OT: world heading towards economic recession ?

Al Patterson said:
Olsen, I want to thank you for contributing many excellent posts in this thread. Some of them I'm going back to read again. They were that good.
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Thank you, Al. I am just an ordinary guy from Norway...
 
Speaking of cycles.


I really like reading about Norway's and various other countries' recent growth and prosperity, but remember all this is relatively new. Some countries in this quickly growing prepubescent phase, have not started their cycle quite yet.
 
Thardy said:
Speaking of cycles.


I really like reading about Norway's and various other countries' recent growth and prosperity, but remember all this is relatively new. Some countries in this quickly growing prepubescent phase, have not started their cycle quite yet.
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Norway is new at growth? They fooled me then for the last 37 years I've been walking this planet. While European economies may have seen ups and downs (as any economy does over time), I can't remember when we actually had regression here. We haven't become poorer in all those years. Really.
 
Thardy said:
Speaking of cycles.


I really like reading about Norway's and various other countries' recent growth and prosperity, but remember all this is relatively new. Some countries in this quickly growing prepubescent phase, have not started their cycle quite yet.
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Sure. Depends on what you mean by 'new'.

I will say that Norway started it's growth to economical stardom back in 1848 (back then we were the 2. poorest nation in Europe, after Ireland) when the British ended the Navigational Act, a law regulating the flags of ships trading on British harbours. Then our shipping career started.

It propelled us through two world wars from which our ship owners profited enormously, but which cost thousands of norwegian sailors' lives. By 1945, - and 40 years onwards, we had the 2. largest merchant fleet in the world (afer USA, reserve fleet on the Lakes included). Norwegian ship owners are still the 3. largest national group of ship owners in the word. We own more than 60% of all the floating drilling rigs in the world, and so on...

Norway was invaded by the germans during WWII, but most of the nations assets; ships, were overseas and could be used in the convoys. The norwegian government fled to Britain and continued the fight from there.

We were one of the few allied nations who could pay cash for weapons like navy vessels and Spitfires during WWII. Britains last repayment tied to the Lend/Lease agreement were payed few months back. So, we were relatively rich back then.

Sure, in the last 30 years the build-up of our oil export has played an important part. A few years ago we were the largest oil exporter in the world, but oil export is now slowly falling while natural gas grows.

The norwegian oil & gas fortune is enormous, but of far lower value compared to our hydro-electric power forune in form of dams and powerstations built up in the last 100 years or so. We produce 122 TWH per year (more than the private consumption of all the scandinavian and baltic countries combined) of which large parts are utilized in the aluminium and ferro silicium industry. 85% of the power stations are publicly owned. Now we are about to build wind mills along our enormous coast line. So, energy, poluting and non-poluting is coming out of our ears.

Then add fish. More people work in the fish industry here in Norway than in the oil industry. About 2/3 of europe's fish resources are found in norwegian teritorial waters. Then add mining, forest, paper and pulp (puh!).

And we still have a competent IT and shipping industry and spend about 20 billion NOK, private and governmental, on research.

So, this is a lot for a nation of only 4,7 million people, about half of Ohio. Our living standard is about the same as nations not so fortunate regarding natural resources like Sweden, Denmark and the Netherlands which are export industry driven.

But still; our most valuable asset is our responsible politicians,- a functional democracy. Potentially and relatively speaking, Russia (look on the map!) is the richest country in the world, but a few bandits run off with all the valuables.
 
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Olsen,
This post makes me really want to make a trip up there 🙂 ... I've known several nice things about Norway for a long time, and I even have some school friends from there. I know you still live in a sort of crime free environment (occasionally interrupted by some foreign originated robbery...). I know Bergen is one of most civilized places on earth, and I would love to come and see it all by myself -maybe next year - will ask you for a good tip on the appropriate timing... 🙂
 
I dont have loans myself, just a little stock options that have been declining - just as they did little over a year ago. then I paniced a bit, withrew from risky ones (with loss). now I'm wondering should I repeat the same mistake again, or fleet the sinking boat and put my money into Leica's 😛[/quote]

Thought I would stay away from this, but could not resist..............
My 2cents in a straight and blunt way:

