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  Quotations - Invest  
[Quote No.36996] Need Area: Money > Invest
"Here are a few rules of thumb for the contrarian indicator of investor psychology -sentiment: Dr. Martin Zweig sums up contrarian sentiment indicators in his book 'Winning On Wall Street' by saying, 'Beware of the crowd when the crowd is too one-sided.' Extreme optimism on the part of the public and even professionals almost always coincides with market tops, as nearly everyone who is going to buy has already bought. Extreme pessimism almost always coincides with market bottoms, because nearly everyone who is going to sell has already sold. 1-Investors Intelligence, which tracks the opinion of Wall Street letter writers - allows a bull bear ratio to be created by dividing the number of bullish advisors by the number of bullish plus bearish advisors. The number of neutral advisors is ignored. The final number is multiplied by 100. High readings of the Bull/Bear Ratio are bearish (there are too many bulls) and low readings are bullish (there are not enough bulls). In almost every case, extremely high or low readings have coincided with market tops or bottoms. Historically, readings above 60% have indicated extreme optimism (which is bearish for the market) and readings below 40% have indicated extreme pessimism (which is bullish for the market). 2-American Association of Individual Investors (AAII) tracks the opinion of individual investors, rather than Wall Street letter writers, and the AAII bull bear Index Ratio is calculated by dividing the percentage of bullish investors by the sum of bullish and bearish investors. A reading greater than 70% is considered bearish, and a result lower than 30% is bullish. 3-National Association of Active Money Managers (NAAIM) equity exposure - 40% is considered bullish and 70% bearish. 4- CBOE 10-day put/call ratio 75% is considered bearish and 95% bullish. 5-CBOE 3-day equity put/call 56% is considered bearish and 72% bullish. 6-CBOE Volatility Index (VIX) 16 is considered bearish and 29 bullish. " - Seymour@imagi-natives

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[Quote No.37080] Need Area: Money > Invest
"[Increases in global gold hedge book can suggest gold producers consider that gold may fall in the future so sell future production now at higher prices or they do this to guarantee future cash flow especially to get loans for future mine expansion.] Gold producers are increasingly locking in forward sales of the metal or tying it up as collateral for loans to expand their production, indicating some miners are concerned gold prices could weaken before they complete their projects. Miners have forward sold material and set up 'options'--orders to buy or sell at specific price levels--for more of their gold production during the first three months of the year than the amount of hedged positions they closed in the same period, U.K.-based metals consultancy GFMS said Wednesday in a report. The first-quarter rise in hedging activity this year marked the second quarterly increase in the last 12 months, GFMS said. During these periods, miners locking in a price for their production added net supply to global hedges by forward selling or committing more gold than they'd bought back in order to exit such trading positions. Hedging activity boosted the global supply of hedged gold by six metric tons in the first quarter, GFMS said, up 4% from the previous quarter to 152 tons at the end of March. That's a small portion [about 5%] of annual global gold production, however. In 2010, global gold production rose to a record high of 2,689 tons, up from 2,590 tons the previous year, according to another GFMS survey. With gold prices already at record highs this summer [$1600 USD], market participants will keenly watch for the second quarter hedging figures to see whether this activity will actually weaken the market. 'If gold miners, seeing the price reaching this far, are tempted to lock in prices, it would exaggerate a move downward in the gold price,' said Carl Firman of metal consultancy Virtual Metals. The most significant hedger of gold in the first quarter was Swedish producer Boliden AB (BOL.SK). It added 10 tons of forward sales in the period, equivalent to more than half of the additional global hedges in the first quarter, primarily to secure the long-term viability of the expansion of its Garpenberg complex in Sweden. Another significant forward seller during the quarter was Mexico's Minera Frisco (MFRISCO.MX), which extended its hedging positions by 17 tons to cover additional production costs from its latest development projects. Golden Star Resources Ltd., Industrias Penoles (PE&OLES.MX) and Great Basin Gold Ltd. GBG +2.14% also added hedging programs during the period. While most of the first-quarter hedging has been attributed to forward selling within deals to secure financing for expansion projects, gold's recent rush to new highs may exacerbate this process in coming quarters as miners and financing bodies are increasingly eager to build a buffer against a potential drop in gold prices, said analysts. [Gold futures are 1% lower in 2012 at present] 'Project hedging is inherently to do with fear of price decline, but more specifically about securing financing or revenue against a future project,' said Matthew Piggott, a metals analyst at GFMS. 'When hedging is occurring, people are very conscious of price trajectory and the impact on shareholders.' Since the financial crisis, lenders to the often-volatile mining industry have imposed stricter requirements. Miners are frequently required to lock in prices for future production in order to convince banks to secure the funding to develop new projects or fund expansion. Miners hedge their gold-market exposure by locking in a price to be paid in the future, when its metal is produced. The aim is to protect a portion of a miner's cash flow in the event that gold prices suddenly fall, allowing the company to meet its daily operating expenses and limiting losses. But until recently, as gold prices have risen steadily in recent years, miners bought back the gold that they had tied up in forward sales agreements. This enabled those companies to gain exposure to the rise in prices. Large gold producers AngloGold Ashanti Ltd. AU -0.11% and Barrick Gold Corp. ABX -0.25% , for example, spent much of 2009 and 2010 closing out gold hedges. " - Francesca Freeman
Marketwatch.com August 3rd, 2011.
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[Quote No.37081] Need Area: Money > Invest
"Market Indicator with Perfect Record Just Signaled 'Buy' - An indicator followed by veteran technical analyst John Roque that has perfect results for almost twenty years just flashed a buy signal. The beauty of Roque's indicator, which has signaled positive returns three months out every time from its trigger point, is in its simplicity. Roque looks at the percentage of stocks on the NYSE that are trading above their 200-day moving average to get his timing signal. In a note to clients today, Roque pointed out that the number of NYSE stocks above their 200-day average on the NYSE was a measly 19 percent, When the number of stocks that manage to stay above this moving average -- a common measure of momentum -- make a nasty two standard deviation move to the downside from the norm, it usually means an oversold market and a good time to buy. Looking at past examples from his report, it seems when more than 80 percent of NYSE stocks fall below their 200-day average, the market is close to being oversold. 'Extreme readings in this indicator (so far) have a perfect record with respect to market rallies both two weeks and three months later,' wrote WJB Capital's Roque, a respected staple of the technical analysis community, in a note. 'We still think this market has issues, notably with the industrial sector, but we're putting our trust in this indicator/data near term.' The analyst cited seven other occurrences besides today since 1994 where the percentage of stocks below their respective 200-day moving averages reached such an extreme. Two weeks and three months later, the S&P 500 has been positive every time hitting the oversold trigger, with gains averaging 5.3 percent and 15 percent respectively. The last -- and most extreme -- oversold position was on March 2, 2009, about around the start of the bull market. Over time, strategist after strategist have tried to find the one magic indicator or mix of indicators that determine the right time to buy or sell the market. Some focus on extremes in investor sentiment, volume, crossings in moving averages… even cycles of the moon. As is the tone in most of Roque notes, he's not proclaiming to have found the secret to the market timing question that's plagued every trader since Jesse Livermore. It's just an indicator he's kept track of over his career and so far, it has served him well for predicting short-term comebacks in the market." - John Melloy
Executive Producer, Fast Money & Strategy Session. Published: Friday, 5 Aug 2011
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[Quote No.37082] Need Area: Money > Invest
"...US GDP growth has now fallen below the well known 2 percent stall speed, below which the economy does not seem to be able to regain altitude but instead crashes directly into recession." - Albert Edwards
Equity strategist at Societe Generale. Published on CNBC Tuesday, 9 Aug 2011. [http://www.cnbc.com/id/44071889/ ]
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[Quote No.37083] Need Area: Money > Invest
"What signals the end of this [or any monetary-interest rate] tightening cycle is weaker economic data followed by lower inflation." - Adrian Mowat
Chief Asia and emerging-market strategist at JPMorgan Chase & Co. in Hong Kong. [http://www.bloomberg.com/news/2011-08-09/emerging-stocks-priced-for-profit-tumble-signal-bottom-to-morgan-stanley.html ]
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[Quote No.37091] Need Area: Money > Invest
"I believe that the New High – New Low Index is the best leading indicator of the stock market. The most powerful pattern of NHNL is a downspike on the weekly charts. It occurs when the weekly NHNL drops below its minus 4,000 level and then closes above it. It identifies a total panic and a massive cleaning out of weak holders, after which the market is ready to rally again. This signal is so strong that it works even in bear markets, driving a rally for a few months – but when it occurs in a bull market, it is beyond powerful: buy and buckle up your seat belt." - Dr. Alexander Elder
Respected technical-chart investor. Published August 10, 2011.
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[Quote No.37096] Need Area: Money > Invest
"It sounds extraordinary but it's a fact that balance sheets can make fascinating reading." - Mary Archer

