Talk of Worst Recession Since the 1930s

[Ex-SD]

From a Nov. 12, 2007 article in The New York Sun by Dan Dorfman:

After what Los Angeles money manager Arnold Silver called “a brutal three days,” the question is: What now for the market?

A Wall Street superstar this year who runs Balestra Capital Partners, Jim Melcher, says he’s “worried about a recession. Not a normal one, but a very bad one. The worst since the 1930s. I expect we’ll see clear signs of it in six months with a dramatic slowdown in the gross domestic product.”

Balestra Capital, a $350 million New York hedge fund, was up 3% for the past three market sessions, when the Dow Jones Industrials, spearheaded by widespread declines in financial stocks and fears of more billion-dollar-plus asset write-downs, tumbled more than 677 points, or about 4.5%. The Nasdaq fared worse, skidding about 7%, triggered by across-the-board declines in those fast-stepping technology stocks.

Balestra has increased in value by 175% so far this year, Mr. Melcher tells me. A 9-year-old fund, it has posted compounded annual growth of about 30% since its inception.

Mr. Melcher, a market bear, had some pretty discouraging words. “What I think is not good for the country, but good for me.” he says. His basic advice to the country’s roughly 80 million stock players: Run for the hills — the worst is far from over. An investor’s stock portfolio now, he believes, should be only about half of what it might normally be.

With the housing market in a state of collapse — and he says he believes it is far from over — Mr. Melcher argues that average homeowners will not be able to withstand the kind of recession he sees, given the added burdens of rising energy and food costs, and continued deterioration in the credit markets.

Noting that consumption is already slowing, Mr. Melcher figures sharply rising unemployment is inevitable. Another of his worries is that central banks around the globe, America’s included, are debasing their currencies, which is setting the stage for a new round of higher inflation. Our bear figures the next six to 12 months will be awful for investors as the market goes down “pretty substantially.” His frightening outlook calls for an additional 20% to 30% decline from current levels. A drop of that magnitude would put the Dow down in a range of roughly 9,100 to 10,400.

Entire article, here: http://www.nysun.com/article/66268

[cashman]

Citigroup just downgraded E-Trade Financial. Warns of possible bankruptcy.
http://www.marketwatch.com/news/story/e-trade-backs-off-earnings-forecast/story.aspx?guid={2FE9802B-A85A-4674-A43C-C3F1FE6980AC}&siteid=yahoomy

[cashman]

Citigroup just downgraded E-Trade Financial. Warns of possible bankruptcy.
http://www.marketwatch.com/news/story/e-trade-backs-off-earnings-forecast/story.aspx?guid={2FE9802B-A85A-4674-A43C-C3F1FE6980AC}&siteid=yahoomy

[cashman]

Citigroup just downgraded E-Trade Financial. Warns of possible bankruptcy.
http://www.marketwatch.com/news/story/e-trade-backs-off-earnings-forecast/story.aspx?guid={2FE9802B-A85A-4674-A43C-C3F1FE6980AC}&siteid=yahoomy

[cashman]

Citigroup just downgraded E-Trade Financial. Warns of possible bankruptcy.
http://www.marketwatch.com/news/story/e-trade-backs-off-earnings-forecast/story.aspx?guid={2FE9802B-A85A-4674-A43C-C3F1FE6980AC}&siteid=yahoomy

[LostCat]

What was american’s debt to savings ratio back in the 30’s? Did we have the same level of credit available back then.

Seems to me the big difference between today and the 1930’s is, please, eventhough broke, used cash for everything so the banks were able to use some of that to handle the slamming that took place. Now where do the banks and the feds go? No one has savings anymore. it’s all credit.

We’re SOL..

[LostCat]

What was american’s debt to savings ratio back in the 30’s? Did we have the same level of credit available back then.

Seems to me the big difference between today and the 1930’s is, please, eventhough broke, used cash for everything so the banks were able to use some of that to handle the slamming that took place. Now where do the banks and the feds go? No one has savings anymore. it’s all credit.

We’re SOL..

[LostCat]

What was american’s debt to savings ratio back in the 30’s? Did we have the same level of credit available back then.

Seems to me the big difference between today and the 1930’s is, please, eventhough broke, used cash for everything so the banks were able to use some of that to handle the slamming that took place. Now where do the banks and the feds go? No one has savings anymore. it’s all credit.

We’re SOL..

[LostCat]

What was american’s debt to savings ratio back in the 30’s? Did we have the same level of credit available back then.

Seems to me the big difference between today and the 1930’s is, please, eventhough broke, used cash for everything so the banks were able to use some of that to handle the slamming that took place. Now where do the banks and the feds go? No one has savings anymore. it’s all credit.

We’re SOL..

[bsrsharma]

E*Trade Bankruptcy is likely; I have quite a bit there in brokerage & bank accounts. Don’t know whether it is time to get worried. Has anyone here dealt with a bankrupt brokerage? How difficult/easy to get your assets back? How does it work? I am aware of the FDIC process, but how to move stock accounts?

[bsrsharma]

E*Trade Bankruptcy is likely; I have quite a bit there in brokerage & bank accounts. Don’t know whether it is time to get worried. Has anyone here dealt with a bankrupt brokerage? How difficult/easy to get your assets back? How does it work? I am aware of the FDIC process, but how to move stock accounts?

[bsrsharma]

E*Trade Bankruptcy is likely; I have quite a bit there in brokerage & bank accounts. Don’t know whether it is time to get worried. Has anyone here dealt with a bankrupt brokerage? How difficult/easy to get your assets back? How does it work? I am aware of the FDIC process, but how to move stock accounts?

[bsrsharma]

E*Trade Bankruptcy is likely; I have quite a bit there in brokerage & bank accounts. Don’t know whether it is time to get worried. Has anyone here dealt with a bankrupt brokerage? How difficult/easy to get your assets back? How does it work? I am aware of the FDIC process, but how to move stock accounts?

[an]

bsrsharma, I am in the same situation minus the bank accounts part. Brokerage account is insured by SIPC, not FDIC, so I wonder how it work. If they declare bankruptcy, how easy is it to transfer the fund to a different brokerage company? Accounts I’m worried about is my IRA. Should I worry and move the money now? Seems like a possible “run of the bank”.

[an]

bsrsharma, I am in the same situation minus the bank accounts part. Brokerage account is insured by SIPC, not FDIC, so I wonder how it work. If they declare bankruptcy, how easy is it to transfer the fund to a different brokerage company? Accounts I’m worried about is my IRA. Should I worry and move the money now? Seems like a possible “run of the bank”.

[Author]

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