happy holidays / frohe feiertage

i wish everybody a happy and healthy holiday season. posting will be very light until 1.1.2007.

ich wünsche allen frohe und gesunde feiertage sowie einen "guten rutsch" ins neue jahr. in sachen postings herrscht bis zum 1.1 eine weile ruhe.

"dow theory / minyanville"

looks like something in´t adding up........... but maybe this time its different......... but i doubt that when you read the fed ex warning from yesterday http://calculatedrisk.blogspot.com/2006/12/fedex-outlook.html

sieht so aus als wenn im chart irgendetwas nicht stimmt......aber evrl. ist ja diesesmal alles anders...... wenn ich mir allerdings die warnung von fedex durchlese glaube ich nicht daran.......

... the company said it expected lower third-quarter earnings than last year, largely due to a sluggish U.S. economy and fuel bills....

"We believe FedEx is beginning to see the impact of a slowing economy and as such, management is tempering expectations for the second half of the year," analyst Art Hatfield said in a report for Morgan Keegan.

Dow Theory? Dow in Blue, Transports in Green

"Global Rebalance, Consumer Imbalance / us spillover risks / pimco"

a very detailed outlook from pimco. but i have to admit that they seem to be very optimistic in their assumption regarding the impact of the housing slump in the us. so i think their call for a soft landing is very optimistic. but they made it clear that the risk is to the downside.

sehr ausführliche vorschau auf 2007 von pimco. muß gestehen das ich denke das sie sehr optimistisch im zusammenhang mit dem rückgang im us immomarkt umgehen. denke dager das deren soft landing wohl eher optimistisch ist. immerhin sagt pimco das die risikien klar gen süden gehen.

The PIMCO outlook sees growth coming in at close to 2% in the U.S., Eurozone and Japan over the next 12 months. The U.S. growth forecast is below the consensus 2½% expectation, ...... The 2-2½% range for U.S. inflation, measured by the core PCE index, suggests a modest pace of disinflation next year, .........

Overall, this adds up to a soft landing for the U.S. economy and for the global economy following a period of robust global growth. The Federal Reserve and a number of other central banks remain focused on late cycle inflation risks, but we expect those concerns to subside. We expect a combination of continued sub-par growth and an improving inflation outlook to lead to Fed rate cuts, starting after the first quarter. ( not because inflation is low but the economy is heading south.../ aber nicht wegen der infaltion sondern wegen der schwachen us wirtschaft......)

Overall, we see the risks to our U.S. soft landing call as slanted to the downside. The U.S. housing market, which helped to support U.S. consumer spending and in turn the global economy earlier in the decade is now a significant source of global risk. Eurozone and Japanese economic performance has improved markedly. But growth that is driven by investment spending rather than consumer spending remains vulnerable if U.S. consumer spending slows significantly. The U.S. remains the world’s bass drum.

Partial Rebalancing
Slower U.S. growth means that the world economy has become a bit more balanced. ...... In the past two quarters the Eurozone economy has grown at a 3.1% annualized rate, faster than the 2.4% growth rate in the U.S.

Within the U.S., growth has become more balanced, shown in Figure 2, owing to the moderation in consumer spending and the housing correction. U.S. consumer spending has cooled, growing by 2.7% year over year in the third quarter, compared with an average of about 3.5% since the start of 2004 and 3.7% over the past decade. Over the past two years U.S. GDP and U.S. domestic demand have expanded at the same rate. In contrast, over the past 10 years, domestic demand growth outstripped GDP growth by about half a percentage point per year. The current account deficit, which increased from 1% of GDP in 1996 to more than 7% in the fourth quarter of 2005 has since stabilized below that level.

The U.S. housing sector is in recession, with residential investment subtracting about 1 percentage point from the annualized GDP growth rate over the past two quarters. PIMCO’s housing experts expect that the housing market correction will be a long and drawn out process. Over the cyclical horizon, we expect residential investment to continue to subtract from GDP at a somewhat lesser rate. The labor market remains strong but over time we expect the weakness in the housing and related sectors to feed into job losses. The impact of the housing market on related sectors can already be seen with the ISM manufacturing index dipping below 50, reflecting the impact of the housing market inventory correction and also the Detroit car manufacturers’ woes.

Consumer Imbalance
The clearest sign of decoupling in the U.S. lies in the fact that the ISM non-manufacturing survey indicates the service sector remains strong, to date.(only a matter of time .../ nur ne frage der zeit....) The clearest sign of global decoupling lies in the fact that business surveys in the Eurozone and Japan remain at elevated levels, even though the expectations components have weakened.

Strong business confidence is reflected in strong investment spending. Gross fixed capital formation in plant and equipment has grown at close to a 6% rate in Japan since the start of 2004. Eurozone overall gross fixed capital formation grew at close to a 3% rate over the same period.

But as Figures 3 and 4 show, consumer spending has lagged, growing at about a 1.5% rate in the Eurozone and a bit slower than that in Japan. In part this reflects weak wage growth, which has been held down by both cyclical and secular factors, even though employment growth has strengthened this year.

On PIMCO’s baseline forecasts, a U.S. soft landing and growth at trend in the Eurozone and Japan next year will hopefully facilitate a handover to consumer spending outside the U.S., which is crucial to a rebalancing of the global economy over time. It would be easier to be confident that global rebalancing would continue during continued sub-par U.S. growth – or if there was a hard landing in the U.S. – if consumer spending rather than investment was already driving growth in the Eurozone and Japan. Business confidence and investment plans are likely to be highly sensitive to weaker than expected global growth...... (lots of if´s......./ ne menge wenn´s......)

U.S. Spillover Risk

The key uncertainty in judging the U.S. outlook is whether the housing market inventory correction will prove to be relatively well contained, or whether there will be domestic spillover effects to consumer spending........ The lagged impact of below-trend growth, including expected continued contraction in housing and housing-related sectors, is expected to translate into job losses. here is more on the jobs picture and the ripple effect http://immobilienblasen.blogspot.com/2006/09/anteil-immobiliensektor-am.html,http://immobilienblasen.blogspot.com/search?q=ripple, http://immobilienblasen.blogspot.com/search?q=tools

Trying to assess the impact of flat or lower home prices on consumer spending is more of a walk in the dark. A large part of the problem is that there is no U.S. precedent for the current conjunction of a housing correction, a personal savings rate of zero and the uncertainty created by the boom in mortgage equity withdrawal (MEW) in recent years and its uncertain relationship with consumer spending. Therefore, it is necessary to be modest in making a forecast.(better be realistic.../ lieber realistisch...)

PIMCO’s forecast of a U.S. soft landing includes the expectation of a moderate slowdown in consumer spending next year, with the negative ongoing impact from the housing market partially offset by wage growth and the boost to real incomes from lower energy prices. But there is a great degree of uncertainty in the outlook.......