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[Quote No.37151] Need Area: Money > Invest
"As a general rule, the most successful man in life is the man who has the best information. [He knows what is important to know, how to get it and how to interpret and act on it!]" - Benjamin Disraeli

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[Quote No.37186] Need Area: Money > Invest
"Small recessions are the price we pay to not have big recessions." - Andrew Smithers
Founder of investment analysis company, Smithers & Co.
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[Quote No.37187] Need Area: Money > Invest
"I couldn't find another person [his wife died 13 years ago] or occupation that had as much interest for me as economics." - Irving Kahn
Chairman of Kahn Brothers - a small family investment firm he founded in 1978 - who at 105 years old in August 2011 when this quote was given is perhaps the world's oldest investment banker. In the 1930's at Columbia Business School, Kahn served as an assistant to economist Benjamin Graham, the value-investing guru whose principles of caution and defensive investing inspired a cadre of disciples that includes Warren Buffett. He has followed those principles since while managing a number of companies and investing and still happily does even now each week at work.
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[Quote No.37188] Need Area: Money > Invest
"New research suggests the high and rising debt of the U.S., Japan and Europe will stunt economic growth unless countries act quickly to contain it. A paper presented Friday [26th August, 2011] by three economists at the Bank for International Settlements finds that debt–be it government or corporate–starts to weigh on growth when it rises close to an economy’s annual output, a predicament currently shared by almost all of the world’s largest advanced economies. Stephen G. Cecchetti, M.S. Mohanty and Fabrizio Zampolli show that public debt begins to hurt once it rises from a range of between 80% to 100% of gross domestic product. The threshold is above 90% of GDP for corporate debt and around 85% of GDP for household debt, though the economists warn the latter is only their best guess. The research provides food for thought at [Jackson Hole] the Kansas City Federal Reserve Bank’s annual summer retreat of top global policy makers in Wyoming’s Grand Teton Mountains. The findings are similar to results from a January 2010 paper by economists Carmen Reinhart and Kenneth Rogoff, even though the data set and analysis are different, reinforcing the point that advanced countries hit by the financial crisis now face a big challenge in managing economies loaded with debt. In 2010, the U.S., Japan, the U.K., France, Italy and Canada all had public-debt levels above 80% of GDP, according to Organization for Economic Cooperation and Development data used in the paper. Germany was the only country in the Group of Seven industrialized nations just under that threshold. 'Countries with high debt must act quickly and decisively to address fiscal problems,' the paper says. 'The longer they wait, the bigger the negative impact will be on growth.' The research shows that in an economy where public debt rises from 80% of GDP to 90% of GDP–or any 10-percentage-point increase beyond that–subsequent average annual growth rates will tend to be more than 1/10 of a percentage point lower than without the debt increase. For corporate debt, the drag on growth kicks in once it increases beyond 90% of GDP and the impact is only half as big. Asked by Bank of Mexico Governor Agustin Carstens about the optimal rate of debt for growth, BIS economist Cecchetti said he recommends countries keep 'substantially' lower level of debt than the thresholds suggested by the paper. U.S. government debt shot up to 97% of GDP last year from only 58% in 2000. The increase was particularly sharp in recent years, when President Barack Obama boosted spending to fight the financial crisis and recession of 2008 and 2009. Growth has been disappointingly slow since the recovery began around mid-2009 and there are now fears of a new recession. The U.S. faces an uphill task in keeping its debt under control because Republicans in Congress oppose Obama’s plan to mix spending cuts and tax increases to slash the country’s huge budget deficit. One small positive in the paper: The U.S. has the lowest level of corporate debt among G-7 countries, at 76% of GDP. A separate paper presented at the Jackson Hole gathering by Harvard economists Katherine Baicker and Amitabh Chandra argues that health-care spending in the U.S. is highly inefficient and, if left unchecked, could lead the world’s largest economy to accumulate more public debt than Greece. Though all of the largest advanced economies look in bad shape, Japan’s situation seems particularly dire. Public debt is now at a staggering 213% of GDP, from 145% in 2000. Japanese companies also have the highest level of company debt of the world’s largest economies, at 161% of GDP in 2010, according to the paper from the BIS economists. The Asian country’s anemic growth rates over the last decade lend credence to the research findings. In Europe, where concerns about a fiscal crisis are forcing countries such as Italy to make aggressive budget cuts, the picture is mixed. Among the euro zone’s three largest economies, Germany is in the best shape with public debt below the danger zone at 77% of GDP and corporate debt equal to total output last year–lower than in Italy and France. Italian Premier Silvio Berlusconi faces the worst problems, with public debt at 129% of GDP in 2010. That ratio was only slightly below Greece’s, which was 132% of GDP last year." - Luca Di Leo
Wall Street Journal Blog, August 27, 2011. [http://blogs.wsj.com/economics/2011/08/27/high-debt-levels-poised-to-stunt-growth/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29 ]
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[Quote No.37269] Need Area: Money > Invest
"[In a recession or a depression] the winners are those who lose the least. " - Richard Russell

