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Friday, 9/20, Market WrapUp (Granddaddy of Derivatives in Trouble)
Financial Sense Online ^ | 9/20/2002 | James J. Puplava

Posted on 09/20/2002 5:55:07 PM PDT by rohry

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"This is one risky hedge fund that could implode and bring down the financial system. Another credit downgrade, or an explosion in the price of gold, could make Morgan a relic of the past. Morgan’s gold derivative book could be the Achilles heel of this blue shoe bank."
1 posted on 09/20/2002 5:55:08 PM PDT by rohry
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To: sinkspur; bvw; Tauzero; robnoel; kezekiel; ChadGore; Harley - Mississippi; Dukie; Matchett-PI; ...
Market WrapUp is delivered....
2 posted on 09/20/2002 5:56:57 PM PDT by rohry
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To: rohry
This week $4.6 billion flew out the doors of mutual funds

It is going to snowball. The mutuals will have to sell into an already weak market.

Richard W.

3 posted on 09/20/2002 6:14:00 PM PDT by arete
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To: AF_Blue
Ping!
4 posted on 09/20/2002 6:31:38 PM PDT by TruthNtegrity
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To: rohry
bump for later
5 posted on 09/20/2002 6:40:42 PM PDT by tsomer
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To: rohry
If we are going to worry, we should worry about the below as well.

money.cnn.com/2002/09/19/news/economy/imf_dollar.reut/index.htm

"IMF says U.S. dollar overvalued

Global lender says global trade imbalances have left the U.S. dollar overvalued, asks for reforms.

WASHINGTON (Reuters) - Global trade imbalances have left the U.S. dollar overvalued, are unsustainable and call for prompt reforms in the United States, Europe and Japan, a new International Monetary Fund report said.

"With the U.S. current account deficit remaining in the range of 4 percent of GDP, an historical record, there is continuing concern that the dollar may be overvalued," the IMF said in its semiannual World Economic Outlook, issued Wednesday.

But the risk to the global economy goes beyond the U.S. position alone. The report said the imbalances between nations with surpluses, notably the euro area and Japan, and deficit countries like the United States, have "risen to levels almost never seen in industrial countries in the post-war era."

Perhaps more worrying, the IMF research suggested the situation could worsen in the coming years and concluded that the existing imbalances were unlikely to be viable.

It also said the possibility of a disorderly correction cannot be ruled out -- something that could produce a sharp correction in exchange rates among major currencies and a steep decline in global economic activity..."

6 posted on 09/20/2002 6:49:38 PM PDT by shrinkermd
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To: rohry
Thanks Rohry.....

"the Achilles heel of this blue shoe bank." ...what the heck is a blue shoe bank?...is he referring to the bank's pedigree as in Morgans, Rockefellers and Park Ave?......I always heard it was blue stocking or silk stocking...also on the above derivatives chart what is the "notional amount"...does that mean the actual amount?....Warren Buffett referred to derivatives as sewage...from the chart it looks like the septic tank needs pumping out....

Good luck to everybody!! Stonewalls

7 posted on 09/20/2002 6:56:17 PM PDT by STONEWALLS
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To: rohry
Hi Rohry. Checking in after a long absence. Hope your vacation was enjoyable.

On WSW this evening, an fund manger with Swiss bank Julius Baer advised leaving equities - even international - saying the valuations are still too high.

George Soros on tape said many more participants must leave the market before it will have bottomed.

Check your FR mail, my FRiend


8 posted on 09/20/2002 7:09:27 PM PDT by Dukie
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To: rohry
John Q is still holding on

My friend has told me to stop sending him CSCO prices. He continues to buy on a payment plan and he will not sell. He won't sell no matter what. How many people like him are out there? How does this affect the aggregate market psychology? His "VIX" is zero, I can tell you that.

The price of CSCO will have to be cut in half and earnings will have to double to get the P/E down to 12. But on Yahoo it says earnings are predicted to more than double (0.25->0.57). That means the stock will have to fall to $7 to be considered cheap, assuming P/E of 12 is cheap.