The wealth effect from rising asset prices, and the greater ease of liquefying house price gains, has meant that, in aggregate, U.S. households have stopped saving out of income. Savings rates are hard to forecast, but the current stagnation of house prices and a reassessment of the rate of future house price appreciation will put upward pressure on the savings rate over time. ( fro here on there is only one way t go..., kann eh nur noch nach oben gehen....)

U.S. consumer spending has proved largely impervious to the forces of gravity in recent years. If MEW turns out to have been an important driver of consumer spending, then the leveling off of house prices and associated drop in equity withdrawal may have a more direct, mechanical and pronounced impact on consumer spending. .....(i´m reading this correct. they put an if in front of the mew impact. what a joke. just look at the mew impact on gdp.../ kann meinen augne nicht glauben. die stllen in ihrer vorhersage für 07 den einfluß des mew in frage. bei dieser grafik schwer zu verstehen.....)

The experience of the U.K. and Australia offer both comfort and warning. Consumer spending growth decelerated when the housing markets slowed in those countries in 2004-2005, but it did not grind to a halt. But it is not clear how useful those examples will prove as guides. The U.K. was helped by buoyant global growth and Australia by the commodities boom. Neither had the same huge rise in housing inventory that we have seen in the U.S.

Global Spillover Risk
Canada and Mexico are the economies most directly exposed to weaker U.S. growth. But in thinking about the impact of a weaker U.S. growth impulse on the global economy, direct trade links are only the starting point.

Figure 5 summarizes the ways in which weaker U.S. growth can impact the global economy, including trade, business confidence and a broad array of financial market linkages. Indeed, U.S. economic data and associated market movements at turning points in the U.S. cycle tend to have a greater impact on Eurozone and Japanese markets than the local data. ......

the Eurozone is experiencing another form of spillover, in the form of the euro’s appreciation against the dollar.

A U.S. slowdown as a result of a U.S.-centric housing correction is very different to the 2001 experience of a common shock in the form of a stock market/capital spending bust. While business investment is strong in the Eurozone and Japan, it is vulnerable in the event that below-consensus U.S. growth feeds into weaker business confidence around the globe.....

.... As for monetary policy, one question is how long the window of opportunity remains open for the Bank of Japan and possibly the European Central Bank to raise rates further. Fed rate cuts would send a signal of external risks. In the event of weaker than expected growth, the BoJ will be extremely reluctant to cut rates and past experience would suggest that the ECB would be in no hurry at all to react.

Monetary policymakers in English speaking countries, which are further ahead in the rate cycle and, like the Fed, currently focused on near-term inflation risks, would be the first to follow the Fed’s lead.

China has provided an increasingly important source of demand growth in Asia owing to its rapid economic expansion and openness to trade. The U.S. has accounted for about 20% of overall global growth since 2002, measured at purchasing power parity (PPP) exchange rates, while China has contributed 30% of global growth. ......In spite of its rapid growth, in nominal U.S. dollar terms, China’s economy is not much larger than the U.K.

Since trade accounts for such a large share of China’s economy, the gap with the U.S. in terms of imports is much narrower than the GDP gap. In October, U.S. imports were worth about $182bn while China’s came in at about $64bn. But a large share of that import bill represents intermediate goods shipped in from China’s neighbors to be re-exported in the form of finished goods to the U.S., meaning that independent of the Chinese authorities’ efforts to slow investment spending, slower U.S. growth should have an impact on Chinese import demand. The U.S. trade deficit stood at $59bn in the month of October. China’s trade surplus was $24bn. Over time, continued growth and a shift towards consumption will mean that China will indeed emerge as a second global bass drum. For now it is the high-hat cymbal.

To give an idea of the amount of ground that would have to be made up in the event of a more pronounced slowdown in U.S. consumer spending, it is worth noting that U.S. consumer spending accounts for about 21% of world GDP, compared with 14% for the Eurozone and a similar amount for the whole of Asia, including Japan and China. As for the oil exporting countries, the OECD2 points out that in spite of the big rise in petrodollars over the past few years, merchandise exports from its member countries to OPEC have been decelerating since early 2005. Oil exporters have taken over from developing Asian nations as the largest component of the global savings glut, measured by their combined current account surpluses.http://immobilienblasen.blogspot.com/2006/12/petrodollar-pegor-why-all-talk-about.html

Over time, strong growth in China and other emerging market countries will reduce the role of the U.S. in setting the global tempo – a long-term decoupling. ....... Every country can’t run a current account surplus: the world is a closed economy.

"Manufacturing activity / economist"

one more stat that something is different in the us........./ ne statistik mehr die zeigt das die usa anders sind..

The buoyancy of most rich countries' manufacturing industries is reflected in the healthy state of purchasing managers' indices. Managers in all but one of the countries in our chart report that activity is expanding.

The exception is America, which is also one of only two countries where manufacturing activity has weakened in the past year. The other is Japan.

"Beware the overpriced debt markets in 2007 / economist"

very good summary on the correlation of debt and other asset classes like equities. the first sign of trouble for the stockmarket will be trouble in the debtmarket like a big default or spike in spreads.

klasse zusammenfassung über das zusammenspiel von krediten und anderen vermögenswerten. die ersten probleme im aktienmarkt werden sicher mit problemen wie ausfällen oder einem ansteig der spreads im kreditmarkt einhergehen.

GENTLEMEN prefer bonds. If you look round the world for speculative excess at the end of 2006, there are many more signs in the supposedly staid world of debt than in the stockmarkets.(unfortunately they are closely correlated, dummerweise hängen diese beide eng miteinander zusammen)

Investors are enthusiastic about buying fixed-income assets, even though yields are low by historical standards and the returns on cash (particularly in America and Britain) are as attractive.

Many investors in shares argue that the low levels of bond yields make stockmarkets look cheap. To take one example, emerging-market bond spreads (the excess yield over American Treasuries) are close to all-time lows, according to Morgan Stanley, an investment bank, whereas emerging stockmarkets trade at their usual discount to developed-world shares. In the short term, the perceived cheapness of debt is persuading private-equity groups that they can make big profits from buying quoted companies. And the prospect of such bid activity is keeping a floor under share prices.


But there may also be structural reasons why investors are favouring bonds over shares. The first is that savers have changed. Pension funds and insurance companies in the developed world have become more cautious (thanks to regulation and the bear market of 2000-02) and are increasingly buying bonds in an attempt to match their liabilities. Furthermore, savers are no longer risk-happy Americans but Asian central banks, which have traditionally put bonds at the core of their portfolios.

A second reason is the massive growth of credit derivatives, which has given investors the ability to sample the debt markets so as to get exposure to the precise risks they find attractive. Debt is no longer just plain vanilla; now there is as much variety on offer as at an Italian gelateria; credit risk can be scooped out and separated from interest-rate risk; money can be made from predicting default as well as avoiding it. Rather than investing in a few, often illiquid, corporate-bond issues, investors have a host of vehicles to choose from..... Abundant liquidity has persuaded people to accept lower yields as a result.

