Economics, economies and has the world gone mad.

[El Presidente]

Just throwing some observations out there and looking for input from FOH members all over the world just to gain an understanding of what is happening on the ground in your home country.

I have always had an interest in economics and banking. I worked as a corporate banker for many years as well as property development and manufacturing. I am just struggling to make sense of what is going on right now.

1. I had a disturbing discussion with partner in China yesterday regarding increased production costs. 30% over past 6 months. Inflation is proving to be a tiger very difficul to control. There are going to be some negative short to mid term ramifications.

2. We all know what is happening with US bailouts. Credit markets are still exceptionally tight. Is Detroit MV industry the next to need a hand? Where do you stop. Is it prudent to do so. Can you fund it?

3. US and UK property markets. Granted US property market downturn is regional as all markets are not affected similarly. Still, the numbers are astounding.

4. Unemployment is rising globally. Early stages and again from historic lows in many countries. Still, this is riding on the back of the highest personal debt levels in history. Will this fuel wider spread real estate abyss?

5. Given the EU is economically 5 times the size of China, what is going on there on the ground? How is the vibe? With US/Japan teetering the EU becomes an essential part of the equation.

6. Have a bailout and see the market rally 300 points? On what fundamentals? Similarly the USD rise? On what fundamentals?

If there is an escape to a hard landing....can anyone point out how? Hell I am an optimist (you have to be in business) but I also like to understand the environment I am working within. For the first time I can remember....I am struggling to pull the threads of understanding together.

[Colt45]

buckle your seat belts - hard landing imminent.

don't bail anybody out of anything anymore -

let the **** hit the fan, and maybe, just maybe we'll all learn next time around -

I know, wishful thinking. you'd think people would learn from past history, yet

history continues to repeat itself.

F@!#ING ANARCHY!!!!!!!!!

[PartagasIV]

One of my friends said he read very recently that the coming few years will be the worst global economic crisis since the great depression...I think there might be some truth to that.

[sepp]

What looked like early retirement just 10 years ago now looks to be an added 10 years of labor.

deserves repeating: F@!#ING ANARCHY!!!!!!!!!

[Ken Gargett]

re china, speaking with a mate heavily involved in commodities and mining a few nights ago and he had just been to briefings with some of the 'china experts', guys who know the place and the market there very well, as well as anyone. they have no doubt that massive need for our resources is very real and that this will continue for several decades. there will be ups and downs and no one has a crystal ball for exact timing but if i had any spare dosh that i could put away long term, i'd happily flick some at some of the more serious resources companies. especially at current prices. that doesn't mean that there will not be major issues along the way.

i think that we have a heap of pain left in the property market here. to be honest, i don't think we've come close to working our way through a fraction of that. it is going to make things tough for some time.

that 300 point leap on the bailout was not reflected at all here. even though, as is obviously common knowledge, we do follow the dow to a degree, that bailout was not so relevant to us, it suggested that there are major problems with financial insitutions (when i worked in DC, fannie mae was one of our major clients so it is amazing for me to see this happening - would not have picked it back then) and the resources took a hit overnight so we went backwards.

the simple fact is that the markets are haywire at the moment as no one really has a clue what is happening. i think that many of the indviduals who did so well in the market over the last decade have not come to grips with the turnaround, espcially as most of them would never have traded in a serious bear market before - certainly many of the young traders/brokers in london/new york/sydney etc are completely lost - and they still think it is all a bad dream and that the days of easy money again are just around the corner.

sorting out the short selling nightmare would also help resolve some of the problems.

i think anyone wanting to continue to play the market has to be careful, cautious and have a very good understanding of what is happening (or trusted advisors). i watched one small offshore miner recently come out with a brilliant report on its progress (and it is producing, not simply looking) and the shares went backwards. a year earlier and they would have gone up 20% overnight - it is just crazy. fundamentals are seemingly irrelevant but that won't last forever. there are a lot of very good companies out there that are seriously undervalued. problem is timing.

we have 'interesting times' ahead.

