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Merill Lynch's chief North America economist believes we are in a depression

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  1. Jan 28, 2009 #1
  2. jcsd
  3. Jan 28, 2009 #2
    In your reference, David mentions "advocating high fixed-income orientation". First a humorous remark and then a serious contrarian remark.....

    (1) Humorous: does David have the office across the hallway from John Thain's old office which just received $1M in renovations?

    (2) Serious Contarian: Do the opposite of what David says to do. Is this case, this could imply buying equities and shorting fixed credit. They could have loaded up on what they are advocating and wanting to dump their position to retail followers, like us. China Wall? HAH!

    There is absolutely no credibility on the street.


    https://www.gpcresearch.ml.wallst.com/common/emaillink/pdf.asp?SSS_20E89F090409B81E37D8B7177FAE1685&
     
    Last edited: Jan 28, 2009
  4. Jan 28, 2009 #3

    LowlyPion

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    You may not be far from right.

    With the massive printing of money, inflation might make fixed income the last place you want to be.
     
  5. Jan 28, 2009 #4

    russ_watters

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    I love how in the section "How is a Depression Defined", the author declined to even define what he means by the term. But I guess that's fine - I think we've gone past "depression" and now we're in a deep zerbet.
     
  6. Jan 28, 2009 #5

    Ivan Seeking

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    He explained that there is no accepted definition, and it took thirty seconds to see that he goes on to explain what he means.

     
  7. Jan 28, 2009 #6

    mgb_phys

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    It's also interesting how there is no definition of a 'bubble' either.
     
  8. Jan 28, 2009 #7
    Notice the accounting trick in the article below regarding deferred bonuses that could have originated with tax dollars. What? Bonus for losing money?

    If I were the Chief North American ML economist and didn't receive my normal $1-3M bonus, heck, I would think we were in a depressioin also if I had to make a $100K mortgage payment every month (just speculating).


    http://biz.yahoo.com/ap/090128/na_us_bank_of_america_board.html?.v=2
     
  9. Jan 28, 2009 #8

    mgb_phys

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    Maybe thats the new definition
    It's a recession if the CEO bonus go up by less than 100%/year
    It's a depression if the CEO bonus is less than last year
    It's Armageddon if the CEO get made redundant
     
  10. Jan 28, 2009 #9

    russ_watters

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    "Depressions are basically long recessions" is exceedingly vague, to the point of being useless. It also doesn't fit with more conventional definitions, which require it to not only be long, but deep. For example, a 10% drop in GDP is one typical definition.
     
  11. Feb 3, 2009 #10
    Sprott Says U.S. Depression Will Boost Gold Price (Update1)

    And we have mainstream depression call number 2:

    Sprott Says U.S. Depression Will Boost Gold Price (Update1)

    http://www.bloomberg.com/apps/news?pid=20601087&sid=acQ4RaOnhRK4&refer=home

    Feb. 3 (Bloomberg) -- Eric Sprott, the Canadian money manager who last year predicted banking stocks would collapse, said the U.S. is at the beginning of an economic depression that will help gold prices more than double.

    Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes, the chairman and founder of Toronto-based Sprott Asset Management Inc. said yesterday in an interview. Banks will battle to replenish capital, Treasury auctions stand the risk of failing and the moribund economy will create a dire operating outlook for many companies, he said.

    “The trend is down, and there’s not one signpost that says it’s changing yet,” Sprott said yesterday from Toronto. “We’ll stand by to wait to see those, and until it does, you have to assume it gets worse.”

    Sprott, who manages $4.5 billion, said in March that the world was in a “systemic financial meltdown,” a call that presaged the collapse of financial institutions including Bear Stearns & Co. and Lehman Brothers Holdings Inc. Since then, the U.S. has entered the worst economic slowdown since the Great Depression, credit markets have tightened and asset prices have dropped as companies and funds sell portfolios to raise cash.

    The 81-company Standard & Poor’s 500 Financials Index has dropped 62 percent since Sprott said on March 6 he was buying bullion and gold-producers’ shares, while shorting financial- sector stocks. Gold slipped 6.3 percent during the same period.

    So-called short-selling allows speculators to profit from a stock’s decline by borrowing shares, selling them to raise cash and buying them later when the price drops to repay the debt.
     
  12. Feb 7, 2009 #11
    IMF Says Advanced Economies Already in Depression

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a6aaWZ8ab8yU&refer=home

    By Angus Whitley and Shamim Adam

    Feb. 7 (Bloomberg) -- Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.

    “The worst cannot be ruled out,” Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. “There’s a lot of downside risk.”