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[Quote No.37279] Need Area: Money > Invest
"If you see the bandwagon [everyone is getting on] you've missed it." - James Phillips

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[Quote No.37322] Need Area: Money > Invest
"The real effects of debt - Abstract: At moderate levels, debt improves welfare and enhances growth. But high levels can be damaging. When does debt go from good to bad? We address this question using a new dataset that includes the level of government, non-financial corporate and household debt in 18 OECD countries from 1980 to 2010. Our results support the view that, beyond a certain level, debt is a drag on growth. For government debt, the threshold is around 85% of GDP. The immediate implication is that countries with high debt must act quickly and decisively to address their fiscal problems. The longer-term lesson is that, to build the fiscal buffer required to address extraordinary events, governments should keep debt well below the estimated thresholds. Our examination of other types of debt yields similar conclusions. When corporate debt goes beyond 90% of GDP, it becomes a drag on growth. And for household debt, we report a threshold around 85% of GDP, although the impact is very imprecisely estimated." - Stephen Cecchetti, Madhusudan Mohanty and Fabrizio Zampolli
Bank of International Settlements, Working Papers No 352, September 2011. [http://www.bis.org/publ/work352.htm ]
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[Quote No.37332] Need Area: Money > Invest
"We studied the factors contributing to 29 past sovereign defaults and found that default or debt restructuring occurred, on average, when external debt reached 73% of gross national product (GNP) and 239% of exports. " - Carmen Reinhart and Ken Rogoff

