Chile Forum

Roubini, speaking on Friday about the outlook in his view. Pretty grim.
http://www.iadb.org/news/videos.cfm?art ... n&parid=7#

In related news:

From The Sunday Times, October 12, 2008:

IMF warns that markets could collapse by another 20%

Separately, the IMF’s chief economist predicted that shares could slump by another 20% before stabilising. G7 finance ministers pledged to take all necessary steps to support the banking system and stave off an economic slump.

http://business.timesonline.co.uk/tol/b ... 926584.ece

My daughter-in-law had Greenspan as a client when she was a tennis instructor at his club in D.C. He was not very good at playing the game. He is, after all, a “gray” person. Since she was his tennis instructor, she was invited to affairs where he was present. She shared the fact that he made everyone, or at least all acquiesced, call him, Alan, “the chairman,” including his wife. Really. His wife.

When I lived in Chile, hace tantos años, de 1962 a 64, Allende and socialism were burgeoning through the parliament and in murals on the tall walls lining the highway between Vina and Valparaiso. In subsequent years. I learned that a primary source of the situation that led to the 1973 coup was that those who had money in Chile invested their funds outside of the country, not in Chile and its people. Little me, I spent much time with “los gallos,” mis amigos de la calle, what was then the closest one might get to a middle class in mi segunda patria, o quizás mi primera. In this practical life, it is economics that greases the wheels, and our humanity, our need for each other that fuels the engine and is taken advantage of. Historically, Chile is an exceptional example of democracy, and what can happen when we choose to accept greed and defer to fear, rather than connect with our hearts. There is much irony in life, and for me, since this country and its people, my dear friends, significa tanto, I look into the mirror that is provided for each of us, and see you. O sea que, lo que pasó en Chile desde los años 40 hasta 1973 fue nuestra responsibilidad, y esto continua. No es coincidencia que dos gran poetas originaron en el pais – Mistral y Neruda. Como que yo era renacido en este lugar, en tu pais, siento por ellos.

Aqui, esto es un experimento, una divulgacion de lo que queremos lo mas. Lo mismo que ocurio en Chile, hace tantos anos.

Ahora, this great country, great experiment, does for me what it is supposed to do – it asks me to be critical. I don’t really like to do this, examine my life, cast an eye toward the big picture, look at where all of us are going. What, me? You? Perhaps it’s the poet in me, Gabriela and Pablo. Chile and my friends there certainly had a role in teaching me what is important about life.

It is a most wonderful thing to poder pensar y hablar en un otro idioma. Pero, tambien, lleva una responsibilidad. This country is truly an experiment. When I was in Chile, in 1962, we were the cat’s meow, we could do no wrong. Then we assassinated our leader. Then we killed another. Now we are committing slow suicide, which is, ultimately a request for help. O sea que, we need very much to do this together. This is what Chile, los gallos, los viejos, me ensenaron. I will do my best. Just don’t forget that there was one gringo who spent a bit of time in your country, who appreciated very much his lessons, and who remembers almost daily Chucho, Gaston, Chico, Pedro, Julio, Alfredo, Tatiana, Yolanda, and very much, Vina. Quizas me volvere algun dia. It is tough becoming a citizen, ciudadano del mundo, pero cada uno de nosotros tiene que hacerlo, al menos por nuestros hijos.

Cuidanse
Greg from the United States. an experiment in freedom, and I miss Chile, the other experiment

I seen the most amazing thing Friday afternoon on CNN. During the after market buisness report, they where reporting the latin American markets. They reported that Brazil closed down like 3.9% on the day, like nothing much was happening. At no point did they mention that Brazil suspended trading for the second time because of better than 10% drop in the market. They reported that Russia suspended trading, but nothing on Brazil. One of the biggest economies in the World, just had a down day. Nothing to worry about there. Are you kidding me????

Don't trust just one news source in this mess. Assume they are all either lying, wrong, or omitting things. Verify your info, because things are moving so fast even honest sources might be late to the party. Under these circumstances with global instant everything, the show might be over if you blink.

