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Gloom and Doom? - may be not!
Old 08-12-2007, 03:13 PM   #1
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Gloom and Doom? - may be not!

Found this article - its dated 06/04/07 but seems relevant considering the current circumstances.

The Impending Global Liquidity Crisis**********

and another article:

Money Matters
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Old 08-12-2007, 04:07 PM   #2
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Quote:
Originally Posted by maxer View Post
Found this article - its dated 06/04/07 but seems relevant considering the current circumstances.

The Impending Global Liquidity Crisis**********
wow, had to go back all the way to 1837??
Why not use the S&L crisis? The farm debt crisis?
Oh yea, because they didn't result in economic collapse.
TJ
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Old 08-12-2007, 08:25 PM   #3
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Seems timely to me. There are many folks out there who have been warning for quite some time. The events seem to be coming to a head:

1) unprecedented US trade defecits (>6 % GDP) - including >26 bil to China in July alone

2) China holding 1.3 trillion $ in foreign reserves - and threatening to sell if trade battles begin (as anti-trade legislation makes its way through congress)

3) A US $ that has lost better than 30% of its value vs. the Euro in the last 4 years?

4) A housing market that is literally collapsing before our eyes?

5) Hedge funds going belly-up and the almost daily report from one company after another that their "bottom line" or "material operations" are being negatively impacted by "unprecedented" conditions?

6) A sudden intervention by the worlds central banks - >200 bil ECB and >50 bil FED? Maybe they did it just for fun and giggles?

7) A continuing negative savings rate in the US?

8) Knowing that the US consumer continues to drive the world economy. Yes, Asia is growing briskly. How long does that continue when the American consumer stops spending. These are, after all, export economies. I wonder who they export to?

It seems to me that most of you have been drinking too much CNBC and Bloomberg kool-aid.

Let me just ask this: What is it that you see in current economic conditions that could possibly make you positive going forward, other than blind optimism that "you can never go wrong buying real estate" or "markets always go up, long-term"?

One more little article - "stocks for the long run?", to ponder...

Evanson Asset Management - Stocks for the Long Run?



The Impending Global Liquidity Crisis**********
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Old 08-12-2007, 08:45 PM   #4
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Cyclone6, here's one more for folks to ponder...

Amazon.com: Chicken Little: Books: Steven Kellogg
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Longer term perspective
Old 08-12-2007, 08:59 PM   #5
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Longer term perspective

After 9/11, a colleague at work asked "Why do they hate us?" and my response was essentially - its not hate, its envy to some extent and "why cant I have my own American dream where I am."

Additionally, I explained, the rest of the world is just waking up and asking that very question "why can't we have that?" Keep in mind that the rest of the developing world is seeing the old American sitcoms and 1 hour serials like the Lucy Show, the Honeymooners, Dallas, Charlie's Angels, Happy Days, etc. and asking that same question.

Imagine the reaction of the N. Koreans (who may be freezing and practically starving) suddenly seeing those shows! I think it bodes well for the world that most of the developing countries leaders are now realizing that things can be better and are learning and increasing world trade in their own ways.

So I tend to look at it more positively longer term as opposed to shorter term. To throw some numbers at you take a look at the following video:

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Old 08-12-2007, 09:48 PM   #6
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Maxer...

very interesting video. I am generally a very optimistic person, and am easily awed by many things - statistical, technical or scientific. Might explain why I'm a meteorologist - couldn't get enough of those blizzards or thunderstorms as a kid.

I too hold out great expectations for mankind and what we will achieve. (Disappointed I won't be here to see so much of it...) I can't wait until that first non-terrestrial life is discovered (bacterial or otherwise).

I just wish something in my scientific training (exponential curves and unsustainable imbalances, mainly) didn't have the economic warning sirens blaring. But in my head - and many others as well, they are. Something isn't right, needs to be corrected, and eventually will be. Just like any natural system, things do return to an equilibrium.

As for REWahoo, well, nicely thought out response. Excellent counterpoints. Nice links to some opposing viewpoints.

I checked out the only one you did give, and discovered that not only was the link not on topic, but that you were reading above your intellectual level as that paper is geared for 4-8 year olds...



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Old 08-12-2007, 10:15 PM   #7
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C'mon Cy, it was only an attempt at a little humor at your black paint job. Don't get your feathers all ruffled.
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Old 08-12-2007, 10:35 PM   #8
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Quote:
Originally Posted by cyclone6 View Post
One more little article - "stocks for the long run?", to ponder...
Not to say that you dont have a point, but this is a mathematically correct yet statistically uninteresting document. The majority of the details presume full investment at the peak of the 1929 market just prior to the depression.

That certainly would be a bit of bad luck.

