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The Financial Crisis ended in late 2011 (October)
Topic Started: 27 Dec 2013, 09:29 AM (3,440 Views)
HardTruths
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skamy
28 Dec 2013, 01:56 PM
So you don't think any of these companies might have put the borrowed money to good use and managed to increase their returns then?
Sorry, which companies?

Corporations are not the traditional holders of margin debt, financial institutions are. Very few corporations have access to cheap credit. Even with par rates at historic lows, commercial paper spreads are still quite high. What some companies have been doing is using lower rates to buy back their own shares, which in a low interest rate environment is a balance sheet improvement, and also results in higher retained earnings (less dividends to pay). So the balance sheet improvements seen on many S&P500 companies is an accounting effect of swapping equity for debt in a low interest rate environment. If rates go back up, many of these companies will need to reverse that process, and dilute equity in a falling market. It could get very ugly.
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Poontang
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HardTruths
28 Dec 2013, 02:34 PM
Sorry, which companies?

Corporations are not the traditional holders of margin debt, financial institutions are. Very few corporations have access to cheap credit. Even with par rates at historic lows, commercial paper spreads are still quite high. What some companies have been doing is using lower rates to buy back their own shares, which in a low interest rate environment is a balance sheet improvement, and also results in higher retained earnings (less dividends to pay). So the balance sheet improvements seen on many S&P500 companies is an accounting effect of swapping equity for debt in a low interest rate environment. WHEN rates go back up, many of these companies will need to reverse that process, and dilute equity in a falling market. It WILL get very ugly.
Sorry HT... could not resist :)
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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Andrew Judd
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peter fraser
27 Dec 2013, 01:21 PM
You seem to think that the market sets the rates that the government will pay on their bonds - it doesn't - the central banks do that.


The central bank has no power to set rates at the long end unless the government/central bank are prepared to limit stimulation to enable the bond market to remain confidant about the long term prospects for the economy.

Quite evidently the government and central bank have to walk a fine line between maintaining confidance and creating disaster.
Edited by Andrew Judd, 28 Dec 2013, 02:51 PM.
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Poontang
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peter fraser
27 Dec 2013, 01:21 PM
goldbug that's just a massive strawman - I assume because you don't have anything constructive to say.

You seem to think that the market sets the rates that the government will pay on their bonds - it doesn't - the central banks do that.

Perhaps you are thinking of non-currency issuers like Spain and Greece.
I get the impression that you think Central Banks know what they are doing and are in control of the situation at all times....
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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Strindberg
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Poontang
28 Dec 2013, 02:14 PM
Yes, you are right, they hate the stuff.... They can not seem to get rid of the stuff quick enough it seems...

http://www.mineweb.com/mineweb/content/en/mineweb-gold-news?oid=197040&sn=Detail

Save this thread and we will look at it at the end of 2016 ;)
No need to wait until 2016 to resolve the issue. You claimed:
Quote:
 
China is also reducing its holdings of US treasuries by selling them off and buying gold.

We already know that statement of yours to be false. China is increasing its US treasury holdings, not reducing.

China may be increasing its gold too but its gold holdings are still trivial compared to their US treasury holdings even if you believe your doomer con sites like zerohedge and money morning which claim that China's gold holdings are perhaps 3 times their official holdings of 1000 tons.

If you accept the inventions of those doomers, China would have ~3000 tons of gold or about $100 billion in gold - less than 10% of what China has in US treasuries. Even on the doomer claims, China is still pouring more of its dosh into US treasuries than in gold. They increased their Treasury holdings in the last year by $130B which is more than the value of China's entire gold holdings even if the doomers are right with their invented figures.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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Logic
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Stringy
Just to clarify, doom and gloom is house price inflation above wage growth.
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MMM
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Strindberg
28 Dec 2013, 06:27 PM
No need to wait until 2016 to resolve the issue. You claimed:


We already know that statement of yours to be false. China is increasing its US treasury holdings, not reducing.

China may be increasing its gold too but its gold holdings are still trivial compared to their US treasury holdings even if you believe your doomer con sites like zerohedge and money morning which claim that China's gold holdings are perhaps 3 times their official holdings of 1000 tons.

