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Thread: Is an October economic downturn about to occur ?

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    Default Is an October economic downturn about to occur ?

    Historically speaking, some of the worst economic 'crashes' have occurred in the month of October ... huge 'crashes' in 1929 and 1987, smaller 'mini-crashes' in 1989, 1997 and other years. Given the economic consequences of hurricanes Katrina and Rita, is this scenario about to be replayed ?









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    Last edited by Melonie; 10-01-2005 at 07:25 AM.

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    God/dess Gynger's Avatar
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    Default Re: Is an October economic downturn about to occur ?

    Its a coincidence to see this post Melonie, a friend and I were just talking yesterday about this... let's hope not, but it sure does look like it doesn't it?


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    Featured Member GnBeret's Avatar
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    Default Re: Is an October economic downturn about to occur ?

    Maybe. Maybe not. Just don't know what to think re immediate (as in this month) future.

    But, that said, this much I do know - there's no way in Hell we can keep taking the kinds of hits we've been taking, at the pace we've been taking them over the course of the past two years without the train coming off the tracks, so to speak. And, in that vein, the handwriting may already be on the wall - especially if there's any truth to the old saying re things "coming in threes" - 'cause in case you haven't noticed, natural gas has gone from $7.xx/mcf to $13.xx/mcf since June 30 (up 80% this quarter!). "One" being Katrina, "two" being Rita, and "three" being the now-overdue hard winter we haven't had since 2001... and you'll se NG at $20/mcf. Which, in my estimation, will just be too, too much for the economy to sustain, coming as it will be on heels of doubling of mobile-energy costs, enormous unexpected costs of disasters, looming collapse (or, at least serious retrenchment) of housing market, the continuing cost of the war in Iraq, and Dubya's apparent unwillingness to at least forego the coming "give-away" to the rich.
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    God/dess montythegeek's Avatar
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    Default Re: Is an October economic downturn about to occur ?

    Correcting several "facts"--

    Winter 2002-2003 was cold. 04 and 05 were warmer than normal because of weak El Nino conditions.
    http://lwf.ncdc.noaa.gov/oa/document...y/hcs/hcs.html
    2001 was mixed with early cold and late warm.

    there is no coming giveaway to the rich. Tax rates are not going lower and the AMT makes them go up
    There is almost as much gas in storage as last year and Ivan screwd up Oct and November a lot last year.
    http://tonto.eia.doe.gov/oog/info/ngs/ngs.html
    We are close to th ehigh end pof the 5-year band
    http://tonto.eia.doe.gov/oog/info/ngw/nwstorage.html

    The stock market is an overrated economic indicator. It is forward looking, not current quarter.
    the September employment report is gonna suck swamp water and industrial production for September is gonna suck because of chemical outages, lost energy production and the now settled Boeing strike. (the boeing strike alone will take out 0.25% of 9/05 IP--100% of which will come back in October) The market already knows 100% of this and it is already reflected in expectations. the market reacts to surprises and ther is no surprise. The market already knows how bad gas and oil prices will be--it is in the NYMEX futures prices

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    Default Re: Is an October economic downturn about to occur ?

    If there is a downturn, I expect it to be temporary. If it is a severe correction, it'll present a buying opportunity. I have money in an Intermediate Bond Index Fund and my retirement money is in the Emerging Markets Stock Index Fund. The latter of which is doing OUTSTANDING relative to the piss-poor performing S&P 500.

    Going forward, over the long term, a correction in October will present a buying opportunity in (emerging markets) stocks. I'll also keep an eye on dips in the price of my bond index fund.
    I'll need to put my money somewhere.
    The only thing necessary for the triumph of evil is for good men to do nothing. - Edmund Burke
    For rest and relaxation, I command a Panzerarmee Division.

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    Default Re: Is an October economic downturn about to occur ?

