The Myth of the Slow Crash

[Chris Coles]

Re: The Myth of the Slow Crash

Ahhh, but asset prices are the canary in the inflation mine...

And the noise from the canaries is becoming quite deafening...............

[jk]

Re: The Myth of the Slow Crash

Bernanke first appeared at Jackson Hole in 1999 with a paper arguing that central banks shouldn't target asset prices except when they affect the economy.

could someone explain to me how asset prices can NOT affect the economy?

[GRG55]

Re: The Myth of the Slow Crash

could someone explain to me how asset prices can NOT affect the economy?

...When all the assets are in the hands of the top 1%, and the rest of us are squatters and buy our food at the company store?

Seriously, there's a gold mine of material that has come out of the Jackson Hole proceedings (building on Finster's post above). I read Ed Leamer's paper on housing and recommend it. Compare it to Bernanke's views on the same topic from his keynote speech at J.H.

Otmar Issing was an increasingly vocal critic of the Fed's policy regarding asset prices and bubbles through the latter Greenspan years. Dr. Kenneth Rogoff holds the view that asset prices may, in some circumstances, provide the Fed with better and more timely information than lagging (and heavily massaged) inflation and employment data. Even Bernanke made a note that the data the Fed relies on may be less useful at times like this. The Fed is unlikely to adopt the canary as its official mascot any time soon, but might it gain some favour amongst the FOMC members after Jackson Hole?

[c1ue]

Re: The Myth of the Slow Crash

The Fed is unlikely to adopt the canary as its official mascot any time soon, but might it gain some favour amongst the FOMC members after Jackson Hole?

What? And displace the venerable head monetary lemming?

[Chris Coles]

Re: The Myth of the Slow Crash

Wonderful c1ue, best laugh I have had in years.

I may have confused others by writing about singing canaries when they should be hanging upside down from their perches. It just does not feel like the right time to start talking about completely collapsed assets so I thought singing ones sounded better.

[Chris Coles]

Re: The Myth of the Slow Crash

could someone explain to me how asset prices can NOT affect the economy?

It would seem you are not the only one to ask the same question.

September 5, 2007


Brown calls for asset transparency

Gabriel Rozenberg and Christine Seib


Gordon Brown called on the City yesterday to publish more information about the risky financial instruments that lie behind the credit crunch.
As a second British bank revealed its exposure to the US sub-prime crisis, the Prime Minister said that he would support international calls for greater transparency.


http://business.timesonline.co.uk/to...9.ece?EMC-Bltn

[FRED]

Re: The Myth of the Slow Crash

Today's Fast Economic Crash News:

Lay-offs surge 85 pct in Aug vs July: survey

Pending Home Sales Hit 6-Year Low

[Chris Coles]

Re: The Myth of the Slow Crash

Fund Of Hedge Funds To Blame?

09-05-2007 | Source: Hedge Fund Daily

Redemption requests in July by investors in funds of hedge funds may have been the primary cause for the huge market sell-off this summer and its impact on the HF industry, according to the first Trim Tabs BarclayHedge Fund report.


” Biderman said. The good news is that all August HF redemption requests are in and, he noted, “more massive deleveraging in the hedge fund world is unlikely unless something deemed unexpected bad news materializes this month.”

http://www.institutionalinvestor.com...7&LS=EMS139701

[bill]

Re: The Myth of the Slow Crash

The Economist Intelligence Unit has published a report titled "Heading for the Rocks - will financial turmoil sink the world economy?" It contains some scenarios for the major economic regions. The link below...

http://a330.g.akamai.net/7/330/25828...he%20rocks.pdf

Nice report, thank you

The report confirms the unwinding of trades, paper freeze with reappraisal going forward, liquidity drying up, asset price and commodities down globally.

Flippers, speculators feel the liquidity squeeze and many investors run for safety. Who will be in a position to take advantage of such a buying opportunity? On page 30 the report mentions SWF as being a potential purchaser of assets when assets sell off. I agree, as said in my previous post http://www.itulip.com/forums/showthr...1992#post11992 the potential capital pool would have to be big and global.

SWF's will have to be politically positioned, no problem just call up an Investment Banker they will immediately dispatch a team over to help you.
http://biz.yahoo.com/ft/070902/fto09...1368.html?.v=1

September 2, 12:55 pm ET
Investment banks are creating dedicated teams in London, Hong Kong and Japan to advise sovereign wealth funds and cash in on the growing wave of activity from government investment companies.

Bankers also expect SWFs to take advantage of the credit crunch to undertake deals while private equity groups, unable to raise financing, are forced to sit on the sidelines. "The current investment climate has created a huge opportunity for many of these funds and they have become very real competitors to both private equity and strategic players," said Jeffrey Culpepper, head of investment banking for the Middle East and north Africa at Merrill Lynch.

