Apparently the fallout from the sub prime fiasco was worse than we thought.
WASHINGTON, Aug 17 (Reuters) - The U.S. Federal Reserve on Friday said it cut the primary discount rate by a half point as the downside risks to growth have increased "appreciably", a surprise move aimed at calming jittery global markets.
"Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward," the Fed's Federal Open Markets Committee said in a unanimous statement.
The Fed cut its primary discount rate, which governs direct loans from the central bank to commercial banks, to 5.75 percent from 6.25 to "narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points."
This is not the rate your mortgage or your credit cards are based on. When banks or financial institutions need short term loans but can't get the funds anywhere they can turn to the federal reserve and borrow the money.
What this means is the federal reserve wanted to assure the financial markets that there would be "cheaper" money available should they need it. Rarely do you see a very conservative federal reserve move in .50% increments and even more so do you see thay move in such a suprising manner.
This could have a reassuring effect on the markets which have been very volitile as a result of the financial fallout from the subprime debacle or after a frenzy of buying sometime this morning it could have the opposite effect. It could signal that the worst is not yet over and exactly how far into the financial sector reaches could be more profound than we know.
Anybody like rollercoasters??? I haven't played the market since right before the internet bubble burst and have no desire to play....nope been there and done that. It's like gambling lol. Put your money in a solid company and periodically buy more and leave it for the long term.
Showing posts with label Doom And Gloom Report. Show all posts
Showing posts with label Doom And Gloom Report. Show all posts
Friday, August 17, 2007
Tuesday, August 14, 2007
The Perfeect Storm Part Deaux
http://news.yahoo.com/s/nm/20070814/bs_nm/markets_stocks_dc_32;_ylt=AhYHxfBc1GdXcucvPc1mg.UE1vAI
Stocks slide on credit worries and Wal-Mart's view
In the latest signs of a deteriorating credit environment, Sentinel Management Group Inc., which oversees about $1.6 billion in assets, has told clients it wants to block redemptions from the fund to avoid forced liquidation.
Inflicting further pain on financial stocks was news a Canadian trust couldn't find the funds it needed to repay outstanding asset-backed commercial paper and that a bank had declined to provide liquidity.
And Swiss bank UBS (UBSN.VX), the world's largest wealth manager, warned that market turmoil was likely to hit its investment banking business in the second half of the year.
When you have financial institutions that prevent you from withdrawing funds that is never a good sign.
Stocks slide on credit worries and Wal-Mart's view
In the latest signs of a deteriorating credit environment, Sentinel Management Group Inc., which oversees about $1.6 billion in assets, has told clients it wants to block redemptions from the fund to avoid forced liquidation.
Inflicting further pain on financial stocks was news a Canadian trust couldn't find the funds it needed to repay outstanding asset-backed commercial paper and that a bank had declined to provide liquidity.
And Swiss bank UBS (UBSN.VX), the world's largest wealth manager, warned that market turmoil was likely to hit its investment banking business in the second half of the year.
When you have financial institutions that prevent you from withdrawing funds that is never a good sign.
The Perfect Storm
Wikipedia - The phrase perfect storm refers to the simultaneous occurrence of events which, taken individually, would be far less powerful than the result of their chance combination. Such occurrences are rare by their very nature, so that even a slight change in any one event contributing to the perfect storm would lessen its overall impact.
The US housing market has been in decline over the past couple of years...certainly off it's highs of recent memory.
Cheap products comming primarily from China helps to keep our economy chugging along in that we spend less for goods we can buy more.
One can argue that it has been our housing market that has kept our economy going in recent memory considering the vast expenses of the wars in Iraq and Afghanistan and the debt that goes along with it. People in general were tapping into the equity of their current homes to finance everything from second homes to new cars and the lifestyles that go with it. This was fine as long as there was ultimately someone willing to buy your home.
In many regions of the US there was a boom in housing. Builders could not build houses fast enough and the size of the average new home was at all time highs (say 2700 sq ft +). I think everyone could agree that this scenario was not one to go on indefinately. Indeed, a study just this year showed a downturn in the size of the average new home by about 250+ sq ft or so. Not a big drop by any means just one observation that shows that we as Americans were stepping back from the "bigger is better" in our homes even if those steps were baby steps.
We find out now that part of the housing boom was financed to people who were at higher risk of defaulting. They gave loans to people who had little documentation of income and gave them loans at low initial variable rates. When the loack on that variable was removed and the prime interest rates went up these risky borrowers were left to either pay substantially more monthly payments or to refinance.
What happens when you buy a large house at very low variable rate with very little or no money down and then housing sales fall off and your interest rate rises causing your payment to rise like the floodwaters from Katrina?
