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

To: KyrosL who wrote (37191)	7/15/2008 7:36:53 PM
From: elmatador	Respond to of 217918

Roubini fails because it is "unfortunate that economists have not given us a better picture of how comparative advantage works at the micro level through the movement of labor, skills and capital."

To: KyrosL who wrote (37191)	7/16/2008 1:59:37 AM
From: energyplay	Respond to of 217918

Wholesale prices were up 1.8% last month, and up 9% in the past 12 months - the highest rate since 1981. Chances are better for rising prices than deflation and default. There is very little debt in the US financial system with any inflation provision or indexing.

To: KyrosL who wrote (37191)	7/16/2008 6:25:38 AM
From: Haim R. Branisteanu	Respond to of 217918

Agree with most of your points the one thing I agree with him is that the banking sector and other financials must change their business model. In any case I am thinking to buy FNM the stock or 2y leaps as a insurance that things are not as gloomy as any one thinks

To: KyrosL who wrote (37191)	7/16/2008 7:07:56 AM
From: carranza2	Read Replies (2) \| Respond to of 217918

Roubini sounds a bit insane lately. He sounded completely crazy when I began reading him for entertainment years ago. I read him mostly because I like to read everything I can get my hands on and because he was so outre. In retrospect, he was 99% correct and years ahead of the curve. I wish I had taken him seriously much earlier. Look at what he said in 2006 and compare it to what took place. Not 100% correct, but very accurate nonetheless. All at a time when everyone had rose-colored lenses on; rgemonitor.com Do not underestimate Roubini. Do not let his wild hair and speaking manner influence you. Look at his record and challenge his reasoning, if you can. Given his record, he is likely correct. I think the man is absolutely stellar. He is talking primarily about financials and their effect on the market, a point you seem to ignore. He is absolutely correct when he points out this: This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market. Roubini's 12 steps are indeed coming true. See how many of these you can say already exist or are well on the way to becoming true: pithaly.blogspot.com Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted. Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit. Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit. Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue. Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank. Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions. Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt. Step nine would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks. Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices. Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency. Step 12 would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”. Sell Roubini short at your own peril.