Depression ahead, prepare for stock rout: SocGen

[Joanne98]

Source: Reuters


LONDON (Reuters) - Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode.

In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.

He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels.

Edwards also raised the danger of a global trade war with China.

"While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere," Edwards wrote.

"It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."



Read more: http://www.reuters.com/article/ousiv/idUSTRE50E39G20090115

[nc4bo]

1. Once again, the outsiders are telling us what's going on within our borders.

Let's see, it took a year to tell us we were in Recession.

How long before "they" tell us we're heading into or are on the verge of Depression?

[Baby Snooks]

4. How long?

They probably never will. They will keep printing money and telling the American people that the economy is solvent. Even as there are riots in the streets by unemployed Americans who no longer have an unemployment check and are no longer employable simply because there are no jobs.

Congress no longer serves the people. It really is time for the people to accept that. And hope that Barack Obama realizes it as well.

[pattmarty]

9. One things for sure, we won't be asking "are we their yet?"..............

........when we arrive. It won't look exactly the same as 1929-32 (history never "repeats itself" exactly). Employment rate over 10%, people begging and overwhelming "food pantries", sharp uptick in the crime rate, especially B&E and robbery. This may be the time for massive cuts in the military spending and the economy will be fucked up enough so maybe we could get single payer through also. One thing we haven't seen yet though is public panic. If/when it gets bad we all will be looking at something we thought impossible in at least my lifetime.

[natrat]

38. what? you dont believe the whores they trot out on CNBC who say the bottom is in right at every top

[bongbong]

2. Investment plan

I'll be buying SPY puts, both LEAPS and close-expiration. I suggest the same for all Liberals, so they can weather the storm brought about by repigs/conservatives/thieves (three synonyms for the same America-hating crowd)

[Fiendish Thingy]

8. what the heck are SPY puts and LEAPS? n/t

[bongbong]

17. Options

SPY is the S&P 100 index (or is it 500?) LEAPS are far-out (time wise) options. A put is a type of option that you buy if you think the underlying stock or index is headed down.

[Lucky Luciano]

11. Near term vol is about 50...and Dec 09/Dec 10 puts

even have a vol of around 38 using mid prices...that is some chunky premium! It implies the markets move 2.5% per day for two years on average!

[bongbong]

16. Premium Schmeium

Wait until the last week before expiration. Who cares about the premium when the option goes up so much. Right now Dec 82 (SZCMD) is up 110% from yesterday. Although time premium is high for SPY, high VIX is always a bear signal.

I CANNOT overemphasize that you must know what you're doing to trade options, however, there is one silver lining. You can only lose as much as you put up :-)

[Lucky Luciano]

18. "Premium Schmeium"

Famous last words.

[bongbong]

20. Premium Schmeium OH NO

I agree completely with your assessment. That is why option trading is not for the faint of heart or faint of wallet. Money - and time - management is the key to option trading.

[Lucky Luciano]

21. Risk mgmt is crucial..

I would probably prefer to trade either calendar spreads or put spreads...to be honest, I would prefer to trade variance swaps.

[bongbong]

25. Calendar spreads

I never have much luck with calendar spreads...seems my bets are always out of sync with dt in the underlying stock's Fourier series.

If I had more time, or did trading professionally, there are all kinds of hedging scenarios involving options that I have thought about, but didn't have time to research. Most of the opportunities in those are gone, anyway, since the era of math models on the Street being aware of the big plays.

I'm not too familiar with variance swaps. Is the TED spread an example of a variance swap?

[bvar22]

40. I bought land....

...with a protected abundant clean water source, surrounded by National Forrest, far from urban areas, with a long growing season.

[coruscate]

3. BREAKING NEWS: The sky is blue!

Man I've been predicting this for years and now it's here, hopefully this time we shake off the evil bankers totally and don't fall into another trap.

Time to undo 1913!

[LeftHander]

5. When TV and Movies show nothing but wealthy characters....

then you know we are in a depression.

Oh...wait...they already do.

[Soylent Brice]

6. that sad part about that is even then you could see a movie for a nickel.

only the rich can afford two tickets these days. and if you want popcorn, better have a surgeon at the ready, cause you're losing a fucking kidney for that shit.


there will be no mental escape this time.

[davidthegnome]

12. I respectfully disagree

The internet is the only mental escape that many of us need.