All this has coincided with an exceptionally favourable period for corporate-debt markets. Companies have been extremely profitable, generating more than enough cash to service their debts; as a result, the default rate has been very low. Traditionally, low default rates have been associated with low spreads.

Of course, markets are supposed to look forward. All this good news might prompt investors to believe debt markets are close to a turning point. Indeed, corporate-bond spreads did edge higher earlier this year, before taking another downward lurch in the autumn.

The debt markets seem to offer little scope to absorb bad news. As Barclays Capital, a British investment bank, neatly puts it: “The entire asset class of bonds is characterised by symptoms of overvaluation and complacency.” ( they have fallen asleep...... / sind wohl eingedöst...)


But what will puncture that complacency? The most likely cause would be a big default. If the global economy slows next year, companies will find it more difficult to service their debts. And bid fever has prompted borrowers to take on more risks; according to Standard & Poor's, a rating agency, the average purchase price for European leveraged buy-outs has reached a record level of 9.4 times earnings before stripping out the costs of interest, tax, depreciation and amortisation.

The real test will come when spreads start to widen again. Will the rapid emergence of credit derivatives and the greater role of hedge funds make markets more—or less—stable?

There had been fears that hedge funds would be less willing than banks to stump up rescue money in a crisis. But the recent case of Polestar, a British printing group, showed that companies can be refinanced smoothly even if hedge funds are involved. In addition, plenty of distressed-debt funds specialise in taking positions when things look ugly.

Another fear is liquidity. Hedge funds have actively provided credit via leveraged loans. There is a risk that, just when borrowers get into difficulty, hedge-fund clients may demand their money back......

Plenty of people believe the financial system is more secure than before, because banks are not as vulnerable to the threat of corporate failures. The markets have survived the crash of big companies, such as Enron, an energy trader, and the downgrades of motor companies, Ford and General Motors, in recent years.


But the real test of a big recession has yet to be faced. If you want to dwell on one financial worry for 2007, the corporate-debt market is the place to start.

"Riskiest Mortgage Bonds May Fall as Fannie Mae Cuts Purchases "

first i must say that is a joke that a company like fannie mae that has had big big accounting problems in the past (no correct filing for a few years with a restatement over 6 billion) is such a major player in the sub prime market and buys lots of "nontraditional mortages" from lenders that cannot unload the crap fast enough.....

i am sure that regardless what fannie and freddie do the spreads in the sub sector will increase. but it will help for sure. one has to wonder if the slump is great enough maybe the loosen their standards to bail someone out.....(but this is only a guess and fear.) in the past almost all central banks around the world bought the major portion of the fnm and fre bonds.

zuallererst muß man sagen das es eh ein witz ist das ne firma wie fannie die über mehrere jahre keine bilanzen vorlegen konnte und ne berichtigung von über 6 mrd $ vornehmen mußte ein wichtiger spieler im sub prime markt ist. die kreditgeber können ihre "schrottkredite" nicht schnell genug aus ihren büchern tilgen. da paßt es gut wenn ne "halbstaatliche" organisation alles was bei 3 nicht auf den bäumen ist aufkauft und damit ins risiko geht. kein wunder das diese geschichte ausser kontrolle geraten ist.

bin mir aber trotzdem sicher das unabhängig davon was fnm und fre machen weden die spreads weiter stark ansteigen werden. meine größte sorge ist eher das wenn nichts mehr geht die ihre standarts wieder auf null fahren und so den markt retten wollen (sicher mit unterstützung des staates). auffällig in letzter zeit war das der großteil der fnm und fre bonds von den zentralbanken aufgekauft worden sind.


Dec. 20 (Bloomberg) -- Bonds backed by mortgages to the riskiest borrowers may weaken next year as Fannie Mae and Freddie Mac, the largest providers of money for U.S. home loans, cut their purchases, according to Friedman Billings Ramsey Group Inc.

The federal regulator of the government-chartered companies this month told them to tighten standards on ``nontraditional'' mortgages they finance. Waning interest by Fannie Mae and Freddie Mac in so-called sub-prime mortgage bonds would boost the yield premium investors demand to own them,...

Wider spreads on the top-rated AAA classes of such securities that Fannie Mae and Freddie Mac typically buy may raise mortgage rates for sub-prime borrowers, who have poor or short credit histories or high debt burdens. A housing slump and the highest level of late payments on sub-prime loans since 2003 have pushed up spreads on the lower-rated bonds in recent months....(this is quite an understatement.../ ne leichte untertreibung...)
New Policies
Fannie Mae and Freddie Mac, which own about 15 percent of the $10 trillion residential mortgage market, last year bought $221.3 billion of ``non-agency'' mortgage securities, or those not issued by them or government agencies such as Ginnie Mae, according to Friedman Billings. Assuming all the purchases were of sub-prime mortgage bonds, they bought 37 percent of the total new volume, the firm said.

The Office of Federal Housing Enterprise Oversight told Fannie Mae and Freddie Mac on Dec. 8 to create http://immobilienblasen.blogspot.com/2006/10/lending-guidelines-kreditrichtlinien.html policies on nontraditional loans"that mimic what federal regulators asked of banking companies three months ago, including that lenders assume borrowers face higher payments than initially required in evaluating the consumers' ability to pay off the debt. ( what a concept..., was ein fortschritt....)

Nontraditional mortgages include interest-only loans and option adjustable-rate mortgages, whose minimum payments don't cover the interest owed (like in the cartoon...). Bank regulators also may require tougher tests for common sub-prime ARMs, with rates that rise after two or three years even without higher market rates, ....

Late Payments
The seasonally adjusted rate of late payments on sub-prime loans rose last quarter to the highest since the first three months of 2003, climbing 0.93 percentage point from a year earlier to 12.56 percent, the Mortgage Bankers Association said. http://immobilienblasen.blogspot.com/2006/12/us-mortgage-delinquencies-jump-in-third.html

Congress created Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac to expand homeownership by increasing mortgage financing and provide market stability. ( bur a what price.../ aber zu welchen preiß....).

.....They've turned to the market because of narrower spreads on their own securities and rising regulatory targets on how much financing they must provide to low-income borrowers.

The typically largest floating-rate AAA classes were sold last week at spreads of 20 basis points, the least this decade, Friedman Billings' Youngblood said in an interview. Spreads on top-rated sub-prime bonds haven't widened because rating firms have required them to be protected against large losses, he said.

Still Sound
Even if spreads on AAA sub-prime bonds widen due to less demand, the credits are still sound, according to Youngblood.