Is there an equivalent for someone who pumped 100% of their money into the markets at the end of 1975?
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Old 08-12-2007, 10:41 PM   #9
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Originally Posted by cyclone6 View Post
Seems timely to me. There are many folks out there who have been warning for quite some time. The events seem to be coming to a head:

1) unprecedented US trade defecits (>6 % GDP) - including >26 bil to China in July alone

2) China holding 1.3 trillion $ in foreign reserves - and threatening to sell if trade battles begin (as anti-trade legislation makes its way through congress)

3) A US $ that has lost better than 30% of its value vs. the Euro in the last 4 years?

4) A housing market that is literally collapsing before our eyes?

5) Hedge funds going belly-up and the almost daily report from one company after another that their "bottom line" or "material operations" are being negatively impacted by "unprecedented" conditions?

6) A sudden intervention by the worlds central banks - >200 bil ECB and >50 bil FED? Maybe they did it just for fun and giggles?

7) A continuing negative savings rate in the US?

8) Knowing that the US consumer continues to drive the world economy. Yes, Asia is growing briskly. How long does that continue when the American consumer stops spending. These are, after all, export economies. I wonder who they export to?

It seems to me that most of you have been drinking too much CNBC and Bloomberg kool-aid.

Let me just ask this: What is it that you see in current economic conditions that could possibly make you positive going forward, other than blind optimism that "you can never go wrong buying real estate" or "markets always go up, long-term"?

One more little article - "stocks for the long run?", to ponder...

Evanson Asset Management - Stocks for the Long Run?



The Impending Global Liquidity Crisis**********
Well, just a couple of thoughts:

2) China seems to use as much propaganda against us as we use against them. IMO, we both need each other and will continue to do business.

3) If you have held unhedged foreign funds you have made currency gains and it has added to your returns. Also, if you plan on living and spending in USD, then the drop doesn't mean all that much to you on a personal level - aside from an occasional vacation - does it?

4) Housing markets go in cycles. This is another one altough the lending has probably been more generous than usual. Just think back and you will find several other crappy ones.

5) Stupid hedge funds are going belly up. A lot of these firms made incredibly risky bets that other firms would not likely make.

7) As far as I know, we have made some progress in this category - notably in the Boomer category. If people in their 20s and teens have a negative savings rate, so what? We need some people to consume. I would rather not model our spending/saving rates after Japan.

Can someone pass the CNBC kool-aid?
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Old 08-13-2007, 06:50 AM   #10
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Quote:
Originally Posted by cyclone6 View Post
Seems timely to me. There are many folks out there who have been warning for quite some time. The events seem to be coming to a head:

1) unprecedented US trade defecits (>6 % GDP) - including >26 bil to China in July alone

2) China holding 1.3 trillion $ in foreign reserves - and threatening to sell if trade battles begin (as anti-trade legislation makes its way through congress)

3) A US $ that has lost better than 30% of its value vs. the Euro in the last 4 years?

4) A housing market that is literally collapsing before our eyes?

5) Hedge funds going belly-up and the almost daily report from one company after another that their "bottom line" or "material operations" are being negatively impacted by "unprecedented" conditions?

6) A sudden intervention by the worlds central banks - >200 bil ECB and >50 bil FED? Maybe they did it just for fun and giggles?

7) A continuing negative savings rate in the US?

8) Knowing that the US consumer continues to drive the world economy. Yes, Asia is growing briskly. How long does that continue when the American consumer stops spending. These are, after all, export economies. I wonder who they export to?

It seems to me that most of you have been drinking too much CNBC and Bloomberg kool-aid.
I can't speak for anyone else, but I don't watch CNBC or Bloomberg, or
FoxNews or CNN. I don't even have cable. (I do want NBR on PBS)

But I do know, that CRISIS is one of the most overused words on TV
and many people more knowledgeable than I have said this is not a
crisis, not even close. Are people in hedge funds going to lose their
money, yes, and they should. Is the real estate market going down
and probably be in a recession for the next few years...yes, and it
should. Are some companies going to complain about unprecedented
conditions, yes, especially if your a financial company.
Of course international companies are enjoying great earnings; IBM,
CISCO, etc
What to do?? Stay with the large caps, have a decent amount in
international stocks. (I wish VG had a international bond fund).
But I wouldn't start buying gold, we're not going into a depression,
the world is not coming to an end.

