US  Sept. 2008  consumer confidence plunge to 38, ISM manufacturing purchaser index plunge to 38and jobless rate to 6.5 % and Dow Jones plunged 40  % third quarter GDP contract 0.3 %core inflation up 2.9 %, warned, predict by me Sept. 2007 on this blog that US  housing slump continue , will entering double dip inflationary recession 3Q 2008 despite rate cuts, stimulus, bail out plan and extends into deeper recession contracting by 2 % in $Q 2008 and 1Q 2009,  resulted by  full impact o business, consumer spending decline due to 6.5 % jobless and 20 % housing slump, 40 % stocks market loss
  The real causes of current global mortgage, credit, financial crisis and recession are due to poor financial, monetary policy decision modeling in asset pricing and  risks valuation mechanism, MBS, CDO , the burst of super housing, commodities asset price bubbles caused by 7 year longest expansive excessive money supply, easy credit policy .
Global central banks, financial markets financial decision still rely on 30 year old probabilistic, statistical Capital Market Asset Pricing (CAPM) and macroeconomic modeling, ignoring asset price impact on inflation and financial, housing , MBS, CDO prices.
Predicted by Dr. Warren Huang, pioneer of Proactive Global Asset Pricing Mechanism , June 2007 , Beijing, Wall Street Journal Economic, Market Beat
 Blog Aug.2007   and March 5, 2008 Pudong, China Fund World 2008 to 200 global top investment banking, fund managers that Global Housing price bubble burst, prices plunge 30 % into 2009, drag  global economy into recession and stocks bond, oil,  commodities, metals ,Derivative Asset Prices Bubbles Burst with 50 % Price Correction Cause Credit, Financial Crisis and Economic Recession, ( As Dow Jones, SP 500, NASDAQ drag global stock indices plunged more than 50 % into 2002 recession low ,( Dow Jones  after current consolidate in 8000- 9000 will test 7000, NASDAQ test 1250, S&P test 700 low, oil price plunged 50 % from 147 to 60，Gas oil from1300 to 650 , corn  from 800 to 350, cotton from 80 to 44 as global economy  enter deep recession by year  end, despite US 700 billion  and ECB 2.3 trillion bail out to stabilize credit crisis

details on www.osawh.com/Fedcrisab.htm  www.osawh.com/mortdefa.htm www.osawh.com/commody.html www.osawh.com/centmaf.html  

 Dr. Warren Huang (黃華南博士) Pioneer, proactive structural dynamic global inflation, macro economy, daily financial markets interest rates, currency, stock, bond, derivatives, housing, commodities, oil asset pricing and risks valuation markets fundamentals price mechanism, accurately warned on Wall Street Journal Market beat Blog Sept.19, 2007 and Mar 5, 2008 masterclass  workshop China fund world 2008, Pudong, China  to Goldman Sach managing directors JPM, UBS and 150 China QDII/QFII fund managers that  US Fed aggressive rate cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost consumer spending on gasoline and jet fuel summer, demand, driving gasoline , heating oil to 415, oil price to 121-145, commodity price double, will peak out as US dollar rebound follow Fed ending rate cuts cycle , can not stop sub-prime crisis spreading, regional  housing price slump 30-50 %  and credit crisis, crunch crisis continue through  2009 drag economy into 2009 double dip  inflationary recession resulted trillion housing and stock market loss and US, global stock indices bear market  50 % , Dow Jones test  7000- 8000  NASDAQ PLUNGE testing  1250- 1500 and high fliers (GOOG, PTR, AAPL) , IT, retail stocks facing  correction,    with banking, finance, housing share price plunge 70- 90   %, dollar making to new low 90 Yen,   commodity prices doubled,  and bubble burst plunge 50 % in recession widening bond , CDS spread and failure in MBS/CDO, Bear Stearn 30 billion dollar MBS hedge fund and government steps rescue Fannie Mae, Freddie Mac bail out,  despite Fed rate cuts . He also warned top global QFII management on Peking  Univ June 2007 International Financial Engineering Conference that China overheated housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity, Banking housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing  1800  through  early 2009  until economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing prices still  up 3.5 % , FIXED investment , export growth and consumer spending still up 26 %, first 9 month GDP still up 9.9 %, CPI up 7 % despite  China peoples Bank 6  rate hikes, 16 bank deposit rat hike to 17.5 %. China need to further cut its M2 money supply growth  from 15 % to 12 % next year to achieve housing price cut of 30 %, CPI to 4 %, GDP to 8 % to achieve soft landing and start of bull market stock rally.

