World economy talk

[badsekktor]

^^^

Kung total financial meltdown... hindi siguro mangyayari... pero almost nangyari yan.

but what can happen is the banks will still need more capital as more and more loans turn bad.

The US and European governments will have to inject more capital into their banks.

So later on, the governments will not own only 10% or 15% of the banks, they could end up owning them almost entirely.

i see.... parang kulang nga yun 700 billion dollars na bailout plan ng US. So most probably, taxpayers ang magshoulder ng problem since uutangin na naman ng government ang pera na gagamitin pang-bailout.... problem is.... pano kung may mass layoffs at poverty stricken na yun country... sino pa makakapagbayad ng tax.... kaya lang kung hindi naman mag-iinject eh magsasara mga bangko at mga negosyo at mawawalan ng trabaho yun mga taxpayers....

Its never going to work and they have not learned the lesson. You can't throw money into the problem, money does not solve confidence. Only time can heal confidence. So in other words what I am saying is the fast and quick and deep recession is what we need to cure this problem. They have not learned their lesson. They already tried the stimulus route earlier this year and all those money went to the backburner.

I definitely agree.....

[uls]

i see.... parang kulang nga yun 700 billion dollars na bailout plan ng US. So most probably, taxpayers ang magshoulder ng problem since uutangin na naman ng government ang pera na gagamitin pang-bailout.... problem is.... pano kung may mass layoffs at poverty stricken na yun country... sino pa makakapagbayad ng tax.... kaya lang kung hindi naman mag-iinject eh magsasara mga bangko at mga negosyo at mawawalan ng trabaho yun mga taxpayers....

Yes sigurado US taxpayers ang mag shoulder sa bailout.

check this out:


di pa tapos ang mga writedowns.

iba iba ang estimate ng mga analysts...

meron aabot daw sa $1T, meron $1.6T, meron $2T

so clearly, that $700B isnt enough.

Yung mga writedowns ngayon mga residential mortgages palang.

Consumer loans and corporate loans will be defaulting soon, or already starting to default.

[uls]

Tidus1203,

as im typing this, 94.256 na USD/JPY

grabe!!

[Monseratto]

OT: Ahhh...a thread were reason still prevails, unlike those useless oil threads...I'll just eat popcorn and let their egos pop...now back to our grim topic.

Greenspan comments last night seem to have sent the markets in panic mode again. Nikkei nearly lost another 10% and the European Stocks are all down 5 %.

Greenspan said that only when US home prices "recovers" will things improve. I wonder when will that be?

[uls]

^^^

ay juice ko matagal pa yan...

--

ya back to our grim topic...

Corporate earnings down, Q4 guidance down.

expect more job losses.

the next wave of defaults coming: corporate bonds.

[badsekktor]

hehehehe! mukhang mahaba-haba pang lalakbayin ang kalbaryo na dulot ng higanteng bansa ng amerika! medyo swerte pa yata ang Pilipinas ngayon at wala pa ko nababalitaan na mass layoffs

[uls]

Grabe currency markets today!

this is where the action is today...

USD/JPY 91.5 as i'm typing this

i have never seen the yen at that level...

Tidus1203... your call is so right!

you are so damn right!

[Monseratto]

They just halted the S&P futures because it already exceeded the allowable percentage of losses. THere's simply no good news coming in. Opening bell at Wall Street sounds more like a death knell. Expect to careen out of control later.

[uls]

things are going crazy

serious

as im typing

things are going crazy

May panic talaga...

there will be massive dumping of assets tonight... MASSIVE!!

ya Monseratto:

yung S&P Futures -- umabot sa percentage trigger where trading halts has been hit.

Ma-trigger kaya ang circuit breakers sa NYSE tonight?

grabe

katakot

be back later

[Monseratto]

THe European Markets are already hitting 8% losses, and that's before the Dow opens.

Stocks bomb as dire warnings shake markets

Stock prices bombed to new lows Friday as dire forecasts drove the global financial system into one of its worst downward swings since the credit crisis began.

London's FTSE 1000 dropped by more than nine percent at one point, following dramatic losses in Asia as markets reacted with alarm at comments by the former head of the U.S. Federal Reserve who warned of a "credit tsunami."

In Moscow, trading was halted

In Asia, South Korea's KOSPI Composite Index closed down 10.6 percent Friday, while Japan's Nikkei Exchange lost 9.6 percent on news that Sony had cut its profit forecast in half.

[Monseratto]

Now all three (Dow, NASDAQ and S&P) futures have halted European trade. Madugo mamaya talaga...

All three contracts lost the maximum amount permissible before the start of futures trading in the United States.

"We are in a panic mode, I don't know how else to describe it and when you're in panic mode, all rational thought goes out of the window," said City Index chief market strategist Tom Hougaard.

"We've just got to let this thing rage. I think we'll see the Dow below 8,000 today."

