Comments on: Coordinated Central Bank Rate Cuts Stem Equity Rout

By: tasha

tasha — Wed, 08 Oct 2008 20:58:00 +0000

Thank you for responding. Not sure I totally get everything, but this is helpful. I will continue to follow your discussions. It’s been very helpful for me, even though much of what’s said here is over my head. I will be happy to give you the dumb taxpayer’s perspective should you ever require it. Thanks, all!

By: michael

michael — Wed, 08 Oct 2008 17:35:00 +0000

Hey Tasha.
As wintermute said, expect a 1929 scenario. We already have deflation, so hopefully your in cash right now. However, in 6 to 24 months this is going to tilt into heavy inflation. (That is if the asians hold on to our treasuries, else its hyperinflation. And helicopter Ben can take a shortcut in this timeline and give us heavy inflation almost right away.)
And when its inflation you're hopefully in gold and *fixed-rate* dept only.
So as you see the outcome is very clear, but how imminent it is is everybody's guess.

But because inflation will last longer than deflation, going into gold and out of adjustable-rate dept right away is advisable.

By: melpol

melpol — Wed, 08 Oct 2008 17:06:00 +0000

The fat cat stock market has been shocked into reality. The house of cards is crumbling and when all is done the reality of responsible spending will take hold. But there will be social unrest because millions of non-productive employees will be standing in soup lines. Without a government that can afford financial support for the poor the nation will be sharply divided. But in time calm will prevail and people will accept their place in a new lifestyle.

By: S

Wed, 08 Oct 2008 16:19:00 +0000

looks like need a reprise of the cuts help equity. Europe down 6% across board. US selling off.

Matt D –
explain why selling covered calls is a good strategy or the Fed? Do you think the market is that stupid. Look at the long end of the curve today, it is blowing out.

By: wintermute

wintermute — Wed, 08 Oct 2008 16:16:00 +0000

Hey Tasha.
The amazing thing is that there are so many forces at work that some of the brightest economists are going to call the next few years wrong.
In big picture terms we *should* expect a long period of deflation like the 1930’s. Falling prices and wages and general economic malaise.
But! Because so many debts (mortgages, car loans etc) were obtained before deflation – then the govt will view a dose of inflation (printing) as a solution to all the screaming from the public about unpayable debts. The problem then is that this is like using fire to fight a fire and, yes, hyper-inflation can easily occur. The other problem is that the US relies on foreign holdings of Treasury debt (to fund the government). These debt-holders are probably so shell-shocked already – that a hint of inflation will have them dumping dollar-denomated debt until the dollar collapses. This latter process may already be underway.

By: a

Wed, 08 Oct 2008 16:09:00 +0000

“What do you all think people like me should do–the small subset of taxpayers that have some, but not much of a clue?”

IMHO the most important thing is to keep your job (or at least a job).

Otherwise keep in good health – exercise and eat right.

By: tasha

tasha — Wed, 08 Oct 2008 15:35:00 +0000

Hello to all. I found this site on the day the Bailout Bill was proposed. You all seem to be the sanest group I’ve encountered on the internet and I have a few questions for you, if you don’t mind. My story–I’m a “regular person”, product of the US public school system therefore no education whatsoever in finances/economics. I took Econ 101 and 102 in college, a subject I found dry to begin with. My lecturer was an Indian grad assistant who spoke with an extremely heavy accent. I vaguely recall a lot of talk of “goons and bootair” but little else. I’m trying to educate myself now and found the Paul Grignon video “Money as Debt”, which I found extremely enlightening as well as frightening, given that all my previous knowledge regarding money was paltry and my assumptions completely false. I now have a basic knowledge of what fiat currency is, and what our long term prospects are, as a country operating on the monetary system that we have. What I’d like to know from all of you is this–What does it all mean to me as a “regular person” in the short and medium term?. I think I’ve figured out the hyperinflation, possible collapse of the dollar situation. Is it imminent? If so, what happens, in real terms, when it happens? Are there other scenarios that could happen before the actual collapse of the currency, other than recession/depression, job loss, etc? Give it to me straight and tell me what the politicians can’t and won’t tell me. I can balance a check book, never made a late payment in my life, have excellent credit, own about 48% of the equity on my home (almost 60% a year ago!), have a small 401k and some manageable very low interest credit card debt. What do you all think people like me should do–the small subset of taxpayers that have some, but not much of a clue? I’m not really looking for personal financial advice. I just want to have a clue of what’s coming down the pike. I don’t have money to invest in gold or anything crazy, but other than paying off the credit card debt what’s a person to do? I’m seriously thinking of buying a greenhouse, a couple of goats and some chickens. Am I nuts? Thanks for indulging me. I really want you to know that I am seriously, seriously wanting to hear what you have to say. Please educate me.

By: Liquidity Trap

Liquidity Trap — Wed, 08 Oct 2008 15:27:00 +0000

No, its not the end of the world as we know it. It is a return to fundamentals based Investing, but not for a while, yet.

It is the end of silly speculative capital endlessly leveraging in exotic derivatives.

The use of CDS to trade, not to actually insure, is a large part of the great unwind we are now experiencing. The settlement auctions will help to cleanse the system once the losses are know. Other swaps will still need to be reduced.

The notion of risk-less trades based upon exotic derivatives was is and will be a thing of the past.

Next, further transparency of financial institution _Assets_, a.k.a. _Loans_ will be required. Moves to remove mark-to-market accounting are counter productive in the face of lack trust. Greater transparency in the form of enhanced _modeling_ disclosure should be required.

The inter-market funds slosh, carry trades and leveraged speculative finance, ala Doug Noland, are the drivers affecting the equity markets, debt markets and currency markets.

All in my opinion, of course.

(But what do I know, I'm just a trader and analyst for a hedge fund, and we are up month to date and year to date. And we use no leverage...)

By: Anonymous

Anonymous — Wed, 08 Oct 2008 14:55:00 +0000

@ Matt, AW70

Here’s a good one for you guys. Apparently Bernanke worked on it with Prof at NYU.

http://www.wallstreetpong.com/

By: Anonymous

Anonymous — Wed, 08 Oct 2008 14:34:00 +0000

Anon,

Cheaper at 0%. Better wait…