Possible US crash implications for DR

Chip

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Jul 25, 2007
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No doubt a recession is happeneing due to subprime lending "spree", but the severity of the recession is questionable. Also, with all due respect I think it would be difficult to take the author very serious given his obvious "Michael Moore" conspiracy slant because of statements like the following:

"Among those poised to profit from the crash is the Carlyle Group, the equity fund that includes the Bush family and other high-profile investors with insider government connections"

"All (presidential candidates) are heavily funded by the financier elite who will profit no matter how bad the U.S. economy suffers."

"Acceptance by the U.S. population of diminished prosperity and a declining role in the world. Grin and bear it."

With regard to the DR economy, obviously anything that hurts the US will have it's effect felt here but it doubt it will be any worse that the other effect that recessions in the US have caused here in the DR.
 

Chris

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Oct 21, 2002
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It is sure that something is happening. This is not the only material out there that talks about this. For the DR, if there is less disposable income in the US, the obvious conclusion is less tourism, so less tourism dollars flowing into the DR economy.

For DR-Cafta, well, who knows?. I am personally concerned about local food security in the DR and the 'cheaper' imported food is not necessarily a good thing in my book. So, I cannot say how this could play out. It is sure that the US is in trouble with its own food production (lots of ecologically related problems in the bread basket areas, perhaps California excluded at this time). The US manufacturing base is also in other markets. Perhaps they will bring manufacturing back from China etc. if they have to pull in the belt?

In addition to the housing market slump in the US, and cheap credit surely kinda disappearing, personally I think we're looking at the beginning of the real oil scarcity crisis.

The ecological problems caused by global warming is also showing their effects all across the world.

I think these three things together, (housing market slump perhaps leading to a recession, the end of cheap oil, and ecological disasters in food growing areas) may just have disastrous effects - not only on the US, but on the DR as well.

The DR however is resilient I think. And if the US gets a 'cold,' the DR will surely survive the consequent 'pneumonia' - just because it has the ability to produce healthy food.

I recently read a blog that humorously explains this all: "There is no scientific proof of this, but I believe that the use of prescription anti depressants has made enough of a change in group decision making that many of the more amazing aspects of the recent credit bubble can be explained by it."

Disclaimer: These are only my ideas and should not be construed as the truth or accurate in any way. It is only fodder for conversation.
 
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mondongo

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Jan 1, 2002
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That article is amateurish non-sense.

Rather than spend time with such obvious fairy tales, those in the DR should notice that the hedge funds that have filed for bankryptcy belong to Bear Stearns. Thes are the same ambulance chasers that keep pumpimg DR debt, and helped lower (too much?) the interest rate spread between the US and DR.

Part of what is happening now is the re-pricing of risk. What it could mean to the DR is foreign investors could demand higher interest rates on new hard currency loans.
 

Texas Bill

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Feb 11, 2003
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After reading the article referred to by Dolores, i am of the opinion that such could, indeed, be the scenario to be faced by the US and those countries closely tied to it economically.
History has lessons on this pronouncement all the way from Rome to the present day.
Resources of all nations are stretched very thinly in the economic model presently being followed by the fostering of the "Global Economic" scenario. That scenario, while seemingly a panecea of good omens, is actually, in practice, an abrogation, by individual countries, of any form of nationalism as practiced in the past.
I have to ask myself, is the abandonment of nationalism and the embracing of the economic problems of substandard economic societies worth the sacrifices that must be made by the "have" nations?
The conclusion I have arrived at is a resounding NO.
Don't get me wrong. There are people starving to death because their governments have not addressed (intentionally or unintentionally) the problems entailed in feeding millions of idle constituents who are landless, income-less and the like. Yet these governments are far from being bankrupt, have enormous natural resources which politicl prevents them from exploiting. Their populations have become, by default, dependent upon government largess for their very survival and thost government has turned a blind eye to theproblem.
One country, in particular, has allowed it's industrial and intellectual bases to be captured by other countries while it's political parties participate in in-fighting to gain the political power they see as theirs by right.
Elitism has always been with us as humans for millenia andwe still allow it to flourish in our midst. Do we deserve this phenomonen? Yes, we do, because we haven't the knowledge to combat it or we just fost it off as 'what is'.
We haven't yet realized that we, as individuals and regardless of all the allusions of "freedom of action" and "masters of our fates" are just words uttered by a few in the herd of humanity that continue to follow the "lead bell" into infinity.
Think about it. Are we truly free to be the masters of ourfates??
I think not under the present circumstances. We are still the "serfs" of the "Robber Barons" of mideavel times.

I don't like it and neither do you, but the forces are presently out of our control.

Texas Bill
 

aegap

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Mar 19, 2005
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Welcome back Mondongo

Part of what is happening now is the re-pricing of risk. What it could mean to the DR is foreign investors could demand higher interest rates on new hard currency loans.

Bulls eye!!!!
 

Everett

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Jun 8, 2006
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The debt to equity ratio of the US economy is so poor that if it were a private company it would be in recievership.
The DR would be wise to align itself further with the EU and stay clear of the US and its myriad troubles.
Where the DR is going to have a problem is with real estate speculation and with the higher cost of energy. The latter will continue to inflate costs across the board.
The DR does not have a sound, sustainable energy policy.
 

mondongo

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Jan 1, 2002
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Chris, my guess is you have no idea what Cramer was talking about. Never mind that Cramer is another charlatan who pounded the table when Sycamore Networks stock fell "all the way" to 150.


