Maksim
New member
Here is my professional take on it, and what the economists, and analysts that come to my office tell me.
First, didnt mention this yet, but I am a wealth manager/financial advisor with the biggest bank in the world as far as assets, Swiss, 3 letters, along the lines of you and us. :wink:
Moe, you are right in regards to what is happening with the stock market, excessive fear, that caused deleveraging and margin calls.
What most people fail to realize, is that the stock market, and the economy, while related, are not the same. In the long term, the stock market will reflect the fundamentals of the companies as a result of the economy. In the short term, the stock market reacts as a popularity contest. What was excessive greed in 1999-2000, fear in 2000-2002, turned to greed from 2002-2007. Now we are in the fear stage...
Housing market fueld by subprime lending encouraged by democrats under later clinton years --------Leads to------> Greed by shareholders (Investment Banks leverage housing loans.--------Leads to-------> Bubble busts-------> Investment banks have to take writedowns----->Financial stocks take a hit----->500 Billion in writedowns leads to at least $5 trillion in credit taken out of the system----> Short term libor rates shoot up----->Hedge funds have to delever (Since they would borrow dirt cheap at say 3%, and invest in bonds that pay 5%, they would borrow money to invest, since the rate they borrow is based on LIBOR, it shot up and they had to now pay between 6 to 10%, meanwhile their bonds kept paying 5%, so they had to sell the assets (bonds, stocks) to repay the money they borrowed) This further forces more sales, and causes stock prices to drop. This causes more fear, and average investors fuel the fire and sell sell sell. Then what we had lately, is the common people who would borrow and buy on margin.... since the collateral is down in value, they had to liquidate holdings to pay the margin loan back, which causes even more sell sell sell.
Fundamentally, the economy is strong, people are still making money, the only sectors that realllly got hit, is financials. The rest of the economy is still ok. We just reported a gdp drop, finally for the first time, of -0.3%.
Pretty much every financial company/bank has already delevered, wrote down. Hedge funds are doing so now and will probly close down soon. general corporations, like Coke, etc... they went through this in 2001 (Enron days), and the health of the corporate balance sheets is very good. My personal opinion is on regional banks (which are now backstopped), smaller insurance companies, and defnitely the automotives. (auto's were hit with both, crappy sales, tighter lending standards, and the whole mess with artificially inflated residual values.) the next shoe to drop is automotives (which will probly be bailed out), and commercial real estate.
Most recessions, which by the way are NORMAL AND HEALTHY, are caused by over-supply, and minimal demand. This recession is caused by housing that got out of hand, that led to financials, that spread into the consumer. Supplies are still very lean.
Stock market rally today, which may fade by 3pm or go up another 500 points, is like someone said before, market looks 6 month ahead. Rally today was that the GDP of -0.3% is better than we expected.
As far as my own personal feelings...
the bailout was needed. Not the most popular choice, but was needed. More financials were going to collapse, the credit markets were frozen. Trust me, Wall St, has everything to do with main street. If we did not pass the act, depression would be certain.
The reason why this is not the depression, is unlike in the 30's... the government is doing everything to help unfreeze the markets. In the 30's, Hoover and Roosevelt RAISED TAXES!!!!
Now while we are investing money now in the banks... it is so that it relieves the fear of them going bust. AS LONG AS THERE IS FEAR THAT A BANK MAY GO BUST, YOU WILL NOT BE ABLE TO BORROW A PENNY! Businesses depend on short term borrowing for daily needs. As far as we see on this end, it is working. Libor coming down, and banks are beginning to lend.
There will be a recession, in one now, but we dont officially know until we are usually out of it.
Unemployment will go up, probly to as high as 9%, especially if Obama gets elected. I know from my clients that are business owners, they will be laying off workers, if taxes go up even one bit, particuarly if economy is in a slowdown.
As far as how it relates to ski resorts...biggest thing will be consumer demand. I see it two ways. Obviously I am not an analyst, tried contacting one here that specializes in it, but couldnt find one avail right now.
Energy costs are going to be down from where we expected them to be. Gas prices will be around here. Now, near certainty of a global slowdown, demand is down, big time, and all of the speculators that caused the shot up to $147.50 are out of the game. (deleveraging, closing of hedge funds).
Me, I stopped going to atlantic city and starting to go skiing more. With gas prices in the low $2.30's here in jersey, dont mind driving to a ski resort. In fact, I am more likely to go skiing, then flying somewhere.
As someone said, a Stay-Cation, is great. If the ski resorts play it right, with specials, ala Blue Mountain, $29 days, $20 on sunday after 4, I am game!
People who would go on a big vacation are more likely to go local, and stay in PA/VT/NY, for half the price. Hardcore skiers will go no matter what. The biggest question mark is people new to sport, or who think skiing is out of their price range. If resorts push the $50 (pass/rental/lesson) deals, it would bring new people to sport.
Think supply and demand, they have to run a min number of lifts no matter what, drop the price to get the maximum capacity for the fixed costs to get full efficiency, if there is increase supply, start raising prices from that level.... so its the 100 people at $50 or 10 people you would attract at $100. If you have the mountain to run, and the crew is there, you are paying them no matter what, might as well have people go. Lastly, they have to prey for good snow. =P
Not to sound mean, but they can probly decrease wages, in light of economic slowdown, to lower the costs, or offset wages, with benefits, ie deals on passes, or friend passes etc.
