[Eli]

Well the bigger issue from all the evidence we have seen is this is no longer about sub-prime mortgages. The bigger issue is the fact that the subprime melt down has jumped the fire line and spread into other credit markets.

Jesus, a Bank in Germany nearly shuttered its doors, if this was just a subprime issue then they would have just taken a heavy loss. It doesn't matter how small a Bank it was, because even if they were small they owed a bigger Bank billions because of the all their leveraged debt.

If we were talking about one central Bank having to inject cash it would be no big deal, but we are not. Off the top of my head, we have seen Japan, Europe, Germany, Australia , and the US have to inject cash to keep things rolling along. There is a systemic problem within the global financial system should recognize that fact.

Know one has any clue how much the losses will be on all this mess, people have leveraged this debt to the tune of 20 times. What we can be certain of is that all the major US and Global investment Banks are doing their best not to report or have to write down their losses. They are stopping people from withdrawing from accounts, closing funds and doing everything in between to avoid reporting a loss.

Make no mistake their is trillions in toilet paper out their and the name of the game now is don't sell or let anyone sell it because we have to keep this toxic sludge hidden.

This going to get a major US investment Bank because someone loaned all this shit to the mortgage companies and then they made loans to poorly preforming US companies.

[MrBill]

Autocorrelation or serially correlated. The non independence of the error variable. Applicable to time series data.

"In cross-sectional data the value of the error variables are independent. When the data are time series, the errors are often correlated. If the independence requirement is satisfied - there should be no relationship amoung the residuals.

However, if the residuals are related, it is likely that autocorrelation exists. We can often detect autocorrelation by graphing the residuals against the time periods. If a pattern emerges" (for example superimposing a USD/DEM chart over a USD/ITL or USD/FRF chart) "it is likely that the independence requirement is violated."

"Alternating residuals and negative residuals as well as increasing residuals exhibit patterns indicating autocorrelation." The Durbin-Watson test is used to determine if this problem is present.

Source: Paraphrased from 'Statistics for Management and Economics', Fifth Edition, Keller & Warrack, Duxbury Publishing, pg. 668-669

Probably the greatest textbook on quantitative methods ever written because it lets me do all the calculations in an Excel spreadsheet, which I find incredibly helpful! ; - )

The Durbin-Watson Test

[MrBill]

Eli wrote:
$this->bbcode_second_pass_quote('', 'I')f we were talking about one central Bank having to inject cash it would be no big deal, but we are not. Off the top of my head, we have seen Japan, Europe, Germany, Australia , and the US have to inject cash to keep things rolling along. There is a systemic problem within the global financial system should recognize that fact.

[Roccland]

$this->bbcode_second_pass_quote('MrBill', 'E')li wrote:
$this->bbcode_second_pass_quote('', 'I')f we were talking about one central Bank having to inject cash it would be no big deal, but we are not. Off the top of my head, we have seen Japan, Europe, Germany, Australia , and the US have to inject cash to keep things rolling along. There is a systemic problem within the global financial system should recognize that fact.

[mkwin]

$this->bbcode_second_pass_quote('Gideon', '')$this->bbcode_second_pass_quote('', 'T')he so-called 'insider' words MrBill talks about are common in any basic course in Econometrics.

Economics might seem like chaos to someone who has never studied it, but it is no more invalid as a science than physics that uses abstract mathematical equations to explain physical nature.

[MrBill]

Roccland wrote:
$this->bbcode_second_pass_quote('', 'M')r Bill I applaud you for looking at the little guy, but in my mind rates are gonna be dropped...maybe today...but at some point rates are going down...

Then the real pain begins.

[MrBill]

mkwin wrote:
$this->bbcode_second_pass_quote('', 'I') said 'econometrics' not economics. As I'm sure you know, econometrics is the quantitative study of economies. I defy you even to find a very basic 'freshman' econometric course book without the word 'autocorrelation' in it.