1. Options and other derivatives are for professionals or seasoned end very knowledgable investors and market participants only. If you really feel the urge to have options ( I do not use the word investment here) gamble with a small percentage of your funds only, which, if lost, cannot cause you hardship or sleepless nights.
2. There is no such thing as "non risky" options as your post seems to suggest - all of them are very high risk!
3. Why asking whether you should "repeat a mistake"? Mistakes are to learn from. Take the loss as tuition fees and learn from it.
4. Take your cash and stay on the sideline until markets are no longer choppy and up-or down trends (which could go either way!) seemt to emerge, which could take quite a bit longer this time.
5. Start to read about finacial markets and do so for the rest of your life, including daily financial newspapers.
6. In few of the posts here there is some good advice. But don't think you can follow them now! They are of general relevance only and many individual factors need to be considered as well.
7. Never ever follow any "advise" blindly. Do your homework and research as much as possible yourself before throwing hard earned money at something.
8. Now the really really tough one: Try to find an investment strategy, tested and proven through at least the last 25 years and suiting your style and needs best. And then follow it unemotionally, no matter the turbulences in the market - the latter one, being the ultimate test, something only hardened investors can accomplish after having gone trough a number of rough market cycles. The master of them all obviously being Warren Buffet.
9. And lastly, do not trust Bankers, Brokers and financial newsletter publishers, since they are not interested in you growing your assets, but rather in their commissions and subscription fees respectively.

🙂 🙂 🙂
 
mfogiel said:
Olsen,
This post makes me really want to make a trip up there 🙂 ... I've known several nice things about Norway for a long time, and I even have some school friends from there. I know you still live in a sort of crime free environment (occasionally interrupted by some foreign originated robbery...). I know Bergen is one of most civilized places on earth, and I would love to come and see it all by myself -maybe next year - will ask you for a good tip on the appropriate timing... 🙂
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We are far from a crime free society. More cars - some 22.000 - are stolen in Norway per year - than in New York, but most, except for less than a thousand, are found. It's falling, though.

If you are thinking about this bank robber gang that recently were locked up the leaders and most of them were norwegian, - with a few imigrant friends from Albania. They have stolen close to a quarter a billion NOK in less than 5 years. Not bad, he? Quite a few in Palermo would envy them that. What finally sent the police tracking them down were that they shot a policeman. A rare thing here in Norway where police is generally unarmed.

Two of them got 20 years (but will sit in max 15) while most of them will be out on the streets within a few years. We have a liberal punishment system with great belief in human beings ability to improve. We are not after revenge and we are not a bitter flock of people.

We have a large imigrant population. Many from muslim countryes with family tragedies and 'honor-killings' which gets a lot of media attention. We tend to forget that drunk norwegians killing their wifes have filled the murder statistics for as long as history goes.

Bergen is a very special place. It is the tourist city no.1 with close proximity to the fjords. It is also one of the oldest cities in Norway with a lot of character. I was born in Bergen and I am a 5th generation 'Bergenser'.

But Bergen is also 'one of Europe's most corrupt cities', in my opinion, - far worse than Palermo, I am sure. - While Federal (State) politics generally is very clean, local politics is a mess in Norway (quite oposite to USA). When police finally managed to jail one of the prominant local politicians in Bergen, few are ever caught, people did a tear-dripping torch-march to get him out! - It's that bad.

But scenery is beautiful. Like Italy, Norway is a very old tourist country. It is indeed Norway and Italy that have the oldest tourist industries in the world. Based on the same public; the very rich Brits (later germans, french etc.).

Living standard-vice you will experience that Norway is about the same as Northern Italy, which I have heard, is about the highest in the world. Your wealth is based on industial production and famous brands like Ferrari and Gucci. etc. Ours on natural resources.
 
Whatever recession does arrive, I don't doubt we deserve it. In the UK, we are gorging ourselves on expensive cars, designer labels, sales of champagne and doubtless cocaine have long been thriving, but we are not producing more to pay for this.

Houses where I live have shot up in value from $300k to $1.4m, hence home owners convince themselves they are rich and buy more consumer items - but buyers' incomes have not shot up correspondingly, for they are loading themsvles with debt, betting on increasing house prices - which, experience tells us, will not continue forever. There is an increasingly unpleasant materialism in the UK, which will eventually incur punishment. But I doubt that the punishment will fall on the guilty people.
 
retow said:
2. There is no such thing as "non risky" options as your post seems to suggest - all of them are very high risk!
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While I agree 100% that you shouldn't dabble with options unless you have a good amount of experience and understand them well, I have to disagree with this point of yours. A deep-in-the-money call with a far out expiration can often be--barring high extrinsic value--a nice substitute for the underlying equity (and lets you stick the rest of the money you'd have spent on the stock in a safe place) sans dividends, and isn't a high risk speculation by any means. In fact, one could argue that it reduces the total risk as your investment in the market is less than it would've been had you purchased the stock itself.