Keep a eye on Japan ’s prospective SWF http://www.reuters.com/article/marke...0070905?rpc=44 it may invest Japan ’s Sovereign Pension Fund GPIF.http://www.morganstanley.com/views/gsb/index.html

Sovereign Pension Funds
August 28, 2007

By Stephen L. Jen

While the emergence of sovereign wealth funds (SWFs) will be one of the key trends for the financial markets in the coming years, investors should also pay attention to some prospective changes in the way some of the sovereign pension funds (SPFs) may be invested. Specifically, we believe that we will witness a general rise in SPFs' exposure to foreign assets and riskier assets (i.e., equities), with logical implications for the global financial markets.
Numerous examples of SPFs which are 'outward oriented' and not risk-averse. Singapore's GIC manages part of Singapore's official reserves and the Central Provident Fund (CPF). Australia's Future Fund and NZ's Superannuation Fund are likely to have 80% of their portfolios in foreign assets. South Korea's National Pension Service (NPS) is large (US$220 billion) and will increasingly raise its foreign content. Last but not least, Japan's Government Pension Investment Fund (GPIF) - currently at US$1.37 trillion - will export another US$58 billion in the next two years, and possibly a further US$150-200 billion beyond 2009.
SPFs are large. The SPFs of the G10 countries total US$4.4 trillion. This is a large sum compared to the US$2.6 trillion managed by SWFs.
SPFs currently have a low exposure to foreign assets. The weighted average foreign exposure is only 19% for the SPFs in the G10 countries.
This will change, however. Global aging (declining fertility and mortality rates) will exert pressure on the SPFs to enhance their investment returns, and globalisation will encourage a reduction in the 'home bias' of these funds - precisely the same pressures that will propel SWFs. In my view, SPFs and SWFs should be considered collectively as a major factor for international financial markets in the coming years, as several SPFs may in fact become managed by SWFs in the future. Specifically, Japan's prospective SWF may be centred on its SPF - the GPIF.

[GRG55]

Re: The Myth of the Slow Crash

Fund Of Hedge Funds To Blame?...

Redemption requests in July by investors in funds of hedge funds may have been the primary cause for the huge market sell-off this summer and its impact on the HF industry, according to the first Trim Tabs BarclayHedge Fund report.


” Biderman said. The good news is that all August HF redemption requests are in and, he noted, “more massive deleveraging in the hedge fund world is unlikely unless something deemed unexpected bad news materializes this month.”

Hubris writ large..."it must be the fault of all those unsophisiticated investors in fund of funds..."

The hedgies are likely no where near finished marking to market. This sort of nonsense sounds much like: "sub-prime is contained", "housing has bottomed" and "the economy is strong"...and about as accurate. LOL

[FRED]

Re: The Myth of the Slow Crash

New Myth of the Slow Crash story:

Employers Cut Jobs in August
September 7, 2007 (Jeannine Aversa – AP Economics Writer)

Employers Cut Payrolls by 4,000 in August, the First Drop in US Jobs in 4 Years

Employers sliced payrolls by 4,000 in August, the first drop in four years, a stark sign that a painful credit crunch that has unnerved Wall Street is putting a strain on the national economy.

[GRG55]

Re: The Myth of the Slow Crash

New Myth of the Slow Crash story:

Employers Cut Jobs in August
September 7, 2007 (Jeannine Aversa – AP Economics Writer)

Employers Cut Payrolls by 4,000 in August, the First Drop in US Jobs in 4 Years

Employers sliced payrolls by 4,000 in August, the first drop in four years, a stark sign that a painful credit crunch that has unnerved Wall Street is putting a strain on the national economy.

Fund Of Hedge Funds To Blame?

09-05-2007 | Source: Hedge Fund Daily

Redemption requests in July by investors in funds of hedge funds may have been the primary cause for the huge market sell-off this summer and its impact on the HF industry, according to the first Trim Tabs BarclayHedge Fund report.


” Biderman said. The good news is that all August HF redemption requests are in and, he noted, “more massive deleveraging in the hedge fund world is unlikely unless something deemed unexpected bad news materializes this month.”

http://www.institutionalinvestor.com...7&LS=EMS139701

That probably qualifies as "unexpected bad news"...

[Verrocchio]

Re: The Myth of the Slow Crash

Buy yer Financial Apocalypse Survival Tackle kits here! [FAST(tm)]

1) 10 kW solar array
2) 'Mad Max' style solar/fuel cell 4x4 with armor, spare run flat tires, 40 gallon spare fuel tank
3) Stash of 1000 gold coins
4) 2 years per person of MREs
5) water filter and 100 gallon water tank
6) club card at North Sierra Nevada mountains survival club
7) shotgun with 500 rounds mixed 00 and solid slugs
8) 30.06 rifle with 200 rounds
9) .22 rifle with 1000 rounds (for game)
10) 30 pounds of mixed spices
11) 30 bottles of assorted liquers
12) Crate of assorted medicines including antibiotics, cough/cold, antifungal

All for the bargain basement price of $500,000! plus $10,000 per extra person.:eek:

Hmm, the kit includes 1000 gold coins and the other goodies, too? And for only $500k? I'll take your entire inventory.;)

[Rajiv]

Re: The Myth of the Slow Crash

1000 gold coins

Correction: It should have said 1000 golden coins!

[Chris Coles]

Re: The Myth of the Slow Crash

With the greatest of respects, with no salt, you would not last the first winter. You need to read "The River Cottage Meat Book" by Hugh Fearnley-Whittingstall.