Traders described the losses on the FTSE 100 Index as "incredible", with the Footsie at one stage plummeting by as much as 330.7 points.
(Press Association release today.)
Less than 6%. Maybe they should raise the minimum age to be a trader.
Oh, and the PA uses the hack line "More than £x billion was wiped off the value of ... shares". Enough experience for cliche, not enough to remember history.
"See what I mean? Kids!"
Monday, January 21, 2008
It can't happen here
The US bemoans its fate, but we in the UK have also had something of a crash in the last three months, too. FTSE on 12 October: 6,730.70; now: 5,578.20 - 17% down.
It can't happen here
It can't happen here
I'm telling you, my dear
That it can't happen here
Because I been checkin' it out, baby
I checked it out a couple a times, hmmmmmmmm
(The Mothers of Invention)
There was a period of hip journalism in the 60s and 70s that thought it clever to quote pop trash as if it were Holy Writ, and I'm afraid I couldn't resist the cheek. Retro, but maybe appropriate for a rerun of the econogrind of those years.
It can't happen here
It can't happen here
I'm telling you, my dear
That it can't happen here
Because I been checkin' it out, baby
I checked it out a couple a times, hmmmmmmmm
(The Mothers of Invention)
There was a period of hip journalism in the 60s and 70s that thought it clever to quote pop trash as if it were Holy Writ, and I'm afraid I couldn't resist the cheek. Retro, but maybe appropriate for a rerun of the econogrind of those years.
Trad wins out over Progressive
Jazz is in vogue, and so, it seems, are old-fashioned financial virtues (though not, of course, here in the Western world). Ty Andros points out what I have long suspected: we've been failing for a long time, and only inflation has hidden the truth from the masses. He goes back further than I would, and suggests the real-wealth stagnation in G7 countries began in 1990-1991.
Ben Bernanke half-joked about dropping money from helicopters if necessary; now the first $500 tax rebate parcels are on their way. Andros says we're into a Ludwig von Mises"crack-up boom" which means that nominally, assets won't fall in price, but in reality they will be eaten hollow by inflation:
“Volatility is opportunity” and it is about to SOAR! (As you will see in the next installment of the 2008 Outlook) They will “Print the money” as the unfolding “Crack up Boom” powers generational moves in grains, commodities, currencies, and stocks are on the table.
Ben Bernanke half-joked about dropping money from helicopters if necessary; now the first $500 tax rebate parcels are on their way. Andros says we're into a Ludwig von Mises"crack-up boom" which means that nominally, assets won't fall in price, but in reality they will be eaten hollow by inflation:
“Volatility is opportunity” and it is about to SOAR! (As you will see in the next installment of the 2008 Outlook) They will “Print the money” as the unfolding “Crack up Boom” powers generational moves in grains, commodities, currencies, and stocks are on the table.
Danger of systemic breakdown
Doug Noland looks at the world of financial speculation, which has used loads of borrowed money to boost returns, and worries that as liquidity dries up, the market will become inefficient. This is, I think, one of the things about which Richard Bookstaber has warned. Perhaps the gunslinger day traders should assure themselves of the robustness of their counterparties when playing with futures and options.
We've just had a crash
... and Robert McHugh figures that the US stock market (as measured by the Wilshire 5000 Index) has already lost $2.6 trillion in the last three months.
He's begging for inflation now, rather than a useless stimulant later when the mule has died.
He's begging for inflation now, rather than a useless stimulant later when the mule has died.
The $1 trillion loss figure reappears
Thomas Tan thinks the addition of plausible losses in the credit default swap market to write-offs in other areas of banking, could bring the total hit on the US financial system to the $1 trillion mark.
Sunday, January 20, 2008
Economics in the dark
In 1971, the economist Stafford Beer brought the cybernetic revolution to Chile. His key perception was that economic decisions needed not only accurate, but timely information. So he set up a computer network and data analysis systems to empower the government's ministries without overloading them with irrelevant data.
In advanced economies, it's important for companies, banks and individuals to receive such information, too.
But nearly 40 years later, the USA needs to re-learn the lesson. The Federal Reserve ceased reporting M3 money supply data in 2006; accurate assessment of inflation is complicated by "hedonic adjustment" and periodic (and tendentious?) alteration of the types of item included in price surveys; the Bureau of Labor Statistics seasonally adjusts unemployment figures so that an increase can sometimes appear to be a decrease; nobody (not even the lenders) yet knows the full figures on bad loans and "Tier 3 assets"; it is not even clear how we should assess a nation's wealth (GDP per capita seems a misleading measure).
How can you navigate without up-to-date information? Even in the nineteenth century, Mississippi river pilots had to keep track of the river's changes, or risk getting stranded on new sandbars. And as John Mauldin reports, party political manoeuvering is stymying two appointments to the Federal Reserve's Board, at a time when the Fed most needs to concentrate on resolving the unfolding complex financial crisis.
Even given the right data, decision-making has become tougher. Increasing global interconnection and wealth transfer between nations means that normal cycles may be broken by epochal linear developments, so the past is now a very unsafe guide to the future.
We need clarity, direction and vision.
In advanced economies, it's important for companies, banks and individuals to receive such information, too.
But nearly 40 years later, the USA needs to re-learn the lesson. The Federal Reserve ceased reporting M3 money supply data in 2006; accurate assessment of inflation is complicated by "hedonic adjustment" and periodic (and tendentious?) alteration of the types of item included in price surveys; the Bureau of Labor Statistics seasonally adjusts unemployment figures so that an increase can sometimes appear to be a decrease; nobody (not even the lenders) yet knows the full figures on bad loans and "Tier 3 assets"; it is not even clear how we should assess a nation's wealth (GDP per capita seems a misleading measure).
How can you navigate without up-to-date information? Even in the nineteenth century, Mississippi river pilots had to keep track of the river's changes, or risk getting stranded on new sandbars. And as John Mauldin reports, party political manoeuvering is stymying two appointments to the Federal Reserve's Board, at a time when the Fed most needs to concentrate on resolving the unfolding complex financial crisis.
Even given the right data, decision-making has become tougher. Increasing global interconnection and wealth transfer between nations means that normal cycles may be broken by epochal linear developments, so the past is now a very unsafe guide to the future.
We need clarity, direction and vision.
Subscribe to:
Posts (Atom)