    Two-timer, I see that your best performing investment is in emerging markets i.e. investments tied to the value of a currency other than the US$. I happen to agree with Warren Buffet that the US$'s exchange rate value has only one way to go ... DOWN. This is why I also have some foreign stock investments plus good ol' 1oz gold bars.

    In the realm of this thread, though, it is now possible to open an FDIC insured money market account denominated in foreign currencies !!! Check out . If everything goes to hell in a hand basket, it might be very interesting to have a Swiss Franc denominated account.

    To Monty, the Henry Hub near months gas futures prices are up again this morning ... as is copper, while bonds are down. I don't mean to be facetious, but inflation is clearly knocking on the door regardless of what the DJIA is doing (or not doing) at the moment. This is already translating into much higher energy prices, much higher commodity/component prices, thus significantly reduced profits. The ISM 'prices paid' report took the biggest jump in 15 years today, for God sakes !

    IMHO the DJIA is in 'denial' ... GM announced a 24% decline in sales today, yet their stock goes up !?!? A very nasty 'wake up call' is waiting in the wings for the DJIA, either that or we can come right out and admit that the market is now manipulated.
    Last edited by Melonie; 10-03-2005 at 11:05 AM.

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    God/dess montythegeek's Avatar
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    Default Re: Is an October economic downturn about to occur ?

    Melonie,Natural gas was up a dime today(<1%) but gasoline was off 3cents/gallon (>1.5%). Same with heating oil. Gasoline + heating oil swamps natural gas 3-1 if you want to talk daily prices. Both are higher and rose post Katrina and will have a big impact on September and October CPI's. A day does not matter, anyway. Copper ended up down for the day as were au, pb, and ag.

    As for GM it does not matter what you do--it matters what you do relative to what they thought you would do. GM had a big 9/04 because they unloaded 2004 end of year vehicles late. "GM also said last year's September results were propped up by a "72-Hour Sale," which offered zero percent financing for 72 months, resulting in a number of industry sales records." http://biz.yahoo.com/bizj/051003/1172453.html?.v=1 They also started the "employee discount" in June and ran out of 05 vehicles left to sell under the plan, so a drop in sales was expected as F and DCX kept it going in September unloading their 05s. Total light vehicles sold at 16.3 million SAAR, better than the 15.9-16 expected.

    The ISM is 100% post Katrina (9/05) compared to 100% pre Katrina (8.05) and the prices paid was higher in the ISM a year ago. (It takes a few days to receive and tally responses to get it out close to the first of the month).

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    Default Re: Is an October economic downturn about to occur ?

    Despite the validity of your interpretations, I remain unconvinced. First, it is arguable that natural gas is much more significant than gasoline/fuel oil because gasoline/fuel oil can be imported, whereas North American natural gas supplies are essentially all the natural gas there is. Natural gas prices have huge implications in regard to the coming winter's heating bills, but also the coming winter's electric bills (since the only new generation which can pass environmental opposition is natural gas fueled), as a big raw material cost component of industrial production (particularly chemicals and fertilizers) etc. NatGas futures are up another 2% today after the Gulf damage report listed over 100 gas and oil rigs which are essentially trashed. When the basic costs of living which are directly or indirectly linked to natural gas prices come home to roost with a vengeance in December, consumer spending is going to take a serious downturn. As you pointed out, the market is forward looking, thus due for a decline in DJIA very soon as a precursor to declining 4th quarter spending and declining 4th quarter profits.

    It is also speculated that your gas storage curves are going to 'flat top' in October ... for the simple reason that nobody wants to risk buying gas for storage in November at $14+ if they're not sure they can sell that gas in April for the same $14+. This will likely leave March gas reserves bumping on the low side of the curve, and could lead to a real crisis if the degree days this winter are unseasonably cold (which many are predicting).

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    Default Re: Is an October economic downturn about to occur ?