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[Quote No.37395] Need Area: Money > Invest
"How commodity markets fit business cycle patterns [and asset class allocation]: Using models linking markets to the economy for day-to-day trading may be like using a map of North America to travel across Rhode Island. But, in some cases, good working knowledge of how investments in various markets fare over the business cycle - the periodic movement from economic boom to bust - might be the only guide available to position yourself in a given market. Many analysts have formulated generalizations about the business cycle's effect on the markets, but few have been as specific as Martin Pring, the chairman of Pring-Turner Capital Group in Connecticut. While it would be an oversimplification to tag defined market patterns to each phase of the business cycle, Pring contends that, if such patterns do appear regularly, this knowledge would be crucial. To illustrate, say an asset manager has reliable long-term projections for bonds, stocks, precious metals and money market instruments and his portfolio is heavily weighted with long-term treasuries. He receives strong bullish signals for every other asset class, most recently precious metals. Knowing that bonds historically peak at a certain time interval after metals turn up might make him cautious on those treasuries. Rather than fitting his markets to an economic forecast, Pring lets the markets tell him about economics. (The last year or two has shown the extent to which economists and the markets often differ.) 'I believe the business cycle repeats every 4-5 years," Pring says. "Sometimes the trough is a recession, sometimes it's a growth recession.' The chart showing the six stages of the business cycle represents Pring's idealized view of how different asset classes relate to the cycle. If his 'barometers' classify the bond and stock markets as bearish while commodities remain in the bullish camp, Pring puts the economy in Stage Five. This stage traditionally arrives at the start of the slide into recession. 'When a barometer is bullish, the odds favor you when you buy. When it's bearish, it means you just have to be selective,' according to Pring. In the business cycle analysis of Ray Dalio, president of Bridgewater Associates in Wilton, Conn., the class Pring calls commodities is labeled 'inflation hedge instruments.' For Dalio, this group includes fine art and real estate. As an investment class, this area is represented by futures contracts on precious metals or commodity indexes or a managed futures account. Tracing growth:- Dalio lumps Pring's three growth stages into two: non-inflationary growth and inflationary growth. The separation also is marked by a top in bonds. Dalio says the first period is the best for holding inflation hedge assets, such as precious metals and commodities. In effect, he uses the Commodity Research Bureau (CRB) Index to find the overall trend, but he chooses an uptrending commodity as his vehicle. 'I start out with the CRB or some other broad measure of commodities. I then go from there to an individual market,' Dalio says. William Schubert, an economic consultant in La Jolla, Calif., is relatively more statistical in his analysis. To find trends in economic statistics, he monitors their rates of change. In addition, he projects turning points with a mathematical formula that analyzes past movement. With these two approaches, Schubert not only discovers what phase of the business cycle the markets are trading in but when the climate will likely change. Ken Stocketz, executive vice president of research for RXR Capital Management in Stamford, Conn., takes even further the idea that markets, not economic predictions, rule asset allocation decisions. While he believes in market cycles, Stocketz' allocation among stocks, bonds, commodities and cash is based solely on the prospective returns, regardless of economic climate. 'By using our type of asset allocation, we're just judging relative value, not trying to pick certain sectors (that are economically timely),' he says. Pring isn't either, though he fits his judgments in an economic perspective. His barometers, incorporating a wide array of economic, market and technical data, form the criteria on which the six investment stages of the business cycle are based. Stage One:- This stage is associated with declining long-term interest rates. The U.S. Treasury note and bond markets begin their uptrend. The stock market usually has not yet taken notice. Short-term interest rate markets, such as certificates of deposit and Eurodollars, often react even more quickly than bonds to easier money. Often one of the briefest of the six stages, this stage usually occurs during a recession, but this is not always the case. In late 1984, Pring classified the economy as Stage One when it was far from stagnating. Both gold and the CRB Composite Index were in downtrends during that period. The expected bottom in the bond market came late. Another Stage One unfolded in late 1981 as the United States was climbing out of recession. The bond market is the main event in this stage. Pring employs his bond barometer to time the buying public's re-embracement of U.S. Treasuries. According to Pring, the barometer's most weighty component is an indicator that measures growth in different sectors of the economy; it works best identifying interest rate peaks. Other components include the Leading Inflation Index, generated by the Columbia Business School, and the capacity utilization rate. For John Murphy, president of JJM Technical Advisors and a long-time researcher of intermarket relationships, the ratio between the CRB Index and bond prices provides a simple, yet effective, clue. 'If the ratio (of CRB to bond prices) falls, that means the place to be is in bonds. When the ratio strengthens, as it has recently, the investor should look at commodities or commodity-related stocks,' Murphy says. Stage Two:- This stage of the cycle begins with stocks entering a bull trend as the economy begins its recovery. (An exception is 1984, when Stage Two did not follow a recession.) In a nutshell, this period consists of bull markets in bonds and stocks, a bear market in commodities overall and a top in the value of money market securities. Like bonds before, the big question in stocks is when. The lag time between the turn up in bonds and stocks varies by cycle. The turns can be anywhere from simultaneous to more than a year later. In 1974, stocks turned up one month after bonds. In 1980, the market bottoms coincided. In 1982, the lag time was about 14 months. As the Dow Jones Industrial Average chart suggests, these waiting periods may have been excellent times to jump into the market. In January 1982, Pring's stock barometer joined his bond barometer in the bullish camp. The barometer's components include a commodities index and the Leading Economic Indicators, among others. The interesting component is what Pring calls the Torque Index: the ratio of housing starts to vendor performance. Pring says the index reflects various sector's response to changes in interest rate levels. Stage Three:- This stage is associated with a recovery fully under way. Commodities should join bonds and stocks in a bull market. The last place asset managers want to be is in cash. While the six-stage cycle portrayed in the chart [not shown] does not make time periods very clear, bond prices tend to peak [long bond yield trough -ie inverted yield curve] shortly after commodities bottom. A peak in bonds ends this stage. There are only two periods in the last decade when nearly every asset class staged a bull market at the same time. One of these episodes started in late 1982, when gold futures and the CRB Composite Index thrust out of multi-year downtrends. (The CRB Spot Raw Index lagged this move.) Gold also led the way in 1986. By the time industrial commodities turned up, gold had already launched into a bull market. Pring's inflation barometer recommended long positions three times over the same period, sometimes with mixed success. Moving averages and other derivatives of capacity utilization, the CRB Spot Raw Index and AAA corporate bond yields are among the indicators that Pring uses to assemble this barometer. Stage Four:- This phase begins with an economy at full recovery and inflation picking up. After the top in bond prices [yield trough] near the beginning of this stage, interest rates continue to rise. However, stock and commodities markets maintain their bull trends. The price charts [not shown here] reveal three periods over the last 12 years when these conditions were present: 1978, 1981 and 1987. Pring's analysis picked these plus late-1983 as Stage Four behavior. While a long commodities bias in this last period would not have yielded great returns for most markets, Pring's barometers anticipated changes in trend correctly in the other periods. As a note, Pring says trends in the CRB Spot Raw and Journal of Commerce indexes are reliable forecasters of bond market bottoms. Trends of indicators measuring growth in the economy are also important. As is true between bottoms, the lag time between tops in the stock and bond markets varies by cycle. Although futures traders willing to take a long-term position in stock indexes such as the Standard & Poor's 