global financial crash yay!

vimothy

vimothy

yurp
My god, what a terrible article!

"It’s frightening," said Professor Tim Congdon [notorious monetarist, City consultant and UKIP candidate for 2010]... "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets...."

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015....

Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said.

Mr Congdon said the dominant voices in US policy-making - Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke - are all Keynesians of different stripes who "despise traditional monetary theory and have a religious aversion to any mention of the quantity of money". The great opus by Milton Friedman and Anna Schwartz - The Monetary History of the United States - has been left to gather dust.
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EDIT: Actually, it's not even factual mistakes, though it certainly has those (Japan, Bernanke, etc), so much as nakedly pushing an agenda.
 
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HMGovt’s Glorious Return!

HMGovt’s Glorious Return!

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Hindenburg Omens

http://en.wikipedia.org/wiki/Hindenburg_Omen

The Hindenburg Omen is the alignment of several technical factors that measure the underlying condition of the stock market—specifically the NYSE. The main goal of the indicator is to determine if a higher overall probability exists such that a stock market crash has a higher likelihood than normal.

Recent events

A Hindenburg Omen occurred on August 12th, 2010, the first since the market lows of 2009. One nearly occurred on August 11th, failing only in that 67 stocks hit new lows, rather than the required 69.​
 
IdleRich

IdleRich

IdleRich
From historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77% [The Wall Street Journal 8/23/2010 article cited below states that accuracy is 25%, looking at period from 1985], and usually takes place within the next forty days. The probability of a panic sellout was 41% and the probability of a major stock market crash was 24%. Though the Omen does not have a 100% success rate, every NYSE crash since 1985 has been preceded by a Hindenburg Omen. Of the previous 25 confirmed signals only two (8%) have failed to predict at least mild (2.0% to 4.9%) declines.
Because of the specific and seemingly random nature of the Hindenburg Omen criteria, the phenomenon may be simply a case of overfitting. That is, by backtesting through a large data set with many different variables, correlations can be found that do not really have predictive significance. The Omen is at best an imperfect technical indicator that is a work in progress.
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I'd definitely pay a lot of attention to that last bit. It's nonsense to say that because 77% a Hindenburg Omen was followed by a fall of more than 5% that the Hindenburg Omen has a 77% probability of being followed by such a fall.
Also, the probability of panic selling (estimated at 41%) is surely raised by the fact that anybody who is testing for a Hindenburg Omen and finds one is likely to start selling pretty sharpish. There is at least something of a self-fulfilling prophecy there - as there is in almost any technical analysis that is widely followed.

In other news, I thought that this was quite interesting

Amid the rout, it emerged that police acting on orders from the prosecutors of Trani, a port on Italy's Adriatic coast, had raided the Milan offices of the rating agencies, Moody's and Standard & Poor's, as part of continuing investigations into their role in recent financial turmoil. The chief prosecutor in Trani told Reuters that his office was checking to see whether the ratings agencies "respect regulations".
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I wish there was more pressure put on these shysters in more countries.
 
Sectionfive

Sectionfive

bandwagon house
finger-in-the-dike1.jpg


Carnage everywhere. Some good stuff on Dave Malone this week http://golemxiv-credo.blogspot.com/
 
Sectionfive

Sectionfive

bandwagon house
There is going to be some sort of attempt to bailout Italy apparently. :rolleyes:
Or more specificity Unicredit and its subsidiaries like German/Irish Hypo. Back to 2008

This from December

UniCredit is a vast sprawling thing. It owns, and is made up of, somewhere around a hundred different financial companies, leasing companies and banks all over East and West Europe, the Balkans, former Soviet countries, as well as the Far East. The point about this is that losses are not unified and made apparent on one set of Über accounts. So it is quite possible for UniCredit to look quite financially fine, while it is accumulating hideous losses in lets say Unicredit Kazakhstan, Azerbaijan or Belarus.

As I have written before, Unicredit owns Bank Austria which has the largest western banking presence in Eastern Europe. I wondered in Dominoes falling from the East if UniCredit might not be about to receive a train load of debts from Bank Austria, as well as from its US investment companies - Pioneer Global Asset Management, Pioneer Alternative Investment and Vanderbilt Capital Advisers.

So it is of interest that according to this report part of the reason for Nomura's downgrade was due to concerns about UniCredit's expansion in to the East and losses which might come from those operations. And this combines, for me, with UniCredit now wanting to sell off Pioneer, which used to be such an important part of its securitising cash cow business.

Basically I am suggesting that it might be worth keeping an eye on UniCredit for signs that it is having short term funding and overnight liquidity troubles. Just the early first stages, nothing too serious yet. But we live in febrile and feverish times when a mild infection can spread alarmingly quickly. When problems thought to be hidden or quarantined can suddenly erupt.