I wasn't making a direct comparison of economics to physics, what I was saying is it follows the same process of deriving abstract theories and then testing those theories against observed fact. Besides, physics has its own forms of seemingly random variables i.e. quantum physics. Economics has developed a great deal of theory relating to people, i.e. speculation, herd mentality, market inefficiencies, and the effect they have on the economy.

The point is this is not 'Billglish', it is widely recognised terminology in the study of economics, more specifically in econometrics.

[Roccland]

$this->bbcode_second_pass_quote('MrBill', 'R')occland wrote:
$this->bbcode_second_pass_quote('', 'M')r Bill I applaud you for looking at the little guy, but in my mind rates are gonna be dropped...maybe today...but at some point rates are going down...

Then the real pain begins.

[Eli]

$this->bbcode_second_pass_quote('MrBill', 'E')li wrote:
$this->bbcode_second_pass_quote('', 'I')f we were talking about one central Bank having to inject cash it would be no big deal, but we are not. Off the top of my head, we have seen Japan, Europe, Germany, Australia , and the US have to inject cash to keep things rolling along. There is a systemic problem within the global financial system should recognize that fact.

[Elan_Rasa]

Eli wrote:
$this->bbcode_second_pass_quote('', '
')Bullshit!

Let me get you a hankie so you can dry your crocodile tears. You your self have made money off of the global scam we are talking about, you haven't been investing you have been trading. Where was all your compassion for the little guy saver when you were taking a turn at screwing him over all these years?


What we have seen is nothing less than a global debt scam predicated on the fact that saving and traditional investing have been abandoned for excessive borrowing and shoddy leveraged investing. I know full well that traditional savers are being crushed by this global scam. But make no mistake it was a scam bought and sold by hedgefund traders and mortgage CEOs and Bankers who abandoned sound financial reason to indulge their own greed.

They should be dragged out into the street and shot like the filthy greedy dogs they are. I am not going to weep for the little guy until the bastards that fucked him get what they deserve.

I am one of those people who is being screwed over by these greedy bastards. I am not going to indulge myself in a pity party now, what I think we should do is seize the personal assets of every dirt ball hedge fund manager, subprime slime CEO , CDO investment banker who made billions selling this scam. They should be easy to find, just drag them out of their Crystal palaces they have built on the coast of Florida and the South of France. These testaments to their own greed should become their tombs.

Long prison sentences is the least they deserve.

You still are obfuscating the fact that this is much bigger issue than the subprime BS, because you have had a vested interest in the propagation of this scam. You have made a living off of ripping off the very people you now supposedly feel sorry for, if you feel so bad why don't you quit and get an honest job.

[MrBill]

Elan_Rasa wrote:
$this->bbcode_second_pass_quote('', 'Y')ou know I am not surprised at Eli or anyone else's reaction given the economic problems that are at our doorstep and things are likely to get worse (things may stabilize over the short term but in the long run, over 90% of us will be screwed). Take Eli's reaction which is a reaction that many have or will have and just imagine what will happen when you add other unpredictable, uncontrollable stressors resulting from PO and global climate change (droughts, flooding, hurricanes, etc). We can safely say that fear, anger, and despair will be all around and the behaviors stemming from those basic emotions will wreak havoc. Can't say that I am looking forward to that but I point this out because it gives us a glimpse of what's to come.

[Micki]

MrBill, Australia had what looked like capitulation sale today.
AllOrds down 400 points for a while and then bounced up to close down just 75 points.
%wise Australia has done a proper correction and US is just a few hundred point off.
Do you think we can see immediate turnaround?
Will it in that case be short term only (i.e. days or up to two weeks) or medium term (i.e til October or even longer?)

I'm a bit unsure if I should look for opportunity to hop in or not as I haven't seen a proper B (and then C wave).
So just a bit curious how you see the immediate near term.

THANKS

[IslandCrow]

$this->bbcode_second_pass_quote('Micki', 'M')rBill, Australia had what looked like capitulation sale today.