Options get a bad rep from people gambling (that's the appropriate term here) on out-of-the-money 'cheap' ones.
 
retow said:
1. Options and other derivatives are for professionals or seasoned end very knowledgable investors and market participants only. If you really feel the urge to have options ( I do not use the word investment here) gamble with a small percentage of your funds only, which, if lost, cannot cause you hardship or sleepless nights.
2. There is no such thing as "non risky" options as your post seems to suggest - all of them are very high risk!
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hi retow, I agree with your point 1. about 2, I just ment there are riskier and less riskier, not "non risky" ones 🙂

retow said:
3. Why asking whether you should "repeat a mistake"? Mistakes are to learn from. Take the loss as tuition fees and learn from it.
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this was ment to be sort of an irony. I gues its already quite clear I'm no pro investor 🙂 I dont day trade, but rather try get something out from longer trends.

retow said:
4. Take your cash and stay on the sideline until markets are no longer choppy and up-or down trends (which could go either way!) seemt to emerge, which could take quite a bit longer this time.
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the thing I wonder about, we have had many good years behind. when markets start go downward, it propably proceed like that for quite a while. in this perspective, it would be safest to take the money and run, rather than pushing the luck too far.

retow said:
5. Start to read about finacial markets and do so for the rest of your life, including daily financial newspapers.
6. In few of the posts here there is some good advice. But don't think you can follow them now! They are of general relevance only and many individual factors need to be considered as well.
7. Never ever follow any "advise" blindly. Do your homework and research as much as possible yourself before throwing hard earned money at something.
8. Now the really really tough one: Try to find an investment strategy, tested and proven through at least the last 25 years and suiting your style and needs best. And then follow it unemotionally, no matter the turbulences in the market - the latter one, being the ultimate test, something only hardened investors can accomplish after having gone trough a number of rough market cycles. The master of them all obviously being Warren Buffet.
9. And lastly, do not trust Bankers, Brokers and financial newsletter publishers, since they are not interested in you growing your assets, but rather in their commissions and subscription fees respectively.

🙂 🙂 🙂
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yes you are quite right about planning ahead, studying more and only relying only on personal judgement. problem is to remember those, in the turmoil of greed and fear 😉
 
Paul T. said:
Whatever recession does arrive, I don't doubt we deserve it. In the UK, we are gorging ourselves on expensive cars, designer labels, sales of champagne and doubtless cocaine have long been thriving, but we are not producing more to pay for this.

Houses where I live have shot up in value from $300k to $1.4m, hence home owners convince themselves they are rich and buy more consumer items - but buyers' incomes have not shot up correspondingly, for they are loading themsvles with debt, betting on increasing house prices - which, experience tells us, will not continue forever. There is an increasingly unpleasant materialism in the UK, which will eventually incur punishment. But I doubt that the punishment will fall on the guilty people.
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Well put.

When you see all the poverty and injustice in the world, we do not deserve it.

But here in Norway (I am sure in the UK too) we do produce a lot more than we did, say 10 years ago. Back then the price of crude oil was 12 $ a barrel. Today it is 71 $. Volume is doubled. Aluminium; then 'about' 995 $ per tonn, now more than 2000 $. Gross fish prices have trippled. Steel has gone up. And so on.

My salary was - about - 33% lower back 1997 (has increased 50%) and my house worth - about - half of what it is worth today, while our cars are - about - three times as valuable. I reported a negative net fortune in 1996 while I have to pay a hefty tax on a net postive fortune today and I pay slightly more than the double in taxes, - and give not quite the double to charity (Which rings a bell).

The value of my stock of photo equipment has quadrupled despite low value of quite a heap of old analogue stuff.

I have quit smoking so both my health and physical condition is slightly better, - which is a lot more important. I was a happy smoker and a few relatives which were among us back in 1996 are no more. I miss them so I am not happier. - While my laughter had a hefty ring to it, - followed by a few cigarette caughts, I now just shake & smile, producing this hissing sound.

Also 1996 was a very important - and happy, year in my proffesional career while I now just trot along towards retirement.

Have I covered everything...?
 
Paul T. said:
Whatever recession does arrive, I don't doubt we deserve it. In the UK, we are gorging ourselves on expensive cars, designer labels, sales of champagne and doubtless cocaine have long been thriving, but we are not producing more to pay for this.

