Bits Bucket And Craigslist Finds For March 19, 2008
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Easing Credit Collars…
http://biz.yahoo.com/ap/080319/fannie_freddie_capital.html
The same people against a nationalized medical system seem to love the idea of a nationalized mortgage system. I would expect FNM and FRE to rise and then go bankrupt. If I had a crystal ball the first thing I would ask of it is, “what happens to our economy if Freddie and Fannie crash?” The mere thought frightens me. I just want to know how to protect against that very real possibility. Too big to fail, my a$$.
Nothing a $trillion loan will not fix. Move along folks, nothing to see here…
how about your health ?
Dunno. I bet a trillion dollars can fix a lot more health issues than 1 dollar.
How is everybody in the land of the ‘08 Greater Depression, everyone?
Anyone get some sleep? I sure as heck didn’t. I caught up on a LOT of startling reading.
Exhausted.
RE: Anyone get some sleep? I sure as heck didn’t.
Sure glad I’m not sittin’ on a half million dollar mortgage.
If you were, would you be paying it? Ah, that is the question.
–
“How is everybody in the land of the ‘08 Greater Depression, everyone?”
I am official Greater Depression guy. For the past 18 months my scenario has been recession to begin in 2007 (I thought that it would begin in the first half but now I believe that it started in 2007Q4) and depression during 2008-10 (to begin in late 2008). Recession to be followed by commodities bust before the beginning of the depression. The amount of debt and leverage guarantees a very deep depression whatever the name might be.
“Anyone get some sleep? I sure as heck didn’t. I caught up on a LOT of startling reading.”
I always get good sleep. I have my financial house (savings and investments) in order. I do have some speculative accounts to keep things interesting.
Jas
RE: I would expect FNM and FRE to rise and then go bankrupt.
Lottsa pension funds are big holders of their stock. When these whales go belly up, it’s gonna stink real bad.
I used to go the Raging Bull comment boards and post that the
companies were corrupt and buying mortgages based on shoddy and dishonest appraisals to which I got-”You idiot-FNM and FRE represent the GOLD STANDARD in investing. Your observations are baseless!”
LMAO…see ya.
That mandatory cash cushion — now nearly $20 billion for the two — will be reduced by a third under the new deal. The freed-up money will go toward buying mortgages of struggling homeowners to enable them to refinance into more affordable loans.
So they’ll free up $7B and buy mortgages. BFD.
This problem is a tad bigger than that.
And they’ve shown a reluctance to eat much of the poo that has been written in the last few years. Certainly their rules for temporarily conforming jumbo loans are unlikely to bail out the idiots who got 100% neg am stated loans or the idiots who sold ‘em.
this is my feeling too. If our investors from around the globe see this as a way for the GSE’s to pick up new and old toxic junk in a declinging market, who will buy the MBS? It seems like everyone is running out of these securities, and if moves like this make a shaky GSE take on more risk and loans onto their own balance sheet…. wouldn’t this just raise the supply of MBS to investor ratio??? The only way they will get people to buy these securities is to increase spreads for all their MBS. There is simply too much debt already, and I haven’t heard much interest from soverign wealth funds or China for this garbage. If I were an investor, I’d even stay out of any more stock offerings from the GSEs too, they will be even more under capitalized.
I think they just speeded up the GSE demise.
I guess the thinking is the best thing you can do for a junkie is not interrupt his supply of dope.
Or to wean them off of the drug slowly rather than go cold turkey…
Will the GSE XXXXXXX allow them to purchase existing toxic MBS from MegaInvestmentBank, Inc, or only new originations? Wondering about the possibility that bad gambling debt gets buried forever on GSE balance sheets…
That’s the endgame plan, I suspect.
Bury everything on the GSE sheets, they fail, the taxpayer bails them out.
Then, we either go back to “business as usual” with the surviving banks driving up rampant inflation in everything, and a return to Bubble Days with absurdly overpriced housing, or the government takes over the housing market and forces “housing only goes up!” on everyone via taxes, incentives, bad loans funded by the taxpayers, etc.
ANYTHING to restart the scam! Not sure if it will work, but they will try.
The talking heads on the business channel said that about 2 trillion
will be available for Fanny and Freddie and I think I heard that underwriting will be changed accordingly for proposed loan assistance to troubled borrowers .
Next phase of the master plan that I talked about so many months ago . Lower the underwriting standards on government backed loans and make them government insured to bail out loans that normally would not qualify under traditional underwriting standards.Government becoming the sub-prime lender of choice . Change the rules as you go along in phases ,hoping nobody will notice .
Wow …… Even Kudlow ,of all people ,is objecting to merits of these bail-outs and he sees where it’s going and the long term price that will be paid . Even one of Kudlows guess (a x Federal Reserve guy )said that the Feds decisions should really be made by Congress which is addressing my concerns about the Feds having to much power during this sort of emergency .
Let me see if I’ve got this right. Some of the mortgage brokers lied to the mortgagees and to the lenders in order to win commissions on loans they knew would never be paid back. No one was checking whether they were lying or not, so they walked away all the richer for their dishonesty. The mortgage holders packaged questionable mortgages, in substantial numbers, into investment vehicles which they must have known were worth far less than their face value, but they made big profits lying about what was in those packages and selling them. The ratings companies were supposed to be verifying these investment vehicles, but they made more money simply valuing them at whatever their customers, the originators of the vehicles, said they should and certifying that value than they ever would have made actually evaluating and rating them honestly. The investment vehicles were then sold back and forth around the world. EVERYBODY LIED TO EVERYBODY, because there were no regulations, no checks and balances, and, of course, no moral code to encourage honesty. The only ethical decision was teleological: How can I make the most money for myself. Any ends justify my desired means: padding my own pocket. Indeed there has been no honor among any of these thieves so the borrowers lose their homes (a few of them deservedly so, but many through brokers and lenders’ dishonesty and deceit) while the people in charge at the highest level get bailed out by the FEDS with resources sucked out of the national economy and ALL of us pay the price for failing to see what countless psychological studies have shown, that any human system, without proper regulation, with no one minding the store, will inevitably bring out the worst of human nature and do us all damage. Welfare recipients, regular folks, office workers, brokers and CEO’s of major investment houses; there are very few of us who can be trusted when it seems no one’s watching, especially if we’re making massive profits.
I think you summed it up real good grevvv. Thats why I’m a big pusher for law and order and regulations ,because human nature is what it is
I also favor regulations to compensate for human nature. Question is which laws & regulations & who will carry them out? Lots of wiggle room in that question. Lots of room for lobbyists & vested interests to put their twist in. The politicians are in a quandary right now, they seem to have no idea what’s going on.
I also favor regulations to compensate for human nature.
Um…who’s gonna make/enforce those regulations if not humans?
Good post, gkrevvv-
If you have no copyright, I think I’ll send this along to my worthless governmental representatives.
Flat lined…
What ever became of white noise?
So where do we go from here?
any sage advice?
Sage advice? Is it thyme for a change?
I guess you have had more than one cup of coffee this morning. Very sharp response! congrats.
I think we should ask Rosemary.
I mint to but I got caraway
Well, aren’t we just peppering this thread with salty bon mots? Not that I’m trying to curry favor with anyone, but I’m cumin to the end of my spice rack.
I love people with the sense of the whimsical. You each get two gold stars on your responses. Keep it up. It is refreshing to the spirit!
The Chick thinks the indexes go much higher. I think, regardless of what the indexes do, my liver will continue to take a beating. I would be selling my liver short, if I could.
I will drink to that!
Dude — no need to beat up your internal organs due to the anger stage of housing bubble collapse. Just let it go.
My liver kind of takes the beating through the whole array of emotions. It’s always a bear market on my liver.
NYCB, there are some “meetings” downtown you might want to attend. It would all be anonymous:-)
NYCityboy, we should send our livers on retreat together so they can complain to each other about the disrespect and abuse that gets poured on them, and be cheered up by the sympathy. I’m thinking somewhere in Nebraska, because that’s midway between NY and WA state and my liver would have less of a distance to hitchhike back, and also Nebraska seems nice and soothing. I hardly ever hear about serial killers living in Nebraska, for instance, and have plenty of corn and grass, which is calming.
Then, when my liver is gone to Nebraska, I’m going to have a big party with a bonfire and see if I can jump over flaming obstacles better this time. I believe my liver was weighing me down the last time. Or, and this just occurred to me, maybe it was holding the recycling bin lid that did it. (It was being a Viking shield re-enactment. Oh, be quiet all of you, I can practically hear the criticism beginning to steam up like fragrant coffee: if you’d all been there you’d a seen that this makes more sense than it sounds like. It was one of those situational events.)
Take my advice. Stop in Wyoming before you get to Nebraska. Just as crime free and soothing with lower taxes!
It was being a Viking shield re-enactment.
Makes total sense to me. It reminds me of a time when a few of us were standing around outside of a nice summer evening enjoying a few cool beverages. This guy who looked as I imagine a viking would found my axe (the two-bladed kind). I don’t know if he was a city boy or something (friend of a friend) but he was seriously enchanted with it, like he had found an ancient artifact or something. He ran across the street and cut down a small (dead) cedar. As you said, it made total sense for those of us there at the time and one of the funniest things I’ve ever seen.
Man, I wish I was still young enough to drink.
Comment by NotInMontana
2008-03-19 08:29:57
‘Man, I wish I was still young enough to drink.’
I wish you were, too. Then your liver could come along to the retreat I’m proposing here.
Hey! Then it could supervise my liver! I suspect my liver would probably behave stupidly the first chance it got. Like it’d go out and buy cases of canned asparagus or roll around in gravel or play with wild dingoes. Things like that.
The double Nine-to-One signal. Buy at close today and hold 60 days for outsized gains?
Aronson, along with the students in a class he teaches at Baruch College, tested the statistical significance of “Double Nine-to-One” signals. Aronson told me that he and his “class used data from the beginning of 1942 through fall of 2006, and we looked at what happens in the stock market in the 60-trading-day period following a … double Nine-to-One signal, versus what happens the rest of the time. In those 60-trading-day windows, the S&P 500 index produced an average annualized return of over 22%, on the assumption that an investor entered the market on the close the day after a double Nine-to-One signal was triggered and held until the end of the 60th trading day later.”
“In the non-signal periods,” Aronson continued, “in contrast, the return averaged 4.5% annualized. The difference between these two average returns is statistically significant.”
http://tinyurl.com/39w5n7
I don’t understand that mumbo jumbo. I just know I want to be long right now. Hahahahah
The irony will be Frank Quattrone spearheading the next rally via techs.
I don’t ask questions, just follow along.
Do you remember Frank Quattrone - seems he’s back from the dead.
Oh yes. I thought you were kidding.
Had the pleasure of meeting him when my company was going public. The NAZ crashed two weeks before then!
This article was written by “da boyz” to prevent another one day spectacular rally, and three days later the bear has awoken from hibernation in an ornery mood.
One is that “Double Nine-to-One” signals aren’t foolproof. Such a signal was triggered last November, for example, and, far from rising at an above-average rate over the subsequent three months, the stock market fell.
LOL. Will you write the call for me then?
I’m still out.
Roidy
P.S. If there is a bigger Sterns out there, can the Fed really handle it?
Wow. I got my ass handed to me today and yesterday in the stock market. With my play-money account was up $1400 a week ago (unrealized) and I knew I should have taken the money off the table. Today, I licked my wounds and sold off my short positions for…drum roll…a net gain of 27.35 so far this year.
All of the bluster coming off the news wires really scared me into covering this week. News seems to go in cycles, and with the latest moves by the Fed and OFHEO, frankly I am a bit worried that they’ve managed to avert disaster for a while yet. The OFHEO freeing up $200B for FNM/FRE is enough to guarantee a couple trillion in debt–that’s about the total value of the mess. Set up for a taxpayer bailout, maybe, but in the mean time I fear this rally could spike hard.
At least I have learned that capital preservation is important. I hate to see those gains disappear, but at least I’m not facing a loss.
Powder is dry once again, and I live to fight another day.
That is a good way to learn.
One of the things that forced me to cover my shorts: The Federal Reserve opened the window to Security houses. That had never been done in the past. As soon as that was announced I covered my short financials. Unknowns will always get me to cover or close. I can always sell or buy later, but unknowns can create losses. Every day is new.
Thank you for the advice, oh great one. Trading is very fun. I find I spend way more time thinking about it than other work.
If financials rally hard a few days in a row, WFC or FNM or FRE get up to $38, $40, $40 respectively, I’ll probably get back in.
Well, I guess the powers that be did their job of shaking me off my short positions effectively. The rally seems to be ending, with the Dow now down 120 and WFC swinging from +.70 to -.50.
Jeebus, this volatility is too much.
I’m a long term investor and thus don’t play day to day swings. That said, I’m in cash right now–no reason to ride this thing into the toilet. I basically need to figure out when I’d like to re-enter the market. For me, the answer is probably starting late 2008 or early 2009, and average in over several quarters.
Why not now?
Our economy is consumer driven, and option ARMs have yet to wreak their havoc on the system. So far, all the source of stock market pain has generally been about the de-levering of the highly leveraged system that produced massive time-bomb insolvency (a borrower who won’t be able to pay the mortgage payment or refinance his loan once it resets is an insolvency time bomb).
The insolvency time bombs in the market have not yet all gone off. Option ARMs (average mortgage amount of $500k, with far greater than 50% paying the minimum amount–negative amortization), as they begin to reset, will add continued downward pressure on consumption, especially as credit card companies continue their squeeze on consumers.
My bet is that this will lead to lower corporate earnings, which will lead the market lower. I don’t want to be in the market when that happens, since I don’t know how bad it will get. So I stay in cash, wait for the first wave of Option ARMs and take it from there.
I don’t understand why the late 2008 is your entry point. It seems that the _real_ fun will be just starting at that point. So far we just got a taste of what’s coming.
As it becomes more and more apparent that consumption is slowing in latter 2008, people will bring out their rulers and draw a straight line on the decline in consumption and be scared to death. Stocks will be pummeled.
The consumption pain brought on by Option ARMs will start sooner and end sooner than people think. Why?
1. Every chart and graph of Option ARMs takes the 5-year adjustment as a given for all these loans. However, with more than 50% of the borrowers paying the negative amortization amount (I’ve seen a number as high as 85%), the majority of the Option ARMs will hit early because of the early trigger provisions (once you add too much to principal, the rate adjusts and the minimum payment option goes away). These loans average $500k per–big loans from people who have felt wealthy and spent accordingly.
