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Author: doubtit Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 455637  
Subject: 1 of the most perilous trading environments Date: 9/14/2008 9:36 PM
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Fed Plans Expanded Lending Facilities
By DENNIS K. BERMAN, JON HILSENRATH and DEBORAH SOLOMON
September 14, 2008 9:19 p.m.

The Federal Reserve is expected to expand its lending facilities in the wake of the likely demise of Lehman Brothers, taking a wider array of securities, including equities, as collateral for its loans, say people familiar with the matter.

The moves, which potentially represent another landmark step in the Fed's efforts to address the deepening credit crisis, are expected to be temporary. They are meant to calm markets as they head into one of the most perilous trading environments in decades with Lehman's massive market positions on the verge of being unwound.

The Fed has already dramatically expanded its lending facilities in the past few months. Most notably, after the collapse of Bear Stearns in March, it said it would make short-term emergency loans to investment banks under a lending facility called the Primary Dealer Credit Facility.

http://online.wsj.com/article/SB122143939332934501.html?mod=...
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Author: DoctorOptimist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251867 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/14/2008 9:47 PM
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The Federal Reserve is expected to expand its lending facilities in the wake of the likely demise of Lehman Brothers, taking a wider array of securities, including equities, as collateral for its loans, say people familiar with the matter.


This is one of the biggest liquidity injections you can get.
The only thing more liquifying would be for Fed to outright purchase this crap... and who knows they may be quietly doing that too

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Author: Iaato Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251886 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/14/2008 11:56 PM
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Does ANYONE think that we are entering a deflationary era?

I'll reiterate; the only way not to play this game is to unplug. Get out of debt, put your money in physical assets and be done with it.

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Author: MrPlunger Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251926 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 8:05 AM
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Does ANYONE think that we are entering a deflationary era?


Era might be too strong a word.

Asset prices are imploding until the Fed really launches to Big Wing.

But they seem reluctant, so we are headed into a big dip over the next month or so ... but this will sow the seeds of the next great reflation ... because just like Greenspan, they will frighten themselves into eventually easing too much for too long.

The Fed are demonstrating they are very good at the Boom and Bust and Boom and Bust and ...



They "should" ease tomorrow if they really want to execute a counter-cyclical monetary policy.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251931 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 8:16 AM
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Mish & me....that's about it...

Does ANYONE think that we are entering a deflationary era?


KBM (the outcome of all this is not pretty)

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251932 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 8:18 AM
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Does ANYONE think that we are entering a deflationary era?

No. The Fed is all too eager to inflate.

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Author: washcomp Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251941 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 8:30 AM
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The problem is that they are having trouble inserting money into the system as quickly as it is being destroyed. The saving grace for them is the drop in oil and I think it's clear that the central banks and the Saudis (for some future favor not specified) are doing everything they can to keep the prices dropping. I feel there is a reasonable chance that we will see a FED rate drop tomorrow.

This attempt at increase in liquidity is a pi$$ in a rainstorm so it hasn't created any inflationary pressure.

I think they have two problems:

1) Properly timeing the shutting down of their printing presses so that we don't, in fact, enter a period of high macro inflation.

2) Being stuck (or the taxpayer being stuck) with all sorts of crap that they are accepting as collateral. They just announced that they will be accepting equities (at a time when the market is tanking).

They are running out of rabbits to pull from the hat and at some point this train is going to go where it wants.

I am anticipating that at some point our government will set up programs to employ the unemployed. The problem is that, not only is the American consumer tapped out, but our government is cruising pretty close to empty as well unless we can entice our "partners" around the world to give us a loan. This implys higher interest rates which are counterproductive at this stage of the game.

They are also trying to help out Europe with a stronger dollar, but I don't think they can keep that ball up in the air for ever.

At some point, commodities will come back into style as a way to conserve value (despite the fact that demand is down).

We are at a point where the tide is going out and simultaniously lowering all boats.

Jeff

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Author: TiRien Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251953 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 8:58 AM
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Mish & me....that's about it...

>>Does ANYONE think that we are entering a deflationary era?<<



Do not forget Prechter, LOL!

On a more serious note: Deflation is just one side of Stagflation. So yes, I too expect deflation.

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Author: kentm401 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251956 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 9:05 AM
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Yeah, I did forget....

Do not forget Prechter, LOL!

On a more serious note: Deflation is just one side of Stagflation. So yes, I too expect deflation.


"Deflation" [of asset values] is not the "flip side" of "Stagflation", imv, it is the "Causation" of Stagflation.

BWTHDIK?