Thought that this video spells out the size of the problem. This is what you call a 'Holy Sh!t' moment. From CNBC MSNBC - Video Front Page
 

Chris

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Oct 21, 2002
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I thought it was hilarious. But, the numbers that he spewed out, were massive. The Holy Sh!it Moment? Did any of you watch the host of the show? It was such a moment for her ...

I probably don't Mondongo, in reality. But in money, perhaps I do have an inkling.
 

aegap

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Mar 19, 2005
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I thought it was hilarious. But, the numbers that he spewed out, were massive. The Holy Sh!it Moment? Did any of you watch the host of the show? It was such a moment for her ...

I probably don't Mondongo, in reality. But in money, perhaps I do have an inkling.

I wrote a big ass post, but dr1 one ate it. I was then going to give up responding to you, but than decided just to focus on that which Cramer has himself confessed to earlier this year:

...could it be?, ...

"A lot of times when I was short at my hedge fund?meaning I needed [the market to go] down?I would create a level of activity before [the market opened] that could drive the [pre-market] futures [down]. ? ?
It's a fun game, and it's a lucrative game. You can move [the market] up and then fade it?that often creates a very negative feel. ? That's a strategy very worth doing. ?"

TheStreet.com TV


Jim Cramers Guide to Market Manipulation - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Will Cramer's crazy confession destroy his career? - By Henry Blodget - Slate Magazine

..sounds familiar?
 
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Lambada

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Mar 4, 2004
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I'm no financial 'brains' at all but I found this gave an interesting historical perspective:
The Silver Bear Cafe

I also see that Nouriel Roubini, professor at the NYU/Stern School of business and chairman of RGE Monitor, 'predicts that the credit crisis originating in the sub-prime mortgage market will surpass the severity of the liquidity crunch triggered by the collapse of US hedge fund Long Term Capital Management in the late 1990s'. He is suggesting that this will leak into the corporate market as default rates, which have been unusually low in recent years, jump and corporate yields increase with the re-pricing of risk. So yes, he's agreeing with mondongo & aegap that this is risk re-pricing but he is also saying 'the result will be a recession in the US, with growth stagnating below 1% for several quarters'. For those who subscribe it's in Latin Finance
Latin Finance ? Current balance, income and financial ratios for Latin American banks
On right hand side Headlines for 14 August, click on 'Sub Prime Fall-Out Worse than LTCM, Says Roubini'.
 

Chip

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Jul 25, 2007
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Exactly!! ..a very healthy thing actually, for it gets rid of dead and dying tissue..

Wouldn't it be great if the DR had true free market dynamics so that we could rid of a whole lot of dead flesh here too? Then again, maybe that wouldn't be such a good idea as there would only probably be the skeleton left. :)
 

aegap

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Mar 19, 2005
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pretty good predictions

I also see that Nouriel Roubini, professor at the NYU/Stern School of business and chairman of RGE Monitor, 'predicts that the credit crisis originating in the sub-prime mortgage market will surpass the severity of the liquidity crunch triggered by the collapse of US hedge fund Long Term Capital Management in the late 1990s'.

The MSM was yelling "market CRASH!" at full long back then too..


He is suggesting that this will leak into the corporate market as default rates, which have been unusually low in recent years, jump and corporate yields increase with the re-pricing of risk.

..while still remaining well below historical averages

he's .. saying 'the result will be a recession in the US, with growth stagnating below 1% for several quarters'. For those who subscribe it's in

While by U.S. vibrant econmy that is rather low, it really isn't . case in point: 1.5% growth and 6% unemployment would be relative very low in the U.S., but most leading European economies/countries would kill for those numbers.

The E.U as a whole would really, really kill for those numbers, ...

BBC NEWS | Business | Leading EU nations see slowdown

Tuesday, 14 August 2007
Figures showed growth for the 13-nation eurozone hit 0.3% in the quarter, ..missing forecasts.

This figure was down from growth of 0.7% seen in the first three months of the year.
The 27-member EU saw growth of 0.5%, marking a drop from 0.7% in the previous quarter. The data follows disappointing news last week from Italy, which said its economy had grown by just 0.1% in the second quarter, also below expectations.
 
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mondongo

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Jan 1, 2002
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long and very informative

This is for those who really want to learn something and have the capacity to read and ruminate.

Every 5-10 years, there occurs a dislocating financial market event(s) that causes heavily leveraged (hedge) funds and corporations to go out of business.


One of the links posted by Lambada quotes a very rich and well educated man from a highly regarded Wall St financial institution saying something like (I paraphrase): These are 25 sigma events. They should not happen for a million years.


Clearly, these Ivy League educated folk have it wrong. Their mathematical models do not properly take into account (and I'm sure they know it) what are called "catastrophe events". The reason they don't take catastrophe events into account is that doing so would significantly reduce their short term returns. This would then curtail their ability to advertise their fund.

For those who have read this far, congratulations. Take the above seriously because you will not see this in many places. Take a look at the first 2 1/2 pages of the following link....and Google "fat tail distributions".

http://arxiv.org/ftp/cs/papers/0512/0512022.pdf