2. Once an individual borrower blows up, what happens next? Their consumption falls off a cliff while they try desperately to hold on for as short as one hour or as long as forever. Eventually though, as gravity catches up with their bank balances, they will lose the house and become renters again…at that point, they are actually going to be better off than before they bought the house, with MORE money to spend on goods. I’ve already seen this with some stories I know personally–FB with no money down goes from just scraping by to become a renter who actually has money to save and spend.
The consumption plunge will be most acute in the early stages of the Option ARM adjustment timeframe.
In the meantime, housing starts will bottom sometime in 2008 (if they haven’t already). As builders re-adjust to reality, they will start selling homes at reasonable prices (this is happening already with some subdivisions who have downsized, down-specc’d, and down priced their product to meet the market). First time buyers will be priced back into the market.
Overlying all of this is the fact that demographically, we will have more people retiring than entering the workforce, starting pretty soon (if it hasn’t started already). People by and large won’t necessarily have great paying jobs, but they will have jobs.
We’re in for a long sluggish muddle-through period, but I don’t think it’s the end of Western civilization as we know it.
My long-term strategy in public equities is this:
1. Wait the consumption pain begins to be felt, and is reflected in the stock market (late 2008/early 2009) with a commensurate crushing of prices. If prices haven’t fallen yet, I’d need to understand why (have Option ARMs not adjusted? Consumption not been hurt yet?), and potentially re-adjust. Perhaps it means my timing is off, and I’d be into mid to late 2009.
2. Invest over time, I’m thinking of re-entering the market over a 12 month period, with a global ETF strategy. I won’t time the bottom, but I’m less likely to get cut too badly as I’m catching the falling knife.
Of course, this is all subject to change based on what I learn in the interim, but this is my current thinking on how all this will play itself out over the next 12-36 months in public markets (home prices are a different story).
“Eventually though, as gravity catches up with their bank balances, they will lose the house and become renters again…at that point, they are actually going to be better off than before they bought the house, with MORE money to spend on goods.”
Well said. These once-burned buyers will not get into another mortgage fiasco again lightly or easily. They will enjoy whatever liquidity they can achieve, at least for awhile. However, at least half of them (currently married couples) will continue to divorce, while others will have more children and need growth in square footage as the years go on. The former situation usually necessitates two geographical living arrangements- one rental becoming two. I’ve seen stories about how divorcing couples are not able to leave the shared house because of the inability to sell, and how they tolerate the presence of the other. I wonder how much jingle-mail is related to this factor alone. Can you imagine a purgatory of prolonged kitchen encounters with a bitter ex.?
I know of such a situation right now.
Imagine what it would be like if one person were the breadwinner, out of the house all day working, while the other is at home, with no incentive to help get the house sold (think dishes in the sink during showings, off-hand comments in front of the prospective buyer about the neighbor’s barking dog and parties, etc.)…painful situation that won’t get better until the bank comes knocking.
Strong comments by Nouriel Roubini on the Fed actions to date:
http://www.rgemonitor.com/blog/roubini/
“The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.”
Worst financial crisis since when?… since when?… since when?…
Yep - somebody said the “D” word.
And what really sucks is that I think he’s probably right. Nothing will change until upper level executives who trash their companies are blackballed and are looking for work at McDonald’s (and probably can’t get that.)
I would like to take a minute to bring up the subject of credit saturation…. Consumers, businesses as well as our local, state and federal government are “maxed out”. Lowering bank rates will not help, nor will bailing out defunct financial organizations. What is needed are policies which create high paying jobs - manned mars mission? How about rebuilding our failing infrastructure?
Commie!
how about taking the medicine like 1981
Japan paved their whole island and that didn’t work
Not entirely true. While their spending on infrastructure did not lift up the economy as they wished, it kept the impact on the citizens limited by keeping jobs and cash in the system. The also ended up with an infrastructure that is a plus in good times.
Compared to a couple trillion for a bad war and tax cuts for those who need them the least, I’d say I prefer the Japanese model.
Compared to a couple trillion for a bad war and tax cuts for those who need them the least, I’d say I prefer the Japanese model.
Yup.
Those trillion-plus beans sure would come in handy this year.
You mean like the crumbling support pillar on I-95? Or the bridge that collapsed in Minnesota last year? Nah… we need more shopping malls! And more McMansions - expensive, huge ones that are totally impractical in a world of high cost energy! Yep - that’s what we need!
192 tons of stuff piled on a weak point on the MN bridge, I hear.
Near Seattle a while back they cut big holes and filled up the floating bridge barges with water… and the winds finished filling them up and sank the bridge.
Seems like highway repair spending is dangerous…
Infrastructure improvement would be a good thing.
Roads have never in the past been this bad. “Progress” , but after “they” dig it up , they never repave. And this is where the sunshines all the time. The midwest/east have Weather to contend with ruining roads.
“What is needed are policies which create high paying jobs”
HAHAHAHA, this brought tears to my eyes! The two supports of the US “economy” for many years have been (1) ever-increasing consumer debt and (2) stagnant or decreasing wages for the vast majority. Never mind that 1 & 2 contradict each other.
To Second that thought #2 stagnant or decreasing wages.
Just got another notice from corp saying they want to take back more from us, after the -35% 4 yrs ago.
I guess to prop up their bonuses YOY.
Google returns about 421,000 hits for the phrase “since the great depression.” I think there’s a bull market for that phrase now.
–
“Worst financial crisis since when?… since when?… since when?”
The end of the American Revolution. Financial crises are caused by bankers’ mischief and I doubt that America has had this mischievious bankers ever. No?
Jas
Jas
CNBC says that Lehman and Goldman tapped the discount window already. Since the FED is supposed to be a lender of last resort, what does this say about their solvency?
“It is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.”
“Should” being the operative word. The financial system needs a bailout to prevent a collapse. But how can today’s elected officials admit that their generation has bankrupted our country? How would such a fiscal action be financed? Higher taxes? Eliminating Social Security and Medicare for those who were not “at or over 55″ when Bush said the words?
If the Fed prints money, it will be financed by inflation. And no politician will have to cast a vote.
But where is the wage inflation going to come from?
Or, maybe we’ll all just be poor. Still, I don’t see that working out too well. Poor nations tend to have “stability problems” that I’d think TPTB would like to avoid.
Goldman probably did it to try to remove some of the stigma of Lehman doing it. Same thing happened with the real banks.
My question is if the Bear/Morgan deal gets voted down by BSC shareholders, can Bear tap that discount window to prevent immediate BK?
can Bear tap that discount window to prevent immediate BK? The FED opened that window & the FED can close it. The BSC shareholders are toast whether they like it or not, and they deserve that fate. All they can do is try to cause trouble for the rest of us, like vultures fighting over carrion. I’m rooting for the carrion.
It’s come clear to me that the Fed is the beat cop on Wall Street. Open the discount window, see which losers show up, give them the money and then use that loan as leverage to clean up the bank. Brilliant.
So we’re relying on the Fed to put out fires they started. And everyone will think they are the hero.
Correct. Isn’t accountability and personal responsibility the cutesy buzzwords carelessly flung around these days?
“Accountability and personal responsibility” — our Fearless Leader loves those buzzwords.
Too bad he’s never had the ‘nads to put those ideas into practice. We’d be a lot better off, economically and otherwise.
Exeter I don’t quite get your meaning. Sarcasm tends to throw me off.
In any case, I feel one of the main faults of the modern political environment is the tendency by the populous to count on govt to “fix problems” when the govt are the ones who created the problems to begind with.
It seems to me if you have a pyro running amok, the solution is not to give him a water hose but rather to relieve him of his matches.
Accountability and personal responsibility for us wage slaves ya know. It’s “our job” to toe the line, everyday. ET, didn’t you know that so long as we we’re good little workers and sweat just a little bit more that we too might be millionares some day?
So your saying the Fed shouldn’t remedy the problem? Doing so is being accountable and responsible.
I think that’s one area where you and I differ greatly. You tend to favor regulation or oversight. My position generally is that the oversight you seek is going to be done by the same people causing the problems in the first place (and therefore the oversight its self can be trusted neither to prevent nor cause future harm). Several analogies come to mind; fox gaurding the hen-house, the fire analogy above.
My position is the Fed certainly should not be doing the things it has been doing nor “fixing” the results of those things. In my case, I believe “fixing” really doesn’t fix anything and will likely make things worse (although it may defer some results of the monetary policy of the last ~50 years). If I had it my way the big investment banks/federal banks (like Bear) who made decisions leading to their failure would just fail. Let the investors take a loss. Let’s get back to a time where the common man didn’t trust the big financiers. Those guys aren’t any better or worse today than a hundred years ago, the main difference is now the Fed/SEC/govt make them seem legitimate. That gives them more power to do what they have always been trying to do (transfer wealth from everyone else to themselves). And of course the Fed/SEC/govt leaders are getting their kickbacks out of the whole deal…why would you expect them to “fix” anything other than their own pockets?
Let’s get back to a time where the common man didn’t trust the big financiers. By all means, let’s go back to the good old days of the Gold Standard, the Panic of 1837, the Panic of 1873, the Panic of 1893, and the Banker’s Panic of 1907 (bailed out by old red-nosed JP Morgan himself).
“Let’s get back to a time where the common man didn’t trust the big financiers. By all means, let’s go back to the good old days of the Gold Standard, the Panic of 1837, the Panic of 1873, the Panic of 1893, and the Banker’s Panic of 1907 (bailed out by old red-nosed JP Morgan himself).”
Getting off the gold standard didn’t repeal the immutable laws of economics, it just makes the inevitable collapse all the more monstrous and disastrous.
The scary thing is that Roubini has been predicting this for the past 3 or 4 years. And he’s been right the entire time….
RE: If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.”
So where the fook is Pelosi on all this?
Not a clue-not a peep.
You don’t get to be in that position (Pelosi) without knowing when to keep your mouth shut. When bailout checks are being handed out left and right, a good career minded politician keeps their mouth shut.
“The Fed has no idea …” How Carmer-esque…
http://youtube.com/watch?v=SWksEJQEYVU
hehe
subprime blight:
March 19 (Bloomberg) — There is no shortage of regret over the failure of regulators and the Bush administration to heed the warning signs about the extent of the subprime housing crisis.
A new regret is on the horizon: The failure to take action to prevent the descent into disrepair, economic distress and crime of revitalized urban neighborhoods across the nation.
http://tinyurl.com/33g34z
RE: A new regret is on the horizon: The failure to take action to prevent the descent into disrepair, economic distress and crime of revitalized urban neighborhoods across the nation.
This is leftist propoganda.
LIke a plethora of liar loans is gonna float the economic boats of a hodgepodge of undereducated people who can’t even speak English.
Lawrence is a worn-out, run-down, drug ridden, 19th century mill-town with no sustainable job base.
Period, period, period.
View of the Day:
Lessons from past commodity bubbles
By Jonathan Wilmot
Published: March 18 2008 16:18 | Last updated: March 19 2008 11:37
The massive divergence that is occuring currently between rising commodity prices and fading global growth momentum has led to many investors to question if there have been similar episodes in the past.
“Yes,” says Jonathan Wilmot, chief global strategist in fixed income research at Credit Suisse, but only twice in the past 38 years, during the summers of 1974 and 1980.
“Both episodes were periods of US recession that happened to coincide with major supply shocks and/or sharp increases in investment and speculative demand for commodities,” says Mr Wilmot.
Global commodity markets are very tight but there has been no sudden supply shock similar to 1973/74 or 1979/80, according to Credit Suisse. Instead, the investment bank says the primary driver of surging prices today seems to be financial buying by pensions funds, hedge funds and investment banks’ proprietary trading desks.
…
“Sharply rising commodity prices may at first trigger or exacerbate a growth downturn, but eventually weak growth gets its revenge, as falling real demand triggers speculative liquidation.”
And Mr Wilmot warns: “It is one thing to put money into commodity markets, quite another to try and take it out again.”
Looks like today’s Smartest Guys in the Room are trying to burn themselves.
Commodity prices are rising in US$ but not necesarily in other currencies. Priced in Yen, oil is the same price now as it was in November.
Go back two more months and look again.
I think it’s funny that everyone’s talking about “commodities” as if they’re a single entity - you’re either in you’re out commodities.
The real truth is - the nature of the speculation totally depends on the nature of the specific commodity.
Oil speculation is based upon the premise that oil will be high demand (e.g. driven by growth in China etc.) and/or low supply (driven in large part by instability in the middle east).
Wheat speculation is based on the premise that we’re experiencing a wheat shortage, and it will continue. It is tied somewhat to oil with regards to cost of production.
Precious metals speculation is driven by the possibility of financial collapse.
Other metals (copper, zinc, etc) speculation is driven by the expectation of manufacturing growth.
For PM’s - IMO the speculation is justified. And that’s where Wilmot’s premise is wrong. It’s true that PM speculation in the 1980 timeframe was proved to be “incorrect” - in that we didn’t experience financial collapse. But does that mean that PM speculation is never justified? No. Financial collapses do happen. When they do - PM investment/speculation/whatever is proven to be an absolute correct move, with one caveat - a very important caveat - if the financial system that collapses is the one that you’re a part of .
Right now I’m mixed on commodities - I’m long gold (as a safety net), but very short other metals, like copper. Copper won’t do well in an economic downturn - *especially* this one - because its demand will go down. Copper can’t be used as a medium of exchange like PM’s can - thus won’t be in demand in a financial collapse.
Likewise for oil - it can’t be used as a medium of exchange. It’s hard to say if the current speculation is justified though - if the U.S. pulls out of Iraq and the middle east destabilizes further, there really could be a severe shortage of oil. OTOH if things stay stable, and demand goes down due to economic downturn, then oil can go down a lot.
“Oil speculation is based upon the premise that oil will be high demand”
No doubt speculators are buying oil futures, but none of them take delivery of any crude. All that oil is being consumed by end users who are willing to pay $110. The price will only go down if supply rises or demand falls. US demand may decline a bit but China’s economy is still growing at 10%. Even if it takes a major hit from the US depression it may not go into negative terratory and certainly not until 2009 - big economies take a long time to change direction.
Oil prices are up 100% in 12 months. Certainly that is not driven by current demand increases.
The trouble is that its very difficult to cut back on oil usage, so if the price goes up you have no choice but to pay it. As long as other people are willing to pay, the price will remain high. And as the $ weakens it gets easier for other countries to buy oil.
