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Old 02.03.2008, 18:23
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US recession of 2008 - how long will it last?

So the recession is here, little doubt about that. UBS have just announced that the final cost might be 600 billion dollars (how much of that is theirs? 10% ).

Since the site is full of financial experts, how long do you think this will last? 6 months? 10 years? The latter figure is now being suggested, by analogy with Japan's situation. Even zero interest rates were not enough to kick a rotten economy into action.

I'm a natural bear & gain great joy from following the unfolding drama on Mortgage implode-o-meter and its sister sites. They tell of the exotic financial instruments whose horrible downside is far from fully revealed, e.g. credit default swaps.


I favour a figure of a few years, but I'm only a physicist.

Let's hear it from the experts.
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Old 02.03.2008, 18:29
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Re: US recession of 2008 - how long will it last?

As recessions are purely psychological - ie they are what the consumer perceives - with a new president at the end of this year, probably America's first black person president and a free spending Democrat, it should all be over by summer 2009.

But what do I know?
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Old 02.03.2008, 20:07
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Re: US recession of 2008 - how long will it last?

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As recessions are purely psychological - ie they are what the consumer perceives - with a new president at the end of this year, probably America's first black person president and a free spending Democrat, it should all be over by summer 2009.

But what do I know?
You're right about the perception part. As for the free spending Democrat - I sure hope so, but I have my doubts.
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Old 02.03.2008, 20:14
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Re: US recession of 2008 - how long will it last?

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Let's hear it from the experts.

no i don't think you want to hear anything from 'the experts'

they are the ones who got us here in the first place
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Old 02.03.2008, 20:20
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Re: US recession of 2008 - how long will it last?

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So the recession is here, little doubt about that. UBS have just announced that the final cost might be 600 billion dollars (how much of that is theirs? 10% ).
Wow! 600 BILLION now?
I think it will be by 2010+

The true cost of war will play a major role as well. Excellent article worth reading-

Quote:
In 2005, a Nobel prize-winning economist began the painstaking process of calculating the true cost of the Iraq war. In his new book, he reveals how short-sighted budget decisions, cover-ups and a war fought in bad faith will affect us all for decades to come.
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Old 02.03.2008, 20:27
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Re: US recession of 2008 - how long will it last?

Fact is that the US is not the global market superpower it once was. The economies of China, India, Japan, and other Asian countries will keep the global economy going and the effect of the US crisis minimized. Me? I'm just sitting back and waiting till the UBS stock price dips below 31 CHF and then snap up some juicy shares... there's money to be made of the misfortune of others... and no I don't feel sorry for UBS and consorts.
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Old 04.03.2008, 16:04
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Re: US recession of 2008 - how long will it last?

I think it will last longer than the previous downturn, thanks to our fiscally irresponsible govt. According to Paul Krugman (Economics professor at Princeton and NY Times columnist) it could last well into 2010.

http://www.nytimes.com/2008/02/08/op...08krugman.html
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Old 05.03.2008, 17:13
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Re: US recession of 2008 - how long will it last?

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So the recession is here, little doubt about that. UBS have just announced that the final cost might be 600 billion dollars (how much of that is theirs? 10% ).

Since the site is full of financial experts, how long do you think this will last? 6 months? 10 years? The latter figure is now being suggested, by analogy with Japan's situation. Even zero interest rates were not enough to kick a rotten economy into action.

I'm a natural bear & gain great joy from following the unfolding drama on Mortgage implode-o-meter and its sister sites. They tell of the exotic financial instruments whose horrible downside is far from fully revealed, e.g. credit default swaps.


I favour a figure of a few years, but I'm only a physicist.

Let's hear it from the experts.
Hehe...The experts...hmmm.

After 15+ years in "the honourable business of finance" I've learned that greed IS indeed the biggest factor - at all levels - that conditions whatever decisions will be taken by whoever pulls whatever strings.

Personally I remember reading in Q3 '05 on my Bloomberg screen, an article depicting the new boundaries of "creative mortgage financing".
Didn't take more than a couple of seconds to groan, shake my head in disbelief and formulate my own vision of a real-estate induced meltdown.
One of the bank's clients actually listened and I found out that he could have played the impending debacle via options on HGX (Philadelphia Housing Index) which he did, much to his benefit, I might add. We know why...

What is also quite surprising (to say the least) is the naivety which is expressed by "experts" who I would have imagined should know *better*.
To wit:
this study by the NY Fed and Princeton University as published by the online edition of FT.com.
In the 6th and 7th paragraphs we find the following (my emphasis added):
The paper concludes it was inevitable that an industry buoyed by rising asset prices would pursue increasingly aggressive lending growth. This pushed credit upon ever more risky clients and loan structures, which then fed into asset price growth. This of course added more fuel to the fire - or created "positive feedback loops".