                                                                                                                                                               Abstract  
　

This paper demonstrated Huang’s 30 years pioneering  low and high frequency proactive, structural macro, financial, industrial econometrics, economic boom and bust recession cycles, real time 
equities, bond, commodities,  housing assets prices bubbles bursts Operations Simulation Analysis (OSA) with applications to tracking last 20 years equities, commodities pricing bubbles, 
conventional housing bubble bursts, sub-prime default crisis, structural finance mortgage bond, CDO pricing valuations and credit crunch early warning, avoided trillion dollars market loss, loan 
defaults due to probability, statistical  based CAPM asset pricing, betting on the wrong side to investment.

Thousands simulators integrating monetary policy, asset price bubbles impact on inflation, macro, financial , industrial economic fundamentals into proactive structural dynamic high frequency ( 
short term daily ) and low frequency (long term )quantitative expert systems and E-Spline GARCH time series with Granger co-integration causes and consequences econometrics analysis models
 have been developed, implemented.
These models tracking forecast, predicted years, month ahead of last 30 years US, Asian, European, Russian central banks monetary, economic, fiscal policy impact on macroeconomic 
boom and bust recession cycles,  Identifying and Resolving Financial Crises,  inflation, daily interest rates, currency, financial market  equities, commodities, housing assets prices valuation
 mechanism and the causes, onset, spread, rescue, intervention impact and costs to economic boom and bust recession cycles ,financial instability systemic risks, mortgage default crisis 
early warning predicted with average error below 2 %, correlation constant greater than 0.92..
These proactive structural dynamic simulators have been built on last 30 years global central banking, macro, financial, industrial economic information knowledge base and implemented for 
 identify, and resolving, prevention of financial crisis , supporting: strategic decisions providing the what, why, how and timing of

     - Distinguishing between individual problems and systemic crises, crisis rescue early warning

     - Theory and evidence on the resolution of banking, finance, mortgage firms

     - Identifying policies that lead to overheated asset  prices bubbles and contagion or correlated risk    

Huang accurately predict on 1998 ECB conference warning Russian currency crisis, Asian  financial crisis, LTCM betting on the wrong side of junk bonk yield and 1999 on China Peoples Bank, US Fed,
  ECB, Asian central bank governors conferences on 2000 rate hikes, IT bubble burst and warning on 2003 Euro-events Asian/China finance, capital market conferences Singapore, Shanghai that US,
  China rate hikes fighting  housing bubbles till 2007, and June 2007, Peking University International Financial Engineering Risk Management conference, warning top investment banking, mortgage
bond CDO executives on US housing prices slump, economic recession, 50- 70 % bear market correction ( with banking finance shares down 50 %) through 2008 resulted mortgage default and structural
 finance billion dollar loss 
Huang directed Zhang to extend these OSA simulators to Nobel laureate  R. Engle’s Spline GARCH and co-integrate into Granger causes and casualty analysis of . US, China inflation and mortgage
 default and national and regional housing prices, global stock indices and associated corporate accounting scandals are related to deterministic exponential spline, combination of macro , monetary economic and asset prices time series dynamics .

 Keyword :US/China,  Economic recession cycles,  Housing price slump, default,  Equities bubbles burst,  identify resolving crisis, Operations Simulations Analysis, proactive structural CAPM  macro-financial instability  Basel II credit, market risks ,  Structural finance, CDO mortgage default.  policy contagion crisis rescue
Submitted to Research Conference  " Identifying and Resolving Financial Crises "April 17-18, 2008 Jointly organized by Federal Reserve Bank of Cleveland and FDIC's Center for Financial Research
Do not miss this proactive structural macroeconomic inflation simulation and strategic investment, trillion dollar hedging strategy workshops series by OSA  proactive solution pioneer  Dr.Warren  Huang
Millions of global /China central banks, finance, investment management teams bring their management/s operating problems into our strategic fund allocation and  wealth management workshops. take home billion dollar proactive structural solution, avoided trillion dollar housing, stock market loss due to betting on the wrong side of interest rates and bull/bear market trend, ready to implement 
　

2008 China credit tightening/US housing prices bubbles burst impact on  economic, capital markets  asset pricing, IPO, financing and asset allocation , risk diversification strategy
                              DO not miss  Trillion Dollar Recession Hedge by

Dr. Warren Huang will be risk management panelist and    full day master class workshop lecturer for  Terrapinn China Fund World

 2008  conference, Shanghai  Pudong Shangri-La hotel, March 6 offer Proactive structural China/global  asset pricing, 2008 credit tightening, recession impact on BRIC,Optimal  1x0/x0  long-short hedging, asset  allocation strategy 

Dr. Warren Huang accurately warned  on Wall Street Journal Market beat Blog Sept.19, 2007 that US housing price slump continue into summer
 2008 drag economy into inflationary recession and US, gear market recession , oil go to 100, despite Fed  rate cuts

He also warned top QFII management on Peking Univ June 2007 International Financial Engineering Conference that China overheated

housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity,

housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing 3000-3500- 4000 till summer 2008