“The trouble is that its very difficult to cut back on oil usage”
That’s wrong. You work for Chevron or something? Living closer to work (or biking), buying fewer clothes (and other stuff) and eating organic food are not that difficult. Looking forward to $5 gas if only to see people change their tunes and start to innovate.
Americans actually have been cutting back on their oil and gas use during the past year. BTW good article about oil in Salon today:
http://www.salon.com/news/feature/2008/03/17/oil/
“The trouble is that its very difficult to cut back on oil usage”
That’s wrong. You work for Chevron or something? Living closer to work
That’s wrong is wrong. Living closer to work is very easy to write, not so easy to do. For many, living closer to work might involve selling the house, moving the household or changing jobs. Two of these options can be especially hard to do, and getting harder every day.
““The trouble is that its very difficult to cut back on oil usage” That’s wrong. You work for Chevron or something? Living closer to work That’s wrong is wrong.”
If you can’t move closer to work (you can if you are a renter!), then you can carpool, use public transp, work from home, etc. I’m just sick of the “can’t” attitude these days. We can tackle the energy/oil/gas problems if we go straight at it and do something resembling anything about it rather than our mincing, fraidy-cat actions like buying a Prius and continuing to commute from WVa to DC, for example.
We can do something and many of those “somethings” are not that hard. We are selling ourselves, our personal information, our planet for “convenience” too cheaply and it’s not a good trade.
MrBubble
These arguments are similar to “all real estate is local”.
i was watching the business report on pbs last night and the overall mood was “we have turned a corner” the worst is behind us
we shall see but i think the overall trend is down in the markets and housing
It’s hard to disagree with PBS. After the rate cuts yesterday, all the excess capacity of homes in Florida vanished. The same happened to all the foreclosures. They went poof! What’s more, all the worthless paper circulating in the financial system turned to gold. The worst is over. We’ve been saved!
The farce be with you.
PBS just wants to keep their donations rolling in - that’s all.
the overall mood was “we have turned a corner” the worst is behind us
We might do well to remember all the “corners” we “turned” in Iraq. At some point we find ourselves going in circles.
Humans, like other flocking animals, are highly susceptible to mass mentality. I guess it all comes down to whom we consider to be our leaders…CNBC, or our common sense. I prefer to listen to folks like the ones on this blog when checking my um, bearings.
Heh, I just switched my alarm clock radio from NPR to the classical music station about a week ago. Not a moment too soon it would appear.
I think we have turned a corner this month… just not the “right” corner and there’s nothing good hiding around this corner, either.
When you’re in a maze, turning a corner doesn’t mean much. Saying the “worst is over” is just wishful thinking on PBS’s part. None can know this at the moment.
crapped out:
In a move that does not auger well for the construction industry, lead lender Deutsche Bank is proceeding with foreclosure proceedings against the developer of a high-profile casino in Las Vegas.
The project, the $3.9 billion Cosmopolitan Resort and Casino, is going up on an 8.5-acre site on the Vegas Strip, between MGM Mirage’s Bellagio Resort and Casino and CityCenter, an MGM project now under construction. But the Cosmopolitan’s general contractor, Perini, said in a press release yesterday that it has been informed by Deutsche Bank that the bank has begun the foreclosure process on 3700 Associates, the developer of the Cosmopolitan. Deutsche Bank holds a $760 million senior loan on the project.
http://tinyurl.com/2tu2np
Thanks for the story. For a while, LAS resorts looked like they were going to ride out the storm. The link mentions they are seeking more financing- good luck in this market.
The cosmopolitan is yet another of a big luxury project chasing a small portion of the market.
RE: lead lender Deutsche Bank is proceeding with foreclosure proceedings against the developer of a high-profile casino in Las Vegas.
And the gov’nor here in Mazzland thinks the road to financial salvation is to accommodate the building of 3 $$$multi-billion casino’s here.
The lights went off for 90 minutes in Vegas in four hotels yesterday due to a transformer failure. Mandalay, Excalibur, Four Seasons and Luxor. One transformer. Oh, how delicate our modern existence is.
Human existence has always been delicate. A mis-step or a 1-millimeter blood clot can put an end to any of us at a moment’s notice.
Oh, Death, thous comest when I had thee least in mind
Humorous story:
On St. Patrick’s day I stopped to pick up some beer at my local shop and remembered that a co-worker that is leaving always jokes about getting a 40 of Colt 45 - so I pick one up for him. As I’m paying for the beer the conversation turns to the 40 of Colt, leading to the following exchange:
Cashier: Do you work across the street?
Me: No, why?
Cashier: Oh, those shirts [shirts and ties - which I was wearing that day] are always coming in and getting 40s. Figured you were a new guy over there.
Me: No kidding. Maybe I’d like to work there - who is it?
Cashier: Wells Fargo.
Trying not to blurt out “remind me never to bank with Wells Fargo” I finish paying and head across the street - sure enough, there is a Wells Fargo right across the street.
That explains that extra 5k they put in my account about 10 years ago.
I went to the bank and they said it was my mistake. I really tried to give it back, but they wouldn’t take it. True story.
That is awesome.
That’s exactly what I said as I walked out the door, afraid to look back.
Morgan Stanley beats estimates. Who would have guessed? I have a pair of shoes for sale for $63,645.97. Please contact me if you are interested. I never knew how rich my wife and I were until I started valuing our assets the way Wall Street values their assets. Bwahahaha.
Why don’t you put those shoes up for sale on craigslist?
in the last year i have put numerous items for sale on craigslist that my wife was about to throw away and i sold them all quickly
the running total is approximately $1200
people will buy anything it’s really amazing
How much can you get for the wife?
watch it flyboy.
she will bust your ass i told you she works out quite a bit
There seem to be many who think that if it’s on Craigslist, it must be a bargain.
(shrugs)
Velo
eBay had a bid of $20.00 for a single Kellogs Frosted Flake shaped vaguely like the state of Illinois. Wonder what they could get one shaped like the Virgin Mary, whatever that is.
If they are “white shoes”, the Morgan Stanley bankers will buy them.
Not after Labor Day, of course.
30 year not falling:
The Federal Reserve has been slashing short-term interest rates since August with precious little effect on the one that matters most to homeowners and home buyers: the 30-year fixed mortgage rate.
That rate is roughly where it was a year ago, while the discount rate, which is what banks pay to borrow directly from the central bank, is 4 percentage points lower. The Fed’s opening of the spigot of cheaper money is supposed to spur across-the-board spending and economic growth, reversing the tide of recession, but bankers have in effect put a knot in the hose.
http://tinyurl.com/3a74ym
Who says the rate cuts are targeted at the “consumers”? They put more protein on the plate in the faculty lounge, while the school lunch gets smaller. Sure glad I’ve got some Snickers bars stashed in my locker.
Who says the rate cuts are targeted at the “consumers”?
I agree - this is probably the most naive view of them on the planet. The Fed doesn’t care squat about Fred and Erma on Mainstreet USA.
The Fed cares about lots of things but consumers only to the extent that they can cause panic.
Well it IS importatant that they keep up their CC, mortgage, and car payments to Mr. moneybags. We can’t have those “little people” declaring bankrupcy or walking away from the mortgage.
They and the govt care about spending as much as it props up the GDP number. They tout GDP as a sign of economic health (which leads to reelections).
Last night on PBS, the question was raised: how does this affect J and M6P? Somehow the question never really got answered. I’m still waiting for somebody–anybody–to spot the naked emperor and cut throught the BS.
On The NBR, they all acted like somebody who’d been shot at and missed–it was palpable. Paul Gangass was nearly drooling on himself.
The Economy March 19, 2008, 12:01AM EST
The Fed Is Too Easy on Wall Street
Fed Cut Fails to lower 30year…
http://www.latimes.com/business/la-fi-mortgage19mar19,1,7305601.story
vietnam bails on the buck:
HANOI, Vietnam — Vietnam is trying to unshackle its fast-growing economy from the sliding U.S. dollar, a tactic that might stem rampant inflation but is rattling exporters and Vietnamese who have been using greenbacks as a daily currency for years.
http://tinyurl.com/3cpxat
Maybe we could bomb them back into the dollar age. It worked so well the first time.
We’ve committed the next 100 years to the desert. The jungle will have to wait.
Velo
I invested in Vietnam in the last 6 months. It is treating me well.
Just weird to be on the Ho Chi Minh Stock Exchange. (Or as it is affectionately known - the HOSE)
I will not discuss the Vietnam war, to many of my friends went there. It was never about communism, it was about Vietnam wishing self rule.
BUSINESS
A Penny Saved is a Penny Spent
My generation doesn’t know how to be thrifty. That could spell disaster.
By Eve Conant | NEWSWEEK
Mar 24, 2008 Issue
Generation X is a mixed bag.
Some of us do know how to be thrifty - but I can say from personal experience that I didn’t learn it from my parents. (And it turned out that I could relate to my WWII grandparents better at the end of their lives then my baby boomer father, whom I still struggle to figure out occasionally.)
On the other hand, I know many people my age that are up to their preverbal eyeballs in debt.
I don’t know - my thoughts recently have been along the line that Generation X will default on the debts (theirs and those left by their elders) and be the ones that will have to pick up the pieces of that. (Yeah, a rather grim line of thoughts…)
This Gen Xer is leading by example. I hope all of the spenders rot.
This Gen Xer is leading by example.
Hey I am too, but realistically, I can’t help thinking that the immediate future is pretty grim. Like it or not, we’re all connected to the debtors.
The savers, I think, have a real shot at both happiness and getting ahead in a semi-chaotic world.
You all are right on the mark. That’s why it is now more important than ever to really scrutinize every purchase and do everything possible to reduce one’s tax profile.
J6P doesn’t realize it but his SUV, plasma, and granite form the strongest shackles ever devised. The more he spends…well…the more he spends.
May they die of Consumption?
(coughs)
Good one.
“My generation doesn’t know how to be thrifty.”
How many folks these days know enough to change the oil, a flat tire, etc., without help? My inlaws don’t even own a screw driver, no sh*t!
This consumer culture scoffs at the mechanically/technically inclined. Sure there was some wonderment over techies - but still - look at how the average I.T. guy is portrayed and treated. Mechanics - well are just rubes.
Sure, having worked as both a mechanic (jets & trains) and with a bit of tech (avionics & GPS) I have quite the chip on my shoulder. So, if a BMW or MB motorist ever needs help with a flat they can expect me to first ask for $50 - otherwise they should call AAA or pray to baby jeebus. Metrosexuals are ripe for fleecing and should be charged a premium!
Thanks for making me laugh. Do they make baby jeebus dolls?
Know where you are coming from…….I try not to tell anyone what I do anymore. Everyone wants free advice.
A local banker approached me about working on his Citation…….besides being a cheap ba#tard, the first thing out of his mouth (when the airplane has a problem) is how he is going to stick the bill on someone else.
Life is too short to work for pukes like this……..
RE: Mechanics - well are just rubes.
…per the women on Match.com
Just wonderin..are you Brad Pitt’s identical brother?
Or George Clooney?
Just wondering..
LOL
Years ago, I filled in the questionaire in my now deceased Cat’s name, and wanted to just see what was out there on Match and the other one..?
Anyway, one guy came up 95% match and boy was he good looking. I surmised that not only was he getting hit on by 1000s of women online but that the other normal looking guys were SOL. They weren’t too “pretty” but I applauded them for putting up real pics. However, men tend to think they are much better looking while patting their KEGS.(bellies).
Just an observation!
And a very accurate observation, DD!
“A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.”
– Robert Heinlein, Time Enough for Love
I’m getting there . . . .
Lao Tzu…before Socrates…way way back…
Make yourself “useful”
I fixed my broken electric lawn mower today.. $30 in no-longer-manufactured-I-hope-the-new-generation-will-fit parts to replace a thin 1″ long built in plastic bolt that wore out.
My wife was laughing at me as I put the repaired assembly back together three times (installing it upside down first, then backwards second). I tried to tell her: Hey, the skill is in buying the correct parts and not breaking the fragile electric switch parts that I didn’t buy ;). She wasn’t impressed at that for a reason to delay dinner.
Hmmm, I may need to read “Door into Summer” again…
As we said in the 1960’s “ Don’t Trust anyone over 30“
It bothers me when people are told paternalistically told they should be saving more. People in a free market should be considered free to spend or save or invest as they please. What we have now, however, is a Federal Reserve Bank that has set interest rates which discourage people to spend. It is the primary provider of capital now, rather than the accumulation of our savings. So savings, really, play little role now in our economy other than the 10% necessary for banks for fractional reserve lending, as regulated by the current system.
A pity.
Edit: “…discourage people to spend” -> I mean “save.” Not sure if that was a Freudian slip or not…
The “reserve requirement” has largely been done away with. Zero on “savings” accounts and the banks have ways around the reserve requirement on checking accounts.
RE: I bought my first two-bedroom condo (in a marginal neighborhood) for $450,000 two years ago with 5 percent down and an interest-only loan for the next seven years (note to boss: please don’t ever fire me). Though mired in debt,
“I STILL MANAGE TO SLEEP MOST NIGHTS”.
LIAR, LIAR, pants on fire….
http://tinyurl.com/28875h
“State prosecutors shut down seven mortgage companies Tuesday in an ongoing campaign against predatory lenders, accusing a family of con artists of tricking struggling homeowners into refinancing deals that caused many to lose their homes.”
“The suspects are accused of forging signatures when consumers would not sign paperwork, making false promises about favorable loan conditions and ignoring requests to cancel loans within the three-day window provided by the federal Truth in Lending Act.”
“In the coming weeks, Brown said he intends to bring additional legal actions, both civil and criminal, against other unscrupulous mortgage lenders and foreclosure consultants.”
Just in time…
debtor kingdom:
The largest provider of debt advice, the Citizens Advice Bureau, said the increased cost of living in the UK had led to a rapid rise in people unable to pay basic household bills in the first two months of 2008.
In January and February Citizens Advice saw 215,000 more requests for help with debt than in the same period last year. Most inquiries concerned basic household bills such as gas and electricity, water, and council tax debts.
Looks like they could have used some of that cash stuff.
pity Uncle Buck:
March 19 (Bloomberg) — The dollar fell against the euro, erasing most of yesterday’s gains, on speculation the worst U.S. housing slump in a quarter of a century will swell credit-market losses.
The currency weakened against the Japanese yen and the Swiss franc after Bank of America Corp. predicted the Federal Reserve will lower its target rate by another 75 basis points this year following a reduction to 2.25 percent yesterday.
http://tinyurl.com/2prjeo
Sounds like a historic buying opportunity.