[Ken Gargett]

»

» let the **** hit the fan, and maybe, just maybe we'll all learn next time

» around -

colt, that is absolutely the one thing that we will not do. in the mess in the early 90s, my major client was one of our major liquidators. rob and i have chatted about this a lot as he saw it from a slightly different angle. there was every weird, wonderfl and dodgy scheme, project, wishlist, you name it. and everyone kept saying that at least we would never see it happen again. everyone, from the dodgy bastards to the govt regulators would learn and ensure that it nevr happened again. everybody that is, except for a few o the old guys who had seen it all before and knew they would again. they were right.

you think nothing like enron or bailing out financial institutions will ever happen again? i'll bet any amount of havana's finest with anyone interested that we'll se it all again, probably in less than a decade after we get through this.

[Colt45]

» »

» » let the **** hit the fan, and maybe, just maybe we'll all learn next

» time

» » around -

»

»

» colt, that is absolutely the one thing that we will not do. i

Of course we won't. It happens in all aspects of human existence - we never learn.

On a smaller scale than the imminent collapse of the global economy, let's look at

what's currently going on with smoking regulations worldwide.

Ahh, the heady days of prohibition in the U.S. Good times. Organized crime blossomed

like algae in a beijing lake. Nothing good came of it.

And now our insidious smoking laws. I'm actually considering going into the bootleg cigar

business if tobacco is ever outlawed totally - they wouldn't even have to be good!

P.S. I sometimes think that we're all just not that far off from the post apocalyptic premise

of "The Road Warrior"

[Guest rob]

On the subject of corporate bail outs, I heard one analyst put it so matter of factly that I simply must agree:

"Capitalism doesn't work when we allow privitising of profits and socialising of losses."

[Chaki]

» Just throwing some observations out there and looking for input from FOH

» members all over the world just to gain an understanding of what is

» happening on the ground in your home country.

»

This is generally a good sign ;-)

When people talk about the stock market and the economy on a cigar forum, it usually means the bottom is not too far...

[zuma]

IMO, this is just the beginning...

The tide of wealth destruction has just intensified with the bailout of Fannie and Freddie, hitting hard institutions that were banking on investor hope to raise more funds. As a consequence, investment in stock markets and associated products will continue to languish... Naturally, the bailout was just the lesser of two evils as it may at least decelerate deterioration of the US economic climate.

Why did the markets go up with the bailout? Hope... a currency that seems to be losing ground. It is funny how the analysts keep basing their recommendations on hope... remember Lehman's advise on Fannie and Freddie a few months ago?

Though the property markets experiencing the sharpest down turn may be localised in the US and UK, the investemnt products that were sustained by such localised market are global. Hedge funds and municipal funds, global banks and local mutuals, large portfolios and small pensions, have been decimated as a consequence... almost everyone has been affected to a certain extent. I am living in a booming economy (Western Oz)... and although there is housing shortage, my house is not worth as much as it was worth mid last year... and the distant thunderstorms are making me more cautious in my spending and investing.

Inflation will continue rising... limited supply causes prices to go up naturally. Rising costs of energy and water will see increases in the cost raw materials... Is high inflation here to stay? Very likely (cheaper energy and water is needed to reverse the upward long term trend).

Yes... reduced consumption will lead to less demand of goods and services, which in turn will lead to higher unemployment, collapse of businesses, and, if the national banks/treasuries/governments do not intervene, global recession a-la-30's... even worse 'cause the US has already used war -- a potential internal economic booster -- and there is no popular desire to continue in that path (WWII and the resulting high morale had enourmous influence in the post 30's recovery)

China? I reckon the explosion of their middle class means that they have a certain momentum of their own... however, can such momentum be sustained in the long term?

If YES, their economic prosperity will end up keeping afloat the world economy and kick-start again the US juggernaut...

if NOT, then we have a while to go...IMHO, it will be again the US who will lead, after some reckoning and through better economic regulation/reform/conscience and/or ingenuity, that we will emerge from the present economic quagmire.

That's my two cents of pure and unadulterated speculation... :cool:

and yea, as Ken said, "interesting times" ahead...