``I can't envision anything short of the Great Depression of the 1930s that would bring into question the interest and principal of AAA classes,'' ......and wee all know that youngblood is always right....http://immobilienblasen.blogspot.com/2006/07/fundstck-des-tages.html

Letters from Ofheo to Fannie Mae and Freddie Mac don't explicitly say they must apply bank regulators' guidance to bond purchases.(read this twice!) The regulator does expect them to develop systems that ensure they avoid buying securities with loans not conforming to the directive, according to Corinne Russell, a spokeswoman (like the acounting model..... :-), wie das buchführungsprogramm....;-)

Non-agency securities make up about 40 percent of the U.S. mortgage-bond market. About 15 percent of Fannie Mae's $725.5 billion mortgage portfolio, or $108.6 billion, was made up of such securities on Sept. 30, compared with 13 percent, or $97.8 billion, a year earlier. About 33 percent of Freddie Mac's portfolio, or $235.7 billion, was made up of them on Oct. 31, compared with 34 percent, or $232.4 billion, a year earlier.

Sellers of sub-prime bonds to them include Countrywide Financial Corp. and ACC Capital Holdings' Ameriquest Mortgage, according to Friedman Billings.

"Rising Inventories and Price Cuts = Bottom of the Housing Recession?"

thanks to paul kasriel. rest of the story is also worth reading (headline). lots of good charts etc.

besten dank an paul kasriel. der rest ist ebenfall lesenswert (klick überschrift). ne menge gute chrts etc.

Sharply higher cancellations of new-home-purchase contracts undoubtedly are leading to the rising inventories of newly-completed homes for sale. This is prompting aggressive price incentives on the part of home builders to "move the merchandise." But with profits evaporating (see "(see Hovnanian's latest loss report) ",will builders plan to build a lot of new homes soon? The permits data suggest not. Again, separating the signal from the noise, Chart 4 shows that the year-over-year trend in building permits still is down. In November, the year-over-year change hit a new cycle low of minus 32.5%. In sum, I think builders are bending over backwards to rid themselves of expensive-to-carry inventory. But once this is accomplished, it will be a warm day in January before they begin to think about rebuilding their inventories of buildings.

the grey is showing past recessions / das grau markiert vergangene rezessionen

housing starts down 25.5% yoy, permits down 31.3%!

look out below........

U.S. building permits down 31.3% year-over-year
U.S. housing starts down 25.5% year-over-year
U.S. Nov. building permits fall to 9-year low.
U.S. Nov. building permits short of 1.55 mln expected
U.S. Nov. housing starts exceed 1.54 mln expected.
U.S. Nov. building permits fall 3% to 1.506 mln pace.
U.S. Nov. housing starts up 6.7% to 1.588 mln pace

Building permits are down 31.3% in the past year and are down 14.1% in the first 11 months of 2006 compared with the same period in 2005.

Regionally, starts rose 8.6% in the Northeast and rose 18.5% in the South. Starts fell 6.3% in the Midwest to the lowest level in 15 years. Starts fell 8.1% in the West to the lowest level in five years.

much more details and charts as always from "calculated risk!"

"billings bubble video sequel!"

make sure you see this video from doug! click on the headline. a must see!

unbedingt ansehen. wirklich ein kleines "meisterwerk" aus der provinz.

"us current account deficit / kasriel !"

make sure you read the full piece . klick on the headline.

ihr solltete den ganzen bericht lesen (überschrift anklicken)

What I found most interesting about the third quarter current account data was not that the U.S. deficit ran at a record annualized rate of $902.2 billion, nor that this represented 6.8% of nominal GDP, the second highest percentage since Q4:2005's 7.0%.

No, what I found most interesting was, as shown in Chart 1, that for the fourth consecutive quarter, the U.S. ran a deficit in the income account. That is, for the fourth consecutive quarter, the income earned on foreign assets owned by U.S. entities was less than the income earned on U.S. assets owned by foreign entities. As Chart 1 shows, in the past 45 years it was a rare occurrence for the U.S. income account to be in deficit. Prior to the most recent four quarters, a deficit in the income account has occurred only four other times since 1960.

"hovnanian faces reality"

that the stock performance since they guided down in august to 5$ for the year....... now 2,14% and for 07 1,75$. looks like the stock trades at a 20 pe! maybe even wall street will sometime realize this......

das ist die performance seit hov im august die guidance auf 5$ reduziert hat. nun sind es ganze 2,14$ geworden und für 07 sogar nur 1,75. macht ein kgv von 20!. evtl. realisiert das sogar wall street........

The Company reported net income of $138.9 million for fiscal 2006, or $2.14 (-70%!!!) per fully diluted common share, compared with $469.1 million, or $7.16 per fully diluted common share, in fiscal 2005. Total revenues increased 15% over the prior year, to $6.1 billion. (guidance august hov above 5$!, analysts in august 8$!!)

the Company reported a loss to common stockholders for the fiscal 2006 fourth quarter of $117.9 million, or $1.88 per fully diluted common share, compared to net income available to common stockholders of $165.4 million, or $2.53 per fully diluted common share, for the same period a year ago.

- During fiscal 2006, the Company incurred $336 million of charges related to inventory impairments and land option write-offs, including $315 million in the fourth quarter. ( 94% in q4. now it seems that they face reality or maybe the auditors putting pressuers on them..../ 94% davon 10 q4. endlich sind sie in der realität angekommen bzw. die wirtschaftsprüfer machen gehörig druck.)

- The number of net contracts for fiscal 2006, excluding unconsolidated joint ventures, declined 18.2% to 13,761 contracts. The dollar value of net contracts for fiscal 2006, excluding unconsolidated joint ventures, decreased 17.3% to $4.6 billion, compared to $5.6 billion last year.

- Contract backlog as of October 31, 2006, excluding unconsolidated joint ventures, was 8,496 homes with a sales value of $2.9 billion (down 30%!), compared with a $4.1 billion sales value of contract backlog at the end of fiscal 2005.

- The Company ended the year with no balance outstanding on its $1.5 billion unsecured revolving credit facility and $43.6 million in cash on the balance sheet. The Company's average ratio of net recourse debt to capital for the year was 49.0%.

- Management is providing an initial projection for 2007 earnings of between $1.50 to $2.00 per fully diluted common share on 16,000 to 18,000 home deliveries, including 1,000 to 1,500 deliveries from unconsolidated joint ventures. (is naybody seeing a trend....nut the analysts have had it always wrong ...../ trend zu erkennen....die analysten waren auch nicht besser als das management.......)

EPS Trends	Current Qtr Oct-06	Next Qtr Jan-07	Current Year Oct-06	Next Year Oct-07
Current Estimate	1.05	0.46	4.97	2.71
7 Days Ago	1.05	0.49	4.97	2.84
30 Days Ago	1.07	0.51	5.00	3.13
60 Days Ago	1.07	0.51	5.00	3.18
90 Days Ago	1.08	0.52	5.02	3.29

"We did not anticipate the suddenness or magnitude of the fall in pricing that occurred this year in many of our communities. Our profitability and the pace of new home sales in our markets continues to be adversely impacted by high contract cancellation rates, increases in the number of resale listings and increases in the number of new homes available for sale," Mr. Hovnanian said. The Company's contract cancellation rate for the fourth quarter was 35%, compared with 25% in the fourth quarter of 2005 and a 33% rate reported in the third quarter of fiscal 2006.

