The Official Dow 7000 thread

[wimpy77]

they were. it was up .2% higher than they thought. but it the market moved into positive territory when the consumer spending report came out.

http://www.cnbc.com/id/29549825

 

[Toro]

No clue why stocks rose when unemployment was .2% worse than they expected. Stocks are slightly down now and should stay down unless people are tired of selling.

Because people were expecting worse.

But the market opened up and immediately they sold it. There is still liquidation going on.

They were expecting 7.9, I thought?

No, the nonfarm payrolls. That's what investors focus on more, unless the unemployment rate is way out of whack.

 

[Toro]

An index of leading economic indicators I saw today says that we are out of a depression and merely into a recession.

It said we were in a depression in October.

 

[wimpy77]

An index of leading economic indicators I saw today says that we are out of a depression and merely into a recession.

It said we were in a depression in October.

can you post it?

 

[Toro]

An index of leading economic indicators I saw today says that we are out of a depression and merely into a recession.

It said we were in a depression in October.

can you post it?

No, I'm afraid I can't. Sorry. It is the private property of a company.

Plus, its at the office...

 

[manu1959]

An index of leading economic indicators I saw today says that we are out of a depression and merely into a recession.

It said we were in a depression in October.

the decline was so rapid from oct of 07 to october of 09 it was quite shocking......

i am not sure i believe that we are are at the bottom of the dive and climbing......

given you can't post it what were the three indicators that are trending flat or up form oct to now.....

remember ..... "flat is the new up"

 

[Toro]

A better way of thinking about it is that the rate of decline is slowing, not that the economy has bottomed and is picking up.

It is an index of 22 indicators. The index just popped up on the last reading and may fall back down again, but it has been moving up from deep depression to just "depression" since February. Now we are at recession. In other words, the rate of decline has been slowing for about a month, which makes sense because the corporate bond market has opened up and deals are getting done.

Bloomberg.com: Worldwide

The rate of decline must slow before it can stabilize and begin picking up again. That is where we are at now.

It also showed that deflationary pressures are easing.

BTW, the average stock is trading at 6x-9x earnings, depending which way you want to measure it. Those are depression type multiples. The market is pricing in depression and deflation. If the economy is now only "recession" and prices are stabilizing, a powerful counter-trend rally is in the offing. From what level, I don't know, but it should be coming.

 

[Ravi]

Toro seems to agree with NPR. Listening to tonight's broadcast, though overall it seemed dire...it did sound as if things were looking up...claiming the market was reacting to yesterday's news and not to the near future.

We can hope for the best.

 

[wimpy77]

i was watching bloomberg this morning and they seemed to believe it was because of gm and china's vague economic plan details.

 

[manu1959]

A better way of thinking about it is that the rate of decline is slowing, not that the economy has bottomed and is picking up.

It is an index of 22 indicators. The index just popped up on the last reading and may fall back down again, but it has been moving up from deep depression to just "depression" since February. Now we are at recession. In other words, the rate of decline has been slowing for about a month, which makes sense because the corporate bond market has opened up and deals are getting done.

Bloomberg.com: Worldwide

The rate of decline must slow before it can stabilize and begin picking up again. That is where we are at now.

It also showed that deflationary pressures are easing.

BTW, the average stock is trading at 6x-9x earnings, depending which way you want to measure it. Those are depression type multiples. The market is pricing in depression and deflation. If the economy is now only "recession" and prices are stabilizing, a powerful counter-trend rally is in the offing. From what level, I don't know, but it should be coming.

thanks....so the angle of decline is less steep.......

 

[editec]

A better way of thinking about it is that the rate of decline is slowing, not that the economy has bottomed and is picking up.

It is an index of 22 indicators. The index just popped up on the last reading and may fall back down again, but it has been moving up from deep depression to just "depression" since February. Now we are at recession. In other words, the rate of decline has been slowing for about a month, which makes sense because the corporate bond market has opened up and deals are getting done.

Bloomberg.com: Worldwide

The rate of decline must slow before it can stabilize and begin picking up again. That is where we are at now.

It also showed that deflationary pressures are easing.