Sorry took up so much, but hopefully that clarifies it a bit, let me know if you want me to go in depth on any of the sections.
fyi... for this year, I am actually planning a client event where I charter a bus and go skiing. =P
First, didnt mention this yet, but I am a wealth manager/financial advisor with the biggest bank in the world as far as assets, Swiss, 3 letters, along the lines of you and us. :wink:
Moe, you are right in regards to what is happening with the stock market, excessive fear, that caused deleveraging and margin calls.
What most people fail to realize, is that the stock market, and the economy, while related, are not the same. In the long term, the stock market will reflect the fundamentals of the companies as a result of the economy. In the short term, the stock market reacts as a popularity contest. What was excessive greed in 1999-2000, fear in 2000-2002, turned to greed from 2002-2007. Now we are in the fear stage...
Housing market fueld by subprime lending encouraged by democrats under later clinton years --------Leads to------> Greed by shareholders (Investment Banks leverage housing loans.--------Leads to-------> Bubble busts-------> Investment banks have to take writedowns----->Financial stocks take a hit----->500 Billion in writedowns leads to at least $5 trillion in credit taken out of the system----> Short term libor rates shoot up----->Hedge funds have to delever (Since they would borrow dirt cheap at say 3%, and invest in bonds that pay 5%, they would borrow money to invest, since the rate they borrow is based on LIBOR, it shot up and they had to now pay between 6 to 10%, meanwhile their bonds kept paying 5%, so they had to sell the assets (bonds, stocks) to repay the money they borrowed) This further forces more sales, and causes stock prices to drop. This causes more fear, and average investors fuel the fire and sell sell sell. Then what we had lately, is the common people who would borrow and buy on margin.... since the collateral is down in value, they had to liquidate holdings to pay the margin loan back, which causes even more sell sell sell.
Fundamentally, the economy is strong, people are still making money, the only sectors that realllly got hit, is financials. The rest of the economy is still ok. We just reported a gdp drop, finally for the first time, of -0.3%.
Pretty much every financial company/bank has already delevered, wrote down. Hedge funds are doing so now and will probly close down soon. general corporations, like Coke, etc... they went through this in 2001 (Enron days), and the health of the corporate balance sheets is very good. My personal opinion is on regional banks (which are now backstopped), smaller insurance companies, and defnitely the automotives. (auto's were hit with both, crappy sales, tighter lending standards, and the whole mess with artificially inflated residual values.) the next shoe to drop is automotives (which will probly be bailed out), and commercial real estate.
Most recessions, which by the way are NORMAL AND HEALTHY, are caused by over-supply, and minimal demand. This recession is caused by housing that got out of hand, that led to financials, that spread into the consumer. Supplies are still very lean.
Stock market rally today, which may fade by 3pm or go up another 500 points, is like someone said before, market looks 6 month ahead. Rally today was that the GDP of -0.3% is better than we expected.
As far as my own personal feelings...
the bailout was needed. Not the most popular choice, but was needed. More financials were going to collapse, the credit markets were frozen. Trust me, Wall St, has everything to do with main street. If we did not pass the act, depression would be certain.
The reason why this is not the depression, is unlike in the 30's... the government is doing everything to help unfreeze the markets. In the 30's, Hoover and Roosevelt RAISED TAXES!!!!
Now while we are investing money now in the banks... it is so that it relieves the fear of them going bust. AS LONG AS THERE IS FEAR THAT A BANK MAY GO BUST, YOU WILL NOT BE ABLE TO BORROW A PENNY! Businesses depend on short term borrowing for daily needs. As far as we see on this end, it is working. Libor coming down, and banks are beginning to lend.
There will be a recession, in one now, but we dont officially know until we are usually out of it.
Unemployment will go up, probly to as high as 9%, especially if Obama gets elected. I know from my clients that are business owners, they will be laying off workers, if taxes go up even one bit, particuarly if economy is in a slowdown.
As far as how it relates to ski resorts...biggest thing will be consumer demand. I see it two ways. Obviously I am not an analyst, tried contacting one here that specializes in it, but couldnt find one avail right now.
Energy costs are going to be down from where we expected them to be. Gas prices will be around here. Now, near certainty of a global slowdown, demand is down, big time, and all of the speculators that caused the shot up to $147.50 are out of the game. (deleveraging, closing of hedge funds).
Me, I stopped going to atlantic city and starting to go skiing more. With gas prices in the low $2.30's here in jersey, dont mind driving to a ski resort. In fact, I am more likely to go skiing, then flying somewhere.
As someone said, a Stay-Cation, is great. If the ski resorts play it right, with specials, ala Blue Mountain, $29 days, $20 on sunday after 4, I am game!
People who would go on a big vacation are more likely to go local, and stay in PA/VT/NY, for half the price. Hardcore skiers will go no matter what. The biggest question mark is people new to sport, or who think skiing is out of their price range. If resorts push the $50 (pass/rental/lesson) deals, it would bring new people to sport.
Think supply and demand, they have to run a min number of lifts no matter what, drop the price to get the maximum capacity for the fixed costs to get full efficiency, if there is increase supply, start raising prices from that level.... so its the 100 people at $50 or 10 people you would attract at $100. If you have the mountain to run, and the crew is there, you are paying them no matter what, might as well have people go. Lastly, they have to prey for good snow. =P
Not to sound mean, but they can probly decrease wages, in light of economic slowdown, to lower the costs, or offset wages, with benefits, ie deals on passes, or friend passes etc.
Sorry took up so much, but hopefully that clarifies it a bit, let me know if you want me to go in depth on any of the sections.
fyi... for this year, I am actually planning a client event where I charter a bus and go skiing. =P