"In the fourth quarter, we decided to walk away from $141 million in land deposits and predevelopment costs and took impairment charges of $174 million,"

the Company had 60,714 lots held under option contracts and controlled a total of 94,618 lots, a 22% decline

For the first quarter of fiscal 2007 we anticipate modest earnings of between $0.05 and $0.10 (estimate 0,45)

We anticipate that our average ratio of net recourse debt to capitalization will average close to our target of 50% during fiscal 2007

gross margin including interest 17,7 in vs 24,7 in q4 2005!

interest capitalized up over 100%!!!! to 103 m$

mortage loans held for sale up 33% to 282 m$. (problems in the mbs market!?, maybe charges needed.....)

net contracts in the southeast down 77%!

backlog in the west down over 60%

and take this: crispy from the http://bakersfieldbubble.blogspot.com/ has researched the cash flow from operations in the last 5 quarters ! lots of read inc............

click here!" to see the bloodbath/details.......

update after the call.

disclosure: short hov

"thai´s to control speculation, stocks down 16%!"

fortunately this time it is only o financial tsunami that hits mainly foreign investors/speculators. this is a very dramatic move from the central bank and has triggered great pain the last time it has been made. but it will remind lots of investors of the risks that almost everybody seem to ignore in almost all kinds of markets these days. the vola will for sure spike and i´m sure lots of hedge funds will suffer big time! ( no sympathy ...)

glücklicherweise diesesmal nur ein finanzieller tsunami der zudem überwiegend ausländische invetsoren/spekulanten trifft. in jedem fall ist das ein dramatischer zug der beim letzten mal große verwerfungen über das jeweilige land hinaus ausgelöst hat. immerhin werden jetzt evtl auch mal wieder risiken aufgezeigt die momentan bei fast jeder assetlkasse keine rolle zu spielen scheinen. die vola wird sicher steigen udn einige hedge fonds werden sicher massive probleme bekommen. ( kein mitleid...)


Dec. 19 (Bloomberg) -- Thai stocks plunged the most in at least 19 years, triggering declines across Asia, after the central bank said international investors must pay a 10 percent penalty unless they keep funds in the country for a year.

The capital controls, announced yesterday by central bank Governor Tarisa Watanagase, are aimed at stemming a 16 percent gain in the baht this year. The Thai currency had its biggest two-day decline since April 2005.

``It's not good news, it means we've got a real problem in terms of redemption of funds,'' said Mark Mobius, who oversees $30 billion in emerging market stocks at Templeton Asset Management Ltd. ``Some people might get a bit scared because if Thailand is doing this, then maybe Malaysia might do it, and maybe the Philippines.''

Thailand's SET Index fell as much as 134.16, or 18 percent, to 596.39, led by PTT Pcl and Bangkok Bank Pcl, as of 3:09 p.m. in the Thai capital. Government bonds slumped, pushing the yield on the 10-year note up 0.23 percentage point to 5.1 percent. The baht fell as much as 1.5 percent to 36.08 and recently traded at 35.94.

Stocks also fell in India, Malaysia, Indonesia and the Philippines as the currency controls heightened concern about investing in emerging markets. Thailand in 1997 triggered currency collapses in South Korea and Indonesia, leaving much of Asia in a financial crisis that required an international bailout.

Capital Controls
Malaysia's government in 1998 fixed its currency against the dollar and imposed capital controls that barred the repatriation of proceeds from the sale of stocks and bonds for one year.

``Global investors have to recognize risk again,'' said Soichiro Monji, who helps oversee about $47 billion as senior strategist at Daiwa SB Investments Ltd. in Tokyo. ``Investors might shift from developing markets to other safer markets.''

The new rules limit international investors to using 70 percent of their funds to buy Thai stocks, bonds and property The remaining 30 percent will be held by banks and subject to a 33 percent penalty in the event an investor wants to withdraw the full amount and convert the proceeds into a foreign currency.

The baht rose to a nine-year high before yesterday's announcement on speculation economic growth would accelerate after a Sept. 19 coup ended a political deadlock that had curbed spending and confidence.

Thai Union Frozen Products Pcl, the world's second-largest tuna canner, was among exporters that last month asked the central bank to stem baht gains from undermining their competitiveness. Ten industry groups were part of the protest, including exporters of chicken meat, soybean and shrimp.

Stock Slide
``It'll help exporters and the country's trade balance,'' said Visit Tantisunthorn, secretary-general of the Government Pension Fund, the nation's largest money manager, with more than $7.8 billion in assets.
Shares of Bangkok Bank, the nation's largest lender, sank 19 percent to 100 baht, the biggest loss since at least 1990. An index of bank stocks plunged 24 percent. The magnitude of the market slump triggered a 30-minute trading halt at the Thai stock exchange.

``It's basically as if they're putting a tax on any trades less than a year,'' said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``It's going to stop any buying pressure and with the stock market likely to be hit, we could see the baht falling some more.''

India's Sensitive Index declined 2.6 percent, the Kuala Lumpur Composite Index fell 2.1 percent and Indonesia's Jakarta Composite Index lost 2.2 percent. Elsewhere in Southeast Asia, Singapore's Straits Times Index dropped 1.5 percent and the Philippine Stock Exchange Index slid 1 percent.

Slowing Exports
.....``Most exporters are very happy with the central bank's new measure,'' said Dusit Chongsutthamanee, corporate finance manager at Pranda Jewelry Pcl, Thailand's biggest publicly traded jewelry exporter. ``The baht has strengthened at a much faster pace than other currencies in the region. That affects most exporters because it has made their product prices less competitive with other producers.''

`May Adjust'
.......A rising baht hurts exporters by cutting the value of their local currency-denominated profits and making their products more expensive compared with those of Asian rivals. China's yuan has added 3.2 percent against the dollar this year, Malaysia's ringgit has gained 5.5 percent and Singapore's dollar has climbed 7.4 percent.

The central bank may adjust the curbs ``if the baht doesn't continue to be strong,'' ...........

looks like they are already backpaddling.....

"Thailand Abandons Lockup on Foreign Stock Investments "

Finance Minister Pridiyathorn Devakula said Tuesday the central bank would exclude inflows into the stock market from the Bank of Thailand\'s drastic measure of 30 per cent reserve withholding requirement.