If you accept the inventions of those doomers, China would have ~3000 tons of gold or about $100 billion in gold - less than 10% of what China has in US treasuries. Even on the doomer claims, China is still pouring more of its dosh into US treasuries than in gold. They increased their Treasury holdings in the last year by $130B which is more than the value of China's entire gold holdings even if the doomers are right with their invented figures.

http://mobile.bloomberg.com/news/2013-10-22/china-treasury-holdings-drop-to-6-mo-low-as-yields-rise.html


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peter fraser
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HardTruths
28 Dec 2013, 10:11 AM
So it's all over now is it? QE has come to an end already? Sorry, I must have missed that news.

yes - the crisis is over although QE has yet to be wound down. Be patient.

Quote:
 
Being the dominant reserve currency won't change the outcome, only who it effects. Countries with large dollar reserves have been experiencing high inflation as the dollar's purchasing power in agricultural commodities has declined.

You clearly don't know what a reserve currency is. I'm referring to a currency used by the other countries in the world to settle their debts, I'm not talking about any reserves of currency.

Quote:
 
Because issuing currency and issuing currency denominated government bonds is completely different right?

You also don't understand this point. A nation such as Spain that issues bonds but does not issue it's own currency is in a very different position to a country like Australia who does issue it's own currency.

Spain can experience capital flight, or potentially default on their debts because they can't pay, or see it's borrowing rates go sky high - Australia is almost immune to that assuming political leadership remains sound.

It might take you a while to appreciate that point. It does come as a shock to many people especially if they have been reading the propaganda from the gold lobby.
Any expressed market opinion is my own and is not to be taken as financial advice
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MMM
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Strindberg
28 Dec 2013, 06:27 PM
No need to wait until 2016 to resolve the issue. You claimed:


We already know that statement of yours to be false. China is increasing its US treasury holdings, not reducing.

China may be increasing its gold too but its gold holdings are still trivial compared to their US treasury holdings even if you believe your doomer con sites like zerohedge and money morning which claim that China's gold holdings are perhaps 3 times their official holdings of 1000 tons.

If you accept the inventions of those doomers, China would have ~3000 tons of gold or about $100 billion in gold - less than 10% of what China has in US treasuries. Even on the doomer claims, China is still pouring more of its dosh into US treasuries than in gold. They increased their Treasury holdings in the last year by $130B which is more than the value of China's entire gold holdings even if the doomers are right with their invented figures.
What will happen when people start swapping these worthless pieces of bond paper for something of actual worth stringy, like gold as you mention, with ten times more bonds held than gold as you mention , is that with 1000 tonnes or 3000 tonnes worth :), there seems to be a rather large price correction on the cards, and that's just looking at China's debt held to gold. Thanks for putting things in perspective for us .

What if china is just stocking up on gold and down on treasury debt , not only as insurance , but as a means to protect their own currencey.

Are they waiting till they have enough gold and have bought up the majority of goldfields in the USA and also here as they are doing now so that they can then collapse the US dollar. This would make there currency the dominant one as it would actually be backed by SOMETHING, instead of nothing at all. There wealth would go up in more ways than one, first as the gold price increases and secondly not giving all theirhard earned goods on credit to the US knowing they can't pay in anything buy IOU government treasurybonds. Even if they sell it in there own country for ten times less , its still ten times more than an IOU nothing treasury bond.

The chinese could then wipe the US debt and forget about them unless they can pay in gold. But seeing as they have sold all there gold they won't have much. Pants down , worthless pieces of paper in hand that no one wants and no gold, oh dear , you paint a dim picture Strindberg but looks straight forward now that you have mentioned it.
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MMM
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So the financial problem ending in 2011 Peter.

Now I know some of you look at Detroit as a joke, and I guess it is, but let's look a bit closer.

Detroit used to be the city that had the highest median wages in all the US.

Was it a case of the bigger they are , the harder they fall. From one extreme to another.

From rags to riches and back again.

Is it just the mini model from which most the US economy is headed. Just here we got to see the end result in a more exaggerated way which unfolded faster than the rest, giving us an insight into the future.

Is it an insight into our own future , only at a slower pace than the mini model of Detroit that shows us the result with fast forward held down.

http://content.time.com/time/photogallery/0,29307,1882089_1850973,00.html
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