Will the stock market hold...or is the bubble ready to burst?

[Kirkland Laing]

Whether the Dow takes a trip to 7000 in the next year or so depends on events, but one thing we are assured of is inflation. This is just the start of it, worth reading :

Pressure from oil prices spreads - International Herald Tribune


This is all down to the idiot Bush. I'm really furious about that guy right now. In a day or two I'm going to install a piece of art in this thread expressing my feelings for George.

[pacfan]

Yup, the effects of high oil price is starting to show their ugly faces little by little. As I've said, something's gotta give - either the oil price or debt crisis eases or the stock market goes, though that doesn't necessarily mean it'll end up in a depression, but definitely a recession at the least...

...go slow on the ol' man though, he ain't got much time left anyway, I mean in the office.

[Kirkland Laing]

Yup, the effects of high oil price is starting to show their ugly faces little by little. As I've said, something's gotta give - either the oil price or debt crisis eases or the stock market goes, though that doesn't necessarily mean it'll end up in a depression, but definitely a recession at the least...

...go slow on the ol' man though, he ain't got much time left anyway, I mean in the office.

The debt crisis is going to get a lot worse. It's going to get worse as long as house prices keep falling. We haven't seen the start of the bank failures yet, then there's all the investment banks which have bs accounting and are all in trouble. If it gets as bad as it could and the Fed bails everybody out as they almost certainly will, the amount of money they'll have to print to do it will see oil hit $250-300.

And that's just if the credit crunch doesn't extend past the current markets it's affecting. It's already making its way into regular prime debt, personal debt, you name it. Bond insurers are shitting themselves. The stock market tanking may not even be the worst problem we have to face. The credit swaps market is four times bigger in dollar value than the stock market and is built along the same principles as the CDOs and other credit implements that caused the subprime meltdown. If the contagion hits the swaps market, hang on to your hat.

What'll probably happen is that to save impending disaster the Fed and the world's central banks just bail everybody out, but the amount of money they'll need to print to do this will inflate prices to god knows where. That's probably the best-case scenario right now.

[pacfan]

What the heck was that, Kirk, that looked more like an end of the world scenario - an apocalypses! - than an economic crisis. Relax, buddy, here's a good news to cheer you up a bit.

BP chairman rejects "apocalyptic" talk of $250 oil - Yahoo! News

[Kirkland Laing]

What the heck was that, Kirk, that looked more like an end of the world scenario - an apocalypses! - than an economic crisis. Relax, buddy, here's a good news to cheer you up a bit.

BP chairman rejects "apocalyptic" talk of $250 oil - Yahoo! News

I'm not, I'm just talking about a bit of a meltdown in the financial system. I do also point out that however bad it gets all losses will have to be bailed out by the world's central banks, so it won't end in total disaster. There will however be a great deal of inflation which is what the Gazprom people are anticipating and what the BP guy is avoiding. The price of oil isn't being governed by how much is in the ground but by how many dollars the Fed is printing. More financial trouble, more dollars printed, higher oil prices/inflation.

[pacfan]

Yup, the feds have already injected tens of billions of dollars to bail out some troubled banks so we'll just have to hope that that will be it and the debt crisis eases - or else, the apocalyptic (ok, I'm exaggerating) oil price spike can just make it worst and put the world into another recession, at the least.

[Kirkland Laing]

Yup, the feds have already injected tens of billions of dollars to bail out some troubled banks so we'll just have to hope that that will be it and the debt crisis eases - or else, the apocalyptic (ok, I'm exaggerating) oil price spike can just make it worst and put the world into another recession, at the least.

We're just in the first stages of the credit crisis. When banks start failing we'll get some idea of the size of the problem. Washington Mutual just issued a denial that they're in trouble :

WaMu Statement Regarding Rumors of Regulatory Action: Financial News - Yahoo! Finance

[pacfan]

Mr. Laing (who else but Kirkland!) has been reminding me ever since about the imminent collapse of the economy. So I've just dropped by to update you all on the real situation of the economy.

So where is the economy heading towards? Nobody seems to know, not even the top economists out there. So it must be real bad. Hope I had something better to say but, sorry guys, I don't...

Ok, Kirkland, tell 'em all about it...

[luvfightgame]

It's much worse than they are saying. Even if they somehow get through the housing and credit crunch, we still have the baby boomers retiring. We are instantly broke when they all start drawing ss and medicare. That's not to mention the stock market suddenly getting all these people taking money out rather than putting it in. We are in big trouble folks and the talking heads aren't addressing real problems at all. Vote for me I will give everyone free medical care even though I can't pay for your retirements we promised. It's not just our federal government that's broke, virtually every state has multi billion dollar deficits.

The only people really talking about these problems are censored by tv, and not given an opportunity to talk about solutions. But we keep on paying the idiots who created the problem. Not only do they get paychecks, they don't really spend their own money on most things they do.

When do we wake up?

[pacfan]

Pretty much true, Luvfightgame. 700 billion dollar won't be enough if many more banks start to fall one be one and what scares me is that the possibility is there, however remote it might be. I'm not impressed by the hastily crafted rescue plan either - the words panic and confusion is written all over it.

[luvfightgame]

Not only is it panic, it's a bad idea to begin with. It's like me saying that all I need to avoid bankruptcy and losing my home isn't to get a job and actually earn money, I just need a larger credit line on all my credit cards so I can keep doing the balance transfer juggling act.

If your coworker or friend told you that's their plan you would say what an idiot. It'll never work.

But a politician says it and we all say great I hope it works.

[Kirkland Laing]

It's a handy thing being Infallible, isn't it?

Though it looks like I was a little bit too optimistic.

[pacfan]

It's a handy thing being Infallible, isn't it?

Though it looks like I was a little bit too optimistic.

Must be in a good mood, Kirkland.

...Ok, folks. Most of you guys seem not to be aware of it but the economic situation now looks very, very grim. So far, the 700 million rescue package failed to do what it's supposed to do - get the credit market moving. The credit market got to get rolling! Or else, the already weakend consumption, housing and other investments - the foundation of the economy - are further weakened. When that happens, businesses are also weakened, naturally leading to more lay-offs. That further leads to lesser consumption and investments in a sort of chain reaction manner, until it reaches the pit. When that happens... (I haven't got the heart to tell you what will happen.)


...but don't worry too much, you probably won't go hungry...

[Kirkland Laing]

The $700 billion is a drop in the bucket, a pebble thrown into a churning ocean. This thing is going to cost many trillions. The Fed is now buying commercial paper and the commercial debt market is showing signs of life, but banks are all still terrified to lend to anybody else. Until we find out where the bodies are buried (may take years) that'll be the case. Until then the central banks will have to do everything, from guaranteeing commercial debt to effectively nationalising the banking industry in their respective countries. I'm still fairly confident that we'll avoid Armageddon but it's still a distinct possibility. The best-case scenario right now is a year to ten of recession, sluggish growth, economic contraction etc., while the global banking system deleverages and indivisual banks write off/pay down their debt/go out of business.

[Kirkland Laing]

Just to explain, if the commercial debt market remains frozen large corporations can't roll their debt over and then they have to shut down part or all of their operations. Done on a global scale this would mean easily 20+% unemployment pretty much overnight, a new Depression in other words.

Private credit is another market that will need bailng out eventually. There aren't going to be too many interest-free offers being advertised on goods in the next decade.