500 can capitalize on the imminent change in trend, Pring is more cautious about buying individual stocks. While those stocks that are more inflation-sensitive should peak with the index, deflation-connected issues tend to drop with the bond market. Stage Five:- Money becomes tighter [monetary policy tightening - higher interest rates] in an economy over the course of Stage Four, but Stage Five is when the investigating public starts to feel the pinch of tight money. The sentiment of the public is reflected best by the stock market. Accordingly, Pring says this phase of the cycle is initiated by a bearish signal for stocks - not necessarily a top, just recognition of conditions ripe for one. Other trends in this stage include declining bond prices [as yields rise with monetary policy tightening] and rising commodities. While to most futures traders this would be an argument to play the short side of bond and stock index futures, the more traditional asset managers suggest a move toward short-term, or 'cash,' instruments. These conditions (topping stock market, bearish bonds [prices falling as yields rise], bullish commodities) have occurred three times in the last 12 years: 1978-79, early 1984 and 1988 to present. Pring's barometers appear to coincide with these, with the addition of a small blip in mid-1981. This stage and its converse - Stage Two - are the longest stages in the entire cycle. Stage Six:- This stage is typified by relatively high interest rates that continue to rise. Nearly everything is in a bear market, including futures contracts on debt instruments (both long-term and short-term), stock indexes and most commodities. The markets move downward in concert, but this unison does not last long. In Stage Six, the economy is most likely to enter a recession, signs of which usually trigger easier money and a bull market in bonds. The best example of this stage can be found in mid- to late 1981. Pring's barometers, working together, have pegged certain periods as Stage Six environments. A look at the chart [not shown here] displaying the barometer signals shows three different Stage Six periods over the last 12 years. A component of all of Pring's market barometers is commodity prices. [This makes sense as copper is called DR. Copper as it seems to behave as if it had an economics degree rising and falling in anticipation-usually- of the global economy] For Pring, the best representation of this is the CRB Spot Raw Commodities Index, coupled with its rate of change. The rate of change is used to discover the trend of the index, which, in the case of a downtrend, can be a valuable guide for finding an approaching bottom in bonds. The fact that the Spot Raw index has been bullish may be confusing to those who follow the CRB Futures Index. The CRB Index, an actual traded contract, is a very different measurement than the Spot Raw index. Today's dilemma [December 1989]:- Both Pring and Dalio see the U.S. economy at present in a Stage Five environment - but not without some significant reservations. Pring's stock barometer turned bearish shortly before the October 1987 collapse and has been so ever since. The crash gave him a top, but he, like other researchers, is in a quandary: The barometer was still bearish when the market was hitting new highs. 'The markets appear to be in Stage Four, but the barometers say we are in Stage Five,' Pring observes. Another snag came when Pring's bond barometer recently - maybe only temporarily - gave an inconveniently bullish reading. From an intermarket perspective, bull markets in both bonds and commodities while stocks are looking down is a rarity. Pring offers two interpretations: Either the bond market is merely experiencing a whipsaw or commodities prices will soon drop and the economy will be in Stage One - having skipped the recessionary Stage Six altogether (consistent with predictions of a 'soft landing'). According to Pring, if that occurs, it will be only the third interruption in the chronological order since 1953. He says it will mark the first time commodities have peaked before stocks since (gulp!) 1929. For this reason, Pring cites the gold market. If commodities are to maintain their bull trend, he says, the shiny metal must reverse its current long-term downtrend. Pring anticipates such a reversal, which would be achieved by a Friday price fix above $375 per oz. Stocketz also sees opportunity in the commodities sector. 'About 1 1/2 months ago we re-established our 20% allocation in managed futures,' he says, explaining this is done when the futures markets have a clear trend and don't appear 'frothy and dangerous.' Bearish on stocks:- Dalio is less sanguine about the economy's ability to side-step the nastier phases of the business cycle. He expects stocks to top out soon [This article was written in December 1989]. 'It's going to be a long time until stocks are a good place to put your money,' he says. Dalio, whose asset mix lately has consisted of cash, then bonds and inflation hedge instruments, has been recommending a yield curve play in futures markets: short Eurodollars long T-bonds. Later, after evidence that the Federal Reserve believes the economy has slowed enough, Dalio's mix favors bonds, then cash and stocks and inflation instruments last. At this point, his yield curve play will reverse, with the expectation of faster-rallying Eurodollars. Dalio sees substantial monetary easing, as he discounts the Fed's concern for the U.S. dollar. 'I think you're going to see interest rates come down and the dollar with it. The Fed will let the dollar be damned,' Dalio says. The recent confusion over what the markets should be doing under the present economic climate has even led to speculation about the business cycle in general. 'You can't really say that there's a clear recessionary-inflationary process. I think it's rotational by geographical area,' Stocketz says. He suggests the Midwest, the Oil Belt and the Northeast already have all gone through slowdowns of their own. PHOTO : Ray Dalio sees a four-part economic cycle, each segment favoring certain types of investments. PHOTO : According to Martin Pring, the idealized business cycle involves six successive stages that feature peaks or bottoms in specific market sectors. PHOTO : The results of Martin Pring's barometer signals are plotted here from 1978 to mid-1989. Each set of readings from the barometers, which consist of several economic, market and technical indicators, allows Pring to determine what phase of the business cycle the economy is in, giving insight into market possibilities. As the chart shows [not shown here], stages two and five tend to be longer and stages one and six tend to be shorter. The economy may skip a stage, though usually they occur in succession. " - Jon Stein
Article was written in December 1989. [http://www.allbusiness.com/specialty-businesses/112383-1.html ]
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[Quote No.37396] Need Area: Money > Invest
"[Jim Paulsen of Wells Capital Management has created a 'Boom-Bust' barometer. This barometer simply divides the Commodity Research Bureau's spot commodity price index by the four-week average of U.S. initial unemployment claims.] When the economy is booming, commodity prices tend to be high as demand for raw materials rises faster than supply can catch up. Similarly, when the economy is doing well, unemployment claims will be low. Conversely, unemployment claims will be high and commodity prices low when the economy is struggling. [Since 1968, there have been 10 peaks in this barometer. The most recent occurrence of a barometer peak was in 1999. Currently, (2004) we are peaking in this barometer and it currently stands at the third-highest peak over the last 36 years. According to Paulsen's work, such extremes in this barometer result in significant increases in bond yields to a tune of 80 basis points on 10-year Treasury bond yields. The bottom line is that this indicator is projecting upward pressure on Treasury yields. (2004 was actually a share market recovery but with a very weak employment recovery.)]" - Jim Paulsen
Wells Capital Management
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[Quote No.37397] Need Area: Money > Invest
"The decisive cause of every single, serious economic and currency crisis are credit and debt excesses." - Kurt Richebacher
German economist. Quote from June, 2000.
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[Quote No.37401] Need Area: Money > Invest
"...the end of the quarter usually sees some window dressing by fund managers where they try to make their top holdings look better by selling the underperformers of the quarter and buying more of the outperformers." - Julia Lee
Bell Direct equities analyst
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[Quote No.37402] Need Area: Money > Invest
"In this [share investing] business if you're good, you're right six times out of ten. You're never going to be right nine times out of ten." - Peter Lynch
Famous and very successful fund manager.
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[Quote No.37413] Need Area: Money > Invest
"How does one recognise an investment genius? He [or she is the investor] who has cash available at the end of a bear market [ready to buy all the great companies at bargain prices]!" - Wall Street Saying

