in this article, I doubt the Thai' will be able to hold the naht anywhere near where it is today. Baht at 25 America not by buying where are the sales goign to come from. China, I dont think so they can produce the articles themselves for less.

    The end result an overdue adjustment that is going to a bitter pill to swallow. Watch carefully China will slowly buy America. I already see deals being cut with American bank stock. Hey the Japanese had thier day time for China to get a piece of the action.

    What I worry about as a dollar earner (retirement) is what is gong to be the effect in Thailand and it's really not looking good for us. Nor does it look real rosy for the Brits at the moment.

    My approach is going to be very conservative with money.

    The other side of the coin is it won't last forever, There will actually be huge fortunes made over the next few years. Thing are going to get inexpensive again such as housing, at least in the states.

    So I would say to all if you don't really need it wait. I was lucky enough to get sit up five years ago. So can survive at 25, I would hate to be trying to do it that now. It certainly would take a lot more money today then what Ihad to start with. For me Thailand is a good place to ride this out. Although I will bitching and kicking all the way.

    " U.S. Recession a Bigger Risk Than China, Malkiel Says (Update1)

    By Allen Wan



    Jan. 15 (Bloomberg) -- A U.S. recession poses a bigger threat to the global economy than a slowdown in China, according to Burton Malkiel, the Princeton University economics professor who wrote ``A Random Walk Down Wall Street.''
    ``The U.S. is more important to the world,'' Malkiel, 75, said during an interview. ``The U.S. is slowing down dramatically and we're going to see little or no growth in the first half of 2008. I'm not worried about a slowdown in China because growth there will still be larger than anywhere else in the world.''
    Stocks in the U.S. have fallen three straight weeks and posted their worst start to a year since 1991, amid concern the economy will contract. Goldman Sachs Group Inc. joined Morgan Stanley and Merrill Lynch & Co. last week in estimating that the nation may already be in a recession.
    Malkiel predicted the Federal Reserve will reduce interest rates to as low as 3 percent this year, from 4.25 percent now. ``I anticipate lots of lowering in the first half,'' he said. Malkiel was a member of President Gerald R. Ford's Council of Economic Advisors when former Fed Chairman Alan Greenspan led the group.
    Trading in futures contracts gives 100 percent odds that policy makers will shift the target rate for overnight loans between banks to either 3.75 percent or 3.50 percent this month.
    11.5% Growth
    China expanded at an 11.5 percent rate during the third quarter, the fastest among the world's 10 largest economies. The nation will expand 10 percent this year, Goldman predicted last week. Last year, China contributed 17 percent to global growth, the same as the U.S.
    Malkiel said he is confident China will be able to slow growth to a ``sustainable pace'' of 7 percent to 8 percent.
    He recommends that investors buy stocks of U.S. companies that have business ties to China. Malkiel also favors the SPDR S&P China ETF and iShares FTSX/Xinhua China 25 Index Fund.
    ``A Random Walk Down Wall Street,'' first published in 1973 and now in its ninth edition, argued that asset prices fluctuate randomly and investors can't consistently beat the market.
    Stocks in China are in a ``bubble'' and will tumble once the government allows funds to flow more freely, Malkiel said.
    China Life Insurance Co. illustrates the point, he added. The nation's largest life insurer trades for 46.6 times estimated earnings in Shanghai, 25.9 times in Hong Kong and 30 in New York, according to Bloomberg data.
    `Restricting Arbitrage'
    ``It's just nuts,'' he said. ``China has been artificially restricting arbitrage.'' Malkiel expects ``these valuation discrepancies to disappear eventually as China liberalizes its currency. When that will occur, I don't know.''
    The CSI 300 Index, which tracks A shares listed on China's two exchanges, has gained 6.7 percent this year after jumping 162 percent in 2007 and 121 percent in 2006. The shares are trading at ``bubble valuations,'' Malkiel said, referring to the yuan- denominated equities restricted mostly to local investors.
    Malkiel declined to predict when the Chinese stock market ``bubble'' might burst, repeating his argument that it's impossible to predict future share prices.
    ``Over time, China will allow its citizens to invest in Hong Kong and overseas,'' said Malkiel, whose newest book, ``From Wall Street to the Great Wall,'' was published last month. ``Valuations of these Chinese stocks will then have to normalize.''
    In October, China's securities regulator said it was studying a plan to allow arbitrage in shares of companies traded on domestic and Hong Kong exchanges. The regulator is seeking to end price discrepancies.
    Last month, Hong Kong submitted a proposal to the Chinese cabinet for mainland individuals to buy shares directly on the city's stock market, paving the way for a pilot program that has been plagued by repeated delays.
    To contact the reporter on this story: Allen Wan in New York at awan3@bloomberg.net
    Last Updated: January 15, 2008 10:07 EST "

  22. #22
    I am in Jail
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    well the market was brutal yesterday, down almost 300 points

    THB to USD is 33 now,

    everyone is waiting for the next bad news or someone to blink and draw the guns,

  23. #23
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    Define "resession".

  24. #24
    ding ding ding
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    Quote Originally Posted by Butterfly
    everyone is waiting for the next bad news
    Not much of a wait, Coutrywide Financial (one of the biggest offenders in the sub-crime fiasco) and Jp Morgan will report Q4 later today. Expect another 200 shaved off the Dow.

  25. #25
    Thailand Expat
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    In my next life I'd like to be a financial institution, to either make good decisions and generate lots of loverly profit to keep my stakeholders happy, or make the wrong decisions and get bailed out with public money.

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