Question: When we say that "the market is down 30%" (or whatever number you want to use), what does that really mean? From my admittedly infantile understanding of markets and finance and macro-economics, it seems that these are not "real" losses. it means that the DJIA has gone down 30%, but this is just "wealth on paper", right? it isn't a tangible possession. it's a piece of paper with some numbers on it. big deal.

it's like equity......the difference between what people believe a property is worth and what is owed on the property. the real estate "bubble" was all about building make-believe wealth through make-believe equity. isn't the stock market the same thing...that is...make believe?

so then....for people who don't have "real property" (with make-believe equity) or lots of investments in the stock market, what are we "losing"? and for the people that do...well...where did that money go? it wasn't real to begin with. it's a concept, and the damage is psychological more than real, except in the way that it changes human behavior.....ahhhh....there's the REAL issue, right? no more trust, no more confidence, no more lending money, no more belief that the system is stable, everyone retreats to a defensive position until the new institutions with new rules are developed and then we start over.

this is major adjustment for people that shuffle papers for a living and cut deals on the golf course, but for people who build real things and provide real services, people who are close to the earth, what difference does it make? am i the only who can't help but smirk a little bit because the capitalist bubble is losing air at a historical rate? my job is safe, my pension is safe, and the arrogant f**** who created this mess are getting a taste of reality.

i am completely fulfilled watching a soccer game in the park with a beer in one hand and my girl in the other. gadgets? who needs them? the upside of all of this may be that more people learn to appreciate simple things and warm relationships more than before.

For those not in Chile or who don't follow Chilean TV and news on the net, this weekend was full of coverage of the AFP plans losing money. The "A" plan I recall has lost around 25%. So the impact on the middle and upper class is becoming evident.

I bet the next problem of the worldwide interbank systematic credit squeeze will hit the rest of the population when important imports are delayed or cancelled.

This is all in the offing in the immediate future IMO if the world does not coordinate and implement a new Bretton Woods system this week.

cali_chile48 wrote:... my job is safe, my pension is safe, and the arrogant f**** who created this mess are getting a taste of reality.

Will you be my life and financial advisor? Can I pay with Cristal beers?

sure.....go teach in the public school system in the US for 25 years....ooops...too late!

eeuunikkeiexpat wrote:

cali_chile48 wrote:... my job is safe, my pension is safe, and the arrogant f**** who created this mess are getting a taste of reality.

Will you be my life and financial advisor? Can I pay with Cristal beers?

Wow, that is a strong statement - I thought California was worse than Arizona. The Arizona Retirement System for State employees has been significantly impacted. There is a lot of discussion about the coming avalanche of retiring boomers, large unemployment, diminished returns, and the ability to honor current obligations. Sooner than later we'll here talk of adjusted benefits, or worse.

I was at a large gathering recently where a state-level official mentioned that city and state agencies, civil service, law enforcement, and health services are coordinating activities "to be prepared." When asked to be prepared for what, the person said s/he couldn't discuss it. You could hear a pin drop in the silence. I think everyone was a bit surprised, but it only makes sense to prepare for the possibility of stress on systems before they are overwhelmed.

We could very well see a wave of unemployment. Here's a timely example:


http://www.guardian.co.uk/business/2008 ... oymentdata

More than a million Britons will be out of work and on the dole by next month as the
toxic fallout from Black October filters down to ordinary families, economists are warning.

A bleak Christmas lies ahead for many as the City turmoil spreads into the so-called real
economy. Companies are now being squeezed on two vital fronts, with shoppers
abandoning the high street and bank lending drying up, making it almost impossible for
smaller businesses to get credit to stay afloat.

Geoff Hoon, the new Transport Secretary, yesterday warned that there were 'potentially
serious consequences for small business, for employment' from the current crisis, reflecting
private warnings to the Prime Minister's new economic 'war cabinet' that job losses and
business collapses later this year are now virtually inevitable.

Official unemployment figures for September, due on Wednesday, are expected to show
another increase in job losses - although this will not yet be the sharp upward spike which
is expected as the full consequences of last week's stock-market crash filter through. Some
forecasts suggest that unemployment will hit two million by Christmas.