After an urgent meeting in the evening among Finance Ministry, Stock Exchange of Thailand, the Securities and Exchange Commission, and Bank of Thailand, the Thai authorities agreed that the earlier measure is too harsh. Pridiyathorn said they agreed to exclude inflows for stock investment from the harsh measure.

peter shiff on bulls and bears / fox

"peter shiff"is a hard hitter and is bearish as long as i can remember on the us $ and bullish on oil, gold and high yielding non us stocks. he was also correct on housing!

peter ist seit ich den verfolge sehr negativ in sachen $ und bullish in scahen öl und gold. ausserdem liebt er nichr us aktien mit ner hohen dividenrendite. den bubble in immosektor hat er ebenfalls gesehen.

i suggest to see the "full video!" (3 minutes. lots of fun!

unbedingt das video ansehen. ist fats ne art wunder das in der show auch wirklch bären auftreten. sonst sind doch alle irgendwie bullish. ist schließlich fox.........


thanks to tim und fred i mellerud. "transcript and tims insights here"

"In a Merger Wave, a Dangerous Undertow for Stocks "

one more indicator that questioned the upside......looks like there could be rainy days ahead....

ein indikator mehr der eher auf ne unruhige fahrt mit hoher regenwahrscheinlichkeit hinweist....


thanks to mish and his http://www.markettradersforum.com/

THE total value of mergers and acquisitions this year is already one of the largest in history. That’s ominous, because past merger waves have coincided with overvalued stock markets.

The biggest single year for mergers and acquisitions was 2000, with the totals for 1998 and 1999 only slightly behind. At the moment, 2006 ranks fourth over all. Of course, those earlier three years were at the end of the great bull market of the 1990s, and a severe bear market followed.

Should we be concerned right now? Yes, because the correlation between stock market tops and soaring M.& A. levels is no coincidence,....

“Periods of high relative valuation are nearly always associated with high M.& A. activity,” he said in an interview, “and the stock market has fallen after each major merger wave.”

Understanding the reasons for the correlation is the difficult part. Though it is easy to see why an overvalued company would want to acquire another — because it could pay for the deal with overvalued stock — it is hard to see why the company being acquired — the so-called target — would sell itself for stock that is priced too high.....

.....current merger wave, much of which has been paid for with cash raised through debt financing.

..... “To the extent the current merger wave reflects an overvalued debt market, it stands to reason that it will eventually correct — just as overvalued stock markets eventually correct,” he said. “And it can’t be good news for the stock market if money is destined to become much tighter in coming years.”

The bottom line is this: The current merger wave means that stocks are probably closer to the overvalued end of the spectrum than to the opposite extreme, and that they also are vulnerable to tighter money in coming years.

This doesn’t necessarily mean that stocks will fall in the near future. But it does imply that their prospects are well below average.

just the m&a activity today.....

"Statoil to Buy Hydro's Energy Unit for $28 billion"

"Realogy Agrees to Buyout By Apollo Management for $6.4 Billion"

"Express Scripts Bids $26 billion for Caremark to Trump CVS Offer "

"THE NEXT ROGUE WAVE/puplava!"

what a great piece. make sure you read all details and see all the charts! a must read.

fantastisch. ghet auf nummer sicher und lest alle details und charts!

RAMPANT DEBT AND SPECULATION
It isn’t just a matter of rising debt levels. It is the fact that more of that debt is going into financial speculation. This should be of great concern to Washington, Wall Street and Main Street.
Debt and speculation have become ubiquitous in the global financial markets. Yet as debt levels have risen, raising the degree of risk in the financial system, the degree of complacency has also risen along side of it. It is evident everywhere, from declining stock and bond market volatility to declining option and credit spreads! ..... (klick n headline/überschrift for full piece!)

"p/e equivalent valuations / hussman"

as always sober and excellent stuff from Hussman".
to read the full piece klick on the headline.

wie immer ne nüchterne und sehr gute analyse von hussman. bitte auf die überschrift für den vollen bericht klicken.

....when the price/peak earnings multiple for the S&P 500 has been 16 or higher (the current multiple is over 18), we find that the S&P 500 has experienced a loss, including dividends, averaging -6.5% over the 18-month period following the final hike of a Fed tightening cycle.

Only 4 bull markets over the past 75 years had life spans which exceeded the current one.” Those included 1949 (which began at a price/peak earnings multiple of 6), 1974, 1982 (both which began at multiples of 7), and 1990 (which began at a multiple of 11 and ended in a hypervalued frenzy at nearly 34 times peak earnings). The current advance began at a multiple of 16, so even from the beginning we had less room for valuations to expand, compared with those unusually long bulls. And as noted below, valuations have now moved far higher (on the basis of a broad range of fundamentals) than current earnings would lead investors to believe.

Of course, that's part of the difficulty here. As long as investors perceive valuations to be acceptable, there is no compelling reason why the actual facts should get in their way over the short-term. That allows for the possibility that the current speculative blowoff will continue further

The following chart illustrates the current disconnect, and presents the market's price/revenue, price/book, price/dividend, and enterprise value/EBITDA multiples, scaled by their historical relationship to the S&P 500 price/peak earnings multiple.

While the current price/peak-earnings multiple is already at an elevated level above 18, what I'll call the “P/E equivalent” multiples on other fundamentals are: 21 on the basis of book values, nearly 23 on the basis of enterprise value/EBITDA (which factors in the increasing share of debt on corporate balance sheets), over 25 on the basis of revenues, and 29 on the basis of dividends (largely because dividend payout ratios remain relatively low even on the basis of normalized earnings

Among these alternatives, my impression is that the “P/E equivalent” figure of just over 25, based on revenues, is the most accurate measure of “true” current valuations on the basis of normalized earnings. You can see from the chart why everybody loved EBITDA in the late 1990's, and why it's not so popular anymore. Wall Street analysts seem to pick the fundamental that gives them the lowest valuation to tout. Recently, a few analysts have even appeared on CNBC quoting metrics like “price to 2010 operating earnings.” Now there's a bag of wishes for sale.......

"No more bubbles to bail out the housing bubble / fleckenstein"

now the prediction is for 2007. his timing has really been bad. but the theses is correct.

nun wird der abschwung für 07 vorhergesagt. sein timing ist wirklich schlecht. die fakten aber sind stimmig.

The negatives keep growing, this time unchecked. The stock market, the real estate market and the economy will get in sync on the downside -- it’s just a matter of when.

Wall Street has a soft spot for the "soft landing" thesis, but to me it's crystal clear that a serious economic slowdown is under way. What has been surprising: not that the economy is weakening but that so many people seem to expect a soft landing, and therefore remain in denial about the seriousness of the slowdown.



I guess the predilection toward a soft landing is a function of the following: So many folks in the investment business -- and in the country at large-- haven't experienced a consumer-led recession in so long that they think this outcome is just not possible. That's because the Federal Reserve Board has evolved into being a business-cycle suppressor and bubble manager. Consequently, folks just assume that economic weakness is a feature of the business cycles of yesteryear.

Bubbles begat bubbles
To review: We had a mindless equity bubble that was precipitated by a complete abdication of responsibility on the part of Fed monetary policy. That bubble popped in 2000, precipitating a recession led by businesses cutting back from their previous misallocations of capital.

Next came our umpteen interest-rate cuts and tax cuts to help fight the aftermath, the result of which was a massive housing bubble -- aided and abetted by the utterly irresponsible actions on the part of lenders. The housing bubble topped out well over a year ago, though it's taken some time for the problems in real estate to begin affecting the consumer.

