Financial topics

[Higgenbotham]

Hig

Does telling American's "He " needs "Our" help and to call /mail Congress answer you're guestion ?

jusme

Oh, Brother.

"My name is Barack and I thought I was here to help you. Now I need your help."

No you weren't, Barack, and no you don't.

[jcsok]

For people who follow Elliot Wave Theory, for which there can be a myriad of counts, a poster who believes the top is in:

March 9, 2009 - October 11, 2007 = 515 calendar days, A down
July 25, 2011 + 515 calendar days = December 21, 2012 ... C down?

Got to hand it to those Mayans ...

[Higgenbotham]

For people who follow Elliot Wave Theory, for which there can be a myriad of counts, a poster who believes the top is in:

March 9, 2009 - October 11, 2007 = 515 calendar days, A down
July 25, 2011 + 515 calendar days = December 21, 2012 ... C down?

Got to hand it to those Mayans ...

Another one that hit the top date:

From the March 24, 2000 to the October 11, 2007 tops in the S&P = 2757 calendar days.

Half of that is 1379 days.

Adding 1379 days to October 11, 2007 is July 21, 2011.

This was the exact date of the S&P high last week.

[Higgenbotham]

Another cycle.

May 11, 1931
Credit Anstalt declares bankruptcy.

August 15, 1971
Nixon declares bankruptcy (reneges on international gold standard - Bretton Woods agreement).

There are 14,706 calendar days between these 2 events. Adding 14,706 days to August 15, 1971 is:

November 19, 2011
Watch for a major declaration of bankruptcy around this date. This could be our generational panic time frame.

[OLD1953]

While I would not be surprised if this happened in November, I've been amazed at the ability of the modern system to kick the can down the road. Just MHO, but if they ever get around to a BUDGET debate (rather than this nonsense) it's going to get very dramatic.

It's going to be interesting over the next few days, watching the show in DC. Especially the business with wanting to just kick the can to December. That means all Congress would do between now and December is repeat this fight all over again, and that would mean no budget for 2012 either. Err, correct me if I'm wrong, but doesn't passing a budget give them all sorts of opportunities for cuts? LOL. Seems to me the reality is that nobody wants to make any decisions about WHAT to cut, so they'll just force a shutdown.

Examining the CBO figures (for what they are worth) shows the budget deficit is going to drop anyhow, as the last of the TARP money and the stimulus funds are expended. This whole thing is theater, and pretty poor theater at that.

What will be really interesting, after this particular circus is over, is to see just how Boehner will punish his freshmen. Or will he dare to? If he doesn't, then they'll just be more powerful the next time he needs their votes on something important, if he does, they may become more intransigent and bitter. One thing is certain, he's not in control of his party. And this either passes or we have the crisis right now.

[jusme]

The Mayan's were discovered because of their "ruin's .

You keep hearing about the "V " recovery

Turned upside down that looks like a very narrow cliff !

Just how mean is this reversion gona be ?

Wonder what they will conclude from our ruin's ?

John ? ? ?

Do they drug test our Gov't servent's ?

Or are the graph's symbolic of a whole lot of people who maybe need to be on some med's!

John Mauldin for President !

For those of you who don't know he was explaining to some "Con "gress and Senators,some were G O P and one gang of Six what "debt ceiling "was ???

They told him they"'didn't know what was going to happen" ?

Obama 'the Lawyer' doesn't know if he can use the 14 Th ?

(Banging head on keyboard ! )

You couldn't "make this stuff" up !

jusme

[Higgenbotham]

While I would not be surprised if this happened in November, I've been amazed at the ability of the modern system to kick the can down the road.

The Dow made its 1931 high on February 24, 1931 at 196.96, about half of the 1929 high. Credit Anstalt's bankruptcy was 76 days after the high. The same length of time after this year's May 2, 2011 high is July 17, 2011. That was about the time Europe kicked the can one more time and the stock market made one possible last gasp.

One interesting aspect of Credit Anstalt is that it didn't have a huge effect on our market immediately, but the subsequent selling was steady and relentless, with the Dow falling all year to a low around 73 in December.

The selling so far since the July 21 high has been similar. Steady selling but nothing earth shattering enough to get people excited.

I think there comes a time when kicking the can down the road is no longer even the immediate lesser of two evils. The US may be immediately better off cutting spending than getting a debt downgrade and facing other consequences associated with overspending.

