Saturday, June 13, 2009

Is it possible that this crazy global economic bubble can be reinflated?

Scrambling for green shoots

Over the past few days, the City has echoed to the sound of frantic scribbling as economists have scrambled to update their forecasts on everything from growth to gold. On the whole, the updates have been upbeat. The recent run of more encouraging statistics continued this week with news of an increase in industrial production in April, more optimistic signs from the housing market and slightly less gloomy noises from employers on job cuts.

Posted by flintster1994 @ 08:31 AM (1567 views)
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13 thoughts on “Is it possible that this crazy global economic bubble can be reinflated?

  • Nearlyboughtit says:

    With enough ‘air’ the economic balloon could, in theory, be re-inflated but as there is a big tear in the envelope it will just go down again. Nothing will be achieved, except a complete waste of ‘air’ (or valuable liquidity).

    What is instead needed is the re-balancing of equity values in order to bring these back into line with both earnings and savings nationally.

    As far as house prices are concerned, market appraisals by estate agents have been out of kilter with reality for a good while now. This forces a correction. There’s no alternative, sorry but …

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  • japanese uncle says:

    Majority of the window-jumpers in the Wall Street after the initial crash in 1929 were the speculators who blindly believed the market was the rock bottom providing the chance of a lifetime, and grabbed such ‘dream chance’, and that by borrowing money.

    New entry to the New Oxford Thesaurus of Englishs:

    greet shoot = suckers’ rally

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  • There is indeed a greater degree of positive news. I thought the recession would be an up and down affair but I’m getting the feeling we may see a double-dip recession. I did put a sizeable chunk of money back into equities about March/April time, but that was not based on the feeling that we were out of the woods but on the fact that the market was so low it was a good time to buy. I also thought the US would have shown stronger signs of recovery by now.

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  • Bottom line: aggregate demand isn’t rising any time soon because consumers have exhausted their ability and desire to borrow, governments are finding it more and more difficult to borrow and banks are still stuck with books full of junk.

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  • japanese uncle says:

    Sorry there were a few typos.

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  • denzil – are you thinking of getting out soon? it looks to me that we have a false move out of this range to the upside to kill the shorts and then we revert to the downside. whether that creates another place to go long – i.e. this move up is the first leg of the counter trend rally or ALL of it is what interests me. Hopefully you picked the right stocks in this rally.

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  • fwiw I have sold all equities after I read sentiment was 88% bullish….the same as the market peak in october 2007

    I am expecting a retest of march lows but it does not mean that it get there exactly just head towards it.

    sp500 p/e ratio in oct 2007 was 17..its now 14.5!

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  • it could be worth quite a lot tafee!!! :-). Re p/es and dividend yeilds, they are often compared against recent past (which is not really that good a barometer) also the Es of the p/e are reducing so the p/e is often looking on past earnings that may not be substantiated. Re the sentiment indexes I think they were high nineties in T-bonds and in oil at their respective tops.

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  • I bought equities in march after the bullish sentiment was 3%! and the baltic dry index had fallen 95%.

    I sold property when I saw 125% mortgages and a pundit on bbc said property a 1 bed flat in norwich could hit £1 million in 2015 and that houses were affordabe for privileged few only!

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  • tyrellcorporation says:

    I bought rio tinto at £16.50 in march and sold at a smudge over £30. Made a tidy sum but am now waiting for them to hit £24. It might not happen but things look very toppy to me at the moment.

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  • techieman @11.05 said “denzil – are you thinking of getting out soon?”

    No. At present there is seems too much “good feel” and sentiment to revert to a downward trend. The FTSE seemed to find stability @ around 4300 but since then the feel good factor has improved. I can see the FTSE closing 09 above 5000 and that is what I’m leaning towards. However, the bear in me is looking at the ongoing troubles in the US and the potential for more downward pressure at some point so the current upwards move may prove to be a “false move” but not soon, hence I’m not getting out now.

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  • weird Denzil, i have just this second logged on for a few minutes and there is your very recent response. Fair enough. I would personally like to see an upside break of the 4520 level and then a few days of big up moves to “convince” everyone that this is all over . Same with the S&Ps i would like to see them march on a bit. All in all a bit tricky :-), although to me the move up will just be a place to “get shorty”.

    I suppose you are saying that you are looking for the US to give you some fundamental underpinning to your longs. Personally i have been tinkering around. I did have a small short FTSE position, averaged at around the mid 4400s and had that offset against a long S&P. I am still net short but have been trading around the range – buying the dips but getting out quite soon thereafter. All in all this trading means my net short position is covered (should the stop be hit) , and will actually make some if the S&Ps go up by more than the FTSE. The next break of the range either way SHOULD be decisive – so no more range trading for me.

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  • techieman @11.22 said:
    “I suppose you are saying that you are looking for the US to give you some fundamental underpinning to your longs.”

    Precisely!

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