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from DeatCatsBouncing

..great article..great analysis..great source..

Recession is spreading faster than Bird Flu…

We have reached a disturbing moment in financial markets, where the noise to signal ratio across all asset classes is probably at an all time high, the August effect notwithstanding. Never has it been more important to adopt a strategic mindset to investing, rather than stampeding after the latest momentum trade without a shred of conviction. I’ve been a skeptic on economic decoupling, and had bet the right way on the dramatic reversal in the dollar (where I strongly suspect we saw discreet US intervention last week, possibly as a quid pro quo to the Gulf States/Saudi for maintaining their dollar pegs after recent visits by Hank Paulson). I’d advised a short on oil and other commodities, where the deteriorating outlook triggered a sudden slump, but I fear that equity markets are still dangerously complacent as to the risk of the brakes slamming on global growth. We will probably reach a tipping point in the next couple of months when the grim outlook for 2009 becomes inescapable and triggers steep earnings downgrades for non-financials and potentially a market panic. I predicted months ago that Japan and much of the Eurozone would be in recession by year end, and that China would see growth slump to mid-high single digits; these views are now becoming consensus. Countries from Estonia to Denmark are now officially in recession, while Spain, Italy, the UK and Canada are a one way bet. Overall, growth is slowing faster and more widely that I had feared, making recent IMF global growth forecasts of 3.9% in 2009 (down from 5% in 2007) look wildly optimistic. I’d take half that and be grateful. Deflation will be the new buzzword before long. The debate as to whether the US is technically in recession using NBER criteria is sterile (I believe one effectively began 6-8 months ago); the key is that recent GDP numbers have stayed positive only thanks to net exports, and exports will now come under pressure as emerging market investment spending slows. Meanwhile, we are at the beginning of a structural downshift in US consumption; personal consumption as a % of GDP reached over 71% in recent years driven by equity withdrawal from housing, against an average from 1975-2000 of 67%; expect at least a reversion to that mean. Policymakers are running out of options; only 10-20% of the recent tax rebate checks were spent, the Fed balance sheet is stretched to its regulatory limit and full of toxic credit sludge swapped by investment banks who are then recycling those Treasuries to feed the leverage appetite of their critically profitable hedge fund clients. The Fed has become the biggest Prime Broker in the world by default. Subsidising overconsumption and overtrading just make the core US economic imbalances worse; ultimately, I’d expect a new ‘New Deal’ involving huge infrastructure/energy diversification spending and $1trn plus deficits to fund it. Having sucessfully traded extreme oversold conditions in financials since mid July, capital preservation will be the priority in the next few months. I will be closing out all my equity positions in into what’s left of the Bear Rally, and buying deep out of the money equity index puts (options are surprisingly cheap given the low VIX), as an insurance policy. If I had to stay invested, consumer staples and healthcare should outperform further. A near term Bull Trap rally in commodities is likely, before the reality of slumping demand in 2009 sees the move I’ve forecast to about half peak levels for most. Agricultural commodities are an exception, having already corrected up to 40% and with structural demand underestimated (see Food: What’s the Chinese for Big Mac?). It is quite possible that incoming housing data will flatter to deceive on the upside, as foreclosure criteria have been relaxed by many banks under regulatory and political pressure, but I’m concerned that the Superprime mortgage market is the next blowup as white collar job losses grow. I’m no Gold fan as regular readers will know, and recent technical damage to the bull case is brutal, but at around $800 those so inclined may well take advantage of the steep selloff to profit from a spike in risk aversion in the Autumn. The wreckage of a real free-fall panic, creating some bargain valuations, will throw up wonderful opportunities for a cash rich investor.

Gooossshhh!

OFFICIALY my demonstration account is already wiped out..

My Risk Parameters were crushed some 450 Pips ago on EUR/USD positions and around 80$ @ Gold.

I had a plan to hedge but changed my plans in-between after opening the hedges and got hooked to my belief that the fundamental factors of the US economy never ever could allow the dollar to rally that much in the last few weeks.

Adding to these immense faults ,I had Price action screaming at me to short the Euro at around 1.5800. I even had a short open but closed it for a lousy 70pips because of the foregoing argument.

In retrospect I could have handled everything in a logic manner as my plans were prepared and sound.But overwhelmingly I feel that one reason stood out the most and that was that pleasure and pain of just being in the market.Like a Pavlovian dog or like a mouse trapped in an lab,I had to get my daily dose and ignored clear signs which were against my “belief”!

To this subject let me quote Jesse Livermore once again from Chapter V of his “Reminiscences of a Stock Operator”

“And right here let me say one thing:  After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this:  It never was my thinking that made the big money for me.  It always was my sitting.  Got that?  My sitting tight!  It is no trick at all to be right on the market.  You always find lots of early bulls in bull markets and early bears in bear markets.  I’ve known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit.  And their experience invariably matched mine – that is, they made no real money out of it.  Men who can both be right and sit tight are uncommon.  I found it one of the hardest things to learn.  But it is only after a stock operator has firmly grasped this that he can make big money.  It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”

I think that I can say without much ego-polishing that I can identify the nature of fundamental trends quite early and my study of price action allows me to see good entry points to make use of them and should be able to make some good money with my forecasts. But being right and then trading right is an entirely different game.Patience is the key..and I have to learn it ..the best way is pain isn`t it ?

