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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (36815)	7/11/2008 9:10:41 AM
From: carranza2	Read Replies (1) \| Respond to of 217573

Don't do it! Yup, here we go.

To: TobagoJack who wrote (36815)	7/11/2008 9:24:10 AM
From: elmatador	Respond to of 217573

consumers’ purses snapping shut. The problem is the range of blows falling on American and British shoppers. On the ropes Jul 10th 2008 From The Economist print edition Beware a frightening noise in America and Britain: consumers’ purses snapping shut LIKE Rocky Balboa, the boxer portrayed on film by Sylvester Stallone, Anglo-Saxon consumers have taken a lot of punishment in recent years. And each time, just like the pugilistic thespian, they have come back fighting. At last, however, it looks as if they are about to be knocked out (as alas happened, cinematic cognoscenti might recall, at the start of “Rocky III”). The problem is the range of blows falling on American and British shoppers. Academics and economists continue to debate how important the role of house prices, and mortgage-equity withdrawal, was in sustaining demand during the early years of this decade. No matter. Consumers who were using their houses as ATMs cannot do so any longer. And if a decline in their housing wealth does not hurt them, surely the fall in the stockmarkets (20% off their peaks) will do so. Perhaps consumers could shrug off the decline in their wealth if they felt confident at work. But the American economy has shed jobs in each of the first six months of the year. In Britain the headline unemployment number has not risen much yet but some sectors, such as builders, are laying off staff. And even those workers who have kept their jobs are not feeling flush. Thanks to the jump in food and fuel prices, headline inflation rates have risen sharply. For central bankers it is good news that pay claims have not kept pace. That way economies can avoid a 1970s-style wage-price spiral. But the corollary has been that workers are suffering from wage cuts in real terms. Consumers could overcome even that handicap if they were able to keep borrowing. But the credit crunch is likely to put a stop to that. Mortgage approvals have already fallen sharply and surveys indicate that banks are eager to restrict other types of consumer lending. Holes in the walls This bad news has not gone unnoticed. The June survey of American consumer sentiment showed the most depressed outlook since 1980. So why has there not been much effect on retail sales, or indeed on economic growth? In America a tax rebate landed in people’s bank accounts in May and acted like a dose of smelling salts on a groggy bruiser. Although Merrill Lynch estimates that some 90% of the rebate was saved, there was still enough money around to boost sales of food and electronics. In Britain consumers may have experienced a Wile E. Coyote moment: having walked off the edge of the cliff, they have only just looked down. Marks & Spencer and other retailers have seen a sudden deterioration in sales in recent weeks, perhaps connected to a similar plunge in the housing market. In America department stores such as Neiman Marcus, Saks and JCPenney have all reported declining sales in their most recent results. The corollary of high consumer spending has been that savings rates have been correspondingly low. Perhaps that was because Americans and Britons felt the housing and stockmarkets were doing the saving for them; perhaps it was because credit was cheap and easy to get. Neither is true any longer. So the low savings rates recorded in the first quarter—0.6% in America and 1.1% in Britain—can surely not be sustained. If savings rates grind their way back up to the 7-8% seen in the early 1990s, consumer demand will be slow for several years to come. And that is a heavy burden, since consumption is such an important part of both economies; in America, it made up more than 70% of first-quarter GDP. What can the authorities do? America has just enough firepower for another tax cut, which must look tempting in an election year. The Federal Reserve must also be hoping that its interest-rate cuts, which began last September, will start to be felt in the second half of this year (monetary policy usually takes 12-18 months to work). In Britain the size of the budget deficit limits the room for tax cuts and high inflation makes it awkward for the Bank of England to reduce interest rates. Although it may be good in the long term for the Anglo-Saxon economies to reduce their dependence on consumers, the short term could be nasty if the shift is rapid. Either way, like Rocky’s face after 15 rounds in the ring, it won’t be pretty.

To: TobagoJack who wrote (36815)	7/11/2008 11:38:26 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 217573

TJ, I am getting more optimistic by the day :) long AUD since Sept, 2005, long CAD since May 2006 long EUR since 1999/2000 (see my posts to Heinz then) - boxed the amount at 1.58 and added some more short EUR long USD with hedges around 1.43 / 1.46 in Put EUR/USD options - well the hedges go to money heaven and I pocket the premium money and after the whole bruhaha with the US RE will blow over and EU problems will take center stage as will RE in CEE and ME I will collect my pennies take into account we are speaking mid 6 figures and 7 figures Best of Luck