BTW, the average stock is trading at 6x-9x earnings, depending which way you want to measure it. Those are depression type multiples. The market is pricing in depression and deflation. If the economy is now only "recession" and prices are stabilizing, a powerful counter-trend rally is in the offing. From what level, I don't know, but it should be coming.

What wonderful news.

We can only hope that you're right.

 

[Toro]

Toro seems to agree with NPR. Listening to tonight's broadcast, though overall it seemed dire...it did sound as if things were looking up...claiming the market was reacting to yesterday's news and not to the near future.

We can hope for the best.

There are some signs we are groping towards stabilization, but the data is still pretty awful.

thanks....so the angle of decline is less steep.......

Right.

We can handle a recession. We've seen that before.

Of course, it could turn back down again, but one of the reasons why business fell off a cliff is because financing in some markets just stopped. For example, trade financing went to almost dead overnight. That's why ports in Asia literally did zero business on some days. If you cannot finance your trade bills, there ain't gonna be any trade. So, as that financing becomes more available, you will see more shipments across the ocean. That is likewise across various other markets. The securitization market has shut down. If you have difficulty factoring your credit card receivables or car loans, there are going to be less car loans and higher credit card rates. This is what the TALF is supposed to address.

Of course, there are still enormous problems. There is a black hole in Eastern Europe that threatens the European banking system perhaps even more than the subprime mess threatened American banks. We still could tip over the abyss.

 

[wimpy77]

do you think TALF will work

 

[toomuchtime_]

do you think TALF will work

It depends on what you expect it to do. Basically, TALF is the Obama-Geithner plan to get private investors to buy up new issues of debt backed securities in order to get more cash into the hands of lenders without the government having to go to Congress and ask for more money it would rather spend on social welfare projects.

Technically, the government will guarantee a portion of the price of each new derivative it approves in order to lower the potential risk to the private investor, and if it guarantees enough of the price, no doubt there will be a few stalwart takers, but since creating this market for new issues will not also create a market in which to resell them, the value of the derivative will drop sharply under the mark to market rule as soon as it is purchased unless the guarantee goes along with the derivative when it is sold, but even in that case, this will not effect the lack of a market for non approved derivatives,so under the best of circumstances its impact will be limited.

Another problem with TALF is that it will only approve AAA rated derivatives, but the debt they are based on will be composed of non mortgage consumer debt such as student loans, auto loans and credit card debt. I guessing that in the midst of this recession it will be difficult to find this kind of consumer debt that will be of AAA quality, so the scope of the program will likely be very small.

Putting it all together, I can't see how TALF can have any significant effect on the financial crisis or the recession.

 

[Care4all]

do you think TALF will work

It depends on what you expect it to do. Basically, TALF is the Obama-Geithner plan to get private investors to buy up new issues of debt backed securities in order to get more cash into the hands of lenders without the government having to go to Congress and ask for more money it would rather spend on social welfare projects.

Technically, the government will guarantee a portion of the price of each new derivative it approves in order to lower the potential risk to the private investor, and if it guarantees enough of the price, no doubt there will be a few stalwart takers, but since creating this market for new issues will not also create a market in which to resell them, the value of the derivative will drop sharply under the mark to market rule as soon as it is purchased unless the guarantee goes along with the derivative when it is sold, but even in that case, this will not effect the lack of a market for non approved derivatives,so under the best of circumstances its impact will be limited.

Another problem with TALF is that it will only approve AAA rated derivatives, but the debt they are based on will be composed of non mortgage consumer debt such as student loans, auto loans and credit card debt. I guessing that in the midst of this recession it will be difficult to find this kind of consumer debt that will be of AAA quality, so the scope of the program will likely be very small.

Putting it all together, I can't see how TALF can have any significant effect on the financial crisis or the recession.

a year ago, this might have been a good plan, before the recession had taken the major downslide perhaps?

but from what you just explained, it does seem unlikely this will have any kind of major impact at this point, because all debt has to be risky at this point....not AAA quality?

care

 

[toomuchtime_]

do you think TALF will work

It depends on what you expect it to do. Basically, TALF is the Obama-Geithner plan to get private investors to buy up new issues of debt backed securities in order to get more cash into the hands of lenders without the government having to go to Congress and ask for more money it would rather spend on social welfare projects.

