Monday, March 3, 2008

Next in line is the $45trillion derivatives market for credit default swaps (CDS).

The Federal Reserve's rescue has failed

The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.

Posted by sold 2 rent 1 @ 07:31 AM (2000 views)
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14 thoughts on “Next in line is the $45trillion derivatives market for credit default swaps (CDS).

  • Looks like the only thing they can do now – and the only think they haven’t tried, so far – is to sit tight!

    The problem is that they still think they can make a difference, and need to be seen to be doing something.

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  • sold 2 rent 1 says:

    This is an extremely bearish article. I suggest that everyone reads it twice

    “For the first time since this Greek tragedy began, I am now really frightened.”

    Martin Armstrong’s model suggests a big low in late March.

    Whilst Calleman/Lungold’s model shows things are going to be extremely destructive right through until the autumn

    Will we see a big stocks sell off on such a scale that it forces gold down as well – as everything gets sold to cover other losses.
    If so then this could be the Elliott 4 correction that is needed before a Elliott wave 5 super surge in May/June.

    After Saturday’s very lively debate on the 7/7 attacks, I can’t help mentioning The Daily Mail’s coverage of Marion Cotillard’s 911 comments. We haven’t heard the last of this story. I am sure Charlie Sheen will be back in the news as he started the ball rolling a while back. Will other actors stick their head on the block too? Calleman/Lungold’s model says yet.

    Very exciting/dangerous times indeed.

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  • “For the first time since this Greek tragedy began, I am now really frightened”.

    My thoughts, too.

    Ambrose Evans-Pritchard also said, “As the once unthinkable unfolds, the leaders of global finance dither. The Europeans are frozen in the headlights: trembling before a false inflation; cowed by an atavistic Bundesbank; waiting passively for the Atlantic storm to hit”.

    Oh dear..!

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  • hpwatcher said:

    “The problem is that they still think they can make a difference, and need to be seen to be doing something.”

    Agreed – I don’t think there is much the central banks can do about this, and certainly not, as the piece implies, pull a rabbit out of the hat that will solve everything.

    The real value of western money is very much at the heart of all this – those who think that wage squeezes will magically solve the inflation issue are living in cloud cuckoo land.

    In the last year, the true cost of getting manufactured goods made in China and shipped to the UK has increased by a third. For over a decade, ever cheaper Chinese goods held inflation down – now that trend has gone into reverse at top speed. Add in soaring commodity prices and you realise just how much inflation is waiting to hit home.

    It is inconceivable now that people will be able to borrow cash on anything like the terms they have previously enjoyed. In my analysis of the property crash timeline (first drafted four years ago..!), I realised that falling prices would result in a situation where it would be near impossible for the lenders to advance funds, thereby turning a downturn into a full blown crash.

    The US property meltdown is tracking the model I predicted for the UK – a rapidly accelerating fall. While the UK market has taken much longer to fall over than I originally anticipated, that only means that the fall will now be very much worse.

    To those waiting for the UK crash to bottom out, I would advise:

    1) Patience – don’t call the bottom of the market too soon, and don’t put faith in a small uptick – it is likely there will be a false dawn or two before the true bottom of the market is reached.

    2) Don’t assume that cash in the bank will be 100% safe – a broad portfolio of core commodity stocks is probably a safer bet at the moment.

    3) Save hard, and be ready to pay cash when you finally make your move.

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  • Hpwatcher – Re your three points

    1. YES! – beware the “B” wave “dead cat bounce”.
    2. Probably better off in safe currencies. Eg CHF, SGD and maybe JPY (but [for all of those not just yet – wait for US to correct and take £ with it to a lesser extent). Otherwise pound cost averageif you have enough cash to do that and wont be hit by too much in transaction costs. If thats too exotic, short maturities in soveriegn debt, or NSI (or other governemt equivalents). Re core commodity stocks not sure i agree with that one! Examples?
    3.YES – but LTVs might have come down more by then, wait until these stabilise at the lower levels(other people will have to have the ability to buy too before prices can stabilise at the lower levels). Co-incide with “blood on the streets” type headlines and high unemployment levels

    All in all we probably have quite a long wait. 2 questions: 1. Will rents increase and erode savings. 2. The old hyperinflation argument.

    s2r1 – intersting discussion on Saturday, I will look at your documentaries.

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  • Just for perspective, the Telegraph has been predicting financial meltdown since Labour got elected.
    ie They have an agenda, they want to have problems that only a right wing Tory government can “solve”.
    Things are bad, but not so bad as the Telegraph wants you to think.