    Mel...Mel...Mel (hehehe),
    I know where the bodies are buried (except the ones in your back yard).
    the weekly storage injections
    http://tonto.eia.doe.gov/oog/info/ngs/ngs.html
    From the week ending 9/23 (half whacked by Rita and Katrina) still showed 53 B cuft going into storage. Todays lost gulf Production is 7.2 BCF or 50 Biliion a week. If nothing additional came back we would flatline until winter started...EXCEPT it won't. because 9% of the gas came back since last Friday to today.
    http://www.mms.gov/ooc/newweb/pressr...ewsstories.htm

    We can import more because the capacity exists to do so.
    http://tonto.eia.doe.gov/dnav/ng/hist/n9100us2m.htm
    look at 12/04= we imported 106 BCF more in 12/04 than in 7/05. Why? Because in 7/05 we did not need more because we had close to a record amount in storage and winter was 6 smonths away. We import from Canada and they get cold before we do, so if demand constrains our ability to import, we would not have been able to do last Dec.
    There are two primary pipeline directions- East and South and the West has 11% more gas than the 5-year average. The East is 1.4% above the average and is 60% of total working gas. It can come East and cut through your backyard to get to NE and the Mid Atlantic or turn south to Chicago and Ohio.

    the hundred platform destroyed are mostly obsolete and represent 0.9% of gas production in the Gulf. http://www.mms.gov/ooc/press/2005/press1004a.htm
    or .09 BCF/day or 1% of the amount we put into inventories in the 9/23 week.

    I forgot to mention imports are equal to 1/5th of production so it is 16% of demand and canrise to 20+%. LNG can rise in time and get here before New YEars and Boston's facility can take more gas.
    Utilities are no dummies. they can hedge their storage against the futures markets and unload invnetory in February and March above the nearby price for gas because even a warm February is still damn cold
    http://www.nymex.com/ng_fut_csf.aspx

    A quarter of the gas used is in manufacturing and much of that can be replaced by imported chemicals made in Europe with petroleum rather than gas in the shortterm.

    The market is smarter than the number of platforms damaged and natural gas is set up for a big fall where the speculators who think the sky is the limit get burned by reality. For myself I am praying for an El Nino, a mild winter and some hedge funds going belly up because they thought they made a one-way bet when they were wrong. Gas could go to $20/MMBtu. It could also go to $5. I do not like to gamble on winter weather or I would short the gas producers. Weather, not GOMexico controls the price in February.

    Ps I started out as a raw materials analyst in 1978 for a company which had a long term contract (long since expired) for gas a $0.20/MCF.

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    Default Re: Is an October economic downturn about to occur ?

    Monty, I don't discount your arguments or your figures. However, I would point out that in the three trading days since I started this thread, the DJIA has averaged about 100 points down per day. Also, 'after hours' action continues to go even further on the downside tonight. This is despite the fact that crude oil and gasoline futures have pulled back substantially over the same three trading days (however natural gas has continued to rise). Also, volume of shares traded is unusually heavy.

    IMHO tomorrow's market direction constitutes a 'line in the sand'. Another big down day tomorrow would tend to indicate that this hasn't just been the latest example of hedge funds 'shaking the tree', but that some real FEAR now exists.



    On the other hand, this could also be a deliberate market manipulation at the hands of the huge fund managers to drive down market prices so fresh 4th quarter inflows can be used to load up on more stocks on the 'cheap'. If that is the case, then tomorrow could hold a big DJIA move to the upside.

    Personal opinion, if tomorrow's market direction is down again, it's time to start looking for a 'hard hat'.

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    Default Re: Is an October economic downturn about to occur ?

    My personal opinion is that jobs are on the rise. Companies are doing lots of business, especially in what I consider to be the largest market (oil and energy). IMHO when that industry mobilizes to make money, they spend money at an almost wreckless pace.

    Even our crappy Iraq contracts are starting to generate business.

    We've been short handed because it seems there is NOONE UNEMPLOYABLE LEFT TO HIRE. Every company around us is hiring as well. Maybe the displaced people from the hurricaine will mess that up, but not much.

