How low will the Dow Go?

I would take Billy T over people who did not see this coming. He predicted it years ago.

 

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You must not have read the link I posted. That line was the final sentences of the article in Newsweek.

 

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First, I never singled out one country vs another.
Second, we have seen poverty increase in other areas of the world before the financial mess began outwardly (though no doubt well known a while back).

I am aware you feel that Brazil is insulated from these issues however, the dependency of the growth of these very countries is tied directly to the purchace of products by these foreign countries who now are facing financial issues.

Below is a list of the top-ten countries purchasing Brazilian exports in 2005. Although the U.S. is the largest single country to buy the South American giant's exports, Europe represents Brazil's largest customer. In eleventh and twelfth place, the U.K. and France accounted for 2.2% and 2.1% of Brazil's exports respectively.

1. United States (18.9% of total exports)
2. Argentina (8.4%)
3. China (5.7%)
4. Netherlands (4.5%)
5. Germany (4.2%)
6. Mexico (3.5%)
7. Chile (3.1%)
8. Japan (3.0%)
9. Italy (2.7%)
10. Russia (2.5%)

http://internationaltrade.suite101.com/article.cfm/brazil_s_trade_buddies

Brazil Unemployment:
http://indexmundi.com/map/?t=0&v=74&r=sa&l=en

Additionally China is very dependent on the USA/EU for a market to export too:

Exports: $1216 billion (2007)
Exports - partners: US 21.0%, EU 18.1%, Hong Kong 17.0%, Japan 12.4%, ASEAN 7.2%, South Korea 4.7% (2004)

Imports: $953.9 billion (2007)
Imports - commodities: machinery and equipment, oil and mineral fuels, plastics, optical and medical equipment, organic chemicals, iron and steel
Imports - partners: Japan 16.8%, EU 12.4%, ASEAN 11.2%, South Korea 11.1%, US 7.9%, Russia 2.2% (2004)

http://en.wikipedia.org/wiki/Economy_of_the_People's_Republic_of_China

Now I wont argue details on Brazil's economy, which has made remarkable improvements over the last 30 years, but one only needs to look at their list of exports and weed out the must haves from the luxury items to come to the conclusion the economy of Brazil is not based on Must Haves Globally. Hence the closure of so many starbucks coffee houses earlier this year. Do you really think unemployment in Brazil will not increase as demand for their exports falls?

While they have petro to export, those prices are falling also. I dont know where the profit point comes in on their sugar vs petro comes into play ie when its cheaper to drill than grow.

 

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True, you said "developing countries" so I only commented on the top four (the BRICs)

Not my POV at all. In many post I have said China's GDP growth rate would still be several times greater than the US and EU's, but might fall to ~6% and that Brazil (and other suppliers to Asia would become "economic colonies" of Asia, but still have small positive growth while US and EU were in depression.

Your 2005 data is quite obsolete. Brazil’s exports are rapidly growing. Currently Brazil's exports to the US and to China are essentially equal with those to US a rapidly dropping percentage of the total, even before Joe American maxed out his credit card.

For one direct observation of this, every July I sit in the NYC Macy ladies shoe department and read newspaper while wife shops. (Dollar has lost so much value she thinks everything there is cheap.) In 2005 (or 2006?) after finishing with paper I started to pick up shoes, noting where they came from - 2/3 came from Brazil, which makes sense as Brazil has world's largest cattle herd and cheap skilled labor. This year, (2008) not one did. (They leave me alone in the ladies department. - In men's department salesmen keep coming to help me.)

Brazil's coffee is below Starbuck standards - Coffee is way down on the list of Brazil's exports - you have old stereotype impression. (Too many Carman Miranda movies I bet.) The soy beans crop is perhaps 20 times greater and iron ore pellets are second only to it in value. Embaraer sell mid size commercial jet planes to about 30 countries but ironically very few to Brazil except some fighter trainers. (A new company, called Jet Blue, will soon be flying in Brazil. It will be the first to use them. I think buying from Embaraer was a factor in their getting permission to operate in Brazil.) I own share in them. Here, from my file is some second quarter report data:

2Q08: Net sales = $1,635.0e6. Net income = $134.4e6, so diluted earned per ADS of US$ 0.7427. New customers to firm order backlog (Dubai’s Star Group, + TRIP Linhas Aereas, + a Brazilian airline). Firm backlog on 30June08 = $ 20.7e6, a record, includes corporate jets at ~$6.0e6 and 170/190 jet family total of 847 firm orders, which have also 827 options, not included. Delivered 52 aircraft during 2Q08, up 44.4% on 2Q07, closing out the semester with record 97 jets delivered, up 59% over the 61 airplanes in first semester of 2007. Expecting still to deliver 200 jets in 2008, , as well as ten to 15 Phenom 100 jets. (Just starting to deliver these corporate jets - order book has first delivery now available inearly 2012! - it is like the one that collided with big Boeing, broke it into two pieces, killing more than 300, but the Embaraer jet flew on for 30 minutes, landed safely with no one injured. If you have a used one, you can sell it for at least 120% of the price of a new one.

Brazil sells more cars per Capita than the US does, and they are flex-fuel - more modern and generally more desirable. Brazil is now building it first semi-conductor -chip factory and already makes computers, but not a well as Asia does yet.

Also "falling oil prices"actually helps Brazil and will for several years still. Most of Brazil's current oil is heavy, of low value, and sold to import the lighter oil it refineries need. Brazil is net exporter of liquid energy, not even counting the alcohol but on cost basis, oil imports exceed oil exports. two new refineriers are in construction that can use the heavy oil. The newly discoverd deep "pre-salt" oil is light but it will be a few years before much is commercially available. Probably, Brazil will mainly sell it as most car will be on 100% alcohol then and these new refineries will met the local demand for gasoline with the heavy oil from the old field, for decades as little will be required.

SUMMARY:
Your comments reflect an obsolete understanding of Brazil and it trading patterns. US is still important but rapidly becoming less so. Sure a collapse of the US now will hurt Brazil, but China and Asia in general are taking over the old US role rapidly. This is true of China too - soon they will not need to sell anything to the US and for at least a year already their sales to EU have been larger than to the US.

 

GDP grows when there is demand for the products offered. 1 in 6 americans is struggling. Not feeling a pinch but struggling month to month. As far as creating new numbers the data is not quite obsolete. I chose to use it because it was easy to read and was to the point I was trying to make. Heres a more current view:

http://www.state.gov/r/pa/ei/bgn/35640.htm

Quibble all you want over the source, but Brazil is not out of the woods by a long shot.

Under Economy Heading:
"However, significant vulnerabilities remain. Despite registering year-on-year declines from 2004 to 2007, Brazil's local currency government debt remains high. Total tax burden is high, and income and land distribution remains skewed.

Sustaining high growth rates in the longer term depends on the impact of President Lula's structural reform program and efforts to build a more welcoming climate for investment, both domestic and foreign.

Export promotion is a main component in plans to generate growth and reduce what is seen as a vulnerability to international financial market gyrations. "

Site after site reports coffee as one of their main agriculture exports.

Brazil is the world's largest producer of sugar cane, coffee, tropical fruits, frozen concentrated orange juice (FCOJ)... Brazil is also an important producer of soybeans (second to the United States)...

I would expect more car purchases per capita than the USA at this time. We've been offering cars to US citizens for ownership for a very long time. Everyone (generalization) all ready has one. I dont expect to invest in a new car anytime soon. I do expect some repair work in the future.

As demand continues to fall, as prices continue to fall, brazil should find itself in a position of paying more for its light.

As far as 100% alcohol via sugar, again I do not know where the breaking even point is vs oil. As demand increases (as it will) internal consumption will eat away at export availablity (regarding self sufficiency). Brazil does have alot of forest left to chop down and convert. Brazil does have alot of poverty to address.

Not as obsolete as you would like to think. You do wear rose-colored glasses when looking at Brazil's economic situation and thats fine. Truth is I paid off my debt almost 3 years ago predicting an economic downturn.

I for one would be pleased if China sold nothing to the USA.

 

Starting sentence with "however" makes one wonder what came immediately before. Here is what you omitted:

"{GDP} grew approximately 2.8% in 2006 and 4.5% in 2007. Brazil is now a net creditor nation, and sustained growth, coupled with booming exports, healthy external accounts, moderate inflation, decreasing unemployment, and reductions in the debt-to-GDP ratio led two major rating agencies to give Brazil an investment-grade sovereign debt rating in early 2008. ..."

The High internal debt is much less than the US's debt on both absolute and per capita basis. As your reference notes: Brazil is now a net creditor nation.

When was last time that was true of the USA? I might also add that the reason the internal debt is high iws dierct result of Brazil's central bank trying to prop up the falling dollar. a Few years ago, Brazil had about 30 billion dollars in reaserves and dollar began rapidly dropping in value wrt the Brazilain Real. - That hurt export manufactures. "De-industralization" was new word in all the newspapers and wsimple repetative jobs were being lost as factories closed. (Recal my direct observation of this in the ladies shoe department of Macys.) Politicians do not like unemploied workers so they lean on the central bank to buy up dollar, making the dollar more valuable with higher demand for it.

So the Central bank did give Real to buy dollars. If only that, were done than lots more Real in circulation would make inflation return, so the central bank offered bonds, at the highest real interest rates in the world. (The nominal peak rate was 23%! and real rate abouve 1.5% / month! - I have some.) This removal is a standard economic proceedure called "sterilization" but does make your local debt increase (and buying the dollars is why Brazils dollar reserves are now 207 billion dollars.) The domestic debt (in Real of these bonds issued to steralize) is very slightly more than 1 trillion Reais. Again, however this on per capita basis, is much less that the US's internal debt, even if the un-payable promisses made to the retiring Baby Boomers is not included in the US debt.

See my post today in the BRIC news thread- GWB is asking Lula for help!n (I suspect he wants Brazil to lend the US some of the 207 billion.)

 

Almost hit 9000.

 

Gains still riding on the backs of other peoples (foreign) investments. Reality is imports to the USA is falling and will continue to fall. Brazilian growth is based on speculation towards continued export gains. We've seen a bit of the reality of speculation via the market failures. Infrastructure gains are an effort to increase exports, but who is going to buy your stuff. Not Macy's according to your observations.

Temporarily a net creditor nation.

"But the Bovespa stock index .BVSP sank to its lowest in around two years on Wednesday morning, and is down almost 50 percent from its all-time high of 73,920 points on May 29.

Brazil's currency, the real, has lost about one-third of its value in just over a month."

http://www.reuters.com/article/reutersEdge/idUSTRE4976YB20081008

After how many years of flat-line/red-line? Good thing Brazil was able to borrow so much during all those lean times eh? Macy's obviously found brazilian shoes to be a lesser value rather than greater value. Doesnt matter to me, I dont shop at Macy's (who have reported a decline in sales and decline in purchase orders).

Shrug. Easy come easy go.

I understand why you promote Brazil as the land of milk and honey. From what I gather, you have invested heavily in that country and stand to make alot of money if things go well. Salemen do promote their products as all sunshine, no rain when they work on a commission. When they make an hourly wage, they tend to be more honest about the competition. Anyways, thats my experience as an average Joe/Jane American consumer.

Nothing wrong with that, and you may truly believe Brazil is the answer. I would guess theres a few people visiting the forum who wish they would have paid more attention when you were posting your predictions. Like I said, I worked very hard to pay off all my debt and achieved that almost 3 years ago in anticipation of this very situation.

 

Why would you pay off your debt? Inflation benefits debtors not creditors.

 

Well time to collect the bets. We are now in the 8k neighborhood.

 

Nothing to collect yet joe, she's not done sinking yet!

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Bankruptcy of GM will send index below 7500, but subsequent hyperinflation will see index at 50,000 within five years.

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I know. I am thinking it will stabilize at 8k...but that remains to be seen. It would not suprise me to see it break 8k. It would suprise me to see it break 7k. I am thinking the sinking will stop when the Treasury starts buying the problem securities.

 

There will soon be no more stock market, it's a flawed system for keeping nations alive. Watch and see, it will fail and then everyone will need to build little villages with easy access to crops, etc. It'll be no more taxes cuz land isn't really anyones anyway it's free, indians showed us that

 

No your opinion only, not “reality,” except true that exports to US are falling but most of rest is far from the facts; However, it is true that many are investing in Brazil to make big profits. That is hardly exploiting the "backs of foreigners." The only backs I know of that are being exploited are Brazilian backs doing cane cutting in the fields for minimum wages (or less if not good cutters) etc.

The influx of foreign money has made life harder for simple farmer with a few dozen acres that his family has farmed for generations. The taxes are rising as foreign investment in farm land has more than doubled the value of it in last three years. It is being operated in ever larger units. Recently I saw an aerial photo of a V shaped "wedge" of 33 very large air-conditioned combines marching across field of soy beans under GPS guidance as they could not see anything but soy beans, ready to harvest, from horizon to horizon. Each was trailed by huge dump trucks. The storage areas are like covered foot ball fields. Brazil badly needs to (and slowly is) improve it rails system. At the peak of soy harvest large 18 wheel truck are lined up bumper to bumper on the side of the road for 22 kilometers sometimes to get the soy beans to the waiting ships. Send more capital to Brazil – there are great economies (and profits) to be made still.

The just released data on the grain harvest show it is yet another record. - 144.6 million metric tons. Here is the external dollar sales data (only farm exports) for the 12 months ending in September 2008. Agricultural total = $71 billion (US dollars), also a record. First three contributors were: Soy at $17.7 billion, Meats at $14.5 billion and forest products at $9.5 billion. A lot of the meat goes to EU and Russia but shipments to the oil rich nations* are doubling nearly every year. The Chinese eat mainly pork and Brazil is just starting to sell significant quantities of it to them. (It will be better for both to feed the pigs here than to ship all that soy to China. Same is true of iron ore pellets. China is building large (may be largest in the world?) sheet steel plant in Brazil. Brazil's Vale do Rio Dolce is world’s largest iron ore exporter to China now, but if Australia can keep its pits from flooding and get it port bottleneck problems solved, they may surpass the Brazilian ore shipments to China, but Brazil will remain the main supplier for EU of most minerals.)

LET'S TELL ONLY FACTS, NOT OFFER OPINIONS.

YES and mainly because foreigners who desperately need cash the banks will not lend, are taking some of their > 500% gains made over the last 5 years out. I forget the US market peak but the dow has returned to level of five years ago, GM to level it had back in 1953 - 55 years ago.) GWB spent 15 minutes on the phone speaking with Brazil's president, yesterday. Topic discussed not disclosed, but I suspect begging for a loan of some of the 207 billion dollars Brazil holds in reserves.

Just when do you expect Brazil to cease to be a "creditor nation"?

yes. Foreigners are desperate to get funds whereever they can now to met payroles, replace essential equpment etc.. I bought Real at more than 4 R$ to the dollar about 5 years ago. (In local “cambio” where rate is slightly higher than the official rate.) It did hit low of only 1.56 as you noted about a month ago and has returned to 2.3R$/dollar. - You are cheery picking data and greatly distorting fact that on a year or so time scale (you chose any 15 months in last three years.) the dollar is sinking with WRT the Brazilian Real. - that is what one would expect when US is running ever larger trade deficits and Brazil is running trade surpluses....

As SAM pointed out to you, that was exactly the wrong thing to do. When dollar is sinking you want to be in debt. This dollar rise of a few months duration is not important, if it is caused by the panic and the desperate need to raise cash that banks will not met. These trillion being created out of thin air and given to banks with no restraint on where they are invested will build more factories in China, more resorts in Dubai, etc. making it even harder for Joe American to survive.
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*Just an interesting strange aside: Brazilian bus maker, Marcopolo, got large order from Saudi Arabia, for top less buses. It seems that when one goes on the “Hague” to Mecca, it is OK to ride, if your head is exposed to the sky. They have lots of petro dollars to invest and have been burnt once too often in the US, so they are coming to Brazil now. New trade commission visiting every week it seems.

 

Its okay to ride anytime. Probably they mean for those who cannot perform the tawwaf, but where the hell is the space for a bus???

 

I don ot know details, but think they walk around the big white stone - I think the busses just get them close from far away. I think the whole trip to Mecca is under some rules. I know they can fly and airplanes are not top-less. I really do not understand. Perhas one of the islamic posters can explain.

 

So, has the DOW hit 3000 yet???