Freaky Friday on Wall Street

[ericlp]

http://money.cnn.com/2008/06/0...postversion=2008060617

NEW YORK (CNNMoney.com) -- Stocks tanked Friday, with the Dow industrials shedding 395 points, after oil prices spiked more than $11 a barrel and the May jobs report showed a big jump in the unemployment rate.

Dollar falls, oil spikes: The dollar continued its slide versus the euro on the weak jobs report and comments Thursday that the European Central Bank could potentially raise interest rates. The dollar also tanked versus the yen.

Damn... This is not good news at all! It's off the charts!!!

Is bush gonna come out and tell us about how it's all good ? It's the writing on the wall yet?


All we need now are the raise of interest rates to flame the fire....


Can we just get bush out of office already he has failed with a capital F!

 

[DaveSimmons]

"EVERYBODY PANIC!!!!!"


Or not. It's a correction to a set of bubbles, some of which existed before Bush took office and all of which happened with bipartisan neglect.

It is true though that our economy would be in better shape if Bush hadn't blown trillions on nation-building while Rome burned.

 

[mxyzptlk]

It's funny that for every panicked report that the sky is falling, there's a rebuttal that says "no no, things are fine.. this is just a minor correction, it'll all be okay tomorrow.."

Who do you believe? Now I'm completely untrained in matters of finance and I can't even manage to keep my own checkbook balanced so if I were you, I'd just stop reading this post right here.. Still reading? sucker.. Anyway, like I was saying, I don't think anyone really "knows" what this market/economy thing is going to do until it has already happened. Anyone who claims to know the future is a god damned liar.

 

[mozirry]

Either China or India will break before we do. All we need is a report saying consumption is flat and this is all over.

I can't wait to see the massive cashout.

 

[StageLeft]

Originally posted by: mozirry
Either China or India will break before we do. All we need is a report saying consumption is flat and this is all over.

I can't wait to see the massive cashout.

i think you are right and these countries that subsidize gasoline are already curtailing that, India being one of them. They cannot afford it. We cannot afford it, they REALLY cannot afford it.

I don't think anyone really "knows" what this market/economy thing is going to do until it has already happened. Anyone who claims to know the future is a god damned liar.

This is true. You can see an article saying how this is pure fundamentals right next to one that says it's a bubble. I lean to the latter, but among the pros there is so much debate as to make them all nearly worthless.

 

[brencat]

Originally posted by: ericlp
All we need now are the raise of interest rates to flame the fire....

Actually, it is my professional opinion that if we had started raising interest rates much sooner than late 2004, we wouldn't have had nearly the housing bubble we had and by consequence, the extreme pain we're about to have as a result of the biggest credit bubble in world history beginning to pop.

A hike in interest rates -- while instantaneously causing a serious recession, would actually help the dollar and bring oil and commodity prices down dramatically.

Of course, no one will do that -- it's better politically to drag this out and possibly have the "hope" of skirting a recession, than to take the hard medicine and the pain that comes with it to emerge stronger later.

However, I believe we will end up in recession anyway and it will be far worse if we continue to put it off. Look what has made money this year: U.S. Treasuries, Energy, utilities, agricultural fertilizers, and some technology. Broadly though, the major equity indices S&P, NASDAQ, Russel are down ~ 6 - 8%, high yield is up ~ 1%, and high grade credit is flat. Convertible securities (my discipline) is also flat. For nearly half the year gone already, these returns SUCK.

 

[Cuda1447]

Originally posted by: Skoorb

Originally posted by: mozirry
Either China or India will break before we do. All we need is a report saying consumption is flat and this is all over.

I can't wait to see the massive cashout.

i think you are right and these countries that subsidize gasoline are already curtailing that, India being one of them. They cannot afford it. We cannot afford it, they REALLY cannot afford it.

I don't think anyone really "knows" what this market/economy thing is going to do until it has already happened. Anyone who claims to know the future is a god damned liar.

This is true. You can see an article saying how this is pure fundamentals right next to one that says it's a bubble. I lean to the latter, but among the pros there is so much debate as to make them all nearly worthless.

Thats so fucking true, both of you. I hate how everyone claims to know what is going on. The world economy is so fucking complex and so many people who have the hands in the cookie jar that its impossible for the average citizen to know what the fuck is going on. I bet if you go back over the last 2 years on these boards everyone has predicted something or claimed to 'know' something that has been completely 100% wrong. Its 95% speculation, 5% guessing.

 

[LegendKiller]

Originally posted by: brencat

Originally posted by: ericlp
All we need now are the raise of interest rates to flame the fire....

Actually, it is my professional opinion that if we had started raising interest rates much sooner than late 2004, we wouldn't have had nearly the housing bubble we had and by consequence, the extreme pain we're about to have as a result of the biggest credit bubble in world history beginning to pop.

