Financial crisis

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SamG
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Re: Financial crisis

Post by SamG » Tue Sep 30, 2008 2:48 pm

erk wrote:
SamG wrote: I don't think it's this straightforward. When a nation abandons a standard such as the "gold standard," all you have left is its currency and its collateral. Printing more money because we can isn't good, but printing less money won't increase the credit pool. We probably have more collateral than currency, but it's tough to sell a nation these days.
Oh, believe me it's quite simple and straight forward. And actually you already did it multiple times but not on such a big scale.
I think you missed my point; scale is in fact part of my point. But that's okay.
erk wrote:Well kind of...maybe. It works only because foreign countries, keep crediting this consumerism all the time. But recently many countries have realized that the warm fuzzy feeling, which they have while looking at the USD account with so many zeros, is not what it is all about, and they would like to participate in consumption.
I didn't say US consumers are the only consumers that matter. I just said that I think US consumerism has been a factor in debt investment strategies.
erk wrote:It's not that they haven't found the right solution yet. The problem is that in real goods economy the solution does not exist.
I think that's what I said. Your talk of a "last shot" was what I was responding to. The US, as an attractive place to make simple loans, already no longer exists.
We should talk less, and say more.

erk
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Re: Financial crisis

Post by erk » Tue Sep 30, 2008 3:36 pm

SamG wrote: I didn't say US consumers are the only consumers that matter. I just said that I think US consumerism has been a factor in debt investment strategies.
Neither I did. What I said is that world's preferences changed partly because young people in all over the world prefer to enjoy their live than work hard as their parents did and partly because USA lost part of it's solvency too, thus others might be less likely to credit it.
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SamG
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Re: Financial crisis

Post by SamG » Tue Sep 30, 2008 5:39 pm

That may be true. But when it comes to investing, consumers are of interest in ways non-consumers aren't.

Cut me a little slack here, erk :) . I'm not talking about lifestyle alternatives to consumerism, but about incentives to invest.
We should talk less, and say more.

erk
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Re: Financial crisis

Post by erk » Sun Oct 12, 2008 9:18 am

IMHO consumers might be of interest in green field investment. I fail to see how they affect decisions of investment in bonds.

Anyway I haven't entered this topic again to bump it or talk about US bonds. Actually right now I more preoccupied with the old good Europe.
During these 2 weeks the behemoth of crisis got nastier and nastier by hours and for me it's not even beginning of the end of bad messages. For those who do not pay attention, just a few of them:
Bank sector:
- Wachovia Bank joined Freddie, Fannie, AIG, Lehman Bros, Morgan Stanley etc. in US
- Island is a one big mess with 3 banks nationalized, the scarry part is that the market capitalization of every one of them was bigger than Island GBP
- UK announced buying preference shares in Abbey National, Barclays, HBOS, HSBC Bank, Lloyds TSB Bank, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered Bank for total of 50 billion pounds. It freezes also actives of Island banks in UK.
- Germany puts 50 billion EUR in rescue plan for Hypo Real Estate. There are reports suggesting that German banks have average leverage of 52, and that if some of they fail, not even German treasury can save them. Basically they are to big to fail and to big to be saved.
- Fortis and Dexia saved by joined action of Holland, Belgium, Luxemburg and France
- rumors about Unicredito (one of the biggest bank in Italy) being seriously exposed to suprime & Lehman bankruptcy
etc.

But what's really scary it already started to affect real economy. Let's look at automotive sector (the one who get hit as first by any economic crisis):
- stock of GM and Ford dropped 30% and 22% in one day (the are news that they can have serious problems with cash in 2009)
- Daimler-Benz sold the rest stake it had in Chrysler. Since Chrysler is privately held nobody beside actual owners knows what's is it financial situation, but Daimler accepting huge loses from this operation just to get rid of the stock is everything I need to know.
- even Japanese car makers reported sales drop in US (IIRC in case of Toyota it was all time biggest of about 20%)
- in Europe Ford, Opel, Fiat, Renault, VW Group, all of them announced temporary closures (1-2 weeks) of some of their plants, because of falling demand. Some of them also announced reduction of work force (Volvo and Renault IIRC)
- Russian oligarchy stopped paying for the 20% stake in Magma Group (one of the biggest automotive suppliers), which means it's stock passed to be held by banks. It's possible it was heavily leveraged buy and he couldn't afford it in the new financial situation but I believe he figured out it's cheaper to cut the losses now then to risk loosing even more in future.

I'm scarred. Really. Maybe I should stop reading press. It won't save me from crisis, but at least I will live in sweet ignorance until I get hit.
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erk
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Re: Financial crisis

Post by erk » Sun Oct 12, 2008 11:23 am

A little bit of humor in difficult times (from Financialsense.com):
REALITY CHECK, INVESTMENT ALTERNATIVE: If you had purchased $1000 of Delta Airlines stock one year ago, you would have $49 today. If you had purchased $1000 of AIG stock one year ago, you would have $33 today. If you had purchased $1000 of Lehman Brothers stock one year ago, you will have $0 today. However, if you had purchased $1000 worth of beer one year ago, drank all the beer, then turned in the aluminum cans for recycling, you would have received $214 today at redemptions. Based on the above, the best current investment plan is to drink heavily & recycle. It is called the 401-KEG Plan.
:D
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Nicholas the Italian
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Re: Financial crisis

Post by Nicholas the Italian » Sun Oct 12, 2008 2:56 pm

Yes, the thing is getting out of control in Europe too.
Not because we're directly involved (not Italy, at least), but for a series of indirect consequences and psychological effects (psychosis).
Stock markets fell 20% just in the last week. And that's the good news.

This might be a stupid question, but... where has money gone?
They didn't burn banknotes overnight, I suppose. So, someone must have it.
Whatever I say, it's not my fault.

erk
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Re: Financial crisis

Post by erk » Mon Oct 13, 2008 12:31 am

This is the sad part - either there was never a real money involved (huge leveraging) or money has been spent years ago - now the only thing is left is an enormous debt (held by China, Russia, Gulf countries and other net exporters).
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