I think UniCredit will figure larger in our news in the coming months, as will Italy itself.
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and today

According to Bloomberg, The Euribor, the European equivalent of the Libor (remember that from 2008?) is locking up as banks decline to lend to each other. Those European banks that do have money are putting it in the ECB overnight in preference to lending it to the European banks that desperately need it - such as Santander in Spain and all the Italian Banks led by UniCredit.

Once the Euroibor starts to freeze that is the signal for non-European banks to stop lending to European banks altogether. Why should they trust European banks if fellow Europeans don't. Banks have to have overnight funding or they die.

I think we are now closer to the edge of then cliff than we have been at any time since AIG and Lehman's collapsed. Without short term and overnight funding Europe's banks will die within the week, so the ECB will now certainly step up its overnight lending to any and all not as a matter of prudent banking but of political panic. That however will be merely the response to the weekend's Euribor freeze. I say response because it is not a solution. The banks can't stay addicted to ECB methadone. The amounts would simply run out of control.

But even before the Euribor crisis happened there was already a larger the problem which had, along with the US downgrade, caused a great part of last weeks massive sell-off and panic in Europe. Namely that the EFSF cannot, unless it is vastly increased - some are saying 2 trillion euros would be the sort of figure - bail out Italy and Spain.

As I wrote in Fanfare of Failure the EFSF doesn't have enough money or credibility to be seen as a credible back stop for Italy or Spain. Particularly because when it was set up just last year, as the bail out fund that would save Europe's banks, Spain and Italy were two of its larger backers. Now they are no longer backers but desperate customers.

Once Spain and Italy ceased to be backers and turned to insolvent customers the EFSF is over as an effective force. The only solvent backers it now has of any size are France and Germany. And lots of people are just waiting for France to suffer a downgrade similar to America's. Which leaves Germany holding the entire bill. That won't fly on the markets and certainly won't in Germany. So the EFSF is over unless Merkel and Germany can be blackmailed. I don't think that is going to happen.
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continued here

http://golemxiv-credo.blogspot.com/
 
Sectionfive

Sectionfive

bandwagon house
ECB bond purchases have begun http://www.bloomberg.com/news/2011-08-07/trichet-draws-ecb-bazooka-to-stem-contagion.html

And Trichet/Goldman/Deutsche bank sent a secret letter to Italy last week, allegedly

According to Milan daily Corriere della Sera, ECB President Trichet wrote a secret letter to the Italian government last week “dictating” what they should do in the way of economic reforms.

The letter set out what measures should be taken and gave a timetable for their implementation. Apparently the letter asked for rapid privatization of municipal assets, liberalization of various sectors and offered detailed suggestions on how to loosen Italy’s employment laws.

The letter was co-signed by Mario Draghi who is to take over from Trichet later this year.
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http://www.forexlive.com/blog/2011/08/08/trichet-wrote-secret-letter-to-italian-govenment/
 
IdleRich

IdleRich

IdleRich
Maybe I'm being stupid but I don't get this, can someone explain it to me?

Japan lost its triple A rating long ago and has national debt in excess of 200% of GDP but its bond yields remain extremely low. The reason for that is simple: Japan's growth prospects are poor.
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IdleRich

IdleRich

IdleRich
But it seems to be saying that Japan's lack of growth means that its bond yields will be low. It goes on to say

So are America's [growth prospects], which is why bond yields will remain low in what is still, for the time being, the world's biggest economy.
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In other words, if you aren't growing you pay less to borrow?
 
IdleRich

IdleRich

IdleRich
Oh ok. It seems that the normal yield is based partly on the expected interest rates in the future - a lack of growth means that interest rates are unlikely to rise. But the expected lack of growth in Italy or Greece or whatever hasn't protected them has it?
 
Sectionfive

Sectionfive

bandwagon house
No but like us, they're insolvent.
Italy did an ok job hiding the holes until now or at least attentions were focused elsewhere.

The whole thing is moving so fast now. Several things I have be following for months are all coming to head now at the same time.
And yet the can is still kicked down the road.
 
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Sectionfive

Sectionfive

bandwagon house
Max Keiser was saying something about "don't keep your gold in England" last week.
I'd have to check it again.

Take that with whatever amount of salt you require, naturally
 
IdleRich

IdleRich

IdleRich
Is it because there isn't enough gold in the world to honour all the actual owners of gold if they all took it back? In other words if there was the equivalent of a bank run on gold then somebody would lose out (bad news when its price has gone so how) - you can obviously avoid that happening to you by getting your money out of the bank first.
I liked a comment on The Guardian blog anyway - "the invisible hand of the market seems to be making a jerking up and down movement".
 
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