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[Quote No.37415] Need Area: Money > Invest
"The yield curve is important for 1)banks -that borrow short and lend long thereby making the difference as gross profit, and for 2) insurance-annuity-pension-superannuation companies that use the return on longer dated government bonds to meet their pension disbursement obligations." - Seymour@imagi-natives.com

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[Quote No.37419] Need Area: Money > Invest
"When considering government bonds - i.e. sovereign debt - it is important to consider the Debt-to-GDP percent. It is also important to consider the Deficit-to-GDP percent which describes the speed at which the nominal debt is growing if all else, including tax rates and GDP, is kept the same. The next thing to consider is the Interest Cost-to-GDP, because if that is higher than GDP growth, even if there is no deficit spending, then the debt burden will grow in relation to GDP as well as nominally making things worse and therefore a sovereign default or 'restructure' possibly required. Now if GDP falls as in a recession all of these ratios become even worse and the measures to improve them like growing GDP through productivity or just inflation from 'money printing' and/or currency devaluation, or raising taxes and reducing spending, become much more problematic and also suggest a sovereign debt default is likely. All these ratios should be considered in relation to all the economic possibilities, before investing in sovereign bonds and in forming alternative, emergency planned responses should anything go wrong." - Seymour@imagi-natives.com

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[Quote No.37475] Need Area: Money > Invest
"...apart from the fact that inflationism [Keynesian stimulus through 'printing' money and creating inflation to reduce the real cost of debt and fiscal stimulus] has been thoroughly debunked by economic theory for a long time, its practical application throughout history has been a string of utter disasters. We already mentioned the demise of the Roman Empire, which was hastened by the arch-inflationist emperor Diocletian, but we need not look that far back. From John Law to the post-revolutionary assembly of France to Germany's Rudolf von Havenstein to to Hungary's Szálasi government to countless Latin American money printers to Zimbabwe's Gideon Gono, history is brimming with examples of governments using the printing press in an attempt to overcome their economic difficulties and bringing about total catastrophe instead. To be sure, Mr. Wolf isn't going around advocating 'hyperinflation' – neither did any of the esteemed gentlemen mentioned in our little list above. They all, to a man, thought they could indulge in a 'little bit of inflation' to 'give the economy a badly needed shot in the arm' or ease a 'temporary shortfall' in government revenue. The problem is that it never stops with just a 'little bit' of inflation once this course is embarked upon, as the 'shots in the arm' soon prove to be ineffectual and the 'temporary shortfalls' prove to be less temporary than expected. " - Pater Tenebrarum
October 3rd, 2011 [http://www.acting-man.com/?p=10679 ]
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[Quote No.37476] Need Area: Money > Invest
"Real estate uses a different terminology to shares, rather than pe or price to earnings they use 'cap rates'. Capitalisation (or ‘Cap’) rates are the rate (measured in %) at which income is converted into asset (or capital) values. For example, assuming income is $10 and the cap rate is 10%, dividing income by cap rate gives the asset value ($10/10% = $100). A higher cap rate produces a lower valuation and visa-versa" - Nathan Bell
Certified Financial Advisor with financial research firm , The Intelligent Investor.
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[Quote No.37477] Need Area: Money > Invest
"[Real estate prices slow usually because of interest rate rises on mortgages, which differs from]...the reasons why [usually real estate] bubbles pop – unemployment, recessions or oversupply. " - Michael Yardney
Metropole Property Investment Strategists managing director and SmartCompany blogger.
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[Quote No.37503] Need Area: Money > Invest
"One of the greatest pieces of economic wisdom is to know what you do not know. " - John Kenneth Galbraith
20th century American economist
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[Quote No.37515] Need Area: Money > Invest
"You know a professional gambler is not looking for long shots, but for sure money." - Jesse Livermore
One of the most famous and successful share traders in history. Quote from 'Reminiscences of a Stock Operator' by Edwin Lefevre.
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[Quote No.37519] Need Area: Money > Invest
"[When you hear about a liquidity crisis or the start of a bear market or recession check the growth of M1 and M2 money supplies, which would be supported by M1 growing slower than M2 and forming a 'black cross' as in the following article:] The annual growth of Taiwan’s two major money supply indicators—M1B and M2—both declined to 7.44% and 6.16%, respectively in August, with the gap between the two further narrowing to 1.28 percentage points. If the growth rate of the former keeps falling to be lower than that of the latter, the so-called “black cross” will form at the intersection of the bottom, according to the central bank. Seeing the situation, market observers believe, the “black cross” is very likely to appear this month. They said that the “black cross” usually implies inadequate liquid capital particularly in the stock market and is deemed as a signal of bearish market. The central bank here uses three indicators to assess the money supply on the island, namely M1A, M1B and M2. M1A shows currency in circulation, checking accounts, and passbook deposits; M1B is M1A plus the passbook savings deposits; and M2 plus quasi-money, including time and savings deposits, foreign currency deposits, and postal savings deposits. The annual growth of M1B hit a 29-month low of 7.44% in August with outstanding value of NT$11.67 trillion (US$389 billion) and the corresponding value of M2 stood at NT$32 trillion (US$1.067 trillion)." - Judy Li
Taipei, Sept. 29, 2011 (CENS) [http://news.cens.com/cens/html/en/news/news_inner_37917.html ]
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[Quote No.37524] Need Area: Money > Invest
"Financial markets become more volatile in periods of stress. People don’t know which way things are going to go, so you get these big up and down movements as people pile in and get out." - Richard Sylla
Economic historian of New York University’s Stern School of Business.
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[Quote No.37528] Need Area: Money > Invest
"Bridgewater, the largest hedge fund in the world, which uses leverage and goes both long and short, is up 24% for the first nine months [of 2011], while John Paulson’s Advantage Fund lost 19.3% just in September, and is down a whopping 47% so far this year. The problem for hedge funds when they have losses is that it can be a long time before they become lucrative for their managers again. The typical fee structure for hedge funds is the so-called ‘2 and 20’ package, in which the manager is paid a 2% fee for managing the investors’ assets, and 20% of any profit they make above a ‘hurdle’ which is typically something like 10%. In the typical agreement, if the manager produces a loss, he will continue to receive the 2% management fee, but will not receive 20% of profits until the fund has brought its investors back to even by making back the losses. The result is that a fund that loses 25% in a year must make close to 50% to get back to even plus exceed the ‘hurdle’. A fund that loses 40% would have to make close to 100% before beginning to earn the bonus of 20% of profits again. Rather than run the fund for just the management fee for what could be several years, most simply return investors’ money to them, close the fund to outside investors, and continue it only to manage their own money. There have been a number of them closed so far this year, and I expect we’ll see more such announcements in coming months." - Sy Harding
[http://www.streetsmartpost.com/2011/10/11/more-confusion-from-europe/ ]
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[Quote No.37529] Need Area: Money > Invest
"Trade wars always lead to wars." - Jim Rogers
Highly successful investor. [http://www.financialsense.com/contributors/cris-sheridan/2011/10/06/jim-rogers-trade-war-second-great-depression ]
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[Quote No.37530] Need Area: Money > Invest
"I have found in my career, that when everyone is on one side of the boat... that you should go to the other side for a while. [Being a contrarian can be sensible and profitable.]" - Jim Rogers
Highly successful investor
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[Quote No.37535] Need Area: Money > Invest
"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved." - Ludwig von Mises
Famous 'Austrian School' economist.
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[Quote No.37538] Need Area: Money > Invest
"It takes vast quantities of natural resources to build infrastructure to accommodate explosive growth in population, upward mobility, urbanization and industrialization. Economic studies suggest that industrial metals and minerals consumption depends on the stage of development, the stages are normally divided in four, and are said to be dominated by 1) infrastructure development, defined by high use of cement and construction materials; 2) light manufacture, defined by high use of copper; 3) heavy manufacture, defined by high use of aluminum and steel; and 4) Consumer goods, defined by high use of aluminum, energy minerals and specialty steels (Source: USGS). The stages are expected to take about 20 years each and begin at 5 year intervals, lasting for a total of 30 - 40 years, depending on political and macroeconomic conditions. China for instance, [in 2011] appears to have entered the heavy manufacture stage based on steel consumption, while India may be well into the light manufacturing stage." - Luisa Moreno
Investingthesis.com
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[Quote No.37539] Need Area: Money > Invest
"People are saying these metals [commodities, shares, bonds, currencies] are not trading on the fundamentals, they are trading on the macro, but there is nothing more fundamental in the world than the economic outlook." - Stephen Briggs
Analyst with BNP Paribas.
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[Quote No.37542] Need Area: Money > Invest
"The one game of all games that really requires study before making a play is [share investing-trading] the one he (the average investor) goes into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile." - Jesse Livermore
Famous and successful share trader in the early 20th century. Quoted in 'Reminiscences of a Stock Operator' by Edwin Lefevre.
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[Quote No.37543] Need Area: Money > Invest
"Value (like beauty) is in the eye of the beholder." - Dean Lebaron

