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Texpat

It will probably slip into a recession next qtr.

Nature of the beast. No surprises.

Milkman

We don't need to go into the standard definition, sometimes.

As you know, recessions are cyclical, and there have been 10 of them since WWII.

I think this recession (if it happens by "definition") will be longer and deeper than most.

The USA has bounced back before by adapting, and changing. It might be able to do this, this time, but there are also some very disturbing mathematical trends that the nation cannot change.

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Spin

Inventories grew, making a positive figure.

Anyways, personally I dont take any notice of these numbers, pack of lies if you ask me! The markets been ignoring bad news since the BSC bail out, I'm not sure how long it can continue?

Butterfly

growing inventories is not a sign of good times, GDP was probably growing on a technicality,

bkkandrew

Until the next cheque bounces...

Rdrokit

Right, growing inventories can mean people are not buying. Not a good sign. I look at it this way (as I am a full time Thai resident) when is the dollar going to be worth 40 baht again. Probably not in my lifetime.

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I use to procrastinate,
Now I just don't give a shit.

bkkandrew

I still maintain bottom at 29, but that could be altered by the coming tsunami of the credit crunch upon these shores that will cause a THB slide of 10-30%. For more info, read prior posts on related topics...

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A funny thing happened today - Ant trolls, stalks, prevokes and generally upsets approximately 15 members of the board, yet Noodles goes to jail. Perhaps it was a dream...
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Texpat

May 3 (Bloomberg) -- Warren Buffett, chief executive officer of Berkshire Hathaway Inc., said the global credit crunch has eased for bankers, and the Federal Reserve probably averted more failures by helping to rescue Bear Stearns Co.

"The worst of the crisis in Wall Street is over,'' Buffett said today on Bloomberg Television." In terms of people with individual mortgages, there's a lot of pain left to come.'' Buffett was interviewed before the Omaha, Nebraska-based company's annual meeting, attended by about 31,000 people.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeLirKvQi5jw&refer=worldwide

***

No pain if you signed a fixed-rate mortgage.

Spin

"The Federal Reserve said the share of banks making it tougher for companies and consumers to borrow approached a record after the subprime-mortgage collapse made them more reluctant to lend.

The quarterly Senior Loan Officers' Survey, published in Washington today, underscores the Fed's concern that $318 billion of credit losses and writedowns among financial firms is causing a credit crunch. The survey, conducted last month, also indicates that the Fed's interest-rate cuts and loans to banks have failed so far to defuse the threat to the six-year economic expansion"

Full story here

bkkandrew

Haven't posted for a while on this topic as I have been busy and it is far worse than people realise, so there is little point...

For those in the know, the following article will be of some significance:

http://globaleconomicanalysis.blogspot.com/2008/05/libor-credibility-in-doubt.html
LIBOR Credibility In Doubt


Bloomberg is reporting Libor Poised for Shake-Up as Credibility Is Doubted.

The benchmark interest rate for $62 trillion of credit derivatives and mortgages for 6 million U.S. homeowners faces its biggest shakeup in a decade as lawmakers question if banks are understating borrowing costs.

For the first time since 1998, the British Bankers' Association is considering changing the way it sets the London interbank offered rate, according to Chief Executive Officer Angela Knight, who appeared before a parliamentary committee in London today. ``We've put Libor under review,'' Knight said in an interview yesterday. The BBA will announce changes May 30, she said.

The BBA, an unregulated London-based trade group, sets Libor by polling 16 banks each day on the rates they pay for loans in dollars, British pounds, euros and eight other currencies. The association is under pressure to show the rates are reliable following complaints by investors that financial institutions weren't telling the truth after the collapse of subprime mortgages nine months ago contaminated credit markets and drove up borrowing costs.

While the BBA set the one-month dollar Libor rate at 2.72 percent on April 7, the Federal Reserve said banks paid 2.82 percent for secured loans later that day. Secured loans typically yield less than unsecured debt.

"The Libor numbers that banks reported to the BBA were a lie," said Tim Bond, head of global asset allocation at Barclays Capital in London. "They had been all the way along."

The cost of borrowing in dollars for three months should be as much as 30 basis points, or 0.30 percentage point, higher than the current rate, Citigroup Inc. said in a report last month. Banks are understating borrowing costs on concern they will be perceived as "weakened" by the credit turmoil that forced banks to record $323 billion of losses and credit-markets writedowns, said Peter Hahn, a fellow at the London-based Cass Business School.