It’s just a flesh wound.
Most flesh wounds eventually heal. Not so sure about this one, though — if sepsis creeps in, all bets are off.
I needed to elaborate - think “Monty Python and the Holy Grail.”
Tis merely a flesh wound!!
BS stockholders: Come back! I’ll bite your kneecaps off!
Arthur C. Clarke has died.
He will be missed, but his three laws live on.
“When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.”
“The only way of discovering the limits of the possible is to venture a little way past them into the impossible.”
“Any sufficiently advanced technology is indistinguishable from magic.”
Thanks for that post. Hard to argue with any of those points…
Open the pod bay doors please, HAL.
Forex - Dollar sheds post Fed gains
March 19, 2008: 05:00 AM EST
Do Wall Street bulls know how to read handwriting on walls?
“The Fed’s accompanying statement proved to be more hawkish than many had expected. It showed that the Federal Open Market Committee (FOMC) was divided, with two of the ten governors favouring ‘less aggressive action.’
The Fed also indicated that it was giving increased attention to elevated inflation levels, thereby signalling that an end to the current rate cut cycle was fast approaching.”
That pretty funny Professor Bear . At the level the Fed rates are at now ,I would say they are only about 4 points below where they should be at to fight inflation .
Darn , I hate the choice the Feds (and other powers )made .If I remember right Professor Bear ,over two years ago you thought the Feds would go down the path they are going now.
Steel cents and nickels? More evidence that U.S. money is becoming trashier and trashier. Imagine making coins that RUST! Congress is thinking about it. Trash Coins
Bill 5512 will eliminate Congressional control of coinage and delegate it to un-elected bureaucrats. The Secretary of the Treasury would be given sole discretion to alter the metal content of coins, or even to create non-metal coins.
Said Rep. Ron Paul, “HR 5512 is a sad commentary on how far we have fallen, not just since the days of the Founders, but only in the last 75 to 100 years. We could not maintain the gold standard nor the silver standard. We could not maintain the copper standard, and now we cannot even maintain the zinc standard. Paper money inevitably breeds inflation and destroys the value of the currency.” Mainstream news media and the majority of Americans do not listen to Representative Paul. But he is merely pointing out the sad fact that the United States cannot even maintain a ZINC standard for its most minor coin! Remarks to Congress. (Send a note to your representative in Congress and urge a NO vote on HR 5512. Giving up Congressional control of U.S. coinage is another slap in the faces of the American people by their own leaders.)
Just print $20 on pieces of pure copper (or some figure in excess of the current market value of the metal) and get on with it…
Flashback: My dad telling me, “Don’t take any wooden nickles!”
First, here is a link to a book that answers any questions one may have about how the bankers are playing this game. Follow the link to where the book is posted.
I doubt anyone will actually read it but there it is.
http://greatreddragon.com/
If you go to that site and look under the link “A real solution to Real economic problems” you will find an article that contains this excerpt:
“AMI’s Solution
By changing the law with AMI’s proposed American Monetary Act [pdf], U.S. citizens will be able to allow their U.S. Treasury to print and create money, just as it does now, WITHOUT paying interest on our created-money to a small, private group. The money that is now siphoned out of our pockets to pay interest payments, for absolutely nothing, could then be used for infrastructure, health care, education and so on. It would also stop financing mischief against the interests of 99% of U.S. citizens.
It does NOT abolish any existing beneficial functions of the Federal Reserve. The Act’s main purpose is to make the Federal Reserve a part of the U.S. Treasury, answerable to U.S. citizens, and not to a small group of international bankers. In fact, the REAL records of the Federal Reserve would finally be available to all U.S. citizens. People want “more transparency,” which is just a fancy way of saying “less lying-by-omission.”
Fed’s Retaliate
This was the THIRD meeting by the AMI to forge this American Monetary Act into a final form ready to take to Congress. It is obvious that the Federal Reserve knows about AMI’s work to put them under our U.S. Treasury’s control. I say that because last year [2006] a bill [H.R. 5818] was introduced to the House of Representatives as the “Currency Overhaul for an Industrious Nation (COIN) Act.” Buried in the middle of this bill is this:
“SEC. 8. TRANSFER OF THE UNITED STATES MINT AND BUREAU OF ENGRAVING AND PRINTING TO THE FEDERAL RESERVE BOARD.”
They are not going down without a fight and they have already fired a shot across the bow. HR-5818 was introduced 7/2006, and it now has 5 co-sponsors. The Federal Reserve obviously is not content with only 95% control. This bill demonstrates that they NOW want 100% control. Do we dare allow this, considering that 95% of the value of our money is already gone? And be aware of the fact that we now pay this private group interest on NINE TRILLION DOLLARS of debt. That’s a 9 followed by 12 zeros.
“We, the people, are locked in a death grapple and nothing our leaders offer, or are willing to offer, mitigates our troubles.
The people must think because the people alone can act.”
Henry George (1839-1897)”
That’s a great link. Thank you.
Pretty soon we won’t be using coins at all - just electronic exchanges - 0’s and 1’s.
Then we’ll be arguing about whether or not we should be on the “1 standard”, and that a 1 just isn’t worth what it used to be.
Lots of speculation going on in 0’s though. I hear there’s going to be a shortage - reserves are the lowest they’ve been in 35 years of record keeping.
I think it’s too risky though - everyone knows the availability of 0’s is controlled by just a few insiders. They could flood the market at any time, and then the price will plummet.
2’s - now that’s the thing. I hear technology for producing 2’s is just around the corner. Anyone got any tips on companies on the cutting edge of 2’s? I hear there are lots of Fed subsidies in the works.
Word is though that we’ve been able to produce 2’s for years, but the Gov. has been squelching it, in order to artificially prop up prices of 1’s. Bastards.
How insightful.
Just an attempt at humor (apparently a poor one). No insight or commentary attempted.
I have some steel pennies that were minted during WWII. They haven’t rusted.
The US minted steel pennies in 1943 & they were in circulation for years. They didn’t corrode that fast. Copper pennies deteriorated also, but by different mechanisms. I don’t know why our
worthless, lazy, incompetentesteemed representatives can’t deal with simple issues like this one in the constitutional way, by passing legislation as needed and where needed, rather than delegating their responsibility away via bills like HR 5512.Hoz, can we get Visa stock to short today?
How long would you hold short?
what is the ipo price $44??
should be $90 by the time it hits the public
I have had a few of my co-workers ask me what I thought about the Visa IPO. These people think that because it is selling for $40.00 a share that is just as good a deal as when MasterCard was at 40.00 a share and they can’t lose. These people don’t have the basic understanding about credit and the credit crunch we are in. I ended up giving about an hour lecture via a whiteboard on credit cycles, the current mortgage rates VS short term rates, reasons companies go public, etc One said they had their money invested in an IRA without any understanding that once it is in the IRA one must put it into some other vehicle otherwise it is just in a money market account that pays very little in interest. The deer in the headlights look I was getting made me sad that they are completely financially illiterate. Good people, but will be sheered if they invest their money in things like Visa.
It is irrelevant.
Visa and Mastercard are payment networks and they make money off the payment services. I do not know if their valuation is out of wack ( did not look ) but I can tell you that the volume of non-electronic payments is decreasing while volume of electronic payments is rising in every business that I know of.
But the rate of rise is slowing markedly. The big percentage growth is over. Think gas stations, grocery stores. You only make big money during accelerating growth. GOOG, AAPL, etc. are growing rapidly but their rate of growth is declining, thus the stocks are murdering people who don’t get the second derivative issue. V has the same problem. They do have an international story, but that’s it. It’s dead money. (Chick knows all - I saw a 60 print but if she says short it’s going down.)
They do have an international story, but that’s it. It’s dead money.
Didn’t they float only the U.S. portion of the business? If so, the story is even less compelling.
Til I make enough to pay off my Visa card?
Hahahah.
TxChick, A side note
Do you invest with Thinkorswim?
I was trying to purchase RYJUX (Hoz recommendation at $16.75)
I have 2 brokers and they told me 2 different things.
1 said they could purchase it if I switched part of my account to a commission based account (O.9% fee)
My other broker told me it was closed for new investors.
I am sick of dealing with brokers and have educated myself enough that I know I can do better on my own but am wondering if Think or Swim has access to this and other ETF’s. I am planning on getting rid of 1 of my brokers for THinkorSwim and then if I like it I will go solely with it.
Thanks,
Shakes
Tx has also recommended MB Trading, which I’m going with once they understand I live where I live, and not where their 3rd party info provider says I live.
No, I don’t but I have heard good things about them from others. Call and ask. They are very helpful. I’m sure you can buy the closed end funds without a problem. Try also Interactive Brokers if TOS doesn’t work.
Tx,
I can get stock so you should be able to also get stock.
A little story for you about why I do not short IPOs
When Genentech went public and was up 50% on opening, I shorted. I covered for a loss when it was up 125%. It never saw those prices again.
Since then I have shorted one stock on the IPO, that caused me a lot of sleep and drinking time! There is not enough moneys to be made to justify the loss of sleep. I would raher be shorting the banks at these prices.
The liquidity panic is over, at least for now. The write-downs are not. Investors used to be terrified of the latter, until they stared into the abyss of the former.
Right and I”ll bet we’ll revisit this all again in a few months on the third trip down to 1270-1250 just like the third one down to 1375.
“…The liquidity panic is over, at least for now. The write-downs are not. Investors used to be terrified of the latter, until they stared into the abyss of the former….”
This was from the Financial Times. Not my writing. Sorry quotes did not show in prior post.
I use italics for quotes, they are much more readable on this blog.
Tuesday, March 18, 2008
Will Fed solve crisis, or make it worse?
Though the stock market has been deeply troubled by the subprime mortgage crisis, it has yet to crash. Many attribute the relative health of the markets to actions made by the Fed to keep the cash flowing. Ashley Milne-Tyte reports on what the Fed may do next.
Everything that is happening today is an outcome of the past. Bear’s failure is an outcome. Rising foreclosures, falling prices, walking away, are all outcomes of past behaviors.
The overbuilding already exists. The bad loans have already been made. Borrowed equity has already been spent. Rate cuts are not going to undo any of these things. They already exist.
So, what exactly is the Fed trying to achieve with all these rate cuts?
- Fooling games
- Hair-of-the-dog hangover cure
(IMO…)
Save the lenders and Wall Street firms and push the price or risk of loss on to the taxpayers instead of these clowns . Also ,be a lender when nobody else wants to be in spite of good reasons for not wanting to be . As a taxpayer I just love making bad loans or ending up with them . In other words ,re-spike the bunch bowl ,putting the taxpayers at risk of loss , instead of the goofs they got to buy junk paper before ,who already got burned ,and don’t want to buy these days . (IMHO)
Tuesday, March 18, 2008
What the Fed should demand in return
Whether you call it a XXXXXXX or not, the Fed is aggressively intervening in Wall Street’s business. Commentator Robert Reich has no problem with the Fed stepping in — as long as it demands something in return.
Feh. What I want in return is for the private assets of the management, traders, directors, etc. of these “investment” banks to be immediately frozen, seized and re-distributed to “the people”. Deprive these assclowns of every last penny they have and forbid them, under pain of solitary confinement, to EVER take a job in which they get to handle money. That includes being a cashier at WalMart. Let them figure out how to put gas in their rotting automobiles. When they do manage to get a job, let them work for a few months, start to get ahead, and then viciously yank that job out from under them and tell them the job has gone to India.
Nah, on second though, just deport them to China and make them work off their debts in some forced labor toxic factory.
walmart still accepts us dollars? not for long
It’s sure looking like it will happen P….. Wall St needs an enema in the worst way and the SEC, shrub administration abdicated on their responsibilities so someone has to do it. I want silver bracelets on these guys in addition to returning the money they stole.
“Wall St needs an enema in the worst way and the SEC, shrub administration abdicated on their responsibilities so someone has to do it.”
Amen, E. These Wall Street dicks are SO full of crap, if you gave them an enema, they’d be about a foot tall.
Amen, bruthas, aaaaaaaaaaamen.
WallSt getting the Royal Flush is a schadenfreude moment. How I’d love to see big name CEO’s getting the swirly-twirl…… right into the slammer where they belong.
More than prison time, I want ALL of their assets — foreign and domestic — confiscated and returned to the public/taxpayers. Then, they should be allowed to live in a one-bedroom apartment in a shady part of town, and drive a five-year-old sedan, and that’s it!!!
Anything over that, for the rest of their lives, they will have to pay to the taxpayers. And…they should be forced to work until the day they die.
So there!!!
seems the shrub admin actually sent some to jail
while under the clintonistas’ they went free
100k a month for life for me”
Raines
flats back under a new moniker. BOO!
Speaking of new monikers, exeter, don’t you have one?
Not one I can use here but how bout you “jack”?
“Generation X is a mixed bag. Some of us do know how to be thrifty - but I can say from personal experience that I didn’t learn it from my parents.”
Same for the late (1970s) boomers. The “Greatest Generation” worked and saved. The 1950s and 1960s generations worked even more, but did not save — they spent.
My view is this. Pre-1960s people were forced along a certain path by social institutions — marriage with defined sex roles, forced savings through mortgages, whole life, pensions etc.
Post-1960s those constraints were removed. Some of us did better — better marriages with the father sharing parenting and the wife wage earning, more savings and wealth creation — but most did not.
Post-1960s those constraints were removed. Some of us did better — better marriages with the father sharing parenting and the wife wage earning, more savings and wealth creation — but most did not.
Yeah, that’s thing about freedom: you’re free to choose dumb things.
I have a weird ambivalence about the modern era. Especially as woman, I’m grateful we’re not locked into women stay at home and have babies role. There are many women who just plain old don’t fit that model.
On the other hand, I know women who are not happy in the workforce and/or are very ambivalent about that role. They have a hard time imagining another life because they were very carefully taught that running a frugal household (aka 50’s housewife) was degrading work that was beneath them.
Our household runs the best when I have less work and focus on organizing, keeping house, and track of the finances. Household running doesn’t come that naturally to my husband. I think I’m too brainy to completely let go of work but I get how many women could be reasonably happy in a 50’s type scenario.
I know women who are not happy in the workforce and/or are very ambivalent about that role.
I know many men who are not happy in the workforce, either. Unfortunately for them, if they chose to stay home and be full-time parents instead, most people would mock them mercilessly.
tell that to my lazy husband who stays home and doesn’t take care of any kids. He loves it.
no one’s really happy. That’s the paradox of life
Okay maybe people with no kids are the happiest. Right txchick 
?
