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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: GaAs52 who wrote (80613)	12/3/2000 12:43:41 PM
From: SliderOnTheBlack	Read Replies (4) \| Respond to of 95453

GaAs52 - re: Greenspan bailout Ga; Let me expand... The Greenspan "put" refers to the Fed Cutting Rates to bail out the stock market; stepping in to add liquidity - off market transactions, or any other "stabilization/intervention/manipulation" action they deem necessary & coordinate via the PPT/ESF in addition to mere Fed rate cuts. - but Greenspans warnings to Congress were twofold. One; that he needed new Bank Failure reform - where he has continually specifically addressed derivative exposure and two; that Hedge Funds such as LTC, or individual Banks (ie: none would be too big to fail) would not be bailed out - via "off market" settlements etc, and not only would they not; more importantly - they "could" not... He most assuredly referred specifically to LTC in his comments of the Street not expecting another LTC type of bail out. Now; I would conceed that the Fed would intervene with rate cuts & intervene to stabilize a true market crash/freefall; but it may not matter as the damage is allready significant and the next move down becomes decimation. The sobering fact; is that derivative leverage by many US banks has greatly accelerated since LTC. US Corporate debt has exploded & the quality of that debt has imploded. US consumer spending exploded, their savings imploded - literally to a negative savings rate with an alltime high debt ratio/load. This market has hypnotized investors from reality. Never has reality been so polarized from common sense. The warning signs are all over this market; if the mere valuation bubble was not enough. Seidman just reported that "twice" as many US Banks (9%) face insolvency/failure presently; as what we had during the S&L Crisis; in the event of another Real Estate Contraction. Read that Citicorp expose if you want to see the "accounting" house of cards that many "financials" are created & supported with...and we just had the merger of the two US Banks with the greatest derivative risk - vastly exceeding their combined market caps. Just as in 1998; any global event, any significant credit collapse, any major individual default and any significant currency fluctuations dramatically impact these derivative positions. The US debt and equity markets depend on continued foreign investment. from prudentbear.com; re: foreign investment <"...foreign ownership of US assets now measure over $6.4 trillion (equivalent to 66 per cent of US GDP), according to Bridgewater Associates, compared to US holdings of foreign assets which measure a mere $4.7 trillion (or 48 per cent of GDP). On a net basis, the US now is a net debtor to the tune of almost 20% of GDP, and this continues to mount with every monthly increase on the nation’s current account deficit. The foregoing study by Bridgewater Associates breaks down the extent of this foreign ownership in the following manner: Foreigners own a record 38% of the US treasury market, and if you take out the treasuries held by the Fed, foreigners own 44% of the liquid treasury market. Foreigners own a record 20% of the US corporate bond market. Foreigners own 8% of the US equity market. Including direct investment foreigners own l4% of US corporations Foreign ownership of US assets per se is not the problem. The threat comes from the fact that this foreign ownership overlays an economy rife with debt and, hence, highly vulnerable to financial dislocation should this foreign capital withdraw precipitously. We have already seen the effects of the sudden withdrawal of short-term capital in economies prone to financial fragility during 1997/98: Thailand and Korea immediately spring to mind. But in one respect the US is far more vulnerable than these Asian economies, which at least had the virtue of high levels of private household savings to fall back on. In the US, by contrast, household savings are virtually non-existent (indeed, they are negative, as of the most recent figures for July). Indeed, the ratio of debt relative to income for both the household and corporate sectors is at an all-time high. By way of comparison, these ratios are well above the levels that led to the widespread banking and savings and loan crises a mere decade ago. The net debt issuance of US private households and corporations taken in aggregate is now nearly 6 per cent of national income, according to a recent study by Andrew Smithers---a historically unprecedented level. Wynn Godley of the Jerome Levy Institute has pointed out that when a private sector deficit of this magnitude has been attained elsewhere in the G-10, it has invariably led to financial crisis, recession, or both. The parallels with the Asian nations circa 1997 are both ominous and instructive. As Bridgewater notes, “If foreign sentiment does ever turn they have a boatload of US assets that could be sold. These holdings are so big, and so much larger than US assets abroad that they are a long-term risk to US financial markets.” A precipitous withdrawal of foreign capital risks setting in motion a deflationary dynamic in which debt defaults intensify, thereby accelerating an even greater contraction in economic activity."