A hike in interest rates -- while instantaneously causing a serious recession, would actually help the dollar and bring oil and commodity prices down dramatically.

Of course, no one will do that -- it's better politically to drag this out and possibly have the "hope" of skirting a recession, than to take the hard medicine and the pain that comes with it to emerge stronger later.

However, I believe we will end up in recession anyway and it will be far worse if we continue to put it off. Look what has made money this year: U.S. Treasuries, Energy, utilities, agricultural fertilizers, and some technology. Broadly though, the major equity indices S&P, NASDAQ, Russel are down ~ 6 - 8%, high yield is up ~ 1%, and high grade credit is flat. Convertible securities (my discipline) is also flat. For nearly half the year gone already, these returns SUCK.

Well, it's my "professional" opinion (being an investment banker who works in securitization in NYC...had to throw that in there since we are all "professional" now), that the Fed raising short-term rates wouldn't have had one bit of an effect on the situation.

Why? Because mortgage rates are set with LONG term rates which are controlled by CAPITAL, not by short-term managed rates. If your theory were even remotely correct you'd now see 30-year fixed rates in the 4-5% area, but guess what? A 30-year fixed conforming mortgage that can actually be found (not bankrate bullshit) is at 6.08, the HIGHEST it's been in a year.

"Helping" the dollar would do fuck all in this situation, as this isn't a currency driven problem. If it were you wouldn't have had a 12-month depreciation of the dollar by ~10% and a 100% appreciation in oil.

No, this is really just a repeat of 2001 and 2007 with a different asset class. It has nothing to do with the Fed's rate policy and everything to do with the regulatory situation and our politicians not giving a fuck (or giving a fuck the other way since their pockets are lined) enough to fix the problem *BEFORE* it develops into a major issue.

Had they closed the London Loop, among other derivatives related holes, years ago, this wouldn't have been a problem. Same thing with Sox/Chinese Walls (banks and consultant/accountants), and mortgage fraud/exotic loan reform.

But that's just my "professional" position.

 

[wwswimming]

Originally posted by: ericlpCan we just get bush out of office already he has failed with a capital F!

failed who ? he's done well for his "base", a term he uses when addressing a group of wealthy people in the Midwest, "some call you the Elite. I call you my Base."

as far as the Dow - it has re-traced its steps to where it was in - December 2006.

http://finance.yahoo.com/echar...symbol=%5EDJI;range=my

though admittedly, the Dow is dollar denominated, and the US dollar does not buy what it bought in December 2006.

 

[yllus]

Originally posted by: brencat

Originally posted by: ericlp
All we need now are the raise of interest rates to flame the fire....

Actually, it is my professional opinion that if we had started raising interest rates much sooner than late 2004, we wouldn't have had nearly the housing bubble we had and by consequence, the extreme pain we're about to have as a result of the biggest credit bubble in world history beginning to pop.

A hike in interest rates -- while instantaneously causing a serious recession, would actually help the dollar and bring oil and commodity prices down dramatically.

Of course, no one will do that -- it's better politically to drag this out and possibly have the "hope" of skirting a recession, than to take the hard medicine and the pain that comes with it to emerge stronger later.

However, I believe we will end up in recession anyway and it will be far worse if we continue to put it off. Look what has made money this year: U.S. Treasuries, Energy, utilities, agricultural fertilizers, and some technology. Broadly though, the major equity indices S&P, NASDAQ, Russel are down ~ 6 - 8%, high yield is up ~ 1%, and high grade credit is flat. Convertible securities (my discipline) is also flat. For nearly half the year gone already, these returns SUCK.

I don't think you're correct. In 1996, when Alan Greenspan was still chairman of the Fed he gave his famous speech about "irrational exuberance", which was meant to see if he could reintroduce some sense into the stock market boom happening at the time (the high tech bubble). As the Federal Reserve technically has no responsibility or control over the stock market (or most other markets, really), all he could do is issue this sort of verbal warning and hope that the market would heed his words.

The market did, but only momentarily as everyone sized each other up, and realized that they wanted to keep fueling the bubble even further - almost to sort of tell the Fed, "Hey, keep your traps shut. We know what we're doing." As Wikipedia describes,

The presence of the short comment?not repeated by Greenspan since?within a rather dry and complex speech would not normally have been so memorable; however, it was followed by immediate slumps in stock markets worldwide, provoking a strong reaction in financial circles and making its way into colloquial speech. Greenspan's comment was well remembered, although few heeded the "warning."

The losses were quickly recouped and eclipsed by the accelerating stock market boom; as of mid-2007, stock prices have never again fallen to the levels seen following the warning.

Historically it's seemed that the Federal Reserve is quite powerless to stop a bubble through use of raising/lowering rates. When the market wants to go, it goes, and damned is anyone who tries to stand in the way.