[Fatcigar]

» buckle your seat belts - hard landing imminent.

»

» don't bail anybody out of anything anymore -

»

» let the **** hit the fan, and maybe, just maybe we'll all learn next time

» around -

» I know, wishful thinking. you'd think people would learn from past

» history, yet

» history continues to repeat itself.

»

» F@!#ING ANARCHY!!!!!!!!!

Sell down your inventory, increase cash position, opportunities abound 2009 & 2010 !

Cash will not only be King, it will be GOD ! :-D

[cvm4]

Free market capitalism is the best path to prosperity ;-) The Fannie and Freddie were always quasi government institutions. It seems socialist to bail them out, but that's what can happen when you're a government sponsored entity.

As for the USD, investors think the US will come out of this mess before the rest of the world. King Dollar has been on a roll against the Euro and the Pound. The UK said last week they expect tough times ahead and the EU has high inflation and won't cut rates because of that. Given that the US does come out ahead then we can raise rates and thus giving the dollar a bigger boost. The driving factor is a flight to quality and expectations.

[brooklyn]

Problem as I see it is unrestrained free market and speculators who manipulate markets. See latest USA oil/govt scandal.

The middle class are under siege; the poor have nothing and the ultra rich receive bailouts and corporate welfare. remember Bush when he said of middle class property owners: no bailout for people who made poor decisions. What of Fannie and Freddie Mac or Wall Street investment banks that sucked in outrageous profits on the backs of subprime lending? Remember the savings and loan scandal under Reagan(one of many blips on the screen). If truth to power is told, the Republican shills for corporate greed have spent and lent the world into this present situation.

The USA will bounce back, and the debt China and others hold will collapse as their economies shrink. When I shop, I notice more wares from Malaysia,Vietnam,etc. The tide will flow away from cheap Chinese products for Wal-Mart customers to other markets.

As for property, Miami is only a Chavez or Morales away from an instant boom. Otherwise, as the saying goes, they aren't making any more ocean front land..

As for Detroit, f*&k'em. Let them eat their SUVs; others will take over and provide excellent green tecnology cars that are not fossil driven.

Just my humble ramblings.

[cvm4]

When I shop, I notice more wares from

» Malaysia,Vietnam,etc. The tide will flow away from cheap Chinese products

» for Wal-Mart customers to other markets.

True...Cost of producing and labor is getting too expensive in China, so they go to other Asian nations. Kind of hard to believe labor being too expensive in China though.

[gostgost]

Well Boss the banks all cause the problem that we are facing today and it does not only hurt the US but is and will contnue to effect the entire global market.

Why do I say the banks because they along with the mortage brokers gave out all these what we all lier loans to all these people who they knewn could not afford a mortage. Please someone tell me I'm wrong, who in there right mind thinks they can afford a 500,000.00 house on a yearly income of 42,000.00 yearly income with a family of 6 mouths to feed.

Next I will use myself for the next example, my wife and I brought a brand new townhouse and when we filed for the mortage we were not asked for one piece of paper to proved were we worked how much we made nothing not a stich of paper did we supply but we got a mortage in 24 hours through very well known mortage company. Don't get me wrong my wife and I each make in the 6 figure range and can afford our house but not everyone there can.

It has also been predicted that a major bank was going to fold which I had no idea until this morning which looks as it might be Washington Mutual.

Then we have these shithead speculators that drove the cost of oil up telling investors to pour 60 billion into oil futures which drove the price out of this world. Since everyone made their billion the investors have withdrawn 39 billion and the oil prices drop like crazy.

So far the goverment has bailed out fannie mae and fredy mac well not really the goverment the people of the Unioted States has bailed them out through our tax dollar and of course neither of them will have to pay us back like we have to pay back our loans, now we might lose Lehman too. Can't wait the 7 year ARMS will be here shortly and there will be more forclosures

The entire problem is FREAKING Greed I want more.

Sorry for blowig my top

[demiurgic]

A good doctor once said to me, 'the outward manifestation of a disease is simply the inner imbalance in the body'.