The most disturbing conclusion is that this system should behave in exactly the same way in reverse, creating "negative feedback loops" with a destructive impact on all kinds of asset values - from structured finance to house prices and equities.


Now, I'm by far no specialist, academic, or economist ad to me it was *always* very clear that the excess of leverage is a symmetrical dynamic which may even become über-proportional during the deleveraging phase.
What I found extremely disturbing was the fact that no regulator seemed to care if the financial system was pushing itself to the edge of an abyss where the damage was bound to be systemic.

I even was present at a UBS conference here in Lugano, where their famous economist such-and-so told the audience that it was "impossible" for the bank to be "hiding" more subprime-related losses in their books. Ten days later the same bank had (again) egg smeared all over it's face, and had to resort to a second round of financing.

To come back and answer to the original question:
NOBODY KNOWS just how big, how long, how painful.
Seriously.
This stuff is way bigger than anyone will readily admit, it is now a 200 lb tail wagging a 20 lb house-pet. We're talking about trillions, now, as this gentleman (who incidentally works for UBS) will tell you in this video (courtesy of FT.com).
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Old 11.03.2008, 23:55
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US recession of 2008 - 3 trillion & counting

I'm disappointed. No-one except Uncle Groove has shown up from the financial industry. Where are all those folk who work in derivatives when you need them? Busy fattening the tails in their crappy mathematical models, or deleveraging their smartass derivatives or trying to work exactly who owes what to whom in all those jazzy credit default swaps that seemed like such a good idea at the time ...

Well, the scariest bear is now talking about 3 trillion losses.

http://www.ft.com/cms/s/0/0e63ad12-e...0779fd2ac.html

Brill - I give you one guess who ends up paying for this.
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Old 12.03.2008, 15:48
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Re: US recession of 2008 - how long will it last?

http://www.businessspectator.com.au/...J?OpenDocument

is a document on the "12 steps to meltdown", by Professor Roubini, who is now getting press after having warned about this since 2006. His very interesting blog is at: http://www.rgemonitor.com/blog/roubini/242290. I cannot recall his numbers but they were huge.

He mentions what you are referring to, gain is private, loss is public, and debt will be socialized
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To understand the risks that the financial system is facing today I present the “nightmare” or “catastrophic” scenario that the Fed and financial officials around the world are now worried about. Such a scenario – however extreme – has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.

Start first with the recession that is now enveloping the US economy. Let us assume – as likely - that this recession – that already started in December 2007 - will be worse than the mild ones – that lasted 8 months – that occurred in 1990-91 and 2001. The recession of 2008 will be more severe for several reasons: first, we have the biggest housing bust in US history with home prices likely to eventually fall 20 to 30%; second, because of a credit bubble that went beyond mortgages and because of reckless financial innovation and securitization the ongoing credit bust will lead to a severe credit crunch; third, US households – whose consumption is over 70% of GDP - have spent well beyond their means for years now piling up a massive amount of debt, both mortgage and otherwise; now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted.

So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters.
What will be the consequences of it?
Here are the twelve steps or stages of a scenario of systemic financial meltdown associated with this severe economic recession…
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Old 16.03.2008, 07:23
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Re: US recession of 2008 - how long will it last?

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After 15+ years in "the honourable business of finance" I've learned that greed IS indeed the biggest factor - at all levels - that conditions whatever decisions will be taken by whoever pulls whatever strings.
[/URL].
In my past 12 years of experience in Banking I so agree with what you say. I have questioned many times why I worked so long in a business that is not honourable.
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Old 16.03.2008, 10:21
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Re: US recession of 2008 - how long will it last?

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In my past 12 years of experience in Banking I so agree with what you say. I have questioned many times why I worked so long in a business that is not honourable.
I wholeheartedly agree with both you and Uncle GroOve! I spent eight years on Wall Street and left after being thoroughly disgusted with the greed, dishonesty, scheming, its denizens' aversions to ANY regulation whatsoever and promotion of policies and politics of self-interest -- all, supposedly, in the name of free marketeering.

Wall Street is now reaping what it has sown and the banks and asset managers are getting their comeuppance. I feel NO sympathy whatsoever, only Schadenfreude. Perhaps this will make it easier for us to get rid of Wall Street's shills and apologists in Washington and the White House, and, hopefully, pave the way for some desperately needed reforms and sensible regulations.
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Old 17.03.2008, 07:26
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Re: US recession of 2008 - how long will it last?

http://news.bbc.co.uk/2/low/business/7299938.stm

So it seems J P Morgan is taking over Bear Stearns for a paltry $2 a share and this BBC report is talking about Bear Stearns being the "US Northern Rock".

Wonder how many more of these events will take place this year?