Alan Clarke, economist from the bank BNP Paribas, said the number of those claiming unemployment
benefit was due to break the one million mark by the end of next month at the latest, with up to two
million looking for work by December: he is forecasting unemployment to hit 7 per cent by the middle
of next year and carry on rising until 2010...

...At the height of the 1980s recession, three million were unemployed. The question now is how far
the pain will spread. As one boss told a senior CBI official: 'We know there is a tsunami coming, but we
do not know if it's going to knock us over or just wet our feet.'


U.S. Financial Data for the week ending October 10, 2008 prepared by the Federal Reserve Bank of St. Louis.
http://research.stlouisfed.org/publicat ... 0/usfd.pdf

It looks like it is out of control. All the gestures, rhetoric, and liquidity injections may not stop the cascade.

I found this while trying to make sense of it all:

Increasing unemployment > Increasing deflation on property assets > Increase in defaults > Increase in bank failures> Increasing unemployment. Rinse and Repeat.

So if trickle down makes any sense, and the UK is going to have significant job losses as a result of what is in the system right now, regardless of any action this week effective or otherwise, then it stands to reason Brazil and other large markets will experience similiar issues, and the impact will be system.

The best argument I've heard in awhile came by analogy. Regardless whether you perceive global warming is human made, one has to concede humans may be a contributing factor. That said, there is enough CO2 in the environment to have a predictable impact for a number of years, and that impact will be observable and measurable. By analogy, there are enough CO2-like elements in the economic systems that will have a predictable impact for a number of years that we will observe and be able to measure it as they work themselves through the system. Of course if the game is changed, unlike a natural system, all bets are off because we're in the realm of perception and paradigms, not physics or chemistry. Even if next week has a new Bretton Woods system, will there be confidence?

I'll take a Royal Guard over a Cristal any day.

Putenio wrote:... Even if next week has a new Bretton Woods system, will there be confidence? ...

IMO a new world monetary system backed in some form by gold (again designed in a way that is more for their benefit than ours) is the only way to restore confidence. Rumors have already been floated to see what the reaction may be.

Argentina and Brasil have added to their gold reserves recently but Chile - NADA!! Maybe they think they can just mine it if needed. With all the national reserves sitting in USD, now would be the time for Chile to readd to reserves after having dumped all its gold back in the 80s and 90s.

Putenio wrote:... I'll take a Royal Guard over a Cristal any day.

Sorry, times are hard. Deal with it, or I'll drink it myself after a liter of Escudo starter.

maybe chile should back their currency with copper! or alerce! give me an austral....

Bold emphasis mine.

Grain piles up in ports

John Greenwood, Financial Post
Published: Wednesday, October 08, 2008

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.

“There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”

So far the problem is mostly being felt in U. S. and South American ports, but observers say it is only a matter of time before it hits Canada.

“We’ve got a nightmare in front of us and a lot of people are concerned it’s going to get a lot worse,” said Anthony Temple, a grain marketing expert based in Vancouver.

The port troubles occur as financial institutions worldwide experience an unprecedented level of failures; even the strongest global banks are taking shelter in government bailouts. Yesterday, the U. K was expected to invest as much as £45-billion ($87.01-billion) in three of the country’s biggest banks, while the U. S. government rushed to put in place its US$700-billion rescue package for beleaguered financial market players. Ottawa has so far resisted pleas for direct financial aid for exporters.

Access to credit is key to the survival of maritime trade and insiders now say the supply is being severely restricted. More than 90% of the world’s trade by volume goes by ship.

The Baltic Dry Goods Index, the main measure of shipping rates, is down 74% from its high back in May when trade with China was still strong.

“The credit crisis has made banks nervous and the last thing on their minds is making fresh loans,” Omar Nokta, an analyst at investment bank Dahlman Rose, said in an interview with Reuters.

While shipping has always been a cyclical industry whose fortunes rise and fall with the global economy, analysts said the current crisis over the drying up of credit is something they have never seen before.