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[Quote No.37548] Need Area: Money > Invest
"Numbers like billions and trillions tend to numb the mind. They are too large to grasp in any 'real' sense. Thirty years ago an older member of the NYSE gave me a graphic and memorable example. 'Young man,' he said, 'would you like a million dollars?' 'I sure would, sir!' I replied anxiously. 'Then just put aside $500 every week for the next 40 years.' I have never forgotten that a million dollars is enough to pay you $500 per week for 40 years (and that's without benefit of interest). To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years. And a...trillion that would require $500 million every week for 40 years. Even with these examples, the enormity is difficult to grasp. " - Art Cashin

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[Quote No.37549] Need Area: Money > Invest
"Peter Bernholz wrote the bible on inflation and hyperinflation, called 'Monetary Regimes and Inflation: History, Economic and Political Relationships'. He writes about 29 periods of hyperinflation. What causes such a spectacular increase in prices? Bernholz has explained the process very elegantly. Bernholz argues that governments have a bias towards inflation. The evidence doesn't disagree with him. The only thing that limits a government's desire for inflation is an independent central bank. After looking at inflation across all countries and analyzing all hyperinflationary episodes, the lessons are the following: 1. Metallic standards like gold or silver standard show no, or a much smaller, inflationary tendency than discretionary paper money standards. 2. Paper money standards with central banks independent of political authorities are less inflation-based than those with dependent central banks. 3. Currencies based on discretionary paper standards and bound by a regime of a fixed exchange rate to currencies, which either enjoy a metallic standard or, with a discretionary paper money standard, an independent central bank, show also a smaller tendency towards inflation, whether their central banks are independent or not. Bernholz examined twelve of the twenty-nine hyperinflationary episodes where significant data existed. Every hyperinflation looked the same. 'Hyperinflations are always caused by public budget deficits which are largely financed by money creation.' But even more interestingly, Bernholz identified the level at which hyperinflations can start. He concluded that 'the figures demonstrate clearly that deficits amounting to 40 percent or more of expenditures cannot be maintained. They lead to high inflation and hyperinflations...' Interestingly, even lower levels of government deficits can cause inflation. For example, 20% deficits were behind all but four cases of hyperinflation. Stay with us here, because this is an important point. Most analysts quote government deficits as a percentage of GDP. They'll say, 'The US has a government deficit of 10% of GDP.' While this measure makes some sense, it doesn't tell you how big the deficit is relative to expenditures. The deficit may be 10% the size of the US economy, but currently [2011] the US deficit is over 30% of all government spending. That is a big difference." - Art Cashin