You often find that your house is not worth what it was when you bought it and with little or no equity or tightning of loan qualifications you find you cannot refinance. We now are finding out that those loans were bought up by a number of hedge funds who have lost 100's of millions if not billions and of which several have closed. The extent of the damage to the banking and funding insdustry will take some time to discover but there are people in financial circles who are very antsy lately
Now in the past year or so it is hard to open up a newspaper or browser to not notice a story about one recall or another. Sure we have our own problems (peanut butter, mad cow, e coli contaminated food from California, etc) but these recalls are comming more and more from our largest trading partner - China.
Today Mattel will announce yet another recall
http://news.yahoo.com/s/nm/20070814/bs_nm/mattel_recall_dc_5;_ylt=AqmZ7RY43Sei.cyx7CZTT10E1vAI
The recalled products include about 7.3 million Polly Pocket, Batman Magna, Doggie Daycare and Shonen Jump's One Piece play sets with the small magnets. According to a statement from the U.S. Consumer Product Safety Commission and Mattel, about 2.4 million of the play sets were recalled on November 21.
About 683,000 Barbie doll Tanner play sets were also recalled due to a magnet hazard and about 253,000 Pixar Sarge die-cast toy cars with lead paint were recalled.
Inevitably there are two scenarios here. One is that these Chinese companies producing tainted products whether those be food or manufactured products will be forced into correction which will lead to higher prices or we will come to a collective decision that all chinese products = BAD! and avoid them like the plague.
Look at Walmart
http://news.yahoo.com/s/nm/20070814/bs_nm/walmart_results_dc_6;_ylt=AizlXRNnm7pbrW2du4ZfzaME1vAI
With more than 127 million customers visiting a U.S. Wal-Mart store or a Sam's Club warehouse location in America every week, the company is considered a barometer of the health of the nation's retail sector.
NEW YORK (Reuters) - Wal-Mart Stores Inc. (WMT.N) reported a lower-than-expected quarterly profit and cut its full-year earnings forecast on Tuesday, saying its customers remain under economic pressure.
One has to wonder how these recalls from China effect WalMart's bottom line. God knows WalMart is ruthless when it comes to margins and pressures on suppliers to keep prices low......it's not too much of a stretch to understand how a chinese supplier would cut corners to get an egde over another chinese competitor.
If WalMart wants a widget for 5 cents and my competitor can make a lead free widget at 4.9 cents well what the heck if I use this lead based paint and sell that widget at 4.75? It's not all that far fetched.
So those are two completely different sectors of our economy where individual problems could occure and our economy would be resilient. Taken together though it is comepletely something different.
Perhaps add to that an energy crisis. Maybe Iran or Al Quieda does something to block vital oil shipping lanes in the Strait of Hormuz or perhaps Hugo Chavez does something to disrupt the supply of oil to the US.
The result would be a perfect storm comprising of financial, energy, retail/housing crisis.
Or
It could be a good movie
The US housing market has been in decline over the past couple of years...certainly off it's highs of recent memory.
Cheap products comming primarily from China helps to keep our economy chugging along in that we spend less for goods we can buy more.
One can argue that it has been our housing market that has kept our economy going in recent memory considering the vast expenses of the wars in Iraq and Afghanistan and the debt that goes along with it. People in general were tapping into the equity of their current homes to finance everything from second homes to new cars and the lifestyles that go with it. This was fine as long as there was ultimately someone willing to buy your home.
In many regions of the US there was a boom in housing. Builders could not build houses fast enough and the size of the average new home was at all time highs (say 2700 sq ft +). I think everyone could agree that this scenario was not one to go on indefinately. Indeed, a study just this year showed a downturn in the size of the average new home by about 250+ sq ft or so. Not a big drop by any means just one observation that shows that we as Americans were stepping back from the "bigger is better" in our homes even if those steps were baby steps.
We find out now that part of the housing boom was financed to people who were at higher risk of defaulting. They gave loans to people who had little documentation of income and gave them loans at low initial variable rates. When the loack on that variable was removed and the prime interest rates went up these risky borrowers were left to either pay substantially more monthly payments or to refinance.
What happens when you buy a large house at very low variable rate with very little or no money down and then housing sales fall off and your interest rate rises causing your payment to rise like the floodwaters from Katrina?
You often find that your house is not worth what it was when you bought it and with little or no equity or tightning of loan qualifications you find you cannot refinance. We now are finding out that those loans were bought up by a number of hedge funds who have lost 100's of millions if not billions and of which several have closed. The extent of the damage to the banking and funding insdustry will take some time to discover but there are people in financial circles who are very antsy lately
Now in the past year or so it is hard to open up a newspaper or browser to not notice a story about one recall or another. Sure we have our own problems (peanut butter, mad cow, e coli contaminated food from California, etc) but these recalls are comming more and more from our largest trading partner - China.