My question is: if he and others like him never sell out, the market will never reach a bottom, nor will it rise, it will just languish forever while my friend keeps waiting for the long run. Is he just ruining it for the rest of us?

9 posted on 09/20/2002 7:31:06 PM PDT by palmer
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To: palmer
bump for later
10 posted on 09/20/2002 7:32:11 PM PDT by Unknown Freeper
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To: rohry
BTTT
11 posted on 09/20/2002 7:35:29 PM PDT by Gritty
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To: palmer
I would think that if there isn't enough money going in, people looking to make small profits per share on stocks will just keep taking money out, when stocks go up just a few pennies per share.
12 posted on 09/20/2002 7:37:05 PM PDT by grania
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To: grania
As an amateur trader I have done that. But now I am 100% cash. On the other hand my 401K still has money in stocks and now that I have just finished criticizing my friend, I am doing the same thing: just letting it sit there and lose value year after year.

Each time I consider bailing out I look at a few facts: (1) my 401 is heavily weighted to money market because I started with a conservative weighting. (2) I have watched the market slide a large percentage and it doesn't seem worth the time and effort to bail now.

So my question remains, how will the market bottom out if lazy people like me never sell?

13 posted on 09/20/2002 7:47:09 PM PDT by palmer
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To: shrinkermd
Perhaps more worrying, the IMF research suggested the situation could worsen in the coming years and concluded that the existing imbalances were unlikely to be viable.

Hmmm...that sounds like thats one more good reason to get yourself out of debt! At least thats the way I'm reading it.

14 posted on 09/20/2002 8:06:21 PM PDT by BureaucratusMaximus
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To: rohry
Without liquidity pumped in via tax cuts and fiscal prudence by the government, deflation ala Japan is perhaps unavoidable. But since these actions are not in the interests of the US congress, perhaps the dynamics of failure need to take their course. Unfortunately, those that will feel the pain are the innocent bystanders, such as those approaching retirement.
15 posted on 09/20/2002 8:24:08 PM PDT by lds23
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To: palmer
I heard a couple of days ago that Bush is considering a larger stock loss deduction on tax returns. It seems 75% of Americans have had losses in 401 Ks. There were a couple of other proposals but I don't remember what they were.
16 posted on 09/20/2002 8:47:14 PM PDT by tubebender
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To: tubebender
I heard a couple of days ago that Bush is considering a larger stock loss deduction on tax returns. It seems 75% of Americans have had losses in 401 Ks

Wouldn't a tax deduction only apply to losses outside of retirement plans, and only kick in if stocks were sold at a loss? I can't see how that would help those who lost value in 401Ks or other retirement plans.

17 posted on 09/20/2002 8:59:12 PM PDT by grania
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To: palmer
So my question remains, how will the market bottom out if lazy people like me never sell?

The price of the stock is the last price someone paid per share. So, if people were only willing to pay a really small amount of money for stocks, the value of your stock would keep going down while it sat there.

It's like anything else you own and might decide to sell. Shares of stock only translate to cash if someone is willing to buy them.

18 posted on 09/20/2002 9:05:26 PM PDT by grania
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To: palmer
Is he just ruining it for the rest of us?

Probably continuing to buy equities at this time isn't the most conservative thing to do. If someone wants to hold what he has already, even though stock certificates are down in the paper towel valuation range, fine, someday the companies that survive will come back. Whether your friend and others who think that way are delaying the final bottom or something like that, well, earnings reports have more effect.

19 posted on 09/20/2002 9:20:15 PM PDT by RightWhale
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To: tubebender
Re #16

That would be another way of doing tax cut, I guess. But if the potential deduction is bigger than whatever current income you have, does IRS give you a tax refund to make up the difference ? Do you happen to know the details ?

20 posted on 09/20/2002 10:10:05 PM PDT by TigerLikesRooster
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