Houses where I live have shot up in value from $300k to $1.4m, hence home owners convince themselves they are rich and buy more consumer items - but buyers' incomes have not shot up correspondingly, for they are loading themsvles with debt, betting on increasing house prices - which, experience tells us, will not continue forever. There is an increasingly unpleasant materialism in the UK, which will eventually incur punishment. But I doubt that the punishment will fall on the guilty people.
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You mention the rootcause of the problem the world economy is facing. The economic expansion going on since about 2002, was not driven by employment and wage gains and capital spending. As we know and as it has been stated in other posts, inflation e.g. in the US is much higher than official statistics state. Now how could consumption drive economic expansion albeit the lack of (inflation adjusted) wage gains?
Unlike in previous cycles, consumption growth was driven by (paper) gains on various types of assets and the liabilties that finance them. In the past you would ask how the economy would drive assets, and not how assets drive the economy. The Fed's easy monetary policy caused excessive credit growth, which in turn boosted all asset prices, incuding properties, commodities, equities, collectibles (Leica?) etc. The first asset bubble which popped was the US housing market. Is the next bubble to burst the excessive US consumption (directly and indirectly being one of the key drivers of booming economies, not just in the US)?
With tightening lending policies, the days of mortgage refinancing to use the funds for consumption are over for the average US household (the subprime lending is dead anyway). US households might be forced to sell other assets to offset declining home equity extraction and to sustain consumption. Such scenario obviously would create a downwards spiral, infecting literally every class of assets.
Unless money supply (at lower rates) and credit growth accelerate further...........and lending standards are loosened up again! But then, isn't this where we just came from?
I think the Fed in the US has an almost impossible job in keeping the patient alive.
Don't believe that central banks Friday move of pumping huge liquidities into the system has anything to do with bailing out some smart wall street kids. The problems are much more fundamental in nature.
 
cmedin said:
While I agree 100% that you shouldn't dabble with options unless you have a good amount of experience and understand them well, I have to disagree with this point of yours. A deep-in-the-money call with a far out expiration can often be--barring high extrinsic value--a nice substitute for the underlying equity (and lets you stick the rest of the money you'd have spent on the stock in a safe place) sans dividends, and isn't a high risk speculation by any means. In fact, one could argue that it reduces the total risk as your investment in the market is less than it would've been had you purchased the stock itself.

Options get a bad rep from people gambling (that's the appropriate term here) on out-of-the-money 'cheap' ones.
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Obviously you do understand the nature of options. Wherefore you might fall into the category of very knowledgable market participants I mentioned.
There are certainly many situations in which option strategies make sense.

Cheers
 
Olsen said:
...Emigrate to Europe.
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Olsen, this earlier post led me thinking. am I wrong in thinking that if things start go hard way in world ecomomics, Europe is in most difficult position ?

I think this way because of big, expensive and stagnant public sector that has been built to Europe countries in past decades by various socialist governments. when things go well in economy, tax money is enough to fuel that system, but this is not so when downturn starts.
it is political suicide to try reform it. if you try touch it, you have half dozen intrest groups furiously not only objecting, but demanding for even more. I think USA, or pretty much any other part of the world is much more flexible than Europe in this respect.
trying to cope with recession is very difficult in Europe, and it can only hope boom starts somewhere else (normally USA) in the world, so European companies could join to party.

Norway might be one of the few exceptions in Europe, because it is rich from natural resources.
 
retow said:
You mention the rootcause of the problem the world economy is facing. The economic expansion going on since about 2002, was not driven by employment and wage gains and capital spending. As we know and as it has been stated in other posts, inflation e.g. in the US is much higher than official statistics state. Now how could consumption drive economic expansion albeit the lack of (inflation adjusted) wage gains?
Unlike in previous cycles, consumption growth was driven by (paper) gains on various types of assets and the liabilties that finance them. In the past you would ask how the economy would drive assets, and not how assets drive the economy. The Fed's easy monetary policy caused excessive credit growth, which in turn boosted all asset prices, incuding properties, commodities, equities, collectibles (Leica?) etc. The first asset bubble which popped was the US housing market. Is the next bubble to burst the excessive US consumption (directly and indirectly being one of the key drivers of booming economies, not just in the US)?
With tightening lending policies, the days of mortgage refinancing to use the funds for consumption are over for the average US household (the subprime lending is dead anyway). US households might be forced to sell other assets to offset declining home equity extraction and to sustain consumption. Such scenario obviously would create a downwards spiral, infecting literally every class of assets.
Unless money supply (at lower rates) and credit growth accelerate further...........and lending standards are loosened up again! But then, isn't this where we just came from?
I think the Fed in the US has an almost impossible job in keeping the patient alive.
Don't believe that central banks Friday move of pumping huge liquidities into the system has anything to do with bailing out some smart wall street kids. The problems are much more fundamental in nature.
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You underestimate that you americans 'produce' something and that the growth and value of that production is considderable in, say, the last 10 years. Your oil production is slightly lower, but the price per barrel more than compensate for that. While your steel industry 'smelled of death' 10 years back it now is strong and healthy. Add a hefty growth of the value of the american agricultural industry and that Microsofts products land in more and more (and more..) PC's, that the Apple looks green and healthy again and that no iPod was around 10 years ago. American weapons have never been more deadly, - and expensive. Your wine production thrives and we just love it. I haven't been so drunk for a long time. And so on... So. Common don't cry!