Comment by Warren Huang - June 1,, 2008 Wall Street Journal Real Time Economics at 2:06pm
Fed official are getting more realistic about US economic outlook now than earlier this year and recent stock market optimism about inflationary and economic rebound, eased credit crisis.
I warned last Sept. on this blog that US housing price slump continue into this summer, spread into general credit crisis and Fed rate cuts will not stop housing price slump, but drag dollar lower and oil, commodities price resulted inflationary recession. Current situation is getting closer to my forecast then.
Fed and banking finance decision models are oversimplified, too much rely on interest rate, ignoring industrail sectors supply demand, boom and bust cycle
behavior. Details on www.osawh.com/Fedcrisab.htm www.osawh.com/mortdefa.htm  www.osawh.com/centmaf.html

Comment by Warren Huang on Wall Street Journal Market Beat Blog - May 7, 2008 at 2:49 pma

Fed is pleasing every one in the Wall Street and global capital and housing markets by offering surprise half point cut, even Greenspan in 2001 dare not to

do it when the oil price was only 19 dollar and gold price below 400.Dow Jones shot up 350 points heading for record 14000 again , certainly will boost the housing

prices ( July housing price  already up 5 %),and It cut mortgage rate and lending cost by half point. bail out the sub-prime rate reset cost, will  temporarily cut

 mortgage default rate ( according to my housing prices and default rate model) but it will led to dollar plunge  to new low 1.40 , it will hit 1.50 sometime next year,

 Oil price already celebrating the rate cut, by shooting to 82.4 all time  high and heading for 85-100, gold already 735, shooting for 850  soybean heading for 1100

 wheat to 870., eventually will  spread into core inflation.

As Fed job only focus on inflation ( core inflation rate exclude energy and food price) and unemployment it ignore housing, stocks, commodities asset prices bubbles.

But sooner or later, the current stocks prices will not be sustainable, start to  plunge, it will drag the housing prices, and led to more default, the burst of next housing

bubble,  drag economic into  recession till 2008 summer ,can not be solved by any rate cuts Greenspan was much luckier than Benanke, he could go ahead with full

 steam rate cut, but we will be facing inflationary recession bear market correction ahead
     detail can be found on www.osawh.com/riskm.html    Comment by Warren Huang  Wall Street Journal Market Beat Blog September 18, 2007 at 5:55 pm

Dot miss Challenges and Investment opportunities, risks in 2008 China/US housing prices bubbles burst impact on
inflationary recession , stocks, fund, commodities markets outlook

Dr. Warren Huang accurately warned  on Wall Street Journal Market beat Blog Sept.19, 2007 that US housing price slump continue into summer 2008 drag economy into inflationary recession and US, gear market recession , oil go to 100, despite Fed  rate cuts
He also warned top QFII management on Peking Univ June 2007 International Financial Engineering Conference that China overheated housing, stock market wealth gain resulted inflation over 7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity, Housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing 3500- 4000 till summer 2008

Dr. Warren Huang will be risk management panelist and  full day master class workshop lecturer for  Terrapinn China Fund World
 2008  conference, Shanghai  Pudong Shangri-La hotel, March 6 offer Proactive structural China/global asset pricing,
 2008 credit tightening, recession impact on BRIC,Optimal  1x0/x0  long-short hedging, asset allocation strategy 

Fed is pleasing every one in the Wall Street and global capital and housing markets by offering surprise half

point cut, even Greenspan in 2001 dare not to do it when the oil price was only 19 dollar and gold price below 400.

Dow Jones shot up 350 points heading for record 14000 again , certainly will boost the housing prices ( July housing price already up 5 %),and It cut mortgage rate

and lending cost by half point. bail out the sub-prime rate reset cost, will temporarily cut mortgage default rate ( according to my housing prices and default rate

model) but it will led to dollar plunge to new low 1.40 , it will hit 1.50 sometime next year, Oil price already celebrating the rate cut, by shooting to 82.4 all time high and

heading for 85-100, gold already 735, shooting for 850  soybean heading for 1100  wheat to 870., eventually will spread into core inflation. As Fed job only focus on

inflation ( core inflation rate exclude energy and food price) and unemployment it ignore housing, stocks, commodities asset prices bubbles.

but sooner or later, the current stocks prices will not be sustainable, start to plunge, it will drag the housing prices, and led to more default, the burst of next housing

bubble,  drag economic into recession till 2008 summer ,can not be solved by any rate cuts Greenspan was much luckier than Benanke, he could go ahead with full

steam rate cut, but we will be facing inflationary recession ahead

detail can be found on www.osawh.com/riskm.html Comment by Warren Huang - September 18, 2007 at 5:55 pm
Challenges and Investment opportunities, risks in 2008 China/US housing prices bubbles burst impact on

Comment by Warren Huang - May 30, 2008 Wall Street Journal Real Time Economics at 1:13 pm

Dr. Warren Huang Wall Street Journal Real Time Economic Blog. Jan 2, 2008