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Cptkernow

A Ski-jump Recession

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“Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery…. ‘If we have a recovery at all, it isn’t sustainable,’ Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices. ‘This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.’ Equity and credit markets have rallied on hopes that government intervention is pulling the US out of the deepest economic slump since the Great Depression…. Tudor … told clients in an Aug. 3 letter that the stock market’s climb was a ‘bear-market rally.’ Weak growth in household income was among the reasons to be dubious about the rebound’s chances of survival, Tudor said. A focus on misleading indicators is driving markets, macro managers say…. The housing data isn’t as rosy as some see it, Harrington said. As existing U.S. home sales rose 7.2 percent in July from the previous month, distressed deals including foreclosures accounted for 31 percent of transactions…. Clarium, which oversees about $2 billion, is positioned for an equity bear market through investments in the U.S. dollar, Harrington said. Falling stock prices will strengthen the currency by forcing leveraged investors to sell equities to pay down the dollar-denominated debt they used to finance those trades, he said…. Macro managers’ pessimism is fueled in part by the U.S. government’s response to last year’s financial crisis, which they say fails to address the root cause. Banks still hold hard-to-sell assets on their balance sheets, the managers said…. The Financial Accounting Standards Board voted in April to relax fair-value accounting rules. The change to mark-to-market accounting allowed companies to use ‘significant’ judgment in gauging prices of some investments on their books, including mortgage-backed securities that plunged with the housing market. Banks are reporting better earnings because they haven’t been forced to account for their losses yet, Clarium’s Harrington said. ‘We haven’t fixed the problem,’ he said. ‘We’ve just slowed down the official recognition of it.’â€

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Guest happy?

This phrase was also used on BBC's Moneybox on Radio 4 on Saturday - the speaker described it as a sharp increase followed by a cold bump!

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Did you see the moneyweek article yesterday 4 Reasons Why House Prices Will Keep Falling ?

It also said:

Yet a Rightmove survey at the end of August gave the "encouraging" signal that 78% of respondents reckoned UK house prices won't fall any further this year. And also that "the UK property industry is now seeing a virtuous circle of confidence building upon confidence".

Why's this another worry? Well, as Fidelity's Anthony Bolton explained in the weekend's FT about the stock market, "if everyone is positioned for the market to rise, it means these bullish expectations are already discounted" – i.e. factored into the price. As a result, "the market often moves to make the majority wrong and does the unexpected… so at turning points especially, the correct is the minority view".

And while there are plenty of differences between shares and houses, the principles of crowd behaviour are the same for every asset class. When almost everyone is bullish, get ready for a price fall. The near-8.5% bounce in property prices within the last six months (using Nationwide's figures at least) now looks ripe for a reversal.

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What is it with financial articles and lack of paragraphs?

Ski-jump? Hmm, new one on me.... don't people who go down ski-jumps usually take-off?

Eddie the Eagle Edwards recession??

081120122032.jpg

post-4948-1252622176_thumb.jpg

Edited by desertorchid

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What is it with financial articles and lack of paragraphs?

Ski-jump? Hmm, new one on me.... don't people who go down ski-jumps usually take-off?

but conservation of energy dictates they reach a height LOWER than the height they started at at the top of the ramp.

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And what will fuel the next leg down?

Lots and lots of these, sucking the state dry....

seniors.jpg

(boomers, possibly playing Wii's or not)

they don't look 46 at all!

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but conservation of energy dictates they reach a height LOWER than the height they started at at the top of the ramp.

So it is a backwards S - at this rate, we will soon run out of letters in the alphabet.

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So it is a backwards S - at this rate, we will soon run out of letters in the alphabet.

eh?

no, honestly, a ski-jump worked for me

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The near-8.5% bounce in property prices within the last six months (using Nationwide's figures at least) now looks ripe for a reversal.

Please let it happen God....

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I do think that the predictions of where the market is going ( eg doom and gloom mongers predicting 40%/50% plus) have turned out to be wrong currently.... the bounce has meant overall there has been little real correction so far since 2007 (10%- something like that)..... personally though I also feel those saying the down leg has ceased have got it wrong and we will be seeing further weakness and reductions..... the housing market though is a fickle beast.

it has been in excess if you like vs the key indicators since about 2003.... and yet consumer confidence and cheap debt ket it marching on for another 4 years...... here again the indicators say down... but market confidence and QE etc might produce a different result.... not a boom period I suspect but they could very well erradicate the overcorrection that often occurs with boom periods.

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In fact, the bottom of a ski jump run-up isn't not lipped as most people think, it is horizontal, so a ski jumper NEVER goes upwards at all. This might be a special sort of ski jump though i suppose.

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In fact, the bottom of a ski jump run-up isn't not lipped as most people think, it is horizontal, so a ski jumper NEVER goes upwards at all. This might be a special sort of ski jump though i suppose.

Ok its the Fireball XL5 launch ramp scenario.

on our way 'ome. on our way 'ome.

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