I believe what he is really saying is that Healing comes from within, not the outside. Quick Pills make the problem go away for a bit but they do not fix it from within.

A good friend urged me to invest in precious metals years ago. This man had worked for the Federal Reserve and realized who they really were.

they are the singular tap root of almost every economic problem we have and some we export to other nations.

He made it clear to me that that the Federal Reserve was really a privately owned company, 13 rich bankers formed around the turn of the century. The essence of the problem being that they print America's money and all it's worth is paper. That money is not backed by any tangible resources like Gold Bullion.

Now imagine if this privately owned company wanted something?

manipulating the interest they charge America for printing the money for them, or say, 'creating' a so called national debt which is in line with high interest rates or even 'choosing' the next president or war?

All they have to do is pull on the puppet, America, and it will dance. no exceptions.

We're talking real power that is hidden from the masses here.

Like a tumor that needs a surgical knife to cut it out, America too will need an invasive and painful procedure which is for it's own good ultimately.

The time is near.

Oh and I beg to differ that cash will be king or God.

Precious metals will be far more significant during 'that' time.

[Ken Gargett]

who in

» there right mind thinks they can afford a 500,000.00 house on a yearly

» income of 42,000.00 yearly income with a family of 6 mouths to feed.

that is an issue here as well and that is why i think we have a bucket more pain in property here. way too many folk on okay incomes, but with not much to spare after kids etc, or sometimes families with two incomes, saw low interest rates and rising property prices so figured that they could not lose. at worst, if they had to sell, they'd still make a packet. down go prices, one or both lose a job, up go interest rates. whoops.

i like to video news shows and current affairs when i can and then will just replay them at home in the background when i have a chance (jim lehrer's news hour a favourite). came across one tape that had slipped through which was from a couple of years ago and was on the property boom here and they were talking to a woman who was explaining how - in sydney - she and hubby had just bought an investment property. a 100% mortgage. repayments took up every spare cent but she was not worried because the prices were always going to rise (let us hope she didn't have many kids, not for any inconvenience to them but so as the gene pool is not further diluted). now the timing of that in sydney has to mean they dropped $100 to $200k, may be a lot more. who knows if they even kept their first home. and there are a heap of these stories, many of which have not come through yet. families are doing everything they can to hang on but slowly, many of them are losing their grip.

[gostgost]

It just makes me nuts what the banks have done to the world financial system and then to read the CEO of bank that screws and quits gets a 150 million dollar buyout in his contract.

The world is just bloody crazy

[cvm4]

» It just makes me nuts what the banks have done to the world financial

» system and then to read the CEO of bank that screws and quits gets a 150

» million dollar buyout in his contract.

Link? Which bank is this?

[winelover]

I think there's a lot of pain to come. I think after the early week share bounce after the fannie freddie nationalisation, many started questionning their pesimism re the US economy. Then the Koreans got shy of Lehman - down 40 odd % then I look at the news today and Lehmans taken another battering. Worth just under $4 per share when it was $80 plus about a year back.

The UK economy is only now starting to catch a very heavy cold if not full blown flu. The housing market is taking a downturn and nobody's lending. Inflation and falling economic growth/recession are on the cards. Unemployment is beginning to rise.

Guess who's looking to buy his first property? Yours truly. Looks like I could be pitching a tent in a storm.

[gostgost]

It was Citibank but all banks in the US have deals like that. It's part of their signing contract even before they start the job.

[El Presidente]

Thanks for the update Graham. Mates there concur that a hell of a storm is brewing.

[cvm4]

Going to be a bad day today. Lehman is heading for bankruptcy and Merrill is being bought by Bank of America.

[gostgost]

Bad does not cover it, we'll be lucky to survive the day.

[winelover]

I think we are in a period of extreme market volatility and I think it will be a long time before market confidence restores.

Not great times for any because these shocks have global and widespread economic repercussions. Still, a bit of shock therapy may be better in the l.r. than the central banks bailing out every institution that runs into difficulty.