Today Mattel will announce yet another recall
http://news.yahoo.com/s/nm/20070814/bs_nm/mattel_recall_dc_5;_ylt=AqmZ7RY43Sei.cyx7CZTT10E1vAI
The recalled products include about 7.3 million Polly Pocket, Batman Magna, Doggie Daycare and Shonen Jump's One Piece play sets with the small magnets. According to a statement from the U.S. Consumer Product Safety Commission and Mattel, about 2.4 million of the play sets were recalled on November 21.
About 683,000 Barbie doll Tanner play sets were also recalled due to a magnet hazard and about 253,000 Pixar Sarge die-cast toy cars with lead paint were recalled.
Inevitably there are two scenarios here. One is that these Chinese companies producing tainted products whether those be food or manufactured products will be forced into correction which will lead to higher prices or we will come to a collective decision that all chinese products = BAD! and avoid them like the plague.
Look at Walmart
http://news.yahoo.com/s/nm/20070814/bs_nm/walmart_results_dc_6;_ylt=AizlXRNnm7pbrW2du4ZfzaME1vAI
With more than 127 million customers visiting a U.S. Wal-Mart store or a Sam's Club warehouse location in America every week, the company is considered a barometer of the health of the nation's retail sector.
NEW YORK (Reuters) - Wal-Mart Stores Inc. (WMT.N) reported a lower-than-expected quarterly profit and cut its full-year earnings forecast on Tuesday, saying its customers remain under economic pressure.
One has to wonder how these recalls from China effect WalMart's bottom line. God knows WalMart is ruthless when it comes to margins and pressures on suppliers to keep prices low......it's not too much of a stretch to understand how a chinese supplier would cut corners to get an egde over another chinese competitor.
If WalMart wants a widget for 5 cents and my competitor can make a lead free widget at 4.9 cents well what the heck if I use this lead based paint and sell that widget at 4.75? It's not all that far fetched.
So those are two completely different sectors of our economy where individual problems could occure and our economy would be resilient. Taken together though it is comepletely something different.
Perhaps add to that an energy crisis. Maybe Iran or Al Quieda does something to block vital oil shipping lanes in the Strait of Hormuz or perhaps Hugo Chavez does something to disrupt the supply of oil to the US.
The result would be a perfect storm comprising of financial, energy, retail/housing crisis.
Or
It could be a good movie
Monday, March 05, 2007
The Doom And Gloom Report - Stock Market Correction Or Crash
The Nikkei average is down 5% since last Tuesday to include the 575 pt loss overnight and the DJIA is down 4% and is slated to open lower by almost 100 more pts. European markets are down 1.5 - 2.0% and perhaps are looking for some direction from the US markets which open in an hour and 15 minutes.
A few things to note... Dell took a big hit last week because they rely on corporate purchases for the bulk of their revenue. Hmmm, Generally speaking US companies are making money and LOTS of it but they aren't spending on information technology??? That's not a good sign my friends.
When corporations reduce or stop spending resources on their future it means that they are nervous about the future. No need to make capital expenditures if the business will not be there to benefit from it.
Another point which may be reflected in the US but is definately more worrysome in the asian markets is sub prime lending. Japan for years now has had very very low interest rates. Right now for their best customers I believe it intrest rates are at .25%. Yes, that decimal point is in the right place. Companies borrow at that rate and then use the procedes to fund sub prime borrowing. That's a hell of a payoff when you borrow at or near .25% and lend that at 10% or higher.
A few things to note... Dell took a big hit last week because they rely on corporate purchases for the bulk of their revenue. Hmmm, Generally speaking US companies are making money and LOTS of it but they aren't spending on information technology??? That's not a good sign my friends.
When corporations reduce or stop spending resources on their future it means that they are nervous about the future. No need to make capital expenditures if the business will not be there to benefit from it.
Another point which may be reflected in the US but is definately more worrysome in the asian markets is sub prime lending. Japan for years now has had very very low interest rates. Right now for their best customers I believe it intrest rates are at .25%. Yes, that decimal point is in the right place. Companies borrow at that rate and then use the procedes to fund sub prime borrowing. That's a hell of a payoff when you borrow at or near .25% and lend that at 10% or higher.
Wednesday, January 31, 2007
The Doom And Gloom Report - Jan 31 2007
From The Daily Mail
An alleged terrorist plot to carry out an Iraqi-style kidnapping of a British Muslim soldier was thwarted today in a major operation by anti-terror police.
Eight people were held in a series of raids on addresses in Birmingham. One police source said the suspects were involved in a terrorist plot "the nature of which we have not seen before".