Follow the money (from sales tax receipts)
Now, however, it's quite clear that the consumer is being affected -- whether one looks at the sales data from Wal-Mart and other retailers, or at the Liscio Report´s
data on state sales-tax receipts. To quote from Liscio's latest survey: "The weakening consumption trend is now established, and the majority of our tax contacts expressed real concern about a slowing in sales-tax collections. It now appears clear that consumers are not spending the billions of dollars they have saved on gas in recent months."

Furthermore, when I e-mailed Liscio to share my view that we are entering a recession, here's the response I received: "We note with a shudder that our indexes look a lot the way they did in fall of 2000, especially the weakening and then big drop in the sales tax survey. The SDI led us into the last recession, and the states that led are very weak right now, as well." (The SDI is Liscio's proprietary sales-diffusion index.)

Wishing on a star, waiting on a slide
It is essential that folks understand the past, in order to prepare for what lies ahead. That the Fed was able to precipitate a housing bubble to bail out the equity bubble was a miracle. But there is no next bubble to bail out the housing bubble. ... an unstable, unsustainable engine of growth.... that the ramifications of the housing bubble's unwinding will be brutal. (just look at the effect of the mortage equity withdraw / man braucht nur auf den effekt der refinanzierung zu gucken)

What has, of course, been impossible to determine in advance is the exact timing of when the stock market, the real estate market and the economy get in sync to the downside -- i.e., "the next time down," to quote my euphemistic, forever-and-a-day-in-the-making outcome.

I expect it to occur in 2007 -- because everything seems lined up, as never before, for that scenario to play out. To quote a personal motto from my Web site: "Often wrong, never in doubt." Various areas in the stock market are more vulnerable than others, though in some ways, it's all one trade. Consequently, I think the chance for at least double-digit negative returns next year is very high.

Now to end by saying I hope everyone has a merry Christmas, happy Hanukkah and a happy new year. Until the Contrarian returns on Jan. 8, I'd like to invite folks to peruse past columns from my daily Market Rap at FleckensteinCapital.com. A complimentary username/password -- free/free -- has been established to allow access to the site.

"Money drying up for some investors in buyout firms"

this will be interesting and very importend topic to watch. there is no doubt that the main action in the stockmarket was fueled by private equity takeover/buyout/going private rumors. one thing that is even at least equally importend than the money to fund this private equity funds are the creditconditions/spreads to leverage the investment. the spreads are now close or at recordlows"across the full ratingspectrum (aaa to junk), the only exception in the last month is the bbb us mbs market. (no wonder.....)



das ist der springende punkt für die aktienmärkte in den nächsten monaten. diese spieler haben den markt in letzter zeit entscheidend geprägt. mindestens genauso wichtig wie die gelder sind allerdings die kreditkonditionen/risikoaufschläge um das investment zu hebeln. diese liegen mit ausnahme der us mbs nahe der rekordtiefs.

thanks to http://www.itulip.com/

that is happening at the same time when US credit quality in 25-year retreat toward junk-S&P. amazing!

das ganze passiert zeitgleich mit ner rapiden verschlechterung der kreditratings in den usa. erstaunlich!

this point is so importend because the pe firms didn´t really have to make an exit to get gigantic return. they just load the company up with tonns of debt to get an "extra dividend"
The debt of companies owned by buyout firms has risen to the equivalent to 5.4 times their cash flow (some deals in the last time have had even higher multiples!einer der letzten deals hatten noch höhere multiples), the most ever, S&P says. here are some examples like hertz etc
(time to call the stuntmen.../ zeit den stuntmen zu rufen)


Since buying Hertz, the Clayton Dubilier ownership group has raised debt by $3.4 billion and shaved cash and cash equivalents almost in half.
In a leveraged buyout, the acquirer borrows most of the purchase price and uses the target company's cash flow to repay lenders
The owners have received a dividend of $1 billion and plan to get another payout of about $420 million (and still they have managed to take this company public)

(Reuters) - The massive funds raised by private equity firms and the faster-than-expected speed with which they're spending them are stretching some of their investors thin, causing concern that there won't be enough money to go around in 2007.

The crunch on institutional investors is being fueled by a 32 percent drop in the number of sales by private equity firms, known as exits, in the last two years, while the number of buyouts has skyrocketed.


What is worrying institutional investors is that funds are coming back to them too quickly for money, without a track record from their prior fund.

A drying up of institutional capital would be a major setback to private equity firms raising funds next year and would likely prompt a slowdown in the torrid pace of deals sparked by the sector in the last two years.

Feeding such concerns are reports that firms such as Bain Capital, which raised $10 billion last year, may return to the fund-raising trail next year. The Carlyle Group and Warburg Pincus LLC are also expected to raise $10 billion-plus funds next year -- a relatively short turnaround time from their prior funds. (some argue this kind of fundraising is also in part to make a fortune in fees / einige kritiker behaupten das es pe auch um das abschöpfen der verwaltungsprämien geht. Now that the largest firms have as much as $30 billion in assets, their 1% to 2% management fees alone guarantee hundreds of millions of dollars annually)

Signs that The Blackstone Group is having a hard time raising the last chunk of the industry's largest-ever buyout fund, according to sources, are also helping to stoke fund-raising worries. Blackstone closed a $15.6 billion fund earlier this year, and reportedly is seeking to reopen and lift it to $20 billion. (no wonder when you look like the last "desperate" deals like this. kein wunder wenn man sich die letzten verzweifelten deals ansieht....)

There are some big funds coming out amazingly fast across the board. If you come back to market with few to no exits, that always creates difficulty for the investor. They're being asked to double down here," ......

The value of private equity-backed buyouts this year doubled to $602.4 billion from last year, according to Dealogic, on 1,912 deals.

At the same time, the value of their exits is down 23 percent to $176.8 billion. The number of exits, which include selling to other buyers or public offerings, is down 24 percent to 698, (it would be importend to know if number includes sales to another private equity frim/wäre wichtig zu wissen ob diese zahl verkäufe an andere pe firmen miteinschließt.)

"Exits are way down. That raises issues on what LPs have in cash. LPs keep plowing money out but there's nothing coming in. You've seen them do big deals, but you haven't seen the exits,"

So-called buyout firms used to take four to five years to spend their funds, allowing investors to receive returns gained from the sale of assets over that time. These institutional investors, known as limited partners (LPs), had money going out and money coming in. Right now, the money is mainly going out.

Indeed, so many big funds are spending money so fast that its sucking demand from investors. If private equity firms keep buying into companies at a pace that far exceeds their exits, the LP spigot could go from a steady stream to a slow trickle.

RUNNING DRY
....., an LP pullback in the next fund cycle would almost certainly spark a slowdown.

The Oregon State Treasury, ........, tapped out of its 2006 allocation money in September.

"That's the first time that's ever occurred for us," said Jay Fewel, senior equities investment officer at the Oregon State Treasury. He added that he was aware of other institutional investors that used up allocation money as early as May.