"Since the credit crunch, it's something that appears to have been manipulated," said Hahn, a former managing director at Citigroup. "We are in an extraordinarily delicate confidence time where a small event can shatter things quite easily."

The Bank for International Settlements said in a March report some lenders were manipulating the rates to prevent their borrowing costs from escalating.

Libor is used to guide banks in setting rates on most adjustable-rate mortgages. The prices they quote for credit default swaps are also linked to Libor.

"Libor is a proxy for the effective rates of the economy," said Rav Singh, an interest-rate strategist at Morgan Stanley in London. "Libor eventually feeds into the economy. There's so much on the back of the Libor problem. There are structured products, all the swaps and then there are the hedging positions."

Texpat

Yeah, watched BBC and CNN tonight.

Seems all roundly agree there's about a 30% of this crisis being as bad as the 85, or was it 92 crisis ...

And those were ... um can't remember. I'd suggest they were natural market fluctuations and anyone that was intent on hyping them as anything else was either:

1. Naive, as I was in 87.
2. Wishful thinking
3. Alarmist, Chicken Little types who just want to see action.

I previously stated the world will have completely forgotten this CATASTOPHE within 10 years. I'm hereby ratcheting it back to 5 years.

Perhaps anonymous online forums are a good place to throw out cockamaime theories.
Perhaps it's a breeding ground for freaks and hacks.

Serious investors would/do laff their butts off at these threads. If you had anything worth saying, and you weren't a complete idiot, you wouldn't say it here.

Think about that for just a second.

bkkandrew

^We'll see...

bkkandrew

ECB head: Credit crunch 'ongoing'



Mr Trichet warned against cutting interest rates


The credit crunch is continuing and it is not evident that the worst is over, the head of the European Central Bank has told the BBC.

Jean-Claude Trichet said we were seeing "an ongoing, very significant market correction," during an interview with the BBC business editor Robert Peston.

He warned that if central banks were tempted to cut interest rates now, more serious problems could follow.

He compared recent rises in energy and food prices to the 1970s oil shock.

Mr Trichet said the failure of most European economies to digest tighter monetary policy in the 1970s caused higher wages that undermined the region's ability to compete. The net result was mass unemployment.

He added that we were still fighting unemployment that was a "legacy" of that era.

While the Consumer Prices Index (CPI) has risen sharply, high inflation "will not last forever," said Mr Trichet.

The ECB has kept interest rates at 4% as a result of continuing inflationary pressures, even amid an economic slowdown, and Mr Trichet implied that a cut in interest rates was not on the cards. Separately on Monday the French Central Bank said it expected the economy to grow by 0.3% in the second quarter, half what it was in the first three months of the year.


http://news.bbc.co.uk/2/hi/business/7407759.stm

Credit crisis not ending anytime soon. I think Credit Crisis part 3 is nearly upon us and it doesn't look pretty...

bkkandrew

Oh, and I will stick my neck out and say that Bradford and Bingley will go bust / be nationalised before the month is out...

Spin

The name of one serious investor springs to mind and that is Joseph Lewis. He was Bear Stearns Bear Stearns's second-largest shareholder, and had spent more than $1 billion on the firm's stock since September 2007, paying as much as $150 a share.
After Bear went bankrupt he was given 22 million dollars worth of Morgan Stanley shares.
He must have been of the same mentality as you, just a little bit too arrogant and blase perhaps?

bkkandrew

Serious investors read Bloomberg and also listen to what the head of the IMF say as well...:

Dollar Declines as IMF Says Risks to Financial System Remain

By Kosuke Goto and Gavin Finch



May 20 (Bloomberg) -- The dollar fell against the yen and euro after the International Monetary Fund said the U.S. housing slump still poses ``serious risks'' to financial markets.

The currency declined against the Swiss franc and British pound before private and industry reports this week that may show the housing market is worsening. The euro gained before a report today that may show German investors grew less pessimistic in May. The Australian dollar rose to its highest level in 24 years after minutes of the central bank's last meeting signaled policy makers considered raising rates.

``The dollar has been coming under pressure versus the euro lately, which could be the start of a new trend,'' said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. ``The financial crisis is certainly not over yet, which will weigh on the dollar. And the euro is being buoyed by the continued hawkishness of the European Central Bank.''

The dollar declined to 103.76 yen at 9:20 a.m. in London, from 104.33 yen late yesterday in New York. The currency slid to $1.5607 per euro from $1.5510. The euro was at 161.92 yen, from 161.81.