If the above is true, we may see some version of the relentless 1931 downward adjustment rather than a short term panic adjustment. I'm still betting on both, as stocks may be a lot more overvalued than they were in February 1931. Still, from the February 1931 high to the July 1932 low, the Dow fell over 75% without having any memorable panic days.

However, if there was anything close to a panic, it occurred 4 months after Credit Anstalt. This would also put us to the mid November 2011 equivalent.

http://oi53.tinypic.com/2mi57wk.jpg

[Higgenbotham]

http://www.futurecasts.com/Depression_d ... d-'31.html

A few select quotes.

The September, 1931, stock market Crash was the worst monthly percentage decline of the Great Depression. A speculative leader that had been paying $6 yearly omitted its quarterly dividend, triggering the dive. Domestic bonds joined the sell off at a greatly accelerated pace as confidence in even the long term future was finally drained away. Other dividend casualties continuously pummeled the market along with the continuous decline in commodity prices and an almost complete failure of any materialization of the anticipated autumn business revival.

The Paris and London markets fell. The Berlin Bourse reopened on September 3 with prices 25% to 40% lower than when it closed. The outflow of capital reached drastic proportions.

Complete cessation of foreign bond financing in U.S. markets left debtor nations no alternative but to ship gold. The trade decline, tariffs, quotas, protective subsidies, money restrictions, and price deflation didn't help either. London lost $9 million in gold in one day. U.S. holdings topped $5 billion.

However, this was clearly NOT a failure of capitalism or of the gold standard. This was clearly a failure of political governments - especially in the western democracies - and especially in the United States. No practicable financial system could possibly indefinitely withstand the strain of two decades of the political stupidity of the Great War and the trade war that followed it.

Panic swept financial Europe on September 19, 1931, two years after the start of the stock market Crash in the U.S. As rumors of English abandonment of the gold standard circulated, Amsterdam and other financial centers hastily attempted to bail out. The huge Paris and N.Y. credits were quickly used up and heavy gold shipments again were made to support the foundering pound sterling. England increased taxes 25% and decreased the dole 10% as part of a big austerity drive - but even this was not enough.

England finally abandoned the gold standard on September 20, 1931. The unrealistically high value at which the pound had been pegged had boosted domestic consumption and imports and had undermined the competitiveness of her exports, causing funds to drain out of the country. France, on the other hand, had stabilized the franc at only 20% of its pre WW I level.

England had only $650 million in gold left. The $250 million and $400 million credits from N.Y. and Paris had been quickly eaten away as London lost over $1 billion in reserves in her futile two month effort to support the pound.

Great acceleration towards the end is a common property of financial crises - most of which can seem manageable for months or years before the period of acceleration begins. While the impending crises themselves are often easily discernible by perceptive observers, predicting the onset of acceleration can be very difficult.

[OLD1953]

Given the number of market suspension triggers present today, I'd think the slow slide would be the more likely effect, unless the SEC tried to keep the market closed for some extended period. Picking up at the point things would have dropped to after such a closure could be claimed as a huge drop between trading days, or a steady drop of XXX points per day while the market was closed. Take your pick, both are true. However, I seriously doubt the SEC would have the nerve to close the market for more than three business days.

Trade war that followed WWI - is he referring to the Fordney-McCumber tariff? Smoot-Hawley didn't take effect until after the Depression started. The FM tariff is generally considered to be a disaster. (Historical note: at that time in history, Republicans were pro tariff, Democrats were anti tariff.)

[Higgenbotham]

We were having a discussion a few months ago about how early this is in the crisis period.

Having brought up the comparison of Obama and James Buchanan along with Credit Anstalt in recent posts, I did some hunting to see if there are any analysts making those comparisons and found an interesting recent comment. This comment follows a posting by Edward in his blog.

Edward Harrison says:
22 July 2011 at 11:10
That's the question, isn't it, Tom. I don't think there are many ways out of this without a systemic which precipitates the kind of wholesale political change we see during major crises. Obama has put himself on the side of continuity and has thus become the Hoover of this downturn. While superficially, we might think of events as similar to 1937 because of the statistical economic recovery, in truth events are more akin to 1931. That makes the Credit Anstalt question pertinent.

http://www.creditwritedowns.com/2011/07 ... risis.html

http://www.creditwritedowns.com/2008/03 ... rison.html