Security sources said the alleged plot was to carry out a "close quarters" style abduction of a Muslim soldier, which could have mirrored the kidnappings of the British hostages Ken Bigley and Margaret Hassan by Iraqi insurgents.
The victim would have been filmed, made to plead for his life and ultimately executed, sources alleged.
This is significant as it is a departure from the grand scale of previous attacks. As I have stated on here before that if they want to put fear into the heart and soul of their enemy they target everyone, anyone. As it is at the moment we know that if we are at or near a high profile target albeit a plane, a highrise, etc etc that there is an elevated risk of ending up in the cross hairs of some fanatic who desparately wants to take his place in heaven amongst all those virgins.
Now in order to carry out those grand schemes you need grand and eleaborate plans with many steps and procedures. The more grand the scheme the more likelyhood of detection.
Now it seems the terrorists are turning their attention to the average person. Ok, in this instance an ordinary muslim serviceman. It is not quite the public en masse but it still is one target, one person.
I guess the best way to make my point is to look at any one of several high profile serial killers here in the US.
Kenneth Bianchi & Angelo Buono- The Hillside Stranglers strangled 12 women in LA, CA between October 1977 and February 1978.
Paul Bernardo & Karla Homolka -- A pair of killers accused of 43 sex attacks and a string of killings, including Karla's own sister.
David Berkowitz -- For 13 months, July, 1976 - August, 1977, NYC was terrorized by a "Son of Sam." He shot to death 6 people and he wounded 7. He shot young couples in lovers' lanes with a .44-cal. revolver, which earned him the title "44-caliber killer."
Richard Trenton Chase -- In 1978, Richard Chase killed 6 people. His victims included a pregnant woman and young child. He confessed to drinking the blood of his victims.
Jeffrey Dahmer-- Had an obsession with death and cannibalism that started in childhood.
Albert DeSalvo -- The Boston Strangler - Between 1962 & 1964, in Boston, DeSalvo killed 12 women. All were sexually assaulted and strangled.
Now take a moment to think what fear ripped through these communities at the height of these crimes.
Now factor in Al Quieda and what multiple of these killings could be brought. Now multiply that by numerous cities and towns across the country whether that be here in the US, the UK, France or Chechen separatists striking in Russia.
An alleged terrorist plot to carry out an Iraqi-style kidnapping of a British Muslim soldier was thwarted today in a major operation by anti-terror police.
Eight people were held in a series of raids on addresses in Birmingham. One police source said the suspects were involved in a terrorist plot "the nature of which we have not seen before".
Security sources said the alleged plot was to carry out a "close quarters" style abduction of a Muslim soldier, which could have mirrored the kidnappings of the British hostages Ken Bigley and Margaret Hassan by Iraqi insurgents.
The victim would have been filmed, made to plead for his life and ultimately executed, sources alleged.
This is significant as it is a departure from the grand scale of previous attacks. As I have stated on here before that if they want to put fear into the heart and soul of their enemy they target everyone, anyone. As it is at the moment we know that if we are at or near a high profile target albeit a plane, a highrise, etc etc that there is an elevated risk of ending up in the cross hairs of some fanatic who desparately wants to take his place in heaven amongst all those virgins.
Now in order to carry out those grand schemes you need grand and eleaborate plans with many steps and procedures. The more grand the scheme the more likelyhood of detection.
Now it seems the terrorists are turning their attention to the average person. Ok, in this instance an ordinary muslim serviceman. It is not quite the public en masse but it still is one target, one person.
I guess the best way to make my point is to look at any one of several high profile serial killers here in the US.
Kenneth Bianchi & Angelo Buono- The Hillside Stranglers strangled 12 women in LA, CA between October 1977 and February 1978.
Paul Bernardo & Karla Homolka -- A pair of killers accused of 43 sex attacks and a string of killings, including Karla's own sister.
David Berkowitz -- For 13 months, July, 1976 - August, 1977, NYC was terrorized by a "Son of Sam." He shot to death 6 people and he wounded 7. He shot young couples in lovers' lanes with a .44-cal. revolver, which earned him the title "44-caliber killer."
Richard Trenton Chase -- In 1978, Richard Chase killed 6 people. His victims included a pregnant woman and young child. He confessed to drinking the blood of his victims.
Jeffrey Dahmer-- Had an obsession with death and cannibalism that started in childhood.
Albert DeSalvo -- The Boston Strangler - Between 1962 & 1964, in Boston, DeSalvo killed 12 women. All were sexually assaulted and strangled.
Now take a moment to think what fear ripped through these communities at the height of these crimes.
Now factor in Al Quieda and what multiple of these killings could be brought. Now multiply that by numerous cities and towns across the country whether that be here in the US, the UK, France or Chechen separatists striking in Russia.
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