Capitulation is when people lose all hope and they sell everything.Originally Posted by pete
We definitely are close to it (I sent an text to a colleague on Monday calling capitulation for Tues morning, but it seems I was somewhat premature).
Of course capitulation is a stage in a normal capitalist economic cycle, what if this doesn't turn out like the way the economics books say it should?
A question I don't think has been raised yet - where's all this going to end? What sort of place will the world be in five years, say? I'm assuming subsistence farming is an over-reaction, but the structure of the Irish economy in terms of jobs (phrased badly, but you know what I mean) will be totally different. What will we be doing, what will we be buying, what will we be able to afford?
I doubt any one knows that. No doubt we heading for worldwide recession but how long that lasts is any ones guess.
As small open economy we are badly dependent on multinationals so I think we will ride on the worldwide tide.
Not looking good today sounds like a big US bank could be looking for chapter11 bankruptcy , only way out of this is for the banks to call an amnesty and declare all the dodgy CDO crap that some of them are hiding which is the root cause of the mistrust and re-open the interbank lending markets.
Distrust?
This is more like the Mexican Standoff scene from Tarentino's "True Romance"
I have to say this really feels like the capitulation phase. However, I've mainatined for over a year now that the equity markets have failed to see what the credit markets spotted, and even the wholesale credit markets were slow to cop on to the reality of US housing. I despaired when equities would rise based on alaysts' expectations of easier monetary policy. You'd swear these analysts had been hooked on the Greenspan era panacea of lower rates and knew next to nothing of what really affected corporate earnings.
Anyway, even if this is the capitulation, it's hard to see how any recovery in valuations can happen anytime soon.
FT Alphaville, essential reading during this crisis (and indeed any other time) quotes Jim Read from Deutsche saying the same thing, and Read adds that even at today's crashed levels he sees equities as pretty fairly valued given earnings outlook.
If anyone followed the Niall Ferguson documentary on Ch4 last year "The War of the World" (?) you'll quickly see now that all his conditions for a major international war are actually brewing. I know this sounds daft and alarmist but economic and social conditions ain't too different to the years preceding WW2. Declining empire, recession / depression, ethnic faultlines etc. It might explain why Campbell's Soup is perceived as being the strongest corporate credit globally, its credit margin being less than the UK, Germany and USA! Buy arms makers & baked beans as my mate said to me this morning.
OK, so maybe I'm OTT & I don't particularly like Niall Ferguson but food for thought.
Look at the Baltic Dry Index today - an index of freight volumes around the world and a major leading indicator of the oil price. It stood at 11500 in May this year and is at 2500 today. I read today that the global shipping indistry has ground to a halt. Exporters have asked their ships to remain in port because they won't accept the Letters of Credit provided by their buyers (i.e., the IOU provided by the buyer's bank saying they'll guarantee the buyer's creditworthiness). These ain't local Crimean banks - this is the likes of BNP, Citi and global banking giants.
Rate cuts mean little in my opinion (though thankfully my own mortgage is tied directly to UK Base Rates). Keynes' famous "pushing on a piece of string" springs to mind. This ain't about the cost of money. The very basics of money transmission have broken down. The very basics of global trade are breaking down. Hull beat Arsenal & Spurs. St. Mirren beat Rangers. What's next? A Robbie Keane competitive Ireland goal?
Last edited by Stuttgart88; 10/10/2008 at 2:57 PM.
The last time we had similar economic circumstances National Socialism was the biggest legacy. Food for thought.
Urgent warning
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I was trying to tell ye that I am living in your future and I was told to go talk to Joe Duffy.
Food importers in Iceland obviously have no credit now with their foreign suppliers, a letter of credit is not enough, they have to pay for everything upfront. They have to prove they have done that to the shipper before the shipper will accept the goods on board.
The importers have not the capacity to pay upfront because their lines of credit are already stretched. Even if they do get a bit of local cash, they can't get foreign currency.
The Gov has to borrow foreign currency and make that available to the importers.
Then how do you trust the Bank abroad who receives the money or even the wholesaler, even the lorry driver carrying the goods to the port.
My Bank was trying to send money to a student who is studying in England, legit purchased GBP, one main English bank just grabbed the money that was in transit to the students account and said thats ours you owe us. That issue had nothing to do with the student or the family trying to send the funds.
Can you imagine the morals of that bank, confiscating 3 months food and rent that was in transit to a needy student.
.
Seems it would be best that some banks so under at least in the short as might flush some of the crap out of the system?
Not sure it matters at this stage Pete.Seems it would be best that some banks so under at least in the short as might flush some of the crap out of the system?
Equity valuations are assuming a large percentage of assets are worthless.
Consolidation is bound to occur soon, but no guarantee that will help anything other than cost base.
A few more doing the rounds
Q. What the capital of Iceland?
A. About E3.50 (Apologies Geysir)
Q. Whats the definition of an optimistic banker?
A. One who irons 5 shirts on a Monday....
What do you say to a hedge fund manager who can't short-sell anything? A:
- Quarter pounder with fries please
I think we should book our holidays to Iceland, must be dirt cheap. Any chance of an away friendly there I wonder.
In Trap we trust
It's a tourist paradise right now compared to what it was.
Draught Beer at 1/2 the price now, €3 for 1/2 litre
My 1/2L bottle of Grolsch at €5 hic
Empty pubs.
forget the banks
I can give you a good deal on your Euros
Icelandic PM did a press conf. this afternoon with the foreign press, mostly English hacks.
I have to say, he was proud and dignified and firmly put them in their place.
He's looking more like Churchill with every passing day
Right lads lets petition the FAI for an away friendly to Iceland.
In Trap we trust
Very good.
Incredible how Int and Domestic legislators(who must have access to top advisors) appear so baffled and helpless to stop. what seems a runaway train.
I have heard more that one ecomonic commentator say the formula for short term recovery is for Goverments to increase capital expenditure and this combined with lower interest rates is the way forward.
Sounds risky but what do I know.
BTW Stuttgart I saw that documentrary series presented by Niall Ferguson.
I felt after watching it, that his conclusions centred around tribalism and how we have to learn how it dangerously rears its head in uncertain times.
Scarcity of resources, financial meltdown, who will become the scapegoats?
I personally think we should round up the boys on the trading floor.
"Analysts" my arse.
This is a total crisis/recession and now I'm hearing on the BBC WS 'serious recession'.Scarcity of resources, financial meltdown, who will become the scapegoats?
I personally think we should round up the boys on the trading floor.
"Analysts" my arse.
Beware of the scapegoat agendas but I'm sure I'll get a good response to a 'stand up if you hate the Brits' chant going at the Iceland v Macedonia game on Wednesday.
Joe Rogers has worked with George Soros in the past. Interesting to hear financial guru say bailing out banks is a bad idea. Interviewer was not getting the answer he wanted.
I can´t say I support Joe´s solution either, Laissez faire. Joe just wants to be allowed to get on with doing the sweep up operation and let everything be.
Well I do not trust that the greed of Joe and his like, will be naturally kept in check and will not do untold damage to ordinary people. His responsibility is to his own profits and investments.
No matter what ideology (within reason) one subscribes to, the fundamental principle of Economics is the movement of money. Hide it in a safe, then it loses value. Banks are essential to that principle. Without a banking system an economy stagnates.
Essentially the two fundamental principles of good Banking have been seriously neglected.
The first and foremost, is the Banks intrinsic greed must not threaten the common peoples interests.
The second is the printing of money without proportionate bullion.
When the talk today is about trust, the absence of trust being the problem, I see that as just a symptom of the greater malaise of bad banking practices followed almost everywhere.
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