Friday, September 19, 2008

Storm Chaser

US Treasury Secretary Henry Paulson has been shopping around a proposal to congressional lawmakers that would create an entity to deal with the billions of dollars of bad debt still clogging the financial system. The idea has been compared to the Resolution Trust Corp formed in 1989 to fix the savings and loan industry collapse.

The latest developments came on the first day that the US Securities and Exchange Commission's new rules aimed against abusive short selling of stock in all publicly traded companies took effect. Britain's Financial Services Authority said investors will be temporarily barred from taking new short positions in financial stocks from midnight on Thursday, September 18, which analysts said raised the possibility of a similar action in the US.

There is nothing you cannot save if you throw enough money at it. The way the Fed dumped US$180bn yesterday to provide liquidity and similar moves by central banks everywhere showed solidarity in tackling this crisis confidence.

Are assets not worth anything anymore? Why so many investment banks in trouble? There has been a freeze in credit. Inter party transactions which used to be settled a few days down the road, thereby implying a credit transaction, is not happening anymore. Banks and financial institutions are not willing to fund any kind of trades. Imagine your broker asking you to bring the money first before buying any shares. Thats what is happening. The i-banks do not have sufficient capital to bring the money first in these transactions.

Failing to resolve the situation will cause more failures, and maybe even a run on certain banks as the general public may even lose confidence with their policies and deposits.

While I can put up many reasons to debunk the RTC like bailout (which is rumoured to be in the US$300bn-500bn range), it looks like the situation cannot be left to the market forces to unravel itself.

Looking 3 years ahead, one can see a strong shift in the shape of financial giants. I can see HSBC taking the global mantlepiece as the biggest and strongest bank eventually. I see many more surviving banks and financial companents to have much higher Asian institutional owners (banks and SWF).

HSBC has taken the proposed 51% deal to buy Korea Exchange Bank off the table. Looks like they are seriously considering buying a controlling stake in Morgan Stanley.

Its not over, volatility will be there. Gold really looks very good, and I can see US$1,000 being tested this year, with room to move even higher.

China probably would have been told in no uncertain terms by all central banks to pick up the slack as the engine of growth for the global economy over the next 12 months. Can expect very rapid reductions in SRR and BLR, maybe even twice in a month, with cuts to trading tax and transaction cost. Probably will fast track the spending injection plan. China could look interesting.

p/s photo: Aum Patcharapa Chaichua


ru40342 said...

Dear Dali,

"There is nothing you cannot save if you throw enough money at it."

I really can't believe you say this! It's more than stock market.It's more of the fundamental of the economy itself. an economy of a nation can't be saved by just printing money and pump it in the system. It is much more complicated than that.

Yesterday i sent you the youtube link of what peter schiff is saying but look like you ignore it!

Yesterday was 18 september 2008, exactly one year anniversary of the first rate cut(50 basis point) by federal reserve and look what happen, at least 5 companies about to bankrupt! and economy is sinking to hell!!!

You may say if fed didn't intervene it would be worse, well, if fed didn't intervene in the first place, the us economy would be much better. They created the dot com bubble and it burst in 2001. Then to "stimulus" the economy fed(led by Greenspan) encourage US people to spend money and cut the interest rate all the way til 1.00% and created the housing and credit card bubble(about to burst). Now the housing bubble is bursting and fed inject even more money! They repeated the mistake they done in 2001 by creating more and bigger economy bubble. The last thing you wanna do when you in a hole is dig deeper and that's exactly what the fed is doing.

This is what gonna happen to US if they keep doing the same thing:Their inflation rate will shoot up as the money supply increased heavily.(yesterday gold price up 80 dollar per ounce is the prove), their dollar will depreciate and their debt will be so huge they won't be there to control the world economy(US change from the world biggest creditor in the '70s to the world biggest debtor now) and by that time, the economy of the world will collapse just like what happen to the great depression 1929.

Well just give you a taste of what gonna happen. You can ignore me again Dali but that is gonna happen. Like the MasterCard ad we use to watch on TV: there are really something money can't buy and that's sound economy that the US and rest of the world really need!

So you might ask how? how to save the economy now? First fed should stop acting like this. Let the economy recover itself. The economy have to take the painful medicine to cure and heal itself. Let all the bubble created by the fed and people of America burst and start all over again. It is the only way like it or not.

Good Luck!

lsb said...