[MrBill]

Well, being a scumbag banker that never made any honest money other than by stealing it from others I cannot see what value I can bring to this discussion because obviously I have an ulterior motive by living off the losses of others? ; - )

I see that EUR/JPY and to a lesser degree EUR is over-sold at the moment as the yen trades unwind. But another drop in Asia like we saw today though and I doubt whether all that selling pressure in out of the way? There is almost a perfect correlation between EUR/JPY and the ASX 200 index.

In short, I see markets still have a long way to correct even if technically they get over-sold and then experience a dead cat bounce before resuming their grind lower.

The S&P500 hit 1408 as expected. I now target 1362. I think 1300 eventually by October. Then if the Fed does not cut rates 1165 by year-end. If the Fed does cut rates then perhaps a stronger close to the year. If the market cannot climb back above 1465 then I see continued selling pressure.

As for Asia the effects of higher interest rates, tighter credit markets and low end consumer demand will probably catch-up to them in 6 to 12 months. Just a ballpark date I pencil in the Beijing Olympics as the end point of any robust global demand lead by China. Some Asian stock markets have very high P/E ratios predicated on fast, prolonged growth. I do not see that as sustainable, despite a backlog of infrastructure projects under way, so those markets likely have the furthest to fall. Unfortunately for Australia your markets are equally or more dependent on Asian growth, so your markets will also be punished by any slowdown there as well.

As for the ASX200 index it was in a very comfortable band between 6200 and 6400, but now has been massively sold off. 5695 should have been the lower end of the 'normal' trading range being 2 standard deviations from the mean, but we blew through that support this morning before recovering nominally. The RSI is around 32.

So, yes, it is slightly over-sold, but I think it gets hit with a double whammy of bad news. First, some Australian banks and funds were exposed to US subprime loans. And secondly, the nearby markets on which Australia relies are also in turmoil. Asian central banks have been intervening for several days now to support their local currencies. I guess you can add to that as well that miners like BHP are not going to thrive in a global slow down environment in the short to medium term even if their long-term prospects look brighter.

KKR is down 60% since its IPO, so calling a bottom is not easy. Not until we know the full extent of subprime contagion that has already spread into the commercial paper markets and infected other ABS classes. Until all the banks, funds and insurance cos. come clean on what they own then the market will continue to price in a worse case scenario. That is bound to mean that some companies get over-sold, but the market will err on the side of caution now having once forgotten what risk was in the first place.

UPDATE: As for Elliot Wave you do not need a 1.2.3.4.5 wave pattern down. Usually that is the hallmark of a bull rally. On a correction you usually see an A.B.C correction, which is exactly what we have seen now in EUR/JPY, ASX200 and other markets. For corrections I usually rely on Fibinocci retracements of 0.382, 0.500 and 0.618 for my downside targets.

[MrBill]

$this->bbcode_second_pass_quote('Gideon', 'W')orld markets are in a tail spin.

This is getting bigger by the day.


[align=center]$this->bbcode_second_pass_quote('', '&')lt;i><b>Mr. Bill's fantastic non-event of 2007</i></b>

[firestarter]

$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('Gideon', 'W')orld markets are in a tail spin.

This is getting bigger by the day.


[align=center]$this->bbcode_second_pass_quote('', '&')lt;i><b>Mr. Bill's fantastic non-event of 2007</i></b>

[MrBill]

firestarter wrote:
$this->bbcode_second_pass_quote('', 'Y')ou're correct, Mr Bill.

The only thing unusual about the most recent repo operation centered around the collateral (MBS), and the amount of injection employed.

The MBS part has me scratching my head though.

[firestarter]

I don't have a link at present, but I'm certain that Fridays $38 billion in repos were backed not by treasuries but rather by MBS's.

Roubini and others have written extensively on the moral hazard this engenders.

[manu]

Does anybody think that by Sept. people will be jumping off the buildings in the Wall St. area?

[MrBill]

$this->bbcode_second_pass_quote('firestarter', 'I') don't have a link at present, but I'm certain that Fridays $38 billion in repos were backed not by treasuries but rather by MBS's.

Roubini and others have written extensively on the moral hazard this engenders.