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    Default Re: Is an October economic downturn about to occur ?

    IMHO when that industry mobilizes to make money, they spend money at an almost wreckless pace
    I have heard the same thing from 'manufacturing types' ... that their companies are very busy, and are having trouble hiring enough 'good' people. However, it was also pointed out to me that being busy and making a decent profit are two entirely different things these days, with rapidly rising energy costs, rapidly rising raw material costs, and rapidly rising employee benefit costs taking a huge bite out of profit margins. It was also pointed out to me that investors have learned a lesson from the late 90's ... that growth itself in the absence of profit margin is not enough to levitate the price of stock shares anymore. This I guess is the essence of the current stock market situation.

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    Default Re: Is an October economic downturn about to occur ?

    Melonie,
    Corporate profits (before- and after-tax) as a SHARE of national income is at its highest in my 52-year lifetime. It was close to a record in calendar 04 and has gone UP, not down despite every objection you sight, and sighted a year ago. It was way above average in 03.

    Do not cry to corporate America.
    Want the data?

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    Default Re: Is an October economic downturn about to occur ?

    ... but as you say, the stock market is forward looking. This logically means that rising energy costs, raw material costs etc. are being projected to negatively impact future earnings compared to last quarter's earnings, thus the value of shares is expected to decline.

    If you know where all the skeletons are buried, can you explain where the incredibly heavy buying came from in the last 30 minutes before market close, which shaved a 100 point loss back to merely a 30 point loss ?

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    Default Re: Is an October economic downturn about to occur ?

    Sorry Melonie,
    That question has too many possibilities. It could have been mutual fund buying ahead of the close, the minerals management service saying that a lot of oil and gas can back on line in the past 24 hours, it could have been oil at a month low or the gas storage showing another small positive build to stocks, a big refinery coming back much earlier than expected, a combination of above, or some technical guru saying something. I do not follow the technical poop because it is often gobbeldiegook. Odds are, when stocks did not stay down after the midafternoon selloff, some joker decided it was time to buy and convinced some other bozos it was time to get back in.

    There are a lot of jitters over the employment report at 8:30 EST Fridaywhich could be anywhere because of Katrina and some 20K out because of the Boeing strike. (not Rita because that storm was after the survey week.)

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    Default Re: Is an October economic downturn about to occur ?

    and yet another indicator of impending financial doom, the 'Hindenberg Omen' ...

    (snip)"Which most importantly brings us in long-winded fashion to now, the potential for another panic selling event, which we believe could come in the next few weeks - and may already be underway. If a crash is underway, I would label its start from 9/12/05, at 10,701. So far, here's the most number of NYSE New 52 week Lows we've had: 319 on 10/12/2005 and 321 on 10/13/2005. But after bottoms, the number of New Lows subsides fast, dropping well below 100. Wednesday, October 19th, we got an increase to 215. In fact, we have not seen New Lows drop well under 100 since the 321 New Lows were registered on October 13th. Therefore, we do not have an "all-clear" signal at this time. Beware.(snip)"

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    Default Re: Is an October economic downturn about to occur ?

    October always sucks in the stock market. Not saying anything wild won't happen - just that October is common for profit taking.

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    Default Re: Is an October economic downturn about to occur ?

    Boy that person sure uses the word "crash" loosley. Is everyone aware that th estock market has "crashed" 7 times since 1/1/2000 according to this person. By some miracle his chart of 200-date ends in 2003. I suspect 2003 may have been the last time the guy had a thought.

    PS. the guy also says the number of new lows has to go well 100 and is proud to quote all kinds of numbers of new lows when they were highand leaves out that it was 114 on the NYSE Friday (Therefor 2.3rds of the stocks setting 52-week lows in about 1/3rd of what it was). this is, to me, a guy who quotes all kinds of mumbo-jumbo because he cannot come up with anything serious to say that is worth a bucket of warm spit.

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