Forbes: The Markets Turn To Plasma
By Barry Ritholtz - October 21st, 2008, 4:30PM
I participated in an interesting round table discussion at Forbes this week:
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In any great organization it is far, far safer to be wrong with the majority than to be right alone. —John Kenneth Galbraith
Macro Notes
US$ rally continuesPeter Boockvar
Asian currencies continue to sell off vs the $ on the heels of the news yesterday that South Korea said they will look into hot money inflows stemming from the $ carry trade and the Bank of Indonesia said they are looking into the foreign buying of bills. This follows the news a few weeks ago that Taiwan was limiting foreign deposit holdings and Brazil was taxing foreign inflow transactions. As I mentioned yesterday, we may have reached a short term pain threshold in terms of $ weakness and foreign countries are fighting back as they certainly won't wait for...
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October 21st, 2008 at 5:15 pm
PLASMA ECONOMICS
In physics and chemistry, “plasma” is a partially ionized gas, in which a certain proportion of electrons are free rather than being bound to an atom or molecule. The ability of the positive and negative charges to move somewhat independently makes the plasma electrically conductive so that it responds strongly to electromagnetic fields. Plasma therefore has properties quite unlike those of solids, liquids or gases and is considered to be a distinct state of matter. Plasma typically takes the form of neutral gas-like clouds (e.g. stars). The explanation of the example, star, is a massive, luminous ball of plasma.
October 21st, 2008 at 5:37 pm
If the mainstream media has been “far too slow” to call this a recession, or to even mention the considerable economic danger we’re in — how can we be looking at a bull market?
I think your bullish call rests on a very ill-defined concept of “over sold”.
What’s “over sold”? Housing? Certainly not. Tech? No. Consumer products? Uh, no.
I’m neither long, nor short — but I think your bullish sentiment is just plain nuts — even for the short term, because these little bear-market rallies are next to impossible to time.
We’re making lower lows and lower highs. You can try to jump in on the ups, but that’s a dangerous game.
October 21st, 2008 at 6:00 pm
Excellent reading, Barry! Thanks for posting those.
October 21st, 2008 at 6:23 pm
Lehman’s massive debt swaps settle smoothly
The overall size of the payout was expected to be as much as $400 billion. But if the counterparties’ offsetting trades are taken into account, the Depository Trust and Clearing Corp. had forecast that sellers of the protection may only have to cough up about $6 billion.
“It looks as though there was no major fallout from the settlement to member firms,” said analysts at Action Economics. But they cautioned: “We’ll have to wait to see if there was a broader market impact, however.”
Hmm.. I assume we’re going to see these losses filtering thru the next round of quarterly reporting? And I gotta wonder how much taxpayer $$$ went into paying these off..
October 21st, 2008 at 6:25 pm
“Everything we believe to be true, you have to double check.”
-RITHOLTZ(Well-known Bear)
October 21st, 2008 at 7:27 pm
You might need a torus for this market plasma….
October 21st, 2008 at 7:35 pm
I think ‘liquefaction’ may be a more interesting term. A shock was experienced, and a solid foundation (under typical scenarios) turned to mush.
October 21st, 2008 at 8:00 pm
Do you mean as in bull “plasma”?
October 21st, 2008 at 9:03 pm
I really hate it when someone says the market is pricing in the “end of the world” or “I’m betting this is not Rome falls.” Those words have no meaning whatsoever and are the sort of meaningless crap I expect to hear on CNBC. If the market is pricing in the end of the world, then stocks are at zero. Understand? Be specific.
If you think the government has a chance of making money on these bailout maneuvers, then you are in deep denial. We won’t see the bottom until I stop hearing crap like that.
And as far as Buffett is concerned, he got run over by the bubble in 2000…he didn’t see it coming. If you’re looking for advice, go read Grantham or Pachter. Grantham is much more bearish than you let on and Pachter is the true genius.
October 21st, 2008 at 9:22 pm
I respect Granthams point of view. Basically he seems to be saying that the market has been front running the economic disaster and as such a little bottom fishing is not out of order.
October 21st, 2008 at 10:06 pm
Could it be equally foolish to say the market is at a bottom as it is to say it is not at a bottom?
If it is possible to remove our emotion from the equation, perhaps we would see things differently.
Logic would say that the market is not as bad as most think but not as good as some think — that the end is closer than the beginning of this bear market…
How to trade (or not) in this environment is up to your own reasoning…
“Bad reasoning as well as good reasoning is possible; and this fact is the foundation of the practical side of logic.” ~ Charles Sanders Peirce
October 22nd, 2008 at 4:40 am
Millstone:… but I think what’s equally as important is the amazing amount of stimulus that is going to be hitting the economy. There’s a lot of stimulus that’s been announced, and the programs haven’t been started yet.