``We still see serious risks to global financial stability,'' IMF Deputy Managing Director John Lipsky said in a speech in Tokyo today that was delivered by Daniel Citrin, the IMF's Asia-Pacific deputy director.

Lipsky wrote that some Asian currencies are still undervalued and as a result the dollar is only ``at, or slightly stronger than its medium-term, equilibrium'' against currencies of trading partners after adjusting for inflation.

Home Resales

The yen advanced against the U.S. dollar and the pound after Asian stocks fell for the first time in seven days, prompting investors to curb so-called carry trades and repay cheap loans taken out in the currency. The MSCI Asia Pacific Index lost 0.6 percent, snapping a six-day, 3.7 percent advance.

The yen held gains earlier after the Bank of Japan kept its benchmark interest rate at 0.5 percent. Governor Masaaki Shirakawa told a press conference that inflation risks are rising globally. The Federal Reserve has cut rates seven times since September to 2 percent.

The U.S. currency slipped to $1.9563 against the British pound from $1.9489, and declined to 1.0443 versus the Swiss franc from 1.0533. The Dollar Index traded on ICE futures in New York, which tracks the dollar against currencies of six trading partners, fell to 72.657, from 73.045 yesterday.

U.S. house prices slid 1.3 percent in the first quarter, based on a Bloomberg News survey of economists before the Office of Federal Housing Enterprise Oversight report due May 22. Home resales declined 1.6 percent in April, according to a separate survey before May 23 data from the National Association of Realtors.

bkkandrew

They also take note of George Soros:


Soros warns global boom is over


By Steve Schifferes
BBC News economics reporter




George Soros on why he believes the UK is in a fragile position



Billionaire investor George Soros has given his gloomiest assessment of the state of the US and world economies.

He told BBC business editor Robert Peston that the "acute phase" of the credit crunch may be over but effects on the real economy are yet to be felt.

He warned the "financial bubble" of the last 25 years could be drawing to an end and the post World War II "super-boom" era could also be over.

He predicted a "more severe and longer" US slowdown than most people expect.

And he said that the UK was worse-placed than America to weather the coming economic storm, because it had such a large financial sector and has had the biggest increase in house prices.

Gloomy bankers

Mr Soros said that the current mandate of most of the world's leading central banks - where their main focus was fighting inflation - meant there was limited scope for cutting interest rates to help economies recover.

As for the Bank of the England, he said, "it was like a Greek tragedy", because they "couldn't do a U-turn" until there was a full-blown recession, which would finally take away the price pressures.

The Bank of England is warning of higher inflation and slower growth


It was "inevitable" that they would keep rates too high for the good of the economy, he added.


In part, Mr Soros is echoing the gloomy forecast of the world's central bankers in recent weeks.

The head of the European Central Bank, Jean-Claude Trichet, recently told the BBC that the "market correction was still on-going".

Mervyn King, the governor of the Bank of England, warned in the Bank's inflation report that UK inflation would rise above its target while the economy would slow sharply.

Moral hazard

Mr Soros believes that central bankers are partly to blame for the credit crunch because of their past behaviour in bailing out the financial sector whenever it got into trouble for over-lending, the so-called moral hazard problem.

In the US Bear Stearns has had to be rescued


He said that the central banks should explicitly target asset bubbles such as housing booms and try to stop them getting out of control, which is something they have resisted doing so far.

And he said that tougher but smarter regulation would be needed in the future in order to reduce the excess supply of credit in the economy.

These could include measures to force banks to put aside more reserves in good times to help cushion them in bad times.

Misguided markets

Mr Soros believes that oil and other commodities are over-priced, but he sees little chance of the price of oil coming down until there is a big slowdown in the richer economies.

Oil prices have risen relentlessly this year


He sees the price of oil as being driven by higher demand in developing countries such as China, where subsidised energy costs mean there is less price-sensitivity.

He also said that stock markets are still underestimating the severity and length of the economic downturn, especially in the US, and are now having a "bear market rally".


Profiting from the crisis

Mr Soros has credibility partly because he is prepared to invest his own money to back up his convictions.

The private investment fund he has resumed managing made a return of 34% last year betting that the credit crunch was more severe than many people expected.
Mr Soros was the man reported to have made $1bn in September 1992, betting correctly that the British currency would have to be devalued and leave the European Exchange Rate Mechanism. Mr Soros has devoted much of time since then to philanthropy, especially in Eastern Europe.