What a contrast to the remedy for Asians in 1997, and confirms the perceptions that they did it purposely to pick up assets on the cheap, in Korea and elsewhere.

Tanah Hartah is a vehicle they are considering in whatever sophisticated name it may be established.

Selfishness, i wish the contagion continues as there is great probability to repeat post 1998 earnings., but for empathy no.

Salvatore_Dali said...


Dear Dali,

here i got a video interview done by don harrold with peter schiff. They both predicted correctly about the market during the course of one year so their we should at least hear what they say.

I really hope you can publish or promote this video because what peter schiff try to say is absolutely correct like it or not.

Salvatore_Dali said...


Dear Dali,

here i got a video interview done by don harrold with peter schiff. They both predicted correctly about the market during the course of one year so their we should at least hear what they say.

I really hope you can publish or promote this video because what peter schiff try to say is absolutely correct like it or not.

p/s ru,

i am not ignoring u, i am holidaying in bali, i dont get to my comp all the time...

Yvonne said...


Do I have to worry about money deposited with brokerage companies like optionsXpress or Interactive Brokers?


Yvonne said...

Dear Dali again,

in your post, you said gold is very attractive now. How do one invest in gold if not physical?


clk said...

Dear ru,

What Peter Schiff says is spot on. However many other people have said the same in the last few years, some had perfect timing like Peter, some are way much earlier and some miss the timing by decades.

In life, with so many out there making all sorts of prediction, there is bound to be one or a few who is spot on. The key is to be spot on consistently and unfortunately, I have not seen any who has made that mark.

A simple analogy can be exemplified as such:

A says mkt will fall in the next 12mths.

B says mkt will be flat in the next 12 mths.

C says mkt will rise in the next 12 mths.

After 12 mths one is bound to be right. Then we celebrate the right one! Big deal?

Will the same guy get it right, 12 mths after this first 12 mths? We tend to think, getting it right the first round will make this guy a hero and he's bound to be right the next round.

Like the caveat, "past performance is not an indication of future performance" always holds true!

ru40342 said...

Dear clk,

look like you don't know peter schiff of don harrold.

I have been a follower of those two men for quite some time and i have to say they spot on every time.

It's easy to predict either the market will fall, rise or flat but it's hard to predict how much the market gonna rise or fall, what sector gonna rise or fall, when the crash will start etc.

If you don't believe my word, then you should join their services and you will understand what i am talking about(it's not free though). They both have a +20% profit in their portfolio ytd against a negative >20% for dow and s/p ytd.

Again you can say 20% profit is not good enough or they are lucky but can you name me one so-called expert have +20% in their portfolio?

If you predict one thing correccly then you maybe lucky but when you predict a lot of thing correctly and precisely, that's not lucky.

Go to youtube and study their video first before say something like that. You miss a legend.

Ivan said...

Bro dali,

Correct me if I am misake, The Star show that the HSBC and Korean break is break out.


SecretGarden128 said...

If S&L crisis is an indicator of what could be in store for us next,
I would anticipate the following:

1. US might lose its 'AAA' soverign rating soon but as long as the next president re-stored the old glory American role of exporting hopes instead of fear to te world, US will be the best 'emerging' market after the meltdown.

2. I have no doubt that some Joes at Silicon Valley or their garage would come out with the 'next big thing' eg renewable fuel cells, etc, triggering another round of boom. After all, who would have imagined in the aftermath of S&L crisis that US would experience the DotCom boom in the next 5 years? Innovation and entrepenuership have always been the core of the beauty of the American's capitalism.

3. As more and more young turks are no longer lurked into Wall Streets, they can now focus more on the 'real' industry like the engineering, IT, renewables etc.

4. Some legendary investments would be made, similar to the last S&L debacles (Barry Steirnlight, Step Schwarzman,Tom Barracks, etc). Already we have seen the billions made by John Paulson, David Einhorn etc from this crisis.

Born2Reign said...

Dear Dali,
I've been converting cash to gold the last few months. Now I want to buy silver, however in Malaysia and Singapore can't find any banks that trade silver mints - except UOB Silver Account which charges loan shark fees.

Should I go into options/commodoties trading for silver and platinum?


clk said...

Dear ru, yes my apologies on Peter as I've never done any research on his performance to-date except to hear him on youtube few days back. I was merely making a generic comment on many out there.

I shall however reserve my comments on him for now and track him over the next 36 mths to see if he's really a legend as claimed.

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