"My comment to traders is dive, dive, dive," said Societe Generale's Brian Hilliard.

[Monseratto]

Many were rather amazed at the opening hours so far sa Wall Street. Many were expecting a 800 point dive but only went half that, volume is very thin. Yet it is still down.

[uls]

The Dow is down only 300+ as im typing this

I wanted to see a 1,100 pt drop... triggering a trading halt...

boring...

---

Ya volume is thin.

Everyone's waiting for a massive selloff, then start buying

But no massive selloff... hahaha

everyone is on the sidelines... waiting for the big drop...

[slamtaz]

Greenspan said that only when US home prices "recovers" will things improve. I wonder when will that be?

when ba ika nyo?

as i think i mentioned before pero malamang eh kasama dun sa nabura...

the sub-prime period was for about 5 years until 2006, now the defaults we're experiencing are just the starting 2 years of the sub-prime regime...

based on the foregoing, approximately 3 more years of sub-prime transactions are bound to default and those are the peak years...

so let's pretend that 750 bln was needed and enough to plug-in 2 years of defaults, then at an accelarated rate of 10%/year (i.e. which is modest), the guesstimate for the 3rd year would be 825 bln, 4th yr 900 bln, 5th yr 1.0 Trln or a 5 year lump sum of about 3.5 Trln... hirap bilangin nyan...

tama ka monseratto... the future looks very grim indeed...

it was rightfully said that it's gonna get a lot worse before it can get any better...

[uls]

Subprime is just the tip of the iceberg

next to subprime is Alt A paper

then prime paper

All those belong to a category called residential mortgage backed securities (RMBS)

Which belongs to a category of assets called asset backed securities (ABS)

which also include credit card loans, student loans, auto loans, commercial mortgage backed securities.

and those ABS are bundled, sliced and diced, and packaged into something called collateralized debt obligations (CDO)

tapos meron pa CDO-squared, CDO-cubed...

boggles the mind...

---

An excerpt from Hayman Advisors letter to clients (dated Oct. 14, 2008):

Let’s do some quick math. We realize that there are many moving targets, but we must attempt to put things into perspective for those of you at home. To date, some $550 Billion has been written down by the world’s financial institutions. In the United States alone, there is $10 TRILLION of “Prime” mortgage debt, $1.5 TRILLION of Alt-A mortgage debt, and $1.2 TRILLION of Subprime mortgage debt. Based on our assumptions, we believe we will see cumulative losses of AT LEAST 25% in Subprime, 20% in Alt-A, and 5% in Prime. Our expected default rates and severities imply that over $2.2 TRILLION of defaulted mortgage loans would result in AT LEAST $1.1 TRILLION of REAL LOSSES in mortgages IN THE U.S. ALONE.

sa residential mortgages palang yan...

how about corporate debt?

There is approximately $7 TRILLION of total corporate debt in the United States. An ever increasing trend of this debt is that more and more of it is rated below investment grade. As of today, over $1 TRILLION of all corporate debt is rated BB or lower. In the mini-recession of 2002, we saw 12% cumulative corporate defaults and BB spreads to Treasuries reach a historic 1400 basis points. The bad news is that it was just a “warm-up” for where we are headed. Standard and Poor’s recently penned a report that they expect up to 23% cumulative corporate defaults by 2010. BB spreads are headed to at least 1500 basis points over their current level of roughly 1000 bps. This suggests that we will see at least $1 TRILLION of corporate debt default over just the next 2 years.

[tidus1203]

The US housing will improve if and only if buyers feel that price are low enough and they feel they get a nice price. At the current levels mataas pa rin ang housing prices in comparison to other economic indicators like income/capita.

[tidus1203]

Grabe currency markets today!

this is where the action is today...

USD/JPY 91.5 as i'm typing this

i have never seen the yen at that level...

Tidus1203... your call is so right!

you are so damn right!

I already covered half of my Yen positions yesterday to realize gains. I still have some but I think its now oversold and we should see a rebound. But make no mistake, the Yen is still the currency to own in this environment. The Swiss Franc to a lesser degree.

[uls]

the market is crazy...

the two most in-demand currencies right now -- the USD and JPY -- have the lowest interest rates.

totally opposite of fundamentals

hehe

[tidus1203]

In the case of the Yen many people shorted the Yen and bought other currencies. Thus leveraging was created. Now we are in a process of deleveraging and people are getting out of the exit doors so they now have to reverse those and buy back the Yen which they borrowed to buy higher yielding assets in other places. The trick here is FEAR is a greater emotion than GREED. Thus, down moves are always faster than up moves kaya ang bilis ng akyat ng Yen kahapon.

[Monseratto]

With the Yen going up and the Euro going down against the US dollar, may whammy effect iyan sa already struggling Jap companies, especially with a rather bleak holiday season just around the corner... Sad Christmas everyone.