Jason Myers, head of the Canadian Manufacturers and Exporters, said exporters across Canada are getting caught up in the turmoil as customers delay payments, forcing them to shoulder the cost.

“What some companies are saying is we can’t pay you until our customer pays us, so it becomes a question of who bares the financial risk and the cost,” Mr. Myers said. “We’re hearing about it more and more.”

What that means is that manufacturers are getting hit as revenue slows and longtime customers disappear from the order book altogether. As profits decline, investment in product development starts to fall, too, he said.

The Canadian Wheat Board, one of the world’s biggest grain marketers, has yet to refuse a customer because of poor credit, according to a spokeswoman. “As of this moment we haven’t run into that problem,” said Maureen Fitzhenry.

Officials at Viterra, Canada’s leading grain handler, were not immediately available for comment.

The meltdown in financial markets has resulted in a dramatic slowdown in maritime trade, with major ports in Canada and the United States preparing for sharply reduced activity after several of the busiest years on record.

Statistics from the Port of Vancouver have yet to officially register a drop but at Los Angeles and Long Beach, Calif., among the biggest U. S ports, imports have already declined 9% this year.

gregf wrote:This is sort of a time of opportunity isn't it?

With all the stocks going down so drastically -- if you picked ones that the most likely to be back to normal or better in 10+ years, you could clear a hefty profit, right? For example, I'm 24, if I invested just a modest $5k in a few wise places, 10-20 years from now those $5k in stocks should be worth a lot more, right?

I've been thinking of doing something like this. Am i an idiot? I don't know anything about trading so I'm not sure I should even if it IS a good idea, though

Insider trading buying of stocks this month shows lots of it.

There is speculation that now that everyone has been forced into holding dollars, the next move by the Masters of the Universe would be to devalue the dollar and screw the investors and speculators again.

So where would the insiders place their funds before pulling the plug on the dollar? - stocks, gold, silver, real estate, etc.

Definitely NIA. And DYODD. And good for you if you have the means to take advantage of the situation.

I was just taking a look again at an idea that has been out on the internet for a while. P2P loans. Companies like http://uk.zopa.com/ZopaWeb/, and others that put individual lenders and borrowers together. It is not without its problems, but it is the concept that is intriguing. That organized financial institutions might have cut themselves out of the buisness. People with money don't trust them, and people who need to borrow can no longer get credit from them. So, where do they turn? They have to go to more informal markets.


Well, a couple of years ago I had kicked around the P2P loan idea as a potential solution to the new gringo with no credit in Chile problem, and spent a lot of time looking in to these P2P loan sites and how they work. Rejected it for a bunch of reasons as not workable in Chile ( expensive legal and regulatory hurdles ), but have a modified plan to implement at some point something of this nature.

So anyway, the crash got me thinking about them again and wondering how well they are going to do. Thus, I was shopping for any that might potentially have had an IPO, but none have gone public. Still, going to keep an eye on them. They are a new idea on the internet, and there are not many left.

They illustrate however the potential for the entire system to be reorganized top to bottom all by themselves. The wonders of natural capitalism is that it is kind of like the design of the internet, it is designed to reroute itself around corruption and politics like the internet around bad connections and censorship. Even during serious communism in China and Russia, people entered in to barter and trade. They will figure out a way.

I went to take a look at P2P again as potential investment targets. I am looking for all those businesses that will go good in an economic downturn. The guys that really shine in bad times. For instance I think Open Source related companies are going to make bank and kick ****, as buisness cut back on IT expenses. IBM just proved that theory with their quarterly report. I would be surprised if Microsoft or anyone else with commercial licensing dependency is still standing when this dust settles. I also think the light and fast online banks with little overhead are going to do well in the long run, and be the first to recover. The guys that can cut out the fat easily, without needing to close 5,000 buildings around the World and lots of other very fixed infrastructure.

If all else fails, I have already invested 5,000 pesos in sufficient seeds for at least two years of happy gardening in Southern Chile ( the truth is, I have just been meaning to plant a garden and have no time ).

Make sure those seeds are heirlooms! And plant a few Kuntzmann seeds for me, I'll be down to harvest them when cold