I understand why banks takes risks, but when I see the largesse of the loss, then I have more questions than answers - as to the qualifications of the managers and even the boards of the banks and whether they are capable of running the banks that they do.

I think all the managers of the investment sides involved should be forced to resign in disgrace, with no golden handshakes or parachutes. All board members who said nothing about the coming disasters, should similarly resign.

Then we can start going back to normality again - until then Investment Bankers should be known as GAMBLERS.

Last edited by electric_grey; 17.03.2008 at 10:22. Reason: typo
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Old 17.03.2008, 10:05
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Re: US recession of 2008 - how long will it last?

I know a lot of the focus is understandably on sub-prime mess & greed of the financial institutions, but does this not have any role to play in the soon to happen US Recession :

The Three Trillion Dollar War

have it on order & am looking forward to an interesting read.
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Old 17.03.2008, 10:14
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Re: US recession of 2008 - how long will it last?

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I know a lot of the focus is understandably on sub-prime mess & greed of the financial institutions, but does this not have any role to play in the soon to happen US Recession :

The Three Trillion Dollar War

have it on order & am looking forward to an interesting read.
Absolutely!

http://www.nytimes.com/2008/03/04/op...tiglitz&st=nyt

There was also a podcast (on the site below) in which Joe Stiglitz and another economist further elaborated on the cost of the war, but I can't find it now. I'll continue looking for it and if I can find it, I'll post the link.

http://www.financialsense.com/
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Old 17.03.2008, 10:20
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Re: US recession of 2008 - how long will it last?

Sounds like an interesting book! Hope you sleep at nights after reading!
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Old 17.03.2008, 10:29
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Re: US recession of 2008 - how long will it last?

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http://news.bbc.co.uk/2/low/business/7299938.stm
...

I understand why banks takes risks, but when I see the largesse of the loss, then I have more questions than answers - as to the qualifications of the managers and even the boards of the banks and whether they are capable of running the banks that they do.
...
The problem is that the brightest minds eventually went to work on Wall Street - on in London City - while on the regulatory side we were left with a collection of "lame ducks", attempting to understand the deed (and the collateral damage, be it real or potential) after it was done.

But IMHO the single biggest factor is that, collectively, over the past decades the West has embarked in a move to replace a moral framework (and let's not confuse this with religion, please), with the concept of "profit". And we're talking about a System of values here - something which percolates way beyond the banking / financial industry, all the way down to far reaches of society at large.

In this kind of system the entrepeneur lives to take gambles and to eat all his own cake, and maybe his neighbour's too, and the "state" is thrown in the role of the unwelcome chaperon, the dim-witted and underarmed small town cop caught in a case against a the perp that is many times better armed.

The ONE big Question I pose myself is: is the West, the people that are living through all of this - is this collectivity able to learn from what is happening, and will it be able to forge a new form of all-encompassing Moral reference point that will avoid these destructive excesses and promote a better form of "sustainable economy"?

IMHO this is what IS really needed, and fast (maybe it deserves a thread of it's own...?).

Peace,

Paul
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Old 17.03.2008, 10:40
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Re: US recession of 2008 - how long will it last?

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The ONE big Question I pose myself is: is the West, the people that are living through all of this - is this collectivity able to learn from what is happening, and will it be able to forge a new form of all-encompassing Moral reference point that will avoid these destructive excesses and promote a better form of "sustainable economy"?

IMHO this is what IS really needed, and fast (maybe it deserves a thread of it's own...?).
Paul,

I think the answer to that is the people yes, or at least some of them. The politicians and others, no. I don't think those people have learnt a thing from WW1 and WW2.

Moral reference point, do they have any? I doubt that too.
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Old 17.03.2008, 23:27
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Re: US recession of 2008 - how long will it last?

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I know a lot of the focus is understandably on sub-prime mess & greed of the financial institutions, but does this not have any role to play in the soon to happen US Recession :

The Three Trillion Dollar War

have it on order & am looking forward to an interesting read.

I beg to differ. The war has almost nothing to do with this recession. It results from decades of overborrowing and US government-condoned financial shenanigans. The US mortgage market is/was worth 14$T. 20% of that = the war. We already lost that, more or less. The world derivatives market is worth 500$T. 1-2% of that = the war. These numbers make even the indescribable waste of the Irak war look puny...
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Old 18.03.2008, 06:49
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Re: US recession of 2008 - how long will it last?

The rumours are that Lehmans* are next to fall.. wonder how long that will take given these things are self fullfilling prophecies.... and after that who knows.. the central banks can't (surely) keep thowing billions at these things indefinately....especially since it was the banks own greed that got them there

* have no idea if this is true of course

Last edited by sharon; 18.03.2008 at 07:08.
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