Technically, the government will guarantee a portion of the price of each new derivative it approves in order to lower the potential risk to the private investor, and if it guarantees enough of the price, no doubt there will be a few stalwart takers, but since creating this market for new issues will not also create a market in which to resell them, the value of the derivative will drop sharply under the mark to market rule as soon as it is purchased unless the guarantee goes along with the derivative when it is sold, but even in that case, this will not effect the lack of a market for non approved derivatives,so under the best of circumstances its impact will be limited.

Another problem with TALF is that it will only approve AAA rated derivatives, but the debt they are based on will be composed of non mortgage consumer debt such as student loans, auto loans and credit card debt. I guessing that in the midst of this recession it will be difficult to find this kind of consumer debt that will be of AAA quality, so the scope of the program will likely be very small.

Putting it all together, I can't see how TALF can have any significant effect on the financial crisis or the recession.

a year ago, this might have been a good plan, before the recession had taken the major downslide perhaps?

but from what you just explained, it does seem unlikely this will have any kind of major impact at this point, because all debt has to be risky at this point....not AAA quality?

care

The basic concept is sound, imo, but the size and scope of the program is too small. Last fall, House Republicans, objecting to TARP, proposed that instead of intervening directly in the financial system, the government offer to insure portions of the long term value of debt backed securities charging premiums based on the assessed risk, in effect, insuring the value of the underlying debt. The idea was the with this government guarantee the market for these securities would revive, making these securities liquid again, and the higher market value would greatly increase the banks' reserves making them solvent again and able to lend much more money. In the event the recession continued to produce high default rates, taxpayer liability could have become enormous, but probably no more enormous than it will be if we nationalize the banks under the same conditions or try to buy up the derivatives as TARP originally intended. If the plan did revive the market for these derivatives and if the increased credit available eased the recession, then it would have cost the taxpayers nothing.

However, Obama, the Congressional Democrats, Paulson and Bush had all already committed to TARP and Paulson dismissed the idea by saying that while he believed it would work it would take too long and TARP would allow the government to fix the banks quickly.

 

[wimpy77]

agree with toomuchtime. this was paulson's original idea but backed out. just like at first when geithner was intially was going to release details on the bad bank scenario. the reason he was so vague at that moment was because at the last moment he backed out. he starting think it would cost way to much and too much risk to the taxpayers.

 

[Toro]

Technically, the government will guarantee a portion of the price of each new derivative it approves in order to lower the potential risk to the private investor, and if it guarantees enough of the price, no doubt there will be a few stalwart takers, but since creating this market for new issues will not also create a market in which to resell them, the value of the derivative will drop sharply under the mark to market rule as soon as it is purchased unless the guarantee goes along with the derivative when it is sold, but even in that case, this will not effect the lack of a market for non approved derivatives,so under the best of circumstances its impact will be limited.

It depends on who the buyer is and their time frame. Capital is being raised by partnerships to hold all sorts of paper for an extended period of time. These partnerships are not expecting to flip their paper out in 6-12 months, but instead are looking 3-5-7 years out. Their limited partners are locked in and are generally more permanent capital anyways, they really don't care if they are marked-to-market down in the near-term, at least not dramatically. If partnerships are raised to take advantage of TALF products, I imagine they will have similar terms. I also imagine that the new issues will not be priced based on prior assumptions on default rates. Thus, there prices wouldn't necessarily plunge since they will be coming to market at attractive prices.

But to answer the question, I have no idea if the TALF will work or not. I've heard arguments on both sides.

 

[DavidS]

Futures are off 135. We could break 6500 today.

It took us from 2/11 - 3/2 to work our way through the 7000s. If we breach 5999 next week, that will be the shortest amount of time it's taken us to burn through 1000 points on the DOW ever.

 

[wimpy77]

man stocks are virtually flat.

now they are moving in more of a downward trend atm.