Another Bloody Day: Will more selling come?

There is a huge drastic change in the psychology of the market recent – actually within the last four weeks or less.  The credit market is deteriorating because of the lack of transparency.  Banks and financials are getting hurt.  All the deals and the buyout premiums are being taken out.  But there can be worse to come.  There hasn’t been a reevaluation of stocks yet.  Yes this is yet to come.  Will the American consumer who is being slow stretched be affected?  Well the piggy bank of refinancing has finally come to an end with tighter lending standards and falling home prices.  The consumers spending the most were the same people spending the most on their homes.  When consumers stop spending, revenues go up while fixed cost are basically fixed thus profits go down.  Way down.  If PEs go up then stocks will need to go down.  Value funds will have to readjust.  Growth stocks are definitely not in favor with the lack of growth.

Did someone say recession?  Is it possible?  Some people are saying it’s possible when before it was not.  A rate cut doesn’t seem to be coming soon with the threat of inflation.  Here is the possibilities for this market.

Ok the world’s best consumer us is falling apart.  Will corporations start laying people off in foresight of this consumer spending drop.  Yes there will less money to spend and less money to spur the economy because we know that everyone in America already maxed out their credit cards.  Well what about world growth, what about world growth.  It depends on us, the world’s best consumer who isn’t so great anymore.

Why is there so much selling?  Why?  Well let’s see.  The loan funding was pulled.  Lack of liquidity in the mortgage market pushed up the rates for loan funding.  Then this pushed up rates for corporate borrowing.  Then this killed the buyout mania.  Then the catalyst for stocks started falling one by one.  Buyouts were more expensive.  Stock buybacks are more expensive.  Borrowing cost for corporations are more expensive.  So it’s a huge problem.  So now you have stocks dropping and people demanding for redemptions of their money because they are scared.  I’m scared.  I sold everything today because the market is dropping on low volume.  Flight to quality it’s called.  So now funds will need to sell everything as the redemptions come and you know what some people aren’t sticking with these funds who are supposed to beat the market and so heavily invested.  So there will be fund closures not because of subprime but because of the regular market dynamics.  This is not good for the world of capitalism.

It would be nice to just wait it out until all the rates reset and the banks figure out what is going on with the liquidity situation because money is disappearing every single day.  I say go with something save until you see huge selling at huge volume.  Like is the world coming to an end volume.  We need something to say that everything is ok.  Wait it out folks.

IS AMERICA GOING TO THE DUMPS AND CHINA RISING? PART FOUR

The continuation of the discussion of how America is faring in this new global economy from my buddy: Read Part One, Part Two, and Part Three

This is the Rebuttal to the Second Support for China:

So now we have to figure out while the Euro is growing against the dollar.  Is the European counterpart much better equip as a country than the US.  I really say no.  Their emphasis on jobs and socialism really puts them at a disadvantage against the highly capitalistic US while all the talents of the world come here (well not quite with these retarded immigration restrictions – we need to solve this because imagine if the US stole all the global talent because we all know that all the talent would go to the US because of the higher wages – from China, India, Europe anywhere because our corporations can afford this but keep in mind we are developing egineering and design facilities all over the world to take advantage of this as well while maintaining the best talents in the States while using the best talents of the world)  What do you say to that!  But Europe is only growing because of the Eastern european state and not because of growth.  Germany, Spain, France and everyone else is not growth either.  If the US can annex Canada and Mexico, we could destory the world but too bad we can’t.

I agree that China is exporting everywhere in the world but as the wages in China growth and their competitive advantage disappears because they are destroying their country so that they can make money.  Look at the rivers, the skies, the land, the pollution, the disease, the air….there is no price on that.  While they keep growing uncontrollably, there is neglect of the environment which is becoming damaged beyond recognition.  So is there a price on that?  Also what about the humanitarian issues that China will face eventually, that will cause wages to rise and the cost associated with health care, retirement, welfare, etc.  What will happen if they don’t take care of all those issue…will that cause their economic advantage to go down?

So that’s the end of the discussion.  Only time will tell whether America and withstand the growing global powers around the world.  Japan was once great and now it’s a shadow of itself.  Will America be the same way?  Will it end up to be a lumbering giant among great superpowers.  We’re not the only super power anymore and that’s one truth that we all have to face.  From outsourcing to military power to capitalistic dominance, the world is getting more competitive.

IS AMERICA GOING TO THE DUMPS? PART THREE

The continuation of the discussion of how America is faring in this new global economy from my buddy: Read Part One or Part Two.

If only things are so straight forward. The world is so globalized that just describing the US CHINA relationship is not really representative of the big picture but only one strand. In fact, US has a bigger deficit with the middle east due to oil imports.

And China, in fact is becoming much less independent of the US even though America is still the largest trading partner. China is exporting heavily to Europe…and not to mention every part of the world because the existence of -”product”- originate solely from China because some products are produced no where else in the world because the laws of economy don’t allow it to exist in any place except China. No other country produces better and cheaper -basic- products or even high tech products… (in the grand scheme). It is clear though, China has its fangs, tentacles or whatever you want, in the main blood vessel of the US, and is sucking some tasty cold hard cash.

Yes, America may bounce back because America is a strong country and even though the political system may be decrepit in many aspects, it’s still the best and provides unquestionably the best standards of life (barring little insignificant countries like Norway etc) on a broad scale.

But, maybe the finer point of argument and perhaps the central issue is, can America maintain it’s overarching dominance?