And no wonder. Last year, U.S. buyout funds raised around $150 billion, a 50 percent increase from the prior year, according to Thomson Financial, and roughly $50 billion was raised by overseas funds. This year, funds expect to raise $300 billion, according to private equity experts.

LPs are spending more on buyout funds because their returns are so impressive, especially from the largest funds. In the 12 months through June 2006, investments in private equity firms returned 22.5 percent vs. 6.6 percent for the S&P 500,

Buyout firms' success has been fueled in part by smart deals, favorable debt markets and an absence of corporate buyers. Private equity firms accounted for 22 percent of global M&A volume in the first nine months of the year, hitting a record $570.1 billion in deals. That's up from around 5 percent a few years ago.......


"There are a lot of fears in the back of LPs' minds that private equity firms are writing checks like crazy," said Kelly DePonte of Probitas Partners, a private equity fund-raising firm. "With another fund raising wave incoming in '07, a lot of LPs are beginning to feel tapped out. They're thinking this may be a great time to sell companies, not a great time to buy."

when this source of funding is really drying up maybe some central banks can fill the gap.... :-), the step from buying fannie mae paper isn´t that big anymore ...........

evtl. können dann ja die zentralbanken diese lücke füllen..... :-), so groß ist der schritt vn fannie mae papieren nicht mehr........

"this expansion is getting old"

this is from ""year of transition". the 2007 outlook from rosenberg/merrill lynch. please click on the headline to get to bill cara´s site for more.

das is ein auszug aud dem werk von rosenberg/merrill lynch für das jahr 2007. bitte auf die überschrift klicken um auf die seite von bill cara zu gehen um den rest zu lesen.

thanks/danke an bill cara




größer/bigger http://www.billcara.com/001o004.gif

"Asian Central Banks May Spook Investors in 2007"

its all about liquidity! to me it looks like the central banks "have" to spook investors or to say it more detailed "speculators".

es geht einzig und alleine um liquidität. meiner meinung müssen die notenbänker dringen eingreifen um investoren oder besser gesagt die spekulanten ein bißchen aufzuschrecken.

(Bloomberg) -- While a housing-led slump in the U.S. economy may indeed emerge as the biggest risk to Asian economies in 2007, a more immediate threat to investors will probably be posed by the region's central banks.

Policy makers in China, South Korea and India may have no option except to aggressively contain domestic liquidity and stamp out asset-price bubbles ....

Relying on ``shock therapy,'' central banks in these countries might end up making overstretched securities -- such as Indian and Chinese equities -- more volatile than they have to be. A case in point was the bloodbath on Indian stock markets earlier this week. ( mmmh, but when you look just 2 days later the market was unchanged close to another all time high. looks like there is much more work to be done.....!/mmmh, nur 2 tage später alles wieder ausgebügelt und nahe einem neuen ath. sieht so aus als wenn dort nich mehr zu tun ist......)

In Asia outside of Japan, lax local financial conditions and the authorities' efforts to deal with them may have a greater bearing on investor sentiment than anything that the Big Three global central banks may or may not do.

Perils of Shock Therapy
Some evidence of that came this week when the benchmark Indian equity index plunged 5.8 percent following the central bank's surprise announcement that it would remove 135 billion rupees ($3 billion) from the banking system by raising the ratio of deposits banks are required to hold as cash.( china did the same "thing"just last week.)

maybe they should be more radical like japan. they have been critizised for halting their rates close to zero. but they have taken action!

So the Bank of Japan did what any self-respecting central bank would do (unfortunatly they are the exception/leider ist das eher die ausnahme). when called on the global carpet for “creating” too much liquidity, they stopped. And not only did they stop, they began an immediate program of erasing their quantitative easing (printing money) efforts of the last half decade by beginning to shrink the Japanese monetary base in very big and rapid fashion. this is from contrary investor. i suggest to read the full excellent piece".

The need for cooling the overheated Indian economy is undeniable. What investors can't take for granted is that it will be accomplished in a credible manner.

The Reserve Bank of India isn't the only Asian monetary authority to resort to shock therapy. In Korea, the reserve requirement on demand deposits is going up by 2 percentage points after Dec. 23 to deflate a housing bubble. The decision, announced by Bank of Korea last month, is the first increase in reserves in almost 17 years.

Fragile Korean Consumer
The question in Korea is whether monetary policy will achieve a soft landing in the housing market or cause it to crash.

According to Samsung Economic Research Institute in Seoul, housing prices nationwide rose more than 11 percent in the first 11 months of 2006, compared with less than 6 percent last year. In overheated pockets, price escalation is even more rapid.

With floating-rate mortgages accounting for 98 percent of the total, a sudden drop in home prices may further depress consumer sentiment, which has yet to recover from a credit-card bubble that burst in 2003. (amazing. the debt latest debttruoble is just 3-4 years old..../ erstaunlich. nachdem der letzte bubble gerade 3-4 jahre alt ist......)

Lee Seong Tae, the central bank governor, made it clear that he won't make a habit of manipulating reserve requirements. That's reassuring. Changes in reserves, because they have long- term effects on money supply and economic activity, are generally seen as a central bank's weapon of last resort. ``The change in required reserves won't come often,'' Lee said.

the fed of course has just done the opposite and has eliminatet the reserve back in 1995./die fed hat im jahr 1995 genaus das gegenteil gemacht und die reserve defacto auf 0 gesetzt. thanks to this "piece What (Really) Happened in 1995?" from aaron krowne / itulip!

The key event that happened around 1995 is that the fractional reserve ratio was not only lowered, it was effectively eliminated entirely. You read that right.

`Heavy Dose of Medicine'
There are strong expectations that the People's Bank of China, which has already raised the reserve ratio by 2 percentage points in three steps since June, will be forced to act again to mop up the surfeit of liquidity being released by its massive trade surplus. (see first link/ siehe erster link)

People's Bank of China's third-quarter monetary policy statement released last month included 70 references to liquidity.

``Given the abundant liquidity, an increase in the reserve requirement ratio by a small margin is not a `heavy dose of medicine,' but rather a fine-tuning,'' the bank said.

Dearer Money
China's liquidity challenge is compounded by expectations of currency appreciation. The yuan, traders reckon, must strengthen substantially against the dollar to reduce the growing likelihood of the U.S. Congress passing punitive legislation against Chinese exports. (the us should be pleased with china thta it pumps all the surplusses back into the $. almost 1 trillion and counting....../ die usa sollen froh sein das china die ganzen überschüsse zurück in den $ pumpt. jetzt ne billionen euro und steigend....)

The one-way bet on yuan appreciation is drawing in overseas capital and pushing up equity prices in Shanghai and real-estate values in Beijing to dizzying heights. as shown "here"

While China's economy is plagued by overinvestment, India's is overheating. ..korea is also surprisingly strong.....

At least in these three Asian nations, investors may not find themselves worrying as much about a U.S.-induced growth slowdown next year as they may about the central banks suddenly turning off the money taps.