Human beings are at their most creative when dreaming up new things to complain about, no matter how comfortable their way of life is. I admire them for that.
There was a sociological study done on that a few years ago- married men are happiest, followed by single women, followed by married women, followed by single men. Didn’t memorize any data on kids, but just this sequence provides a lot of thought fodder.
Actually in 2000 there was a study of that sort. It was in Scientific American I think because a colleague of mine, (single male) told me of the study. It said married men are happier than single men. However, single men making an annual income of $150,000 or more in 2000 dollars were happier than married men.
(I think I’m too brainy to completely let go of work but I get how many women could be reasonably happy in a 50’s type scenario.)
Not for long. My mother became completely bored when the kids were gone. She tried to back to work but couldn’t cut it. My Dad worked so many hours we never saw him. He feels he missed out.
My wife and I both worked part time when the kids were pre-school, each three or four days a week. It was a time I wouldn’t have missed. Now we have the two incomes, which is double-coverage for a recession job-loss.
The housework is done on a 40% mine, 40% hers, 20% blown off arrangement.
The best way for kids and housework getting done and everybody getting enough sleep and decent food was the cottage industry model. Before industrialization when everybody “worked out of the home” unless they were adventurous and became whalers or pirates. Except obviously it would have been more fair had whaling and piracy been open to both genders. And I don’t think you ate or slept well at sea. And then there were the floggings, deck swabbings and plank walkings. And Billy Budd didn’t fair too well. Okay, there were some problems with the whaling/piracy career path. But this BS we have now is worse. It’s triangle shirtwaist factory for everybody.
You say smart things, Kandy, although your name smacks of frivolity.
Boy, I agree with you on this one! “Except obviously it would have been more fair had whaling and piracy been open to both genders.” That has always irked me.
And to continue your pirate theme, here’s one of my favorite quotes:
“Now and then we had a hope that if we lived and were good, God would permit us to be pirates.”
Mark Twain
“Now and then we had a hope that if we lived and were good, God would permit us to be pirates.”
I would loved to have been a pirate!!!
I would loved to have been a pirate!!!
Today’s pirates wear expensive italian suits.
And the FB’s are the ones being “pirated”!
I would loved to have been a pirate!!!
It ain’t all ocean breezes, fashionable puffy-sleeved shirts and hanging out with Johnny Depp.
Anne Bonney. Mary Reade. Grace O’Malley. Ching Shih. There were female pirates. Shih had 1,800 ships and 80,000 pirates working for her.
Even so, would have hated to be a pirate. Rough conditions, killing people for money, scurvy, and the worst - horrific personal hygiene (liked looking at Johnny Depp but heard he got enough into his character that I was happy I couldn’t smell him!) Nope, I’ll take modern times, hot and cold running water and fresh oranges right outside my doorway, TYVM!
Modern pirates work in finance, banking & the stock market. Conditions are better, you don’t have to personally kill anyone, vitamin C is cheap & prevents scurvy quite well, and the standards of grooming & hygiene are much better.
Do we have any pirates posting on the HBB?
Gary Taubes says you can get enough vitamin C from meat and that seafarers all got scurvy from eating nothing but hardtack. Does anyone but Gary Taubes believe this? I was on the brink of buying it because he has this whole chapter about “how do the Inuit survive, huh, if fruits and vegetables are so necessary, answer me that, smartie,” but then I read somewhere else that the Inuit are all about eating a kind of pudding made out of berries and seal fat. So that tears that: berries are notorious for their vitamin C. I think we need to eat some plants.
Pigrims drank beer on the C journey.
I would loved to have been a pirate!!!
Or a ninja!
WT, I believe boomers were born ‘46-’64.
Yep, those were the years. I believe what is relevant is when you hit your teens and formed you own opinions and identity.
The early boomers who came of age in the 1960s and early 1970s, during Vietnam and related upheavals but during a time of prosperity, are a much different group than later “stagflation” boomers like myself.
I’m a stagflation boomer. The drug scene was all but gone in Fresno when I got to high school in the fall of 1974. Thank goodness! But then I always felt that the older boomers had a lot more fun when they were in their teens and 20s than us stagflation boomers. They were “act first, and think if there is time left over.” And they had better music than stagflation boomers and later generations.
Hangover time?
Prof,
Yesterday was just an after party. The main party is over.
BTW, I know that Ben does not really like the “we’re screwed” threads, and I agree with him. That being said, I just got through reading Roubini’s 12 points again and am feeling “we’re screwed” right now. Can the Fed really keep this up? We are in a critical illness right now. What happens when it finally goes chronic? Japan?
Roidy
So does Bear Stearns exist or not?? JP owns Bears balance sheet but is the outfit relevant?
So does Bear Stearns exist or not?? It has relevance until someone drives a wooden stake through its heart.
Freddie Mac, Fannie Mae adding $200 billion to housing markets. Their capital requirements cut by 1/3.
It’s too bad they require income documentation!
As long as the OFHEO is easing credit restrictions on the GSEs, perhaps they can ease up on income verification requirements?
I know you are being sarcastic, but how else is this going to have any affect? Will they be even able to purchase $200 billion in mortgages if they aren’t willing to ignore income documentation, credit scores etc.?
Thanks for making my point, and sorry I could only express it through sarcasm…
The bond market has pucker butt. $6billion is what, Ten thousand jumbo mortgages? Oh goodie. Now how will they finance the other 990,000 needed in 2008?
Jumbo requirements will increase through the year. The premium might go up a little more too. We now have Vietnam joining Indonesia in abandoning the dollar. We’ve hit critical mass.
Got Popcorn?
Neil
Then, if that is what is in the way, it will be removed. No income needed, no verification of anything, nope - just buy something and get in debt so we can keep this scam going.
Everything will be tried to prop up the Ponzi Sceme, although I doubt anything positive will be achieved. But it will drag out the fall and recovery for as long as possible.
I am wondering whether there is any possibility this announcement was leaked on Wall Street before the rest of the country caught wind?
Why do “they” always wait until after hours to announce big changes?
Gold and silver are tanking. Why?
1) Do the Indians have to make margin calls?
2) Is everyone selling to get on the bull wagon?
3) Are we entering a deeper stage of the recession where no assets rise?
Commodities have a “thin market” problem…not enough dumb sheep with bank to buy from the small handful of Smart Guys in the Room.
Jonathan Wilmot, chief global strategist in fixed income research at Credit Suisse:
“Both episodes were periods of US recession that happened to coincide with major supply shocks and/or sharp increases in investment and speculative demand for commodities,” says Mr Wilmot.
Global commodity markets are very tight but there has been no sudden supply shock similar to 1973/74 or 1979/80, according to Credit Suisse. Instead, the investment bank says the primary driver of surging prices today seems to be financial buying by pensions funds, hedge funds and investment banks’ proprietary trading desks.
Forgot to mention gold bugs who post on blogs…
“Instead, the investment bank says the primary driver of surging prices today seems to be financial buying by pensions funds, hedge funds and investment banks’ proprietary trading desks.”
Okay “smart guy”, what was the primary driver of surging prices from 02 - 07? Every time gold corrects for ten minutes you top callers come out of the woodwork like roaches…you guys are the best contra indicator in the world.
Gold and silver are tanking. Why?
The PM’s have been way over due for a correction, don’t see it as tanking or a surprise.
PM speculation is based on two interrelated things:
- Weak dollar
- Possibility of financial collapse
In the latter case, the perception (for the one day that they’ve been “tanking”) is this that the risk is reduced - see huge market gains yesterday.
Right now they are correcting. They won’t tank until a later stage in the “slowdown.”
The 1003 closing price on Friday could be analogous to the $735 price in 2006. And I actually bought some gold near that 2006 high. I kept buying gold over the following months and snagged the $608 spot price in January of 2007. I keep buying gold while 10 year notes are yielding well below the yield they were in 1980. My next gold purchases will be in April after tax day.
Patience, Al. 40% is tanking. 4% is correcting. Hot money has to come out and chase the Visa IPO, or Lehman. A 20% correction would take us to 800, what a buy that would be.
It is quite clear that just 4 days ago everyone was expecting black monday and the end of the banking system as we know it. Now there is a general feeling that things are “under control” and that the Fed can and will step up and save all major financial institutions from bankruptcy. While this is highly inflationary it reduces fear and therefore the price of gold/silver falls.
Once the fear returns then the prices will shoot back up. A $100 swing in the gold price in the past 4 days is quite a correction (~10%), but who here on Sunday would have bet that the Fed could trigger a 420 point rally on tuesday after keeping it flat on monday?
What $100 correction? Even if you count the brief time it touched 1030 in Asia, we have not come off a hundred.
1030 - 946 =$84 dollar correction… close enough for government work.
It seems to me that Gold, silver go down after a rate cut. Goes way up days before and then down after the news. Buy on the rumor sell on the news. Dollar is paying 2.25% not good. I will buy more Gold and Silver on the dip.
DEEPer stage of recession = DEEPression…
“Gold and silver are tanking. Why?”
So that I can buy more.
(Actually I’ll wait until it hits the low 900’s, Ben is busy printing a few more $100B to bring it down there).
“Gold and silver are tanking. Why?”
“So that I can buy more.
(Actually I’ll wait until it hits the low 900’s, Ben is busy printing a few more $100B to bring it down there).”
Are you going to buy more at $800 and $700 and $600, too?
Maybe the famed PPT sold a bunch of gold to have cash to give the market a 400 point rally?
New Jim Rogers video; says Fed out of control:
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vggsNLO01KN8.asf
There is also text of his thoughts on the Financial Week site.
It seems like there is a disconnect between the two. He thinks the Fed is trying to fix the problem and things would be better if the correction could be speeded up. From their published remarks the Fed appears to be trying to ease the correction and slow it down, not stop it. Given how slowly labor markets recover nowadays it seems like Jim Rogers is underestimating the potential for social unrest and overestimating the ability for ordinary folks to pick up the pieces after players such as he have thrown the playing board all around.
With just the amount of the Iraq budget of 2007, $138 billion, the government could instead have provided Medicaid-level health insurance for all 45 million Americans who are uninsured. What’s more, we could have added 30,000 elementary and secondary schoolteachers and built 400 schools in which they could teach. And we could have provided basic home weatherization for about 1.6 million existing homes, reducing energy consumption in these homes by 30 percent.
But the economic consequences of Iraq run even deeper than the squandered opportunities for vital public investments. Spending on Iraq is also a job killer. Every $1 billion spent on a combination of education, healthcare, energy conservation and infrastructure investments creates between 50 and 100 percent more jobs than the same money going to Iraq. Taking the 2007 Iraq budget of $138 billion, this means that upward of 1 million jobs were lost because the Bush Administration chose the Iraq sinkhole over public investment.
http://www.alternet.org/waroniraq/79988/
The Iraq War Is Killing Our Economy
I hate it when people think that money belongs to the government to be spent on “something else” instead of saying that money could have been kept by the tax payers so that they could provide for their families needs. I also hate that these people never point out that the money was really stolen from the value of the dollar and represents a violation of property rights (if you assume as most do that they own their dollars).
And by something else you mean the war in Iraq?? Then I agree.
The $ was given to the tax payers, mostly the tax payers in the top 0.1%.
I would wager that if the $$$ had been spent on infrastructure ,energy conservation, education and paying down the massive debt created over the last 7 years that the dollar would not be in the toilet.
This was all borrowed money anyhow, could have been NOT borrowed and our grandkid’s wouldn’t have to pay it back.
respectfully,I don’t agree with you. there is such a thing as the commons and there is such a thing as a benevolent government (supposedly we the people are its most important element) that helps those who are in need. thats why i’d be glad to pay taxes. to lift those who are in need and to upgrade our environs and public works.instead, war and armaments makers and blackwater agents and bailing out companies that produce nothing but smoke and mirrors receive the vast majority of our hard earned taxes. it is just horrible. this country has lost its way unless we decide differently.
You shouldn’t use force to steal from one individual to give to another. If you really care about someone then you can give of your own free will. I believe that most people are very giving when the person they are giving to is truly in need.
VirginiaTechDan, you are spot on. I agree with your above two posts 100%.
Let’s get real. $138 billion? Big deal. How about $3 trillion in total? Now we’re talking serious money. You raise a good point. We could have solved the energy/oil crisis and created LOTS of jobs in the uS if that money had been spent on things like weatherization, photovoltaic research/production, or other productive actions that actually benefit the country. Sure would be nice if our tax money benefited us for a change.
Who does all the money go to? To the Iraqis or what?
Well, we did ship a tracker-trailer full of $100’s from the Fed in Philly to Baghdad in 2003. I’m sure all that money went to the right people.
http://tinyurl.com/hvsk4
“Iraq was awash in cash - in dollar bills. Piles and piles of money,” says Frank Willis, a former senior official with the governing Coalition Provisional Authority. [b]“We played football with some of the bricks of $100 bills before delivery.[/b] It was a wild-west crazy atmosphere”.
Dang, if they’d shipped that many greenbacks to US gangbanger territory, they could have brought Baghdad home.
Several million US citizens have been gainfully employed over the last five years thanks to America’s little misadventures in the deserts.
Whether killing people you’ve never met, blowing up their infrastructure, inventing new and more efficient ways of doing so is truly the best use of this money is another issue altogether. But other than the large percentage that has been siphoned off into the “sovereign wealth funds” (IE: Bushies,) in Dubai, much of that money has been recirculated in the US. For example, a young friend’s widow received $450,000 for her 19-year-old husband’s death-by-IED. She invested it in…you guessed it, a house in Bakersplat .
$450k is a one time payment…
Figure on $10 Million spread over the course of a lifetime, for 2 other crewmen in the humvee that were horribly injured and will need constant care.
Wars are so easy to get into and so hard to get out of…
True, ahansen, but unfortunately the PRODUCTS of that employment might have well been ships that were just towed out to sea and sunk. The point I was trying to make is that we could have had the jobs, as well as the product of those jobs. I know there is nothing like setting off large explosions, but they produce nothing useful. Having the jobs and the products of those jobs could have produced a real boom in the US, instead of the capital/liquidity BS that went on. The question has always been guns or butter; the Repugs wanted both, but weren’t willing to be actual, real life, conservatives about it. Which brings up another thought - what did happen to all those Republican values likeTthe Constitution of The United States, the rule of law, honesty, self-reliance, fiscal responsibility, etc. etc. that we used to hear so much about? They’ve all turned into socialist bail outers as far as I can see.