[Soylent Brice]

19. true, but how many people won't be able to afford the internet in the next year?

[dixiegrrrrl]

28. You ahve hit on an important point.

A while back, I posted a piece from someone who went thru the Argenetine collapse in the early 1990's.
he said one thing he would do over again was to have lots of video games, books, magazines,
( kindly now is a good idea for that reason ) dvd movies, etc. for entertainment since going outside for entertainment was not an option for various reasons, and power was intermittent.
I would add to that board and card games, and oil lamps if you don't have a generator.

[Soylent Brice]

30. scrabble is the game of choice for the wife and i

i think most kids don't even know what a board game is now. we might have widespread children riots...

:scared:

lol

if i remember correctly, the argentine collapse was no picnic. didn't they just get back on their feet in the last few years? i remember reading something to that effect recently.

[dixiegrrrrl]

31. Argentina and Japan both were starting to recover....

but now.....

the piece also said that people were scavenging for every scrap of paper they could find,
for re-cycleing, since paper was not being made. Mills and stuff shut down.

[Soylent Brice]

36. that seems like a good indicator you're screwed, when you don't even

have the paper available to print in the news that you're screwed.

[dixiegrrrrl]

37. Here is the link to the story of what it was like in Argentina's collapse.

http://www.silverbearcafe.com/private/10.08/tshtf1.html

AND
this link has all sort of articles, current dates first, on economic warnings, issues.

Very well known writers from all over the globe.
This is my essential reading page and has saved our retirement fund from any damage,
led us to sell our house at the right time, etc.

http://www.silverbearcafe.com/private/survival.html

[Ghost Dog]

42. Cool. Thanks dixiegrrrrl n/t

[reggie the dog]

41. no going outside???

please tell me I will not have to start packing a 9 with me to go out biking.....

[raccoon]

35. An excellent observation. nt

[raccoon]

7. Off to Greatest! rec'd. nt

[robcon]

10. I've doubled down.. increased my 401k contribution. Stocks are low and a good buy now.

I lost 37% last year (ouch!) But stocks are not going lower, IMO.

[Alcibiades]

14. Get out now!

We took our money out and put it in bonds early last year, thereby avoiding the 40% loss in the global equities fund we had been invested in.

For what it's worth, I think it's unlikely we have seen the bottom yet. Please put your money in something safer than stocks--though what that is, I don't know, though we have our retirement in bonds now.

[xchrom]

13. recommend -- mostly because i do think the chinese economy does

bear watching.

the level of foreign companies orders with chinese manufacturing has to drop significantly.

the multiplier of that effect will be severe.

depression? -- i don't know.

[fasttense]

15. The next step in a Depression is the disappearance of common retail items.

During the last Republicon Great Depression, certain food, clothing and high price consumer items disappeared from retail shelves. The average person could not buy them at any price. They just weren't available.

So keep an eye on grocery and department store shelves. See what disappears first.

[CatholicEdHead]

22. Reports in GD yesterday from a major retailer

they are having a tough time getting anything in. So far no (known) food problems on shelves, but department stores are getting empty. The poster apparently worked there and knew the inside technology.

[Doremus]

26. Have a link to that thread?

I'd be interested in reading it.

I spent last evening browsing wholesale websites. If there's a shortage of goods it's not apparent to me.

[riderinthestorm]

27. Search for Twixvoy's posts. nt

[nc4bo]

29. If someone has a link, I'd like to see too.

Being around a military/military retiree town it may not be too obvious at first what's gone missing or what's getting harder to find. Someone's always spending something on some product or another around here.

My daughter is a groomer for the Fayetteville PetSmart and she has definitely noticed a decrease in customers for grooming services but that's just the service side. She said people are still coming in to buy pet related items but things had gotten a bit slower during the last couple months of '08 - not much though.

[FreeStateDemocrat]

32. Is this the thread referenced?:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4828061

[nc4bo]

33. If it isn't, it's an EXTREMELY telling thread so thank you. nt

[callous taoboy]

23. My brother's accountant is saying almost the same thing:

Has advised my bro to enjoy a nice uptick for a few months into 2009 and then liquidate. He predicts a market loss of 25% as opposed to 50%.

[callous taoboy]

24. dupe- delete

[raccoon]

34. Alas, Babylon. nt

[ItNerd4life]

39. 40% drop? He's only a year late

Of course if he had said this last year and was right, he might be worth listening too.