But like Russia (India, China, Indonesia, I could go on..) your corrupt political system just fumbles away all that wealth so it falls into the lap of a few weird billionairs. It is the government's job to see to that lone mothers are the first to get anything. Because they are raising the next generation americans.

You most probably are right that the US financial problems are much worse than we see now and more 'fundamental'. My hair stand on end when I read about how low banks are regulated in the US. Deregulation has gone all too far. Over here in Europe we have run banks since 'The Merchant From Venice' times. Our banks have gone bankrupt before... European banks are far more regulated, often wholy or partly governmentally owned. Still I fear that some of them are deep into this 'Slime Debt Crises', but we will have safety nets and systems in place to cover losses. Not so in the US.

To run a bank is something quite different than selling pizza. To invest and lend away other people's money demands prudence and responsibilty unlike any other business. In the US safety funds of prudence have been exchanged for 'fancy financial engineering', proposed by smart business lawyers and made into bills by corrupt farmers from Wyoming,- with no understanding of 'how a bank must be run', often lured to sign with campaign funds, business jet travels and trips to Las Vegas.

When it comes to the Federal banks and the Federal debt; there is only one solution: Somebody, a political figure with authority, must approach these bank managers together with, say, John Gotti jr. (I am sure that he will contribute to this cause so important to the nation) - he is fearsome looking alright. And take the 'Tommy Dorsey/give them an offer they can't refuse'-approach; it's either their signature or their brains on that paper stating that they write off their alledged 'debt' on the american people. It is that simple.
 
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Just looking at the changes in that last 30 years on how people spend makes me wonder when the piper will have to be paid. Growing up I watched my parents buy an item only when they had the cash to do so and credit was used only sparingly. I do use credit more than they did but not to the point that I could not pay it off. Basically I live within my means and see no need to have the latest in everything or a bigger house or more expensive car. The vast majority of people today have such high expectations coupled with low fiscal responsibility that they are so debt loaded that I could not sleep nights in a similar position. When incomes do not increase enough to support consumer spending at the scale it is at today the financial powers just slacken the rules governing borrowing and the joy ride continues. I have wondered for a long time how many more rabbits the financial institutions can pull out of the hat to keep this going. The standard of living enjoyed by most middle class people in the western industrialized world is mostly smoke and mirrors with not much substance to it. The blame when it comes should be shared by consumer and financial institutions alike. You can lead a horse to water but you can't make him drink. Maybe too simple but that the way I see it and it will end sooner or later.

Bob
 
jarski said:
Olsen, this earlier post led me thinking. am I wrong in thinking that if things start go hard way in world ecomomics, Europe is in most difficult position ?

I think this way because of big, expensive and stagnant public sector that has been built to Europe countries in past decades by various socialist governments. when things go well in economy, tax money is enough to fuel that system, but this is not so when downturn starts.
it is political suicide to try reform it. if you try touch it, you have half dozen intrest groups furiously not only objecting, but demanding for even more. I think USA, or pretty much any other part of the world is much more flexible than Europe in this respect.
trying to cope with recession is very difficult in Europe, and it can only hope boom starts somewhere else (normally USA) in the world, so European companies could join to party.

Norway might be one of the few exceptions in Europe, because it is rich from natural resources.
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No! It is the other way around!

We will take this fall that is now coming because we have regulated our banks better. How is that? We don't have a corrupt (well, not 'so' corrupt) political system.

Further; due to our social systems people are not thown out in the streets when they can't pay their bills or banks go bust. To be unemployed in Germany is something quite different to being unemployed in the US.

Sure, we are a flock of socialists here in Europe. The wast majority of the european voters of vote for the social democrats making it the largest political movement in _ the world
 
Olsen: since you seem fairly well versed in the goings-on over there, what is your feeling regarding the Swedish economic future? I will be moving back there (left in 1995) with my (American) wife and daughter within the next few years, and being an IT worker I know the industry is booming right now... but I can't really get a good idea of the overall economic climate and expectations.
 
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