A sign that the recession (A.K.A. The Great Unraveling) has begun.
http://wcbstv.com/topstories/Hot.Dog.Firing.2.680305.html
Time to buy the dip today?
Tuesday: Get Shorty
Wednesday: Get Goldilocks
I nibbled on silver again today.
Flight to quality is tipping to Uncle Buck.
Oversold rally. Can stocks, and the dollar rally in tandem?
Bond traders are expressing serious doubts.
The stock market cannot possibly sustain a rally unless the dollar rallies.
Hoz — You shorting VISA? The New Era theory used to justify the high stock price is pretty funny…
Nope, I am shorting BSC. I am margining 2:1 ($2 for every $1 short). If the money center banks rally another 2.5% or so I will start shorting them. e.g. BAC at $40.50 is for me a lock. These are not suitable for any and or all investors. This is suitable for me, myself and I.
BSC will be non-marginable under 5. You will have to cover.
You misunderstood for every share I short I am putting up 2 shares in cash. (My own rule). I am not required to cover short shares that are under $5.00. I can short stocks in BK or in any situation. As long as I have someone willing to lend me the shares I can short. I can only be forced to cover if I am a naked short (creating artificial stock that never existed).
Yep.
Yesterday I heard the FBI was investigating 17 banks or mortgage companies for mortgage fraud. My question, is the fed opening the discount window to some of those being investigated by the FBI for mortgage fraud.
forgot the ?
Switching Sides
Mortgage brokers like Bill Whitehouse thrived on commissions during the housing boom amid lax lending standards. Now, with mortgage defaults soaring and lending volumes plunging, some former brokers and loan officers have converted to a new occupation: counseling borrowers who are trying to avert foreclosure.
“Not all of us ate our own young and spat out the blood,” Mr. Whitehouse recalls telling his new boss at Boston-based nonprofit Neighborhood Assistance Corp. of America.
http://tinyurl.com/2yo2qo
TxChick - did you survive the 4+ inches of rain yesterday? It was a nasty afternoon and evening here.
Sort of. I’m across the street from White Rock Lake so things are pretty soggy.
“WaMu: Skip customers; save the execs”
http://articles.moneycentral.msn.com/Investing/CompanyFocus/WaMuSkipCustomersSaveTheExecs.aspx
Confiscate their stolen $$$ and put them in jail where they belong.
You mean that hip, young, lean, minority guy in the commericals was really a fat cat in disguise? I am shocked!
A book recommendation, and a real quick read:
“Where Does the Money GO: Your guided tour to the Federal Budget Crisis” by Scott Bittle and Jean Johnson
It’s a book, in layman’’s terms, about the US Budget, written to be non-partisan and evenhanded.
Let me guess the answer….
Social Security
Medicare/Medicaide
DoD
VA
Interest on the debt
Does it matter where a thief spends their plunder?
The thieves are us. We are stealing from ourselves to give to ourselves.
We steal through tax.
We steal through inflation.
We steal through regulation, but lack of regulation allows more theft.
“but lack of regulation allows more theft. ”
BINGO
Great post, Darrell! Sadly, you speak of what the masses despise: personal responsibility.
It also underscores the general lack of ethics among most adults everywhere - that in absence of regulations, it’s all well and good to screw thy neighbor.
Those few of us who don’t steal and cheat (from employers, family members, on spouses, the government, fellow taxpayers, etc.) are left with one of two choices: (1) either let the scam artists get away with it, or, (2) lose our freedom.
Given the choice, I’ll accept #1 to keep #2.
The thieves are not us because the government doesn’t follow the majority. Our public officials act according to their own interests and the choices they make are for personal gain of themselves and their friends. You pay 50%+ of your income toward taxes and are provided with subpar schools, roads, retirement plans, insurance, etc. A war where 70% of the people are against it is not “us” stealing from ourselves. This would only be true if we each CONSENTED, but because we have no choice and the politicians have no proof of delegated authority it is plunder. They steal from us to increase government power by making us dependent upon “their” services and outlawing competition.
If you know anything at all about our way of government, you’d know that ours is NOT a government that is beholden to the whims of the majority. It’s not set up that way.
Just because 90 percent of all lemmings in the world (liberals, socialists, fascists, communists) believe “group think” is a sign of brilliance hardly means that it is.
Why is it that so many people who preach the Values of the Majority - i.e, liberals, socialists, fascists and communists - are such Intellectual Bigots? Might it be that they are not interested in freedom for individuals? I guess in the DC Beltway or in nearby counties, freedom for individuals isn’t a popular construct.
“The thieves are not us because the government doesn’t follow the majority.”
Oh I disagree…. Maybe not simple majority, but they follow the super majority.
Social Security is untouchable (until it implodes) because it is popular.
Medicare is doomed, but it is expanded to include drugs to win elections.
Cuts to the military are not acceptable to the majority of Americans. As a Navy veteran I think the Navy’s budget needs to be cut by atleast 50%…. You would not beleive the screams of “NO WAY” I hear from all over the political spectrum.
VA? Retire from the military at 38 and collect a pension for the next 60 years??? Unsustainable, yet untouchable.
Federal student loans?
Medical malpractice insurance…. through a loose burden of proof, nearly anyone can get a claim settled out of court since it is too expensive to fight and too easy to lose. It is theft from all.
Heck, even Loto is just government sponsored theft from the people that are bad at math to be given to the people sucking from the govt. teat…. Who is all of us that wants all the government spending but do not want to directly pay for it through direct tax.
Income Tax, Social Security Tax, Sales Tax, vehicle tax, property tax, school tax, fees, inflation, liability insurance, regulations, zoning…..
All forms of theft, but none of which we can get rid of becuase the flip side is not popular and/or there is no personal responsibility.
Last time I bought tires for my vehicle, I got charged $20 disposal fee. Why? Becuase they can’t be thrown in the trash, can’t be burned, can’t be just piled up somewhere forever. Truth is, had I the option of not paying the fee and just taking the tires with me, I would have just piled them behind the storage shed in my back yard… to sit for decades, and be joined by many more sets… eventually to be dumped somewhere by someone when I die.
So, becuase I am not responsibe enough to take the tires to a recycling center and pay the $20 for them to take the tires, the government has to MAKE me do it. Theft? Sure. Required theft? Yes.
Another good post. Thanks Darrell.
You know….about this ethics thing. I wonder if serial societal thieves (i.e., liberals, socialists, fascists, communists) consider theft via enactment and enforcement of *regulations* to be true and just simply because the government backs such notions with weapons?
No wonder lefties hate the NRA! It reminds them too much of their secret selves.
Right! But it’s interesting that the things the ‘wacky left’ whines about (strategic foreign aid) are less than 1% of the budget, and the things the “nascar right” whines about (illegal immigrants) are similarly insignificant.
It’s a tough sell to suggest that objection to the trillion dollar Iraq debacle is limited to the “wacky left”. Last time I heard, 70% plus wanted out and if a trillion dollars is 1% of the budget then I’ll stand on my head and spit jelly beans.
Illegal immigration is not insignificant to me and I have never been to a NASCAR event.
I’ve never been to a NASCAR event either, but the throttle return spring on my 1964 Plymouth Valiant broke once while I was driving, then I was suddenly in a one-car NASCAR race.
Groups / things I don’t trust:
1) Governments/politicians, they lie alot.
Charities, I’ve researched a few and I trust/donate to them, but there are a lot of crooked ones out there.
2) Economists, most of them try to convince us that things are okay when they’re clearly not.
3) CEOs, they won’t admit the real condition of the companies they run.
4) Accountants, they cook the books for the CEOs.
5) Investment advisors, they tend to provide advice that suits their own financial goals.
6) Ratings agencies, AAA for Ambac?
7) Economic Indicators, unemployment, inflations, GDP, all bordering on useless.
9) Lawyers.
10) MSM, I’m not as down on them as many here, I just know they don’t have the time to do thorough research.
11) Advertisers
12) Polls, eg a poll on peoples’ attitudes on proposition X
25% for
50% neutral
25% against
report: 75% of people are not against proposition X
or 75% of people are not for propostion X
13) Real estate agents
who do you trust?
I’m not trying to sound paranoid here, just pointing out that so many organizations, groups, etc, have shot their credibility via corruption, greed, incompetence…. How can we have a recovery without a little faith in the system?
You think he would recognize Foghorn Leghorn in Dawg suit?
http://tinyurl.com/249e4e
An argument for abolishing the Federal Reserve.
“The history of the boom-bust cycle since the creation of the Federal Reserve in 1913 has been the deliberate increase of the money supply, the misallocation of resources due to the perverse incentives of inflation, and eventually the bursting of the bubble. It is the consequence of the Federal Reserve system, a central bank that confers upon a chosen elite–the Federal Reserve governors–the monopoly of money creation and the power to decide what amount of money is appropriate for an economy in which millions of people are making decisions they cannot anticipate.”
Have to disagree. What has brought us here is the Fed, especially under Greenspan, NOT doing it’s job of regulating the lending market. The housing bubble was the free market gone wild, with all the adherent corruption that comes with it. Abolishing the fed and undoing regulation will only lead to a worse situation.
I’m not sure how I feel about getting of the rid of the Fed, considering it’s performance over the past few years the institution certainly isn’t making a good argument for itself.
I wouldn’t call the housing market an example of the “free market”. If there is any market the government has intervened in on a regular basis it is the housing market. From Mortgage interest deductions to capital gains exemptions, GSEs and the promotion of an “Ownership Society” it has been the policy of both political parties to encourage and subsidize home ownership at all costs.
I do agree about some of the regulatory failures, and I think we are going to see much stricter regulations on lending. However, this closing of the barn door after the horse has left the premises will only accelerate the decline in prices by decreasing the buying pool.
All those were in place since WWII without an out of control housing bubble. The difference is there were safeties along with the help in home ownership. My fathers generation all bought homes with the help of Uncle Sam. They bought at a fair price with a down payment. I would say it was Greenspan and Bush’s blind eye to the abuses that were going on this decade that caused this bubble.
The capital gains exemption on housing was passed in 1997. Also one of the more significant acts of financial deregulation was the repeal of Glass-Steagall in 1999. While I think that President Bush and Alan Greenspan bear significant responsibility, this failure had many fathers.
Those who favor abolishing the FED, first propose an alternative. {crickets chirping, wind blowing through the trees…}
It’s good you provided the sound effect, because it is such an uninformed question, I doubt anyone will bother answering. It’s sort of like saying, ‘if anyone has a better idea for government than a murderous king.’
But let me rephrase it and you might do better. Does anyone have an alternative to the current unaccountable, secret cabal of billionaires, continuing to bleed this citizenry dry, like they have for the past several decades?
And imagine if monetary policy were in the hands of congress circa1994-2006.
That’s lame too, exeter. You straw man the answer, but that doesn’t cut it. The FRN is off 95% since the Fed took over. Think about that.
“The Riksbank is considered to be the oldest central bank in the world and was founded in 1668.
The Riksbank is Sweden’s central bank and an authority under the Riksdag, the Swedish parliament. The Riksbank is responsible for monetary policy with the objective to maintain price stability. The bank has also been given the task to promote a safe and efficient payment system.
The Riksbank’s interpretation of price stability is that inflation should be at a low, stable rate. The consumer price index, CPI, should be maintained at around 2 per cent. The Riksbank’s main tool for influencing inflation is the repo rate.
The payment system and the supplying of credit play a central role in ensuring the economy functions efficiently. The Riksbank makes regular assessments of risk levels in the major Swedish banks and in the central financial infrastructure.”
I have little problem with the central bank. I have a problem with how it is run, managed and organized. Since Sweden has managed fairly well by having the central bank under the government control -”The Sveriges Riksbank Act states that the objective of monetary policy is to ‘maintain price stability’ ”. I see no reason to not try to emulate Sweden.
Some of the problems that many attribute to the Federal Reserve are the result of the Council of Economic Advisers.
http://tinyurl.com/2z7shu
Council of Economic advisers
web site at the White House
I blame the council since 1974 for most of the ills as well as the lack of oversight by Congress. Political aims versus what is long term good for the country.
So here is the Federal Depositor Insurance Corporation telling us that things in the Banking sector are not good. What are they doing about it?
“Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia,” said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.
In job postings on its Web site, the FDIC said it is looking for people with “skill in performing duties associated with a financial-institution closing, such as receivership management, resolutions and/or asset disposition; knowledge of the resolutions process as it relates to complex financial institutions.” Such positions would require “very frequent overnight travel,” the posting said, and would pay up to $180,770. - WSJ
Regulators are bracing for over 2,000 failures - look at the number for hiring.
200 failures is Big 12 accounting, 2,000 is Ivy League, Pac 10, Big 10 accounting.
At least there will be employment for the soon to be retired employees.
“…The US is expected to see the greatest reduction in headcount, at about 15 per cent, reflecting the rapid slowdown in the economy and looser employment contracts….”
FT
let’s see: rust belt states and crazy bubble states…that would be, uh, the entire country!
“…Such positions would require “very frequent overnight travel,”
Is free Emperor’s Club part of the stipend?
I was holding off posting this waiting for an AZ thread, but it has been a couple days….
http://www.azcentral.com/realestate/articles/0317mr-auction0317ON.html
”They were at the Marriott Phoenix-Mesa in downtown Mesa to bid on condos that retail from $179,900 to $249,900. Fourteen condominiums at the complex on Baseline Road near Alma School Road were sold absolute, meaning the seller was obligated to sell regardless of the highest bid.
Joel Kaplan, 59, of Scottsdale, took the first unit, paying $137,500 for a 1,661-square-foot, three-bedroom unit that retails for $249,900. ”
Two with a list price of $220K went for $120K.
40% off comning to all areas of PHX soon.
40%? I am hoping. A 40% additional price drop in Las Vegas would be nice too! And San Diego!
Happy St. Joseph’s day!
On March 16th St Urho’s day, on March 17th St Patrick’s day - two great drinking days. ;>) now we get the hangover of St Joseph’s day. :>(
IIRC the tradition on St. Joseph’s day is to EAT!
Does this mean lots of statue sales??
You what they say: “Don’t believe in miracles, rely on them”
We could use a few miracles now.
This means lots of statue burials.
Urban Dictionary
JINGLE MAIL:
“Jingle mail is the package containing the keys to your house that you send back to the bank when the interest rate on your adjustable-rate or IO/neg-am mortgage resets, or the property tax bill gets reassessed at double what it was two years ago, or you find out that heating and AC and repairs cost a ton of freaking money, or you lose your job because of the recession that’s coming with the housing crash, and you can’t make the payments any more.
