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

To: Amelia Carhartt who wrote (78947)	9/2/2011 10:23:12 AM
From: average joe	Respond to of 220272

The number is diminishing every year.

To: Amelia Carhartt who wrote (78947)	9/2/2011 6:46:43 PM
From: average joe	Respond to of 220272

Honey, I shrunk the global assets by 40 trillion$'s and still counting!! Fri Mar 6, 2009 12:10 PM EST business, missing-trillions By iqbal.latif In the mid-'80s, Wall Street turned to the quants—brainy financial engineers—to invent new ways to boost profits. Their methods for minting money worked brilliantly... until one of them devastated the global economy. World valuation at its peak. Li- Honey, I shrunk the global assets by 40 trillion$'s and still counting!!( the author of 'Gaussian copula function.') Wall Street turned to the quants—brainy financial engineers—to invent new ways to boost profits. Their methods for minting money worked brilliantly... until one of them devastated the global economy. One question haunts me on all dinner tables, from political leaders to bankers the quest of the holy grail of missing trillions remains unanswered, where has the money gone, I usually reply with a little condor that the money was actually not there at the first place, valuations are illusory meltdowns are real. The trail of the missing trillions is a short story of where has the money gone from the global monetary system. One needs to understand what has happened to the 'money' in the system.Valuations are based on 'human design' except when they wear down the monies lost are someone savings; one must never forget that assets are sum total of equity and liabilities, when asset valuation is below the total liabilities the negative equity is actually the disappearance of savings. The insolvency of global financial system is rapture of confidence and savings it can only be repaired by pro active injection of the missing link i.e. cash. When we say evaporation of asset bubble from 65 trillion $'s to 25 trillion $'s, the amount of money that has disappeared from the global asset base is around 40 trillion $'s. Say we assume safe 30/70 loan to equity ratio, on that conjecture at the top of the market the global asset base of 65 trillion constituted of equity of 19.5 trillion and 45.5 trillion of bank loans. Today global assets after meltdown stand at 25 trillion, the equity has just been wiped out and global loans against these assets still stand at 45 trillion with a market valuation of 25 trillion, this represents a negative equity for the lenders of 20 trillion, market like a pendulum swings between' irrational exuberance' on one extreme and 'irrational gloom' on the other end. The write down of the valuation has been ruthless and one sided, market tend to behave irrationally the extremes and volatility that we see today is unprecedented and will subside if confidence returns similar to oil which did not belong at 150$ a barrel nor does it belong to 30$ where the markets expect it to be. (Inflation adjusted we have never seen oil so cheap in recent years) If P/E ratios at an average of 21 were excessive, low P/E ratios today invite investor's enthusiasm; based on these low valuations and negative equity for the 'global lenders' of 20 trillion we see global asset holders owing to the lenders monies far greater than what they are worth. If the global assets in good times were making 4 trillion in profits today in bad times they still make 3 trillion, at 12 times earnings they are worth around 36 trillion far in excess of what market is valuing these assets at 25 trillion. Four trillion in profit decline to 3 trillion might be the optimist view point; a lot of nay sayers are actually saying losses will be much greater. Xover, which calculates default rates for corporate debt assumes at current levels, 35% of firm will go into bankruptcy. We cannot have equity at zero and no impact on loans, equity is correcting as credit market has already written down most of the assets (ABS, CMBS and CDO's) This equation of mass meltdown, negative equity on one hand and strong consumerism and global spending on the other do not balance. Global burden has to be written down or debt monetized, short of that we will see mass bankruptcies leading to actual impact on real economy. Global trade will collapse and nations will economically and politically ruin. The markets have taken care of reduction of debt by marking the corporate and sovereign bonds far below par, leaving USA, UK and other stable economies untouched. The issue if moral hazard is also taken care by the markets by wiping out of the banks equities. ( citi trading below 1$) The flight to quality and flight to $ indicates that market believes that treasuries can help and stimulus is required as an antidote to the poison of asset bubble. Market is the best barometric it is therefore treating the US treasury and even Gilts with respect, as a best referee the 'markets' are telling the government to stave off the crisis by instituting the element that is missing in this equation, the element of cash. Quantitative easing provides one such avenue, money has disappeared as a result of correction in valuation, the written down assets have no markets since there is no cash around, the excessive swing of the markets and writing down of assets have brought values of real assets to a historical low, I see that few trillion $'s of global quantitative easing will help grease the system and bring some stability back. If the global economy will not be stabilized after all these measure the first sign would be flight from US treasury and collapse of major currency majors with onset of mass inflation, presently staying cash would mean no return as interest rates hover around zero. One sign of mass despair and gloom is that you talk to anyone and they will tell you stay cash, but that is a self defeating obsession. The logic is that assets will be cheaper, perhaps as the world collapses the first hit will be the paper currencies, cash will be the first casualty as world will enter into a more barter like trading system. Hopefully global assets will eventually stabilize with a great deal of injection of money, these stimulus packages will work, one should own assets and hedge the bets if we fail the cash anyway will be hit if we succeed assets will be much more dearer, in absence of gold standard paper currency is worth the IOU of the sovereign backing it, today US and UK are trusted by the markets as sovereigns that take their economies out of the crisis, lets trust the markets they are the best indicators, yes my mind will change when US treasury trades at a discount the part will be over then jump into Gold. Member 3771207