1&2 If china would let its currency float, this wouldn't be a problem,
of course by linking their currency to ours, the Yuan has been dropping
as well. We're tied at the hip, either jumps off the cliff, we both go.
3. So? The trade deficit will be balance by the $ dropping, making
our imports cheaper, except for China.
4. How much have home prices fallen?? 2% %5 I hardly use the word
"Collapsing" to describe it.
5. So what, hedge funds are what .02% of the MF market?
6. Basically yes, $50bil Heck, there is a guy in Omaha that's worth
that much.
7. So, some people will have to work until their 70....where do think the
SS is going to get it's money anyway. If everyone started to save $, and
retired early this economy would then be in a crisis. Fortunately people on
this board are a minority....

pass the kool-aid, and the Vodka ;-)
TJ
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Old 08-13-2007, 06:58 AM   #11
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Might explain why I'm a meteorologist - couldn't get enough of those blizzards or thunderstorms as a kid.
THAT EXPLAINS IT, meteorologists are never happy unless there is a
crisis.
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Old 08-13-2007, 07:13 AM   #12
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So I tend to look at it more positively longer term as opposed to shorter term. To throw some numbers at you take a look at the following video:

I like the celtic music :-)
Anybody know where its from??
TJ
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Old 08-13-2007, 07:38 AM   #13
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Thats the soundtrack from the "Last of the Mohicans" movie with Daniel Day-Lewis and Madeline Kahn(sp?)
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Old 08-13-2007, 08:54 AM   #14
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China does have many problems that the US media does not know how to tell the story:
Population - closer to 1.45B
Pollution - deadly
Unemployment - in the 20% range
Job Growth needed to maintain that unemployment rate - 23 million/yr
The trade surplus - has the potential to cause high/hyper inflation - something that Bejing fears because it can cause political instability.
Exchange rate - China really can not let it float or raise it - would cause unemployment in the export sector; harder job growth. It would also cause many loans to go into default if business slows down.
And all those smart people mentioned in the video - that can cause unhappiness and political instability also - if they are sitting at home on the internet seeing all that the west has but they can not afford because they are unemployed.

So just as China has upside potential it also has great downside potential - political and economic instability. If the West was to fight China in some way doing it economically would be one way to go.

We are seeing some of the real negatives of overpopulation.
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Pushing this along - where are we going?
Old 08-13-2007, 09:06 AM   #15
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Pushing this along - where are we going?

I have heard and read many times that "deficit spending is good" - in many ways better than saving. I have not come to any definite conclusion but it sure doesn't feel right. It seems kind of like borrowing to buy a house or a car - IMO, borrowing to acquire an appreciating asset is better than a depreciating one.

I don't want to start a political debate here - but here's the question (may be a question for the polls):
Were you "better off" during the Reagan era (deficits) or the Clinton era (surpluses)?

Please note that the question isn't asking about "feeling good" but about being "better off".
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Old 08-13-2007, 09:18 AM   #16
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Clinton era, though it had little to do with either Reagan or Clinton...
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Old 08-13-2007, 09:34 AM   #17
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I have heard and read many times that "deficit spending is good" - in many ways better than saving
Well the theory, per now dead John Maynard Keynes, is that deficit spending is stimulative. So as long as the economy is operating below full potential/employment then deficit spending will boost the economy. Since for each dollar of deficit spending there is a multiplicative effect then the economy will get a greater boost than just the deficit dollars spent.

The theory also suggests that some types of savings have the opposite effect in that they take money (and their multiplicative effects) out of the economy causing economic contraction.

There are lots of holes in this theory. But it makes for great cocktail party banter and crappy public policy. If you say it enough you might almost believe it. You aren't spending... You are investing.
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Old 08-13-2007, 01:24 PM   #18
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I am generally a very optimistic person...I too hold out great expectations for mankind and what we will achieve. (Disappointed I won't be here to see so much of it
an optimist who sees the glass half empty?
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Old 08-14-2007, 08:09 AM   #19
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I have heard and read many times that "deficit spending is good" - in many ways better than saving. I have not come to any definite conclusion but it sure doesn't feel right. It seems kind of like borrowing to buy a house or a car - IMO, borrowing to acquire an appreciating asset is better than a depreciating one.

I don't want to start a political debate here - but here's the question (may be a question for the polls):
Were you "better off" during the Reagan era (deficits) or the Clinton era (surpluses)?

Please note that the question isn't asking about "feeling good" but about being "better off".
clinton had one year of a surplus and the national debt still increased every single year he was in office. you have to google for the details but that press conference where he said we now have a surplus is like every other government press conference including the human genome project, bush41 and the 50000 soviet tanks, etc.

it's not a lie, but the truth is stretched very thin
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Old 08-14-2007, 08:22 AM   #20
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Well the theory, per now dead John Maynard Keynes, is that deficit spending is stimulative
......

There are lots of holes in this theory. But it makes for great cocktail party banter and crappy public policy. If you say it enough you might almost believe it. You aren't spending... You are investing.
What's not to believe?

If a company borrows money to build a new factory, and that leads to long term growth of the business, that is an investment, right?

So, why can't a govt borrow money to develop infra-structure that provides for the future? Isn't that an investment as well?

Trouble is, the budget is usually one big blob. You can't tell deficit 'spending' from deficit 'investing'.

-ERD50
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