For example through my study of monetary history of hundreds of years of mankind marketplaces, I “knew” (very determined) that gold would go to 1k/oz and still “know” that gold will go to new highs a short few years from here.(Preserving wealth and/or enriching it..depending on your leverage)

But life is patient with me it seems and did not allow me to invest money “one cannot afford to loose”.Because now I know I would have lost it..and being right and loosing money is ,in my humble opinion, the worst pain a trader/investor can feel in his breast.

okay lot’s of I’s here :D Please wish me patience for the next try..I need 6 positive month before going live..

I will wait some time for my margin call (which will eventually occur) and then plan for the second public try.

Have a great weekend! I will ;)

Here some statistics for anyone interested..around 50% win/loss ratio in the middle of my second year is not that bad ,isn’t it?

…(of course there are still positions open..maybe they come back ;)

nearly 6 Month of Trading here->

Click Pic to enlarge

Thx to the BigPicture

via Cryptogon

Wachovia Has Record $8.9 Billion Loss
July 22nd, 2008

WARNING: This is not a recommendation to buy, sell or hold any financial instrument.

If Wachovia goes down, it would wipe out FDIC liquidity about 16 times over. That calculation is based on the following numbers: Wachovia’s assets, $808 billion, divided by $49 billion, which is roughly what the FDIC may or may not have on hand.

Do you still keep money in a U.S. bank account? Yeah, me too. I have about $89 in mine. * hint *

Via Bloomberg:

Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion, slashed the dividend and announced 6,350 job cuts. The stock fell as much as 12 percent in early New York trading.

The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.

The writedown, job cuts and second dividend reduction in three months reflect Steel’s response to the worst housing market since the Great Depression, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent in New York Stock Exchange composite trading since it spent $24 billion two years ago to buy Golden West Financial Corp. just as home prices were peaking.

Via The Wall Street Journal

Through history, outrageous financial behavior has been met with outrage. But today Wall Street’s damaging recklessness has been met with near-silence, from a too-tolerant populace, argues James Grant

“Raise less corn and more hell,” Mary Elizabeth Lease harangued Kansas farmers during America’s Populist era, but no such voice cries out today. America’s 21st-century financial victims make no protest against the Federal Reserve’s policy of showering dollars on the people who would seem to need them least.

Long ago and far away, a brilliant man of letters floated an idea. To stop a financial panic cold, he proposed, a central bank should lend freely, though at a high rate of interest. Nonsense, countered a certain hard-headed commercial banker. Such a policy would only instigate more crises by egging on lenders and borrowers to take more risks. The commercial banker wrote clumsily, the man of letters fluently. It was no contest.

The doctrine of activist central banking owes much to its progenitor, the Victorian genius Walter Bagehot. But Bagehot might not recognize his own idea in practice today. Late in the spring of 2007, American banks paid an average of 4.35% on three-month certificates of deposit. Then came the mortgage mess, and the Fed’s crash program of interest-rate therapy. Today, a three-month CD yields just 2.65%, or little more than half the measured rate of inflation. It wasn’t the nation’s small savers who brought down Bear Stearns, or tried to fob off subprime mortgages as “triple-A.” Yet it’s the savers who took a pay cut — and the savers who, today, in the heat of a presidential election year, are holding their tongues.

Possibly, there aren’t enough thrifty voters in the 50 states to constitute a respectable quorum. But what about the rest of us, the uncounted improvident? Have we, too, not suffered at the hands of what used to be called The Interests? Have the stewards of other people’s money not made a hash of high finance? Did they not enrich themselves in boom times, only to pass the cup to us, the taxpayers, in the bust? Where is the people’s wrath?

Read Full Article

via Telegraph.co.uk

It feels like the summer of 1931. The world’s two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.

The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a “chance of a global recession”. Plainly, the IMF cannot or will not offer any useful insights.

Its “mean-reversion” model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True “mean-reversion” would imply debt deflation on such a scale that would, if abrupt, threaten democracy.

The risk is that these same central banks will commit a fresh error, this time overreacting to the oil spike. The European Central Bank has raised rates, warning of a 1970s wage-price spiral. Fixated on the rear-view mirror, it is not looking through the windscreen.

The eurozone is falling into recession before the US itself. Its level of credit stress is worse, if measured by Euribor or the iTraxx bond indexes. Core inflation has fallen over the last year from 1.9pc to 1.8pc.

The US may soon tip into a second leg of this crisis as the fiscal package runs out and Americans lose jobs in earnest. US bank credit has contracted for three months. Real US wages fell at almost 10pc (annualised) over May and June. This is a ferocious squeeze for an economy already in the grip of the property and debt crunch.

No doubt the rescue of Fannie Mae and Freddie Mac - $5.3 trillion pillars of America’s mortgage market - stinks of moral hazard. The Treasury is to buy shares: the Fed has opened its window yet wider. Risks have been socialised. Any rewards will go to capitalists.

Read full article

via TheBigPicture

Uh-oh, looks whose invited themselves over to stay for a while . . .

Tom Toles via Yahoo!

I wish I could join the march on Washington D.C. !

To all Americans reading this! Hear RP`s message and support him before it is too late!