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[Quote No.37577] Need Area: Money > Invest
"A cynic [and a technical trader] knows the price of everything and the value of nothing." - Oscar Wilde
(1854-1900), writer
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[Quote No.37578] Need Area: Money > Invest
"The Paradox of Thrift — debunked: Ever since John Maynard Keynes popularized the 'Paradox of Thrift', economists, central bankers and politicians have labored under the misapprehension that high levels of savings are bad for the economy and inhibit growth. The Paradox of Thrift simply states: Increased savings means there are less buyers for goods produced, so the nation as a whole will tend to produce less. •If an individual saves they increase their wealth; •But if an entire nation saves, this causes a shortfall in consumption; and •The shortfall in consumption will cause national income to fall. Keynes was correct in his observation that high level of savings caused a shortfall in national income, but we need to remember that he was writing in the 1930s — in the middle of the Great Depression. His General Theory was published in 1936. What Keynes observed was an anomaly caused by the financial crisis. Falling asset prices threatened the solvency of both individuals and corporations, forcing them to increase their level of savings and — most importantly — use their savings to repay debt. Not only will national income fall when savings are used to repay debt, but it falls rapidly. The shortfall between saving and new investment (or spending and income) may be small but, like a puncture in a car tire, the result can be disastrous. At each point in the supply chain the leakage is repeated: A receives an income of $1.00 and use 5 cents to repay debt, only spending $0.95. B will receive $0.95 from A, where previously they received $1.00, and will use 5% to repay debt, only spending $0.9025. C will only receive $0.9025 from B but still uses 5% to repay debt, only spending $0.857... The pattern continues until incomes shrink to the point that parties can no longer afford to repay debt and are forced to consume all of their income. The impact on national income — as evident from the 1930s — can be devastating. Keynes pointed out that government can break the cycle and make up the shortfall, by spending more than it collects by way of taxes — so that the aggregate level of spending is unchanged. But fiscal stimulus is fraught with dangers, not least of which is the massive public debt hangover faced by the US, Japan and many European economies. I will cover these dangers in more depth in a later post. Under normal conditions, however, the paradox of thrift does not apply: •If an individual saves they will increase their wealth; •If the entire nation saves, there is no effect on national income provided savings are channeled through the financial system into new capital investment. •All that then happens is less consumer goods but more capital goods are produced — spending as a whole does not fall. •Production, as a result, will also not fall. National income is, in fact, likely to rise. New capital investment will boost productivity and accelerate growth. Consider the simple example of a farmer who saves and buys a tractor. His overall spending is unaffected. He merely consumes less and spends the proceeds on something else — in this case a tractor. The income of the store that supplies him with consumer goods will decrease, but the income of the dealer that sells him the tractor will rise; the net effect on national income is so far zero. But the farmer now produces more food with his new tractor; so his income — and the national income — increases. This misconception that the paradox of thrift applies in normal markets has done immense harm to the economy and eroded the savings of the middle-class and retirees. For three generations, central bankers attacked savers by artificially reducing interest rates — in the belief that lower savings would boost demand and stimulate the economy. Low interest rates simply forced savers to assume more risk, in order to earn a return on their investment, and encouraged speculation. The traditional work hard and save ethic that is the backbone of the capitalist system has been supplanted by the consume, borrow and speculate profligacy that got us into such a mess. High levels of public and private debt, inflation, volatile investment returns and rising income inequality are all consequences of the low-interest policy pursued by the Fed. Today’s giant casino is a far cry from the cautious, prudent investment outlook of our grandparents’ generation. I will conclude by reminding you that: •Savings channeled into new capital investment actually boost growth. •Savings are only harmful when used to repay debt or other non-productive purposes. •Low interest rates encourage speculation and the formation of bubbles; •Bubbles cause financial crises; and •Financial crises force consumers to repay debt. ...the never-ending circle of life." - Colin Twiggs
October 24, 2011 [http://goldstocksforex.com/2011/10/24/the-paradox-of-thrift-debunked/ ]
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[Quote No.37579] Need Area: Money > Invest
"History shows that bank recapitalizations provide the catalyst for the credit crunch,” he said “Japan learned this in 1998, and the U.S. and the U.K. in 2008. " - James Ferguson
Head of strategy at Arbuthnot Securities Ltd. in an 20 October 2011 note to clients. [http://www.bloomberg.com/news/2011-10-25/banks-warn-of-fewer-airbuses-in-sky-as-credit-crunch-looms-across-europe.html ]
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[Quote No.37580] Need Area: Money > Invest
"In a credit crunch when banks are restricting loans in order to rebuild damaged balance sheets small and medium-sized companies are particularly vulnerable because they lack the cash and collateral needed for a larger bank overdraft or investment loan and unlike the bigger companies they also lack the ability to issue bonds with investment bankers' help. This is perhaps a justifiable argument for some government or other support until credit flows return to near normal with competition for the limited funds and strict rules to not induce moral hazard - creating reckless behaviour from the appearance of privatising profits but socialising losses - and not allowing crony capitalistic exploitation of taxpayers' funds." - Seymour@imagi-natives.com

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[Quote No.37582] Need Area: Money > Invest
"Depressions are basically long recessions lasting three to seven years." - David Rosenberg
Gluskin Sheff’s economist.
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[Quote No.37583] Need Area: Money > Invest
"My colleagues, they study artificial intelligence; me, I study natural stupidity [as most clearly seen in the irrational behavior of share markets when they boom and then bust]." - Amos Tversky
Stanford psychologist and a founding father of behavioral economics
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[Quote No.37586] Need Area: Money > Invest
"What does a government do when it has gotten into a debt position where it is facing insurmountable debt and needs time to arrange higher taxes, faster real GDP growth, an orderly default or inflation to reduce the dangerous - greater than 90% - debt to GDP ratio? One way is like any spendthrift with too many credit cards. They move debt that is near or over its limit from one credit card to a new one with a higher credit limit and lower interest. Therefore a government doesn't effectively pay off its maturing bonds but rolls them over into new short-term or long-term bonds like the US Fed did with 'Operation Twists' in 1961 and 2011 and the Eurozone did with the 2011 European Financial Stabilisation Facility." - Seymour@imagi-natives.com

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[Quote No.37588] Need Area: Money > Invest
"If you don't read the newspaper you are uninformed, if you do read the newspaper you are misinformed." - Mark Twain

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[Quote No.37598] Need Area: Money > Invest
"The most essential gift for a good writer [or investor] is a built-in, shock-proof, shit detector." - Ernest Hemingway

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[Quote No.37599] Need Area: Money > Invest
"The safest way to double your money is to fold it over once and put it in your pocket." - Kin Hubbard

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