> ================ One other thought; foreign investment is not in the noveau dot.com IPO's and not overloaded in the NAZ; it is in the DOW pillars. What has re-assured many US investors is that the DOW is still basically treading water here and many have been led to believe that this is just a "Nasdq" event... wrong. When & if foreign investment repatriation accelerates we will finally see the DOW break imo. The US Dollar will be the barometer to watch. One of the great factors in the risk to our equity & debt markets is also when, not if - OPEC Petro-dollars start hedging what will surely, shortly become a negative double-whammy to their "net receivables" for their Oil - that being a contracting price for Crude Oil itself (the inevitable return to historic norms) and payment in a falling/contracting US Dollar. Would they be so stupid as to continue to take falling dollars & continue to invest, yet alone hold; a simultaneous falling US Dollar and US Equity market & imploding debt market ? OPEC has allways gone to gold in the end stages of virtually all the prior Oil Shocks and they will again. why would they want to simultaneously be receiving a lower price for their Oil and be paid with a depreciating US Dollar ? - they won't; as they never have. Also; the sign that the game is over; is when OPEC moves to price Oil in Euro's globally and I belive that will happen sooner than anyone thinks. Saddam; has allready tipped OPEC's hand there & obviously so. We were able to pull off one of the great illusions of modern financial times - we printed so much fiat money & ran King Dollar to such levels (often through intervention & manipulation) that we not only convinced the world to take our fiat paper, but to then recycle it back and to buy into our fiat hyper pumped-equity market. That game made sense as long as the Dollar remained alone at the top of the global currency heap and as long as the music never stopped in our "musical chair" equity market game. But; the Dollar must fall - as it is creating global stress fractures in other currencies & economies and too severely impacting the profits of our own US Companies. Rubin & Greenspan have truly backed the US into a potential inflation trap and a Catch-22 Dollar trap. Rubin got while the "getting was good"... Greenspan's ego may become his own worst enemy; as he may think that he's good enough to walk us out of even this darkness... but, he's not. We've seen and are going to see; one of the greatest transfers of wealth in history; from those individual US investors - to the Investment Bankers. It is no accident that Goldman went public here, or did their secondary when they did. Look at all these IPO's that are crashing & burning. Look at the Telcom Bonds & that entire industry. Look at the Nasdq now cut in half & even surpassing the Nikkei's decline... and some still deny the NAZ was a bubble - but, have no problem acknowledging that the Nikkei was ? - hello... Folks - fiat dollars & the greatest fiat pump in history will not win. I think Matt Simmons & Big Dog's interpretation & labeling the underlying fundamentals within the Oil world as a looming - "crisis" are correct... but, the big question is when; because I don't think it's in the nearterm horizon and presently; the Oilpatch "stocks" are capped by external market forces. We aren't reaping any reward for record earnings, or record combined commodity prices presently; in fact we're rapidly selling off directly into them. Will there be a time to return to Oil Stocks ? Yes; and we may even be seeing the seeds of the crisis being planted presently; if the pendulum overswings to the downside in Crude Prices, due to a slowing US Economy. If investment in the infrastructure stalls & if drilling & exploration slows here shortly due to the Oil Majors playing the wait & see game; the crisis potential exacerbates... but the "crisis" may be part deux of a great history lesson unfolding here. The "Crisis" may be a late 2001-2002 story. But regardless of when the crisis arrives - the question remains; will the Oil "stocks" be seen as a flight to safety haven and will they be able to move against the grain of perhaps a still negative & collapsing US equity market ? Also; will that move being after the OSX collapses to OSX 50-60-70; and will that move merely be a move from OSX 50-70 to OSX 120 ? - will we all still be ahead by allready having exited here ? Personally I see little on the risk vs reward horizon to tempt me to make any sifnificant bets on the Oil Stocks; or anything other than a purely defensive move in the Gold/PM stocks (potentially a historic opp imo) & Cash; in addition to some short trading positions. I may play some very limited & short term trading opportunities within Oil Stocks; but will not take a permanent position untill all the external factors become resolved & Oil Stock Fundamentals return to controlling their own destiny. - I view the US dollar here as being more "unattractive" than at anytime in recent history - I view the US Equity market as still carrying as much internal & external risk as anytime in recent history - I view the impact that Oil could "still" negatively have upon Global Markets & Economies here - as near an alltime high risk level - I also view the positive impact that Oil Stocks "can & may" receive here from positive Oil fundamentals & commodity prices as being near an alltime low; as Oil Stocks do not control their own destiny here, they;ve obviously disconnected from commodity prices & are being capped by external market forces; creating a terrible risk vs reward scenario. - I view the US Equity market as still being vastly overvalued on any historical metric & the facts still clearly support that. - I view our US Banking Industry as having reached new levels of risk - via both the doubling of the % of Banks facing insolvency during a Real Estate contraction per Bill Seidman's findings; as well as the fundamental risk they face with this reckless explosion in derivitates and their simultaneous reckless credit expansion - that is now internally imploding from both ends... corporate bonds - to the front lines of consumer credit. - I view the US Economy as being on the verge of a Recession and the "R" word will soon be acknowledged just as the "B" Bear Market finally has been. - I can't imagine foreign investment remaining in our Currency, or our Debt & Equity Markets. ... I think we're going to be taught a 20-year generational market lesson here. We shall see...