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  • sold 2 rent 1 says:

    I have just been trying to put some dates on the Calleman/Lungold and Armstong cycle theories.

    As from the graph above, Armstrong’s low falls on March 22 2008

    Calleman’s low takes a bit more maths to try and give a date for the start of a major crisis.
    His theory states we are in the fifth night of the Galactic Cycle that started on 19 November 2007. The fifth night is the period of destruction where Ethics overcomes Power stuctures.

    The previous fifth night (in the Planetary cycle) was 1932-1952 (which encorporated The Great Depression and WW2).
    The number of days in this cycle is 7200.
    The number of days from the start of this cycle (21 Dec 1932) to the start of WW2 (3 Sept 1939), is 2448. I have chosen this date of 3 Sept 1939 because it is the beginning of a major destruction phase

    So if we divide 2448 into 7200 we get 0.34

    If this pattern repeats then what date would this be for a major crisis to start?
    Add (0.34 * 360 days) to 19 November 2007
    Note: 360 days is the length of each day/night. 19 Nov 2007 is the start of the fifth night.

    This leaves us with 122 days + 19 November 2007 = 19th March 2008

    Armstrong’s model: 22nd March 2008
    Calleman’s model: 19th March 2008.

    I am not saying that these dates will be exact but add in the bearish news we are getting and mid to late March looks pretty grim.

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  • s2r1 those dates are Easter. Easter is very early this year and won’t be this early again for another 152 years, apparently…

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  • s2r1 – this is very interesting. I have been trading the FTSE using a count minor a-b-c from the january low. The c wave was expected to go higher (approx 700 points from its low of 5678 for equality (which was why i was looking for 6200 as a conservative value). Its now quite interesting because all the action since the january low could be treated as a 4th wave (although that would mean that this “4th wave” high has broken the low of the 1st – which is a rule!!) for that reason (the violation) I cant count this as a 4th. An alternative is that the bottom of 1 is still at the 22nd nov at 6022 and the move since then has been a massive running correction (I really cant see that being the case either). A final case (and my preffered)would be a double three but…..

    Now looking at your Armstrong / Calleman cycle – and since i am having some trouble getting things to “fit”, I am very interested to see if the Jan low gets taken out. I am a believer of the old saying “when in doubt stay out” – so i will be sidelined -re ftse – for a little while. I have done pretty well on this move since January, given i have been long of options “just in case”, but at the moment looks like im gonna give some back holding some (not enough to get worried though – have liquidated half so will break even overall if they expire worthless!) 6200 March Calls!! – They were looking good with FTSE at 6130!!! All in all this is typical of a difficult against the main trend rally to trade, so yes more downside to come but i was looking for more consolidation / retracement first.My double 3 wont work if your calleman / armstrong is correct (although i understand you are NOT neccesarily saying this applies to Stocks).

    Still gold stop hasnt been hit and has now tracked up to 974, although i am tempted to just get out here (982 ish) but not that tempted!!!

    I’m just wondering if you have a FTSE count on the dailies?

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  • sold 2 rent 1 says:

    “I’m just wondering if you have a FTSE count on the dailies?”

    Can’t help you there, mate.
    I am too busy trying to get a strategy together to avoid any exchange/capital controls that may occur when things finally go pear shaped.

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  • buy a nice boat and sail away…

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  • s2r1 – Fair comment – better to be safe than sorry!! FOMC meeting due on 18th March – that should be interesting . Cornish – prefer a speed boat just in case its a fast “escape” thats needed!!!

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  • sold 2 rent 1 says:

    Found this intersting article that correlates the pattern of earthquakes to Mayan Callendar (Calleman’s model)

    He also admits a “solar year” explanation is also a possibility

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  • S2R1, the guidance on publishing new blog articles asks for “(Summarise the article in your own words OR add the first line/paragraph of the source article)”. Now I’m not going to sttempt to summarise this article at but I suggest that the first sentence may be of interest to some blog readers:

    “Summary. A previous study found a relationship between the number of earthquakes in the lower mantle and the structure of the Mayan calendar. As predicted by a model proposed by Calleman (2004), the number of earthquakes alternated in successive 360-day periods corresponding to the Days and Nights of the Galactic Underworld.”

    So what do the blog readers make of the “Galactic Underworld”? I would like everybody who reads this to comment, if you would be so kind as to indulge me.

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