The near future is certain that it can maintain a waning dominance, militarily, and economically despite it’s debt. ( we are seeing weakness thru the handling of the middle east as well as north korea, where china appeared as a big involvement and mediator/instigator) Nevertheless, I’ve realized that the expandability of debt is very flexible simply because we are not tied to gold anymore and everything is numerical. But what is at stake may be 1) credit loss…the credit (believability and worth) of the US dollar and the US economy 2) opportunity and power, the piece of the pie will get smaller for the US as wealth is distributed throughout the world causing multipolar superpowers rather than one single American power. American’s will have to get used to it and use more of it’s diplomatic/democratic face. They will have to accept other nations doing things better and bigger..Korea, the number 1 LCD producer, Japan most successful car manufacturer, etc etc. We’ll see…say we have another good 40 years to live…we’ll definitely see how this all pans out.

When i try to think deeper, it just doesn’t go further because there simply is NO ANSWER! For example, China. +, -, divide, square root, tons of problems, environmental issues, corruption, bubble, and so on, but the right side of the equal sign yields 12% growth in GDP, a record (some cities must be growing at 20%). So for now, despite the absurdities, it’s on a growth trajectory. America probably is not.

And thank you for reminding me of not only looking to the good when times are good. Just like real estate, and just like stocks. But it can also be told to America..who has a global foothold in every country, just as The Great Britain once did.

IS AMERICA GOING TO THE DUMPS? PART TWO

Here was my rebuttal:

“This is more of a theoretical argument than anything. I tried to look up these figures before but I haven’t found any. Perhaps if I ever go back to grad school. Your father is right in terms of his attacks. The US at this time is currently in huge world of shit however, regardless of how you see it, the American corporation is essentially the American economy. Yes the economy is running into problems caused economic problems associated with trades, overspending and debt yet it’s difficult to argue against the state of the American corporation at this time. You have to see where the flow of money is going to be going in the future:

1. China will have to let the currency flow more – Giving more strength to other currencies including the dollar
2. The industrialization of the world will lead to further growth of American product overseas because regardless of how shitty we are and how we are hated, American culture is a commodity that people around the world still want.
3. Our debt problems and spending problems can be fixed through our political system. We’ve done it before. That is the special thing about America – the resiliency. http://www.uuforum.org/deficit.htm
4. We have our feet in every single country in the world. As the world grows, we have a hand in the growth through corporations. The taxes from this growth will eventually flow back to the US.

So the argument is not if the US is shitty right now…it so is. The argument is whether the US will stay shitty. I don’t think that will continue. China is as dependent on the US as the US is dependent on China. Does China have more politcal problems or the US? The stability of the US will eventually dominant if there are any global problems. Civil war in China is much more possible than civil war in the US. There is not doubt that in any global catastrophe that the US will always be the safer investment but yet again, it’s a theoretical argument.

But in the end, it’s the argument can go back and forth whether the American corporation can save the economy. It depends on the figures. How much are we making overseas compared to domestically. The percentage of international revenue is growing much faster than domestically benefiting from the global growth. American brands are the worlds most widely recognized http://www.cbo.gov/ftpdocs/81xx/doc8116/05-18-TaxRevenues.pdf . The problem is we spend too much because of this war and retarded administration that will surely change after this term. The fix will take decades but it’ll eventually fixed. Ridding of debt and running a surplus will support and strengthen the dollar. That’s the only way but even America at these darks times are not dark. For the last decade almost (the same period that the dollar has dropped so much), we’ve been lead by the Bush Administration that created a deficit by spending way too much.

In bad times, people only see the negatives (US). In good times, people see only the positives (Shanghai) – Not a poke at anyone – just looking at the other perspective because we all know China is still the growing faster.”

IS AMERICA GOING TO THE DUMPS? PART ONE

I had a discussion with a friend regarding America’s prospects going into the future. My argument was while the economy seems weak with a falling dollar and large national weighs us down, the American corporation which is growing because of it’s new business structure benefiting from global growth and excellent balance sheets will save America. This was the response (Note: My buddy is not Anti-American – just a good economic discussion):

The Corporation as america’s savior doesn’t sound as good to me after some research. (I discussed this with my dad and was shot by machine gun with his attacks…i couldn’t out argue him because i didn’t have concrete figures, you can’t just “feel” that american corps are huge and big…)

Yes, I do agree American corporate entities have achieved sophisticated efficiency, the best in the world. Like the machines in the Matrix.

Yes, you can separate the two, American economy and American corporate economy. But aren’t they undeniably interlinked and if America is running a debt it doesn’t matter how well the corporations are doing. At the end of the day, the country is operating at a loss. Trade imbalance measures external loss with other countries, and budget deficit measures internal loss. And both are HUGE recurrent losses not to mention a shaky financial system.

Tell me if you can rebut my thought: America is strong right now and just feeding off of its PAST success, (yes in part because of its corporations that funnel money back), but it is really because the whole world uses US dollars to conduct transactions and THAT fact was established not now but when America was really booming after WWII. When the dollar became the world currency for transactions in goods and trade.

And one MAJOR reason america is losing dominance in the world is the introduction of the Euro. The euro created excess liquidity, an alternative choice, Japan wanted to become a world currency but failed because they sucked in too many USD and became infected with that disease. The introduction of the Euro also contributed to a new global inflationary rise in prices…simply because there’s more money in the system.
Now the middle east oil producing countries are slowly rebuking the USD – which is causing further erosion – and greater adoption of the Euro. The Euro to the dollar has appreciated 40%!!!!! Imagine, suddenly you are 40% worth LESS over the decade since it was introduced.

So the Corporate savior theory may not be the answer. because corporations go down just as easily when the economy of the country starts to fail.

Stay tuned for Part Two!!!