Everybody around the world is going to be doing various things. We even got some cooperation globally, which is amazing. I didn’t think we would have governments cooperating until we had an environmental problem threatening people with death, but here we have a monetary crisis, and now governments and central banks are working together.
The impacts ultimately for the world are very positive, not only in the short run–we’re breaking new ground of international cooperation, we’re strengthening relationships, and that’s bound to have some long-term impact that’s positive.
At the same time, balances of power are going to shift and I don’t think the U.S. is going to be the big winner ultimately. Maybe we’ve been arrogant, maybe a lot of this is our fault and maybe we should be cooperating with other countries. There’s talk of a second Breton Woods. Obviously, our financial system globally needs to come into the modern world.
–from the first link.
And this guy’s name is: Millstone !~ Zounds!
simply, ‘thinking’ like this: We even got some cooperation globally, which is amazing. I didn’t think we would have governments cooperating until we had an environmental problem threatening people with death…is, truly, a Millstone, to be carried by anyone falling for that type of abstruse g**bage..
http://www.thefreedictionary.com/abstruse
and, with this: “and now governments and central banks are working together.”–if that cat really believes that this is a “First” for Gov’t-CB ‘cooperation’, he should do everyone a favor and back away from managing his Clients’ ‘money’, and his own..
past that, BR, how do you square your ‘plasma’ take, with your read on the U of M ’sentiment’ indicators?
IOW: if ‘all bets are off’, wouldn’t the read on that indicator be one of them?
as an aside, while I was reading that, the vid-clip of Taleb w/ the 2 two-bits kept coming back to mind–BR you’re one of the Best, your simple Sagacity shines through the Fog advected by even the densest role players you happen to be sharing a stage with..
http://www.thefreedictionary.com/advection
October 22nd, 2008 at 5:01 am
Millstone: I don’t necessarily think it’s the government’s job to be like Warren Buffett. I think the government is going to make money on these deals. I think they have a lot of objectives and making the absolute most money isn’t their objective.
Ritholtz: Not that the government should be a profit maximizer, but we’re bailing out some really bad actors. There needs to be some methodology to make sure they’re not getting away with too much.
Millstone: Don’t know if this deal structure was the way to necessarily do that. After this crisis calms down a bit we are going to deal with this–why and how this can never happen again.
–from the 2nd link..
I really wonder if she knows that Stupidity can rise to the level of a Statutory offense, let alone a Tort?
O Forbes, it’d be an overstatement to call it a shadow of its former self..
October 22nd, 2008 at 8:04 am
tho, past all that, BR, it’s about Water Filtration, first and foremost..
see:
http://www.katadyn.com/
not ‘bottled water’, most Plastics shed estrogen-mimics–it’s a story the Susan G. Komen Foundation should be on, like White on Rice..but it is a cash-cow for the IVF clinics, so, at least, someone ‘benefits’/riight..
October 22nd, 2008 at 10:12 am
IMO if we get a balanced buget amendment and a graduated long tail tax plan with few loopholes in The Constitution we will get to a more auto pilot capitalism struture.
I guess I’m coming around to the realization that capitalism is the mechanism that is the auto pilot check and balance … but the system is rigged for cartels currently with little lobby power for the Joe, Jane, Bill, and Brendas.
I’m wondering if (or nearly) “the present system of legal deductions” if extended to families and individuals would be a mechanism to further the cause out of this mess. Sam the plumber does not understand business as an underling apprentice plumber. Allowing living expense deductions from income and taxing the excess money in a graduated scale would train the mind to our capitalist structure.
Graduated means all folks pay a tax, proportional to the ability to maintain survival and not curtail the incentive to advance.
Of course we would need trained computers for scamming, ie: excess deductions to reduce taxes to Uncle Sam for his business of enforcing law.
So … Energy and IT is our growth industries. Accounting a decline industry.
Our 1st problem right now is these years of trickle down economics has failed.
Our 2nd problem is money flowing into a region or industry without flowback is stifling.
Our 3rd problem is to big to fail is to big to fight.
Balance.
Period.
October 22nd, 2008 at 10:19 am
ps – Balnced Budget Amendment with a well crafted emergency escape clause. This financial mess is here because this amendment is late to the game. And hense not acceptable to be deemed an emergency. Tax the recent winners out of this mess. Now period.