I only suffered through "it" once and lived to talk about it.

KBM (now "we" are five)

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Author: flyerboys Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251985 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 10:20 AM
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On a more serious note: Deflation is just one side of Stagflation. So yes, I too expect deflation.


"Deflation" [of asset values] is not the "flip side" of "Stagflation", imv, it is the "Causation" of Stagflation.

BWTHDIK?

I only suffered through "it" once and lived to talk about it.

KBM (now "we" are five)



Yo, tambien. So that's 6.

I expect both deflation and inflation chaotically mixed, with the fed pouring an ocean of water on a chain of erupting krakatoas. So, lots of steam as well.


david fb

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Author: Pituophis Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 251987 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 10:23 AM
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Yo, tambien. So that's 6.

I expect both deflation and inflation chaotically mixed, with the fed pouring an ocean of water on a chain of erupting krakatoas. So, lots of steam as well.



me too, me too. I've enunciated the deflation argument a number of times - but that's been hard to do around here these days w/o getting shouted down...

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Author: Iaato Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 252023 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 12:49 PM
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That makes 7. I disagree with all of you. You can't talk about inflation and deflation in terms of what is going on in short time frames of a week or a month. You need to expand your time scale. This guy says it better than I can.

"Commodity prices have fallen sharply off of their highs of the summer and that has caused many to claim we are now in deflation.

I disagree - I see this as a temporary and violent correction in commodities due to widespread deleveraging in the financial system and once that comes to an end we should see commodity prices and gold reassert their market leadership.

What is clear is that we are in a bear market when it comes to the broad market. Bear markets come through three main stages - in the first stage market participants fail to recognize the reality of the bear market and think that dips are just temporary corrections.

As their losses add up the second stage begins as the reality of the bear market takes hold and people begin to recognize problems in the economy and the markets. That is where we are now. In the third and final stage there is a general liquidation as people sell out in a panic in fear of suffering further losses. Each bear leg down also goes through this cycle as a panic washout ends each downtrend and causes the VIX and put/call ratio to spike up. But this cycle also runs the gamut of the whole bear market and can take two or three years to play out."


http://www.safehaven.com/article-11240.htm

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Author: TiRien Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 252042 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 2:06 PM
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Iaato, we are usually on the same page, so you have me wondering if you are really so different as us.

For instance, as oil peaks, there will be many assets that become worthless since they rely on cheap oil to retain their value. IMO this will be the dominant trend for the next decennia. Unless the govt is successful in creating massive inflation, the overall effect on the economy will be deflationary. HOwever since the other side of this medal is that there will be an all out attempt at reflation, the prices will during this time frame generally rise. Also driven by the end of cheap energy btw.
Thus we have a classic stagflation. Deflation of the money supply, and at the same time price increases on the consumer level. We will likely even have wage inflation when the govt is successful. And to be honest, I believe that wage inflation is the only way out for the financial economy. (Which is somewhat in line with Plungers thinking about the wealth disparity that has to be solved)

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Author: Iaato Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 252131 of 455637
Subject: Re: 1 of the most perilous trading environments Date: 9/15/2008 7:26 PM
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<<For instance, as oil peaks, there will be many assets that become worthless since they rely on cheap oil to retain their value. IMO this will be the dominant trend for the next decennia. Unless the govt is successful in creating massive inflation, the overall effect on the economy will be deflationary. HOwever since the other side of this medal is that there will be an all out attempt at reflation, the prices will during this time frame generally rise. Also driven by the end of cheap energy btw.
Thus we have a classic stagflation. Deflation of the money supply, and at the same time price increases on the consumer level. We will likely even have wage inflation when the govt is successful. And to be honest, I believe that wage inflation is the only way out for the financial economy. (Which is somewhat in line with Plungers thinking about the wealth disparity that has to be solved)>>

We probably are on the same page, Ti. I totally agree with your statements, here. I think the confusion comes when people transpose the word deflation for deleveraging. What is happening now is deleveraging, albeit a rather extreme form. Deflation is what happens if the policymakers choose not to, or are unable to reflate the broad money.

If you look at the upside down pyramid, eventually, the top two layers of the pyramid consisting of derivatives and securitized assets will be deleveraged, sliced off, lopped. That will be 888% of the world's GDP. Finally some of the third layer of broad money will go, and I think that either a new money system, gold or barter will replace the fourth, last layer. And yes, the wealth disparities will need to be corrected or there will be revolution.

http://www.leap2020.eu/GEAB-N-26-is-available!-LEAP-E2020-Su...

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