    Ten days ago, the IMF cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone won’t succeed in dragging the global economy out of recession unless confidence is restored in the banking system, Strauss-Kahn said today.

    “All this will work if, and only if, the different countries are likely to do what they have to do in terms of restructuring the banking sector,” he said. “And today it’s not done.”

    The U.S. economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the postwar period as companies from Macy’s Inc. to Caterpillar Inc. cut costs. The U.K. economy will shrink this year by the most since 1946, the IMF forecasts.

    “There is hope that the fiscal and monetary stimulus measures being implemented around the world can help turn things around,” said David Cohen, Singapore-based director of Asian economic forecasting at Action Economics. “But there is still the risk it can be short-circuited by further financial turmoil.”

    $780 Billion Package

    The U.S. Senate is due to vote early next week on an economic stimulus package totaling at least $780 billion that President Barack Obama said is needed to prevent the economy from sinking into a deeper recession. Asian nations from China to Singapore and India have pledged more than $685 billion on their own spending programs.

    The Obama administration is considering subjecting banks to a new test to determine whether they require fresh capital injections as part of a rescue plan to be unveiled by Treasury Secretary Timothy Geithner next week, people familiar with the matter said.

    Governments should be ready for “full-fledged” intervention, acting quickly to sell or wind-up insolvent lenders, Strauss-Kahn said. While the European Central Bank, which left interest rates unchanged this week, may have more room to cut borrowing costs, such a policy may not be as important as restructuring the region’s banks, he said.

    Borrowing Costs

    “We’re probably not very far from the point where the question of interest rates is not the most important question,” Strauss-Kahn said. “Providing direct liquidity to the market, restructuring the banking sector, may have more influence on demand than interest rates.”

    In Asia, “there’s still room for bigger stimulus packages,” the IMF official said. Malaysia, for example, may introduce a second stimulus package larger than November’s 7 billion-ringgit ($1.9 billion) plan, he said.

    Developing Asia will probably expand 5.5 percent this year, the slowest pace since 1998, the IMF said in last month’s update of its World Economic Outlook report. The region may expand 6.9 percent next year, the fund forecasts.

    Asian nations will need a recovery in the global economy before the region can exit a slowdown, the IMF said this month. Strauss-Kahn said today the fund’s forecast for a recovery to start in 2010 is “very uncertain.”

    Demand for Loans

    Demand for IMF loans is rising in nations suffering from weaker export sales, banking industry turmoil and deteriorating investor confidence. The organization has so far agreed to lend $47.9 billion to countries affected by the crisis, including Belarus, Hungary, Iceland, Latvia, Pakistan, Ukraine and Serbia.

    Strauss-Kahn said he agreed with Poland that the eastern European nation isn’t in need of assistance from the fund now, but may require financial aid in the future.

    The fund may collaborate with some countries to restore confidence, without necessarily providing immediate loans, the official said.

    “Some need for precautionary arrangements may appear,” he said, without naming specific countries.

    Critics of the fund say it’s failed to keep up with the pace of change as the worldwide recession deepens.

    The IMF and similar institutions are “incapable” of coping with the global financial crisis, because their resources can’t keep up with demand, former World Bank President Paul Wolfowitz said on Feb. 4.

    Russian Prime Minister Vladimir Putin has criticized the World Bank, IMF and World Trade Organization as anachronistic organizations that give no voice to emerging economies.

    The IMF and the World Bank were set up at the 1944 Bretton Woods conference. The IMF was designed to prevent crises in the international monetary system and to provide financing to distressed countries.

    To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.netAngus Whitley in Kuala Lumpur at awhitley1@bloomberg.net
    Last Updated: February 7, 2009 04:38 EST
     
  13. Feb 7, 2009 #12

    i think you're right, it's a con. they want people to come down to the office and pay commissions to move their money around. probably with annuities or something else that will be a complete raping of the consumers. times are bad so play on peoples' fears. sell them a sure thing. when people are scared, all they want is a little security. of course, as soon as the market starts to turn around a bit, play on peoples' fears of missing out and being left behind. forever and ever, amen.
     
  14. Feb 13, 2009 #13

    Astronuc

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    It's more a funk than a depression.

    Puting things in perspective: Why This Recession Seems Worse Than '70s and '80s
    http://finance.yahoo.com/news/Why-This-Recession-Seems-cnbc-14354968.html

    The states need to get their budgets under control.

    It seems the federal government and state governments do not understand 'business development'.
     
  15. Feb 13, 2009 #14
    I like this old quote by Reagan.
     
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