My neighbor put up the Escalade and the Beemer that he bought with his third HELOC for sale, and has been having garage sales every week for the last month to raise cash … I give it about 90 days till he sends in the jingle mail.”
Garage sales are almost as prevalent as for-sale signs on houses around where I live.
Does anyone else catch some accidental irony in the juxtaposition of this bulletin above the topic discussed below it?
BULLETIN
VISA SHARES TRADE AT NEARLY $60 IN MARKET DEBUT — 36% ABOVE IPO PRICE
Views on future rate cuts deflate after Fed move
By Laura Mandaro & Lisa Twanorite, MarketWatch
Last update: 5:48 p.m. EDT March 18, 2008
SAN FRANCISCO (MarketWatch) — Traders’ bets on future rate cuts fell sharply Tuesday after the Federal Reserve delivered a three-quarter point cut and highlighted risks to inflation.
A friend of mine rents a house in San Francisco. The current owner is trying to sell the house. Unable to get a single offer he wants to start having two “open houses” a week!
Needless to say, this is a huge inconvenience on my friend the tenant. (And may not be legal–you’re entitled to “quiet enjoyment” of your rental unit. More than one open house/month is unreasonable. He’s just starting working with a lawyer to see what actions he can take against the landlord.)
What’s even more frustrating is these “open houses” won’t help sell the house. Only dropping the price substantially will.
But my point is this: Given the abundance of problems that an “amateur landlord” can cause you, NOBODY will want to rent a unit that’s not a real “rental apartment” built as such and managed by a professional company. There’s just too many risks that the the house you’re renting may be taken over by the bank, put up for sale, etc.
*I* certainly wouldn’t rent a unit that’s not in a traditional apartment house. And I’ve been advising friends who need to rent houses to pay a few bucks to do a criminal background and credit check, and judgment search on the potential landlord! How things have changed! Now it’s the tenant who needs to “qualify” the landlord, and not the other way around!
Anyone who thinks he can “get rich quick” by buying a few bargain properties and renting them out in this environment may be in for a surprise! People may not want to rent from you.
‘he wants to start having two “open houses” a week’
Stupid fook. Has he tried qveer eye for the straight guy staging?
Its San Francisco - what do you think?
That was the exact reason I suggested they should try qveer eye for the straight guy staging.
Do anything, but DON’T lower the price!!! -signed your local realwhore
“The popular wisdom among real-estate professionals is that it’s usually a good idea to rent your place and at least generate some cash flow from your otherwise idle property.
Even if you must borrow against your current home for a down payment on your new one, realty pros believe the positives of renting versus waiting tend to outweigh the negatives.”
http://tinyurl.com/32el25
Amazing! Thanks for that link.
There was just an article in my local paper about open houses. There’s been a big debate going on in the RE community about whether anyone who goes to those things actually buys anything. I think RE agents are so bored since the phones stopped ringing, probably gives them something to do.
I’d tell my friend to make the place as trashy as possible while still livable for him. Clothes, dishes etc. all over the place while your friend stands around buyers looking like something out of Deliverance.
“Yain’t goin’ to Aintree…..”
shudder….
This one condo was listed for over 1yr, and one day it was OPEN so pal and I went lookylooing. Now I know why it hadn’t sold. Renters had a baby -Diaper Smell permeating the entire space/damp,dank mildewy , and oh yes, the owner was out of state and didnt’ lower price. She/he could’ve sold for Top $ if had no renters. Someone finally bought and gutted place.
“…Holders of the more than $300 billion in Bear Stearns bonds, in the meantime, are purchasing Bear stock to strengthen their hand in voting for the deal, thus guaranteeing that their bond investments will retain the backing of JPMorgan and its guarantor, the Federal Reserve Bank of New York….”
$300B in bonds vs a few hundred million in stock, buy the stock and force JPM to take it over. Bear shareholders are likely toast.
$300B in bonds vs a few hundred million in stock, buy the stock and force JPM to take it over. Bear shareholders are likely toast.
That is capitalism at its best. In effect, the bond holders are overpaying for the stock in order to get bond insurance. So they’ll lose ~$50 million on the stock (recall, they’ll get back $2/share) but gain $299.5B on the bonds. 1/2 percent insurance… cheap.
Got Popcorn?
Neil
$299.95 = 0.02%
Ever play monopoly with a 7 year old?…they don’t exactly know “all the rule’s” or comprehend the “winning” strategy…no, just kidding…it’s really because “you’re” a genius.
Two local banks had ads in today’s local paper (Bradenton, Fl) for high rate MM accounts:
Bank 1 - 4.05%, 10k minimum, rate good until 51/2008 then adjusts as indexed to Prime Rate as reported in WSJ.
Bank 2 - 4.25%, no stated minimum, guaranteed 9 months
I am diversifying CDs across banks as they come up for renewal for FDIC purposes. Last week I opened 2 CDs at SunTrust, 70k ea, 3.4%, 6 mo term. The rates advertised by the local banks look attractive but I think both of these banks have a considerable investment in local builder/developer woes. Am I being paranoid in staying away from the local risk? Maybe, but Bradenton, Fl is in the epicenter of this mess.
One should ask themselves: Why is a bank paying 4% when they can borrow money from the Federal Reserve at 2.25%?
Because they need more reserves at any cost. With all the loans going bad, the banks need reserves in the vault. They will try to pay customers from the high risk/high return loans that still function.
NEED is exactly what bank agent told a retiree that Countrywide was offering a higher % than they were.
Downey didn’t NEED the funds like CW did/does.
I told my friend that there are no victims in the housing debacle.
She told me I was a spoiled brat.
I still love her and stick to my views.
Anybody here agree?
I’d have to see a picture first.
LOL!
Double that LOL !
Comment by shakes:
“I have had a few of my co-workers ask me what I thought about the Visa IPO.”
There’s always another scheme to entice people without basic financial common sense. The money magazines are filled with ads about hot performance fund returns (even though articles inside regularly advise against chasing performance), people try to time sectors, and those housing tricks were just another part of this same mentality. It’s been opined time and again by sensible financial people to just “ignore the noise”. I may not be able to ignore the noise, but I certainly don’t have to act on it. Although not exciting, what’s not to like about - low cost, tax-deferred retirement funds in a diversified portfolio of which regular, scheduled additions are made?
The war on savers continues…
http://www.azcentral.com/arizonarepublic/business/articles/0319biz-rateqampa0319.html
This part bopped me over the head:
Q: How are retirees and others living on fixed income feeling the pinch of lower rates?
A: “If you are a retiree, these are tough times,” Tysk said. That’s because returns on savings are down while costs - from gasoline to heating oil, health care and food - are rising.
The retirees, he added, are finding a variety of ways to cope.
Some have been borrowing, perhaps to pay for a new furnace or car, because paying a low rate on a loan beats paying tax of 25 percent or more on a withdrawal from an Individual Retirement Accounts or a company-sponsored retirement savings plan, he said.
[Once again, borrowing is held out as the solution.]
As long as you die before they stop lending you money is suppose it could sort of work. Just be sure to leave an insolvent estate!
Ariz,
Come on…the only thing worth saving these days is: produce seeds & non-STD healthy sex apparatus
“(MSN Money) WaMu: Skip customers; save the execs
Around the country, Washington Mutual (WM, news, msgs) regularly plays the tough guy with homeowners who fall behind on mortgages. This as foreclosure filings overall rose 60% nationwide in February.
And its involvement in the subprime mess has been tough on stockholders. Since last summer, the company’s shares have lost nearly 80% of their value.
But the bank is a softy when it comes to bonus pay for top brass.”
http://articles.moneycentral.msn.com/Investing/CompanyFocus/WaMuSkipCustomersSaveTheExecs.aspx
These things are why they hate our freedoms.
What If The Fed Fails?
http://www.realclearpolitics.com/articles/2008/03/what_happens_when_the_crisis_r.html
“The Fed has now stepped up a gear and ultimately we probably need the US Government to do so too. Even though we believe in free markets and believe that pain should be felt after such an unruly credit binge, we also think we are close to a financial system meltdown. At this stage moral hazard arguments need to be put in a wider perspective.”
Mr. Jim Reid
Deutsche Bank
March 18, 2008
Commodities getting killed. Has that bubble popped? Margin calls are going to drive prices a lot lower.
A moment of silence, please. More money going to money heaven. How sad.
Roidy
Maybe we can retire the Uncle Buck crap too.
Now it will be back to Uncle Market getting killed. Dollar rally to the 75 breakdown?
Imagine another two decades of printing currency not backed by anything tangible. Talking heads on CNBC tonight are saying hard currency (gold) is dead now. I cannot reconcile these two statements.
Look at the bank trading revs, are equity and commodities the next numbers to go negative?
http://www.occ.gov/ftp/release/2007-137a.pdf
If commodities break and go lower is that a “tell” that the FED has failed and we get deflation instead of stagflation?
Washington Post cartoon
Tom Toles
http://tinyurl.com/36g5c5
“…Volcker: We’ve seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with a financial crisis, which raises some real questions about not only for the Federal Reserve and its authorities, but for the structure of the financial system… The Federal Reserve is designed to lend to banks. And the banks were considered to be at the center of the financial system, and lend liquidity, provide cash in return for good assets, when a bank got in trouble. Now they found in this case, where some of the investment houses were in trouble, and prototypically Bear Stearns … it’s lightly regulated by the SEC or some other, but not for the same reasons. They haven’t got the concern over the stability of those things….We’re going to lend to them and protect them, shouldn’t they be regulated?
Rose: Is it a wise precedent?
Volcker: Whether it’s wise or not depended upon how severe this crisis was and their judgment about the threat of demise of Bear Stearns. That’s a judgment they had to make and an understandable judgment. There is no question about it.
Rose: Could we have risked the failure of Bear Stearns?
Volcker: Well who knows? It would take a lot of courage.
The Federal Reserve … has not, in the past, been conceived as a place where you put in bad assets, possibly bad assets. Lending institutions take risks. I’m not suggesting the assets are terrible, but they have collateral. But that is a new departure. And at some point, the government ought to — in my view, the government ought to be taking responsibility for that kind of action, not the Federal Reserve, which is an independent agency designed to provide an ample supply of liquidity to the economy but not too much, protect against inflation, not to protect particular sectors of the economy from bad loans….”
Wall Street Journal
http://tinyurl.com/29ful2
“Whether it’s wise or not depended upon how severe this crisis was and their judgment about the threat of demise of Bear Stearns.”
- Unemployment low
- Stock market just a little down from its recent highs
- Housing market about to bottom out any day now
Crisis? What crisis?
“Crisis? What crisis?”
You sound just like one of those double-bubble late boomer, early X-er types who has yet to admit “no end” to some form of the local gravy train.
It’s been going here for a good decade… so no wonder they can’t see it ever ending.
Good one, P-Bear!
Hey, Mr Bear will not admit it :-)…but really, he “knows exactly” the location of “ground zero”
Hedge Funds and Derivatives and Their Implications for the Financial System
September 15, 2006
Timothy F. Geithner, President and Chief Executive Officer
Remarks at the Distinguished Lecture 2006, sponsored by the Hong Kong Monetary Authority and Hong Kong Association of Banks, Hong Kong
“…The apparent success that market participants and supervisors have had so far in confronting these issues does not imply that the potential for systemic risk in financial markets no longer deserves the attention of central banks and supervisors. Although improvements in capital adequacy and risk-management tools seem to have been a key part of the increased resiliency we’ve seen in recent years, we can’t assume that the standards and risk-management practices consistent with stability in the recent past are the ones that will perform well in the future. This is partly because it is impossible to know for sure how the favorable macroeconomic conditions and the financial sector stability interacted and reinforced each other. That is, would financial sector outcomes be as favorable in a weaker macro environment?…
To begin with, financial institutions within the regulated core of the financial sector have become larger, and the industry considerably more concentrated. The 10 largest bank holding companies now hold roughly half of banking assets, compared to less than a third in 1990. These institutions now operate with greater geographic scope and offer a broader range of financial products, but overall volatility of earnings has not changed much relative to capital….
The available evidence is consistent with the view that the changes in the core of supervised institutions, growth of the leveraged sector and rapid financial innovation have strengthened the efficiency and resiliency of the overall financial system. …
The foundations of modern risk measurement rest on a framework that uses past returns to measure or estimate the distribution of future returns. The stability of the recent past, even if much of it proves durable, probably understates potential risk. The parameters used to estimate value at risk can produce very large differences in predicted exposure, especially at extreme confidence intervals…
Another set of challenges comes with the broader damage to markets that can accompany the failure of a major financial institution. Firms have strong incentives to avoid large financial losses and to reduce the risk of failure, of course, but they do not have the incentive to internalize the potential external consequences of their distress on the financial system, and it is unrealistic for market participants to incorporate these risks into market prices.
They should not have been allowed to become too big to fail.
They should be allowed to fail.
My post got cut off
“…It is critical that these broader efforts to fix the capital regime be reinforced with more attention by supervisors to margin practice and limits around the counterparty risk-management process within the major financial institutions. The regulatory capital regime is designed to offset the effects on individual firms of lower margin. Where margin levels are low relative to potential exposure, the capital requirement is higher. Where margin is higher, the capital charge is lower. Both capital and margins have costs, and firms seek to limit these costs and choose their preferred combination.
The question for policymakers is whether the mix of capital and margins produced by the market is appropriate from the perspective of the financial system as a whole. As forms of financing that enable leverage and as leveraged funds grow in importance, the overall level of margin held against positions can provide an important cushion against the type of adverse market dynamics and general run on liquidity we saw in 1998. For these reasons, in the 2005 report of the Counterparty Risk Management Policy Group, chaired by Gerry Corrigan, a diverse mix of major market participants recommended that margin levels be set at a threshold that is “sustainable over the cycle.” This reflects a view that, in general, the initial margin required of unregulated leverage counterparties should be set to provide some cushion against potential exposure….”
http://tinyurl.com/lzzca
Federal Reserve
Mr. Geithner got it. To bad he wasn’t testifying to Congress.
I’m pretty sure he will figure out another way to weigh in his opinion.
Swaps are supposedly the ones that are safe. Do they protect against extreme volatility in the interest rate and currency markets?
Swaps take many forms, including the ones you discussed. Note, however, either side may owe a huge termination payment regardless of who defaults if interest rates change (or other applicable floating rate moves). Many ppl took on lots of exposure and then hedged it in the form of swaps. What if your counterparty goes under? No more hedge, and massive exposure depending on who was in the money. You can find a replacement if your counterparty pays. Are you sure it will? That’s why a major investment bank failure without someone new stepping in will cause domino effect collapses within the system. So many swaps. So much exposure. Some ppl didnt even require a Credit Support Annex or insist on rating downgrade ATEs.
Jpm is the most exposed, is that part of the reason they bought bsc?
Plus they got a decent book of business for pennies on the dollar and other highly valuable concessions. Wall Street loves the taste of blood. Crisis creates opportunity for those that know how to use weapons and are always aware of their actual exposure.
Will clients stay, or will they migrate to a another broker with less exposure?
Swaps dont have optional termination language as the default (at least the1992 ISDA forms, which is the most commonly used form, do not). It has to be specifically negotiated, or you have to ask. If the swap provider hedged correctly it shouldnt be too much skin off its back to allow you to break. If the swap provider did not hedge correctly, is scared of a run on the bank, and/or doesnt mind hurting client relationships, it can insist on a break fee calculated differently than the standard which is Second Method/Market Quotation (i.e., make whole based on bids from reference market makers). Also the client may be the one that would have to pay the break fee, and thus, may stay because it does not have cash or liquidity. Then its a game of chicken.
Will it happen here?
http://www.reuters.com/article/marketsNews/idINT32129420080319?rpc=44
In my mail the other week I found something from ML - ‘BlackRock - What’s Ahead in 2008 - an Investment Perspective, Year end Summary and Market outlook”. I guess they send it to everyone who had accounts there.
While a few of these may be “Duh”’s, their 2008 predictions show just how much the wall street firms are pushing the ‘everything is just fine’ kool-aid.
1. World Growth dips below trend for the first time since 2002
2. The USA narrowly escapes an economic recession, but experiences a profits recession.
3. The fed funds rate falls to 3.5% or lower as treasury bond yields rise.
4. The dollar rises against the Euro, but falls against developing market currencies.
5. Stocks achieve a new all-time high in 2008 as price/earnings ratios improve.
6. Large cap and growth outperform small cap and value.
7. Developing economies and equity markets outperform developed ones yet again.
8. Despite rising above $100 per barrel, oil prices end the year lower than where they started.
9. Information Technology, healthcare and energy outperform utilities, financials and consumer discretionary.
10. Democrats capture the White House and increase their lead in the Senate, House and Governors’ mansions for the first time since 1992.
And their advice to investors? So non-specific as to not be much more than “be smarter than the next guy”.
Pffft.
filled the gap:
http://quotes.ino.com/chart/?s=FOREX_EURusd
and for you fibonacciheads, many commodities have done a .618 retracement.
Adhering to the golden rule?
his name is Mudd:
Fannie Mae CEO Daniel Mudd said while the rules changes are not a complete solution for the embattled housing and home loan markets, he believes it will help, even though the two firms will continue to focus on prime loans to borrowers with good credit and a large amount of equity in their homes.
“We hope it will help restart the housing engine that powers our economy,” he said.
The housing engine powers our economy? Shirley, you can’t be serious.
“restart the housing engine that powers our economy”
What kind of f’d up economy is powered by housing?! We’ve already seen how stable an economy like that is, and he’s wanting us to go back to it again?
Ponzi would be proud.
This is unbelievable.
I recall here on the HBB in 2005 when some were pointing out the follies of such an economy and saying “we cannot base our economy on selling houses to each other for higher and higher prices.”
At the time, such a statement by any public / media person in many areas of the country would have caused a near riot.
Particulary in the Alt-A Bay Area.
And now Mudd wants to start it all over again.
“Leadership? What leadership?”
Hey Jack,
Yes…U.C.L.A. again…but I’m also rooting for Cal- State Fullerton Titans to upset USC (if they meet) …imagine that!
Get shorty (again)…
March 19 (Bloomberg) — Goldman Sachs Group Inc., Morgan Stanley and Lehman Brothers Holdings Inc. said they’ve borrowed from a program created by the Federal Reserve to jumpstart lending amid concern that Wall Street faced a cash shortage.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a1agdKKqf3Nc&refer=home
March 19 (Bloomberg) — JWM Partners LLC, the investment firm run by ex-Long-Term Capital Management LP chief John Meriwether, lost 24 percent in its $1 billion fixed-income hedge fund this year through March 14, according to two people with knowledge of the matter.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aelEnkvIESkg&refer=home
ex-Long-Term Capital Management = ex-Short-Term Memory
…Meriwether’s Relative Value Opportunity fund was hurt as bond managers such as Peloton Partners LLP and Carlyle Capital Corp. were forced to sell securities to meet margin calls, said the investors, who asked not to be identified”
As Bear Stearns Implodes, Spector Keeps $382 Million; Cayne gets maybe 12 million.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a6a7kbyqFJsc&refer=home
Sixty Five Thousand puts traded on 30 dollar strike April expiry.
Blue horeshoe loves Merril
Jpm is doomed!
http://www.cnbc.com/id/23691790
Very droll. Alas Mr. Cramer. Now that CNBC has been found out, who can we call if we need to have a stock pumped up for a dump?
buy the panic sell the hope.
“CNBC has been found out”
Splain please?
LOL HOZ
“CNBC has been found out”
Prof,
If you had ownership of a crappy stock, you called Mr. Cramer and said “Boooyahh Jim, hey I own some XYZ - what do you think?” Mr Jim Cramer would respond “That is a great company, buy more.” This is 83% of the time. It gave one an opportunity to sell to the college students and naive mopes that follow Mr. Cramer. In many cases for a profit.
CNBC is a shill. The financial news that as reported by CNBC could cause a significant loss of moneys. CNBC is good for a pump and dump.
if all panics are buying opportunities, and all buying opportunities are caused by panic…
settle it down.
The business of the US economy continues. Stop panicking. Get back to fundamentals. The growth story is true. But what is gonna grow, and is good, and leads the way to a better future. It lives in transportation, housing, healthcare, infrastructure, and telecomunication…
Policy does not know where to start. Individuals decide.
I planted brocolli and peas after work, and this is my first effort at growing with raised beds…looking forward to more springtime weather.
“…Spector, 50, faced Cayne again in a bridge tournament in Detroit last weekend. …”
I wonder if Mr. Cayne cheated again.
You know, I never even heard about this tournament ’til I saw it mentioned in articles on the HBB.
Here’s a craig listing for Little Rock. Are they trying to NOT sale the place?
http://littlerock.craigslist.org/rfs/609222865.html
Lake front property is very valuable. I guess that’s what pics look like when you try standing in a boat in rough waters.
They are pretending they are not underwater yet.
The Office of Federal Housing Enterprise Oversight said it was immediately easing restrictions on Fannie Mae and Freddie Mac to give them a bigger role in settling queasy mortgage markets. It said they should be able to buy or guarantee about $2 trillion total in mortgages this year.
I’m late to the mark today, apologies if posted above…Hey Neil, I’m off your suggested diet of popcorn for awhile…Trader Joe’s granola bars & single malt scotch…I’m thinking about a new beach chair…non-Made-In-China… I don’t want to add to the lead in my a$s
“All hands are on deck to try and prevent this U.S. situation from becoming a dire crisis,” said David Watt, a currency strategist with RBC Capital Markets in Toronto. “They’re doing everything they can, making policy on the fly.”
Mortgage lenders to pump $200 billion into markets:
http://www.reuters.com/article/ousiv/idUSN1921927120080319
Now a question, what stock should you buy based on this news?
Who benefits? Who profits?
Look at who this helps and ignore the white noise.
Assuming fre and fnm can sell the loans, or are they they just the middleman for the (discount window) fed? Doesn’t this screw the banks and mortgage companies by taking business away?
Well Hoz, are there any publicly traded companies that sell tipi’s or yurt’s?
I like Pacific Yurts; I have no idea if they are public.
If you go camping, the Pacific Yurt is far better than roughing it at a Holiday Inn.
I would say it most helps the lenders by helping them getting bad paper off their books and increase loan activity and by extension revenue from those loans.
I don’t trade (I would like to grow a pair to start someday…) but I would generally say this means one would buy stock of banks for whom mortgages are a large part of their business. Wells Fargo maybe?
I hope you post your own thoughts.
That is the way I have positioned myself. Bingo
Not in Wells Fargone. however.
WF was a poor choice on my part. Just the first bank I could think of with lots of mortgages (they had mine). I don’t keep up with this kind of stuff in detail so I think the trick would be to find such a company which is also not in deep water with too much bad paper now. Is there such a company?
Well all I can think of at the moment are banks, but I’m certainly open to enlightenment.
Guess I didn’t see the above, sorry.
I forgot fnm and fre are not direct lenders. So the taxpayers get stuck and the banks walk away scot free?
I think this answers the question.
http://www.marketwatch.com/news/story/great-unwind-has-started-avoid/story.aspx?guid=%7B1DC25DFD%2D3543%2D4CF4%2DBE26%2D74EA4B9C9330%7D&dist=hplatest
Matt,
I do not think there are any shocks, other than it came from Citigroup. Great catch.
Its not liquidity, it is solvency.
Thanks to you and the previous poster re: Daniel Mudd CEO FannieMae.
This is, as Daniel Mudd says was Fed’s way of reducing the 30% held for safety by Fannie because of previous wrongdoings, to a 20% freeing up $ for loaning.
SO,what I am wondering is, I guess Fannie Mae’s wrongs are being overlooked cause “we need the cash”.
I would think that it would be even more important NOW that at least 30% were held untouchable.
This oil thing must be empirically counter intuitive… I swear I’ve never seen so many Hummers driving around:
Gasoline inventories fell by 3.5 million barrels, when analysts had expected a small increase, and supplies of distillates, which include heating oil and diesel fuel, fell by 2.9 million barrels, more than double the expected decline.
Oil Prices Fall After Government Reports Demand for Oil, Gasoline Appears to Be Weakening
http://biz.yahoo.com/ap/080319/oil_prices.html
Diesel is a big problem; truckers are going out of business as diesel is over $4 per gallon.
Not a problem at all…stop the AFL-ICO without a strike…brilliant!
You think the semi’s from Mexico are selling diesel on the sly? do they require peso’s or euro’s?
Leaving Behind the Trucker Hat
CITY SLICKERS? KayCee Wimbish, 32, a former teacher, moved to Tivoli, N.Y., to raise sheep and chickens with Owen O’Connor, 22.
NYT
Fashion and Style section
Mar 16
http://tinyurl.com/2q967t
I raised beef cattle and honey bees for 15 years on a hobby farm. I could hardly break even on that. Those were the years that China sent honey to the USA for pennies just to get some $US. Boundless energy and a full time job were the only things that made it go. The kitchen garden payed for the place though!
Truckers have been complaining about the high price of diesel ever since 1973. Sob stories play well to the MSM. Individual truckers and trucking companies are always going in & out of business. Businesses that don’t want to pay for shipping their goods to other parties have always been free to keep their goods in their warehouses & go out of business. That’s not going to happen. Goods will reflect the costs of shipping or they will not be available.
Cramer called the bottom yesterday. LOL. He was actually speechless today.
Seriously thought, huge rate cuts, Fed creating all kinds of phony vehicles to hide bank debt, pushing Fannie Mae to buy all the mortgages, injections of hundreds of billions, nothing is working. Nothing, and we are approaching the ZIRP bound. Bennie, what’s next?
Psst: top secret…your eyes only…homes are on their way to be “affordable” to a certain percentage of the population.
Well, according to Cramer, if the Fed had just eased when they should have everything would have been fine. Absolutely would have solved everything. Not easing at just precisely the right time is what caused all this. A timely lowering of the Fed Funds rate from 5.25 to 4.5 back in June would have made everything fine, that’s quite clear to me, as Cramer explained in his tantrum. House prices could continue to be overvalued by a factor of 2 ad infinitum with just that little bit of help.
“…House prices could continue to be overvalued by a factor of 2 ad infinitum with just that little bit of help.”
Help as in…helping pathetic wimpy frustrated renters qualify for a mortgage?
http://www.thestreet.com/s/cramers-mad-money-recap-why-this-420-point-rally-is-different/funds/madmoneywrap/10408387.html?puc=_cnnmoney&cm_ven=CNNMONEY&cm_cat=Free&cm_pla=Feed&cm_ite=Feed&puc=cnnmoney&
LOL. My favorite of his reasons: “The market has bottomed because the market rallied despite Federal Reserve Chairman Ben Bernanke’s disappointing rate cut.”
Are you talking about the dude who screamed on TV that people should hold on to their BSC stock just a few days before it dropped to $2 a share?
India outsourcing to the US
Full circle or now we all know we are third world:
Tata Consultancy Services, India’s leading outsourcing company, on Tuesday opened its first US centre near Cincinnati, Ohio, which has capacity for 1,000 employees.
“…The recruits for Wipro’s centres in Atlanta and Troy, Michigan, would be trained for three months in India before returning to the US for jobs in software development and project management. …”
FT
http://tinyurl.com/38olqt
Time to emigrate to India so I can send rupees home to my family in the States?
Mudd of FNMA just came on CNBC and said he expects peak-to-trough fall in house prices of 13-17%. Also said 5-7% for 2008.
I interpret this as follows: We can survive a drop in the ranges I mention. The reason I put forth these ranges is to signal that anything worse than this we can probably not survive without additional help.
Conclusion: it’s over for FNMA, as we know it.
Schiff has a good article on what happens when Fed trades treasuries for mortgages on its balance sheet. References 1790s France, saying it took only six years to go from the beginning to the end of the French currency.
Historical footnote: Seven years later, Jefferson cleverly cut a deal with Napoleon, desperate for real money, for Louisiana, namely, all the land to the west of the Mississippi River, for (if memory serves) $15 million. Despite this purchase and the subsequent expedition, Jefferson, far more responsible with the nation’s finances than his own, paid down the entire debt during his administration.
Good post .
“References 1790s France, saying it took only six years to go from the beginning to the end of the French currency.”
And what happened over the next thirty years, pray tell?
Wasn’t that the “let them eat cake” era??
Napoleon I, king, Napoleon II, wars with Europe, Russia, lots of turmoil, Napoleon exiled, heck, I’m no expert on French history. I suppose you can look it up as well as I can.
Here’s the Schiff link:
http://www.europac.net/#
look for Mar. 14 story.
“However, backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation. