Nyse And Euronext Merger April 4, 2007, What ?? Options

[jo56]

http://www.nyse.com/about/newsevents/1149243292355.html

http://www.nyse.com/press/1175665133200.html


Does anyone know anything about this?

So, is the AMERO next? (IMG:http://pilotsfor911truth.org/forum/style_emoticons/default/blink.gif)

This post has been edited by jo56: Jun 8 2007, 07:18 PM

[Cary]

Yes, Ms. Jo, this is part of a longer term trend of a consolidation of stock exchanges around the world. I don't know if you remember but the NASDAQ started an exchange in Germany in the late 1990's. It closed in the wake of the dot com and tech bubble that burst in the first few years of this decade.

According to Elliott Wave principle this combination of stock exchanges is part of the topping process of extreme optimism of a bull market. The current bull market has been going on since the late 1700's (very large degree of trend) or from a shorter term perspective, since the early 1980's. In the late 1990's there were all kinds of exchange merger deals that were put into play but most failed as the bear market took hold. Several of the financial exchanges have been taken "public" with initial public offereings of stock. Most exchanges were held privately by the exchange members previously. The NYSE is the most prominent exchange to have gone public in the last several years. This is a sign to me that we are on the verge of a major and historical bear market. It could have started this week with the declines we saw. I'm not saying a top is in, but there is early evidence to suggest so.

And yes, from another perspective it's also part of the larger degree of globalization. The longer term plans for the financial exchanges is to have them all consolidated into one electronic exchange that operates 24 hours per day. If Elliott Wave principal is correct, this trend will be reversed sharply as the coming strong downturn in social mood takes hold. This downturn should also produce a massive deflationary depression. That kind of economic scenario tends to divide people and should result in a huge reversal in the globalization trend.

Sorry to go on so long.

[André]

If Elliott Wave principal is correct, this trend will be reversed sharply as the coming strong downturn in social mood takes hold. This downturn should also produce a massive deflationary depression. That kind of economic scenario tends to divide people and should result in a huge reversal in the globalization trend.

I have read ''Conquer the Crash'' by Robert Prechter, while I find the book convincing, I am confused about the deflationary prediction he makes during a future economic depression, since most other experts predict inflation instead under such circumstances.

Why the difference of opinion ? anybody can fill me in...

[Cary]

If Elliott Wave principal is correct, this trend will be reversed sharply as the coming strong downturn in social mood takes hold. This downturn should also produce a massive deflationary depression. That kind of economic scenario tends to divide people and should result in a huge reversal in the globalization trend.

I have read ''Conquer the Crash'' by Robert Prechter, while I find the book convincing, I am confused about the deflationary prediction he makes during a future economic depression, since most other experts predict inflation instead under such circumstances.

Why the difference of opinion ? anybody can fill me in...

Most of the other pundits are predicting inflation or hyperinflation because of the amount of currency and debt produced by the FED and other central banks. In a normal scenario, pumping more currency and debt into an economic system produces inflation to hyperinflation. But the reverse happens at the end of a debt/credit cycle.

What they're missing is that this is the end of the credit/debt cycle, not the beginning or a continuation of it. The end of a credit cycle means a downturn in available credit and outstanding debt. As borrowers seek to raise cash to pay off debt, and as creditors trying to liquidate repossessed assets secured by debt there will be a plethora of sellers and a paucity of buyers. This will result in falling prices. As debt is retired voluntarily (by repayment of loans) or involuntarily (by default, foreclosure and bankruptcy) lenders will be unable or unwilling to loan and borrowers will be unable or unwilling to borrow. This results in a deflationary depression.

We already went through the US version of hyperinflation back in the 1970's. We've been in a disinflationary cycle since then. Disinflation is a deceleration of the rate of inflation. Deflation follows disinflation. Yes, the inflation statistics are understated, but have been since the Reagan administration at the very least. So while the stats are under reported the measurement of inflation has remained somewhat constant. All debt bubbles throughout history are followed by deflation once the debt bubble ends when the weight of debt collapses the bubble from the sheer size of the bubble. We've got an historic debt bubble in the world economy, most pronounced in the US economy.

While Elliott Wave International holds out the possibility of a short term spurt of hyperinflation, the bigger picture is for a deflationary depression. That's what I've been preparing for. An increased rate of inflation or even hyperinflation would be supported by more credit/debt because borrowers were still able to borrow more. There is overwhelming evidence that the debt cycle is ending. Increased foreclosures and bankruptcies, declining imports (happened last month according to the trade deficit figures) etc. all point to the "maxed out" position of borrowers. Junk bonds are also suffering and junk debt issuance is declining. Debt bubbles implode from the fringes (low quality debt) first and contract to the middle (high quality debt). This same scenario has been repeated throughout the history of debt bubbles from the South Sea bubble of Great Britain and the John Law Companie des Indie or Mississippi Company bubble in France from the 1720's. Another example would be the tulip bubble mania in Holland during the 1600's. This one will be different only in its size, depth and scope. Everyone will suffer the "pain and tears" of a massive collapse of debt, default, bankruptcy and unresolved fire sale of assets - both borrowers and lenders.

A couple of pieces of evidence that we are just at the beginning of a deflationary cycle are 1) the number of subprime mortgage lenders who've gone bankrupt since December 2006 (the number is at 82 this week http://ml-implode.com/ ) and 2) the personal savings rate in the US has been negative for over two years now. That hasn't happened since, you guessed it, the Great Depression of the 1930's. Add the growing number of foreclosures in the housing market, growing bankruptcies in the US over the last three to four years, and we're just beginning the slide into a deflationary depression.

There's lots more, but I've gone on a lot longer than I intended.

[lunk]

Barter.

[Cary]

Barter.

That's what happens in collasped/collapsing economies. Hope you have something to barter with (goods and services people will want).

[lunk]

Volunteer?

[Cary]

Volunteer?

Depends on what you volunteer for. Volunteer for barter? A lot of people have been doing that. In the future, it may not be voluntary. Not sure of what your post was about.

[André]

Thanks for the reply Cary.

If you don't mind here is another question, What usually happens to the interest rates at banks during a deflationary depression ?

[lunk]

It used to be that we learned how to find the right nuts and berries in the wood.
Alas, no more.
The food and materials we need to survive and live are all around us
in nature. Yet we know not what they are anymore.
We rely almost completely on the shopping center and the hardware store for our
basic needs. Thus, we are forced to use cash for transactions.
Nature is being taken away to provide hardware and food, for these cash transactions.
It's a cycle.
Chop down the tree and process it into material to sell for a house.
Use the land the tree was growing on, grow food to sell in the store.
Bartering for products and volunteering for the processing breaks this cycle.

lunk

[Cary]

Thanks for the reply Cary.

If you don't mind here is another question, What usually happens to the interest rates at banks during a deflationary depression ?

Good question. The problem with the answer is that it's not simple and there are relatively few historical examples that are comparable to today's situation.

A deflation is defined as a severe contraction of debt and money supply. But that's the definition and doesn't exist in a vacuum. The world is full of central banks which act in coordination with one another now. I don't know if that cooperation will hold up as a deflation takes hold to greater and lesser degrees in regional economies around the world. Central banks set short term interest rates. The Great Depression was a result of a debt bubble. The catalyst for the collapse was the FED raised interest rates during the late 1920's to attempt to stem speculation in the stock market using debt.

Some background to get to the answer to your question.

Interest rates will fluctuate widely depending on the credit worthiness of the borrower in times of economic downturns. Those lenders who survive a meltdown of defaults, foreclosures and bankruptcies by their borrowers will be very cautious in making any new loans. Those with perfect credit and sound collateral will get much lower interest rates than those with less than perfect credit and compromised collateral. Most won't be willing or able to borrow. For those who can get loans with less than perfect credit and compromised collateral interest rates will be much, much higher and the lender will require an overabundance of collateral to back the loan. Lenders will be more concerned of a return OF their capital than the return ON their capital. (Old Will Rogers joke)

My guess, and that's all it is, will be that the Fed will want to drop interest rates, but will be stymied with foreign lenders dumping Treasury debt. The market (not the FED) sets longer term interest rates. If foreign lenders dump Treasury debt, interest rates will rise to attract other lenders. It could get very ugly if foreign lenders don't materialize as our current lenders fade away.

The bigger picture is that debt will be something to be avoided. Those who will be able get debt/credit easily will be those who won't need it. Interest rates typically rise in the beginning of a deflation because of rising debt defaults and bankruptcies. Lenders will want to raise interest rates to reflect rising risk in lending. Later in the cycle, interest rates typically fall for top quality borrowers as loan demand drops dramatically.

[Cary]

Andre,

Here's the latest from EWI on interest rates in a deflationary crash.

QUESTION:

I've read Bob Prechter's books, I receive the newsletters, etc., but still don't understand a fundamental question. In the predicted upcoming deflation, will interest rates be high, low, or no correlation?

ANSWER:

It really depends on what interest rate to which you refer. Deflation should bring a dichotomy between the price and yield on debt of high-grade instruments versus those of low-grade debt instruments. High-grade debt should hold up relative to low-grade debt, which will be wiped out.

Pretty much matches up with my estimation of things.

[André]

Thanks again Cary,

I read a bit on this and found that Initially the deflation rate was around 10% a year during the great depression, this encouraged saving and discouraged spending and borrowing, even if the interest rate where generally low during that period, I suppose we would face a similar situation.