That was a short correction
After a 5% drubbing, the Shanghai index bounced back 1.7% as the PBOC quelled concerns that monetary policy would change much. Good earnings reports in Japan also helped to lift spirits. European stocks rallied after the July Euro Zone economic confidence # rose almost 3 points from June and was 1 point more than estimated. Also, Germany’s July unemployment report was better than expected and UK home prices rose more than forecasted m/o/m in July. As a result of the above, the risk trade is back on, buy stocks and commodities and sell the US$ and Treasuries. The key test of the week for Treasuries will come this afternoon when we see the results of the 7 yr note auction as the maturity falls into the part of the yield curve where inflation expectations and government finances become a focus. Jobless claims are expected to total 575k and may be a clean # that isn’t impacted by the auto plant disruptions.
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August 2nd, 2009 at 1:38 am
In my Tract The Age of Turbulence: Plea for a New World Economic Order, I explain the nature and causes of economic depressions.
A new, bigger Crash will come causing a real depression.
Preparing for the Crash, The Age of Turbulence. Proposes a way to profit from The Crash.
A turbulence in fluid dynamic is a chaotic state of a liquid or a gas.
It Owns Most of the Proprieties of The Liquidity Trap, Origin of The Crash.
It tries to accomplish Alan Greenspan Mission Impossible:
“That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer.
Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances.
Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated – if people see them coming, then the markets arbitrage them away.”
….
The clear evidence of underpricing of risk did not prod private sector risk management to tighten the reins.
In retrospect, it appears that the most market-savvy managers, although conscious that they were taking extraordinary risks, succumbed to the concern that unless they continued to “get up and dance”, as ex-Citigroup CEO Chuck Prince memorably put it, they would irretrievably lose market share. Instead, they gambled that they could keep adding to their risky positions and still sell them out before the deluge. Most were wrong.”
Alan Greenspan
The Age of Turbulence: Adventures in a New World [Economic Order?].
I propose a plausible alternative solution to the depression:
Enter Your €5 in The Cra$h R€gi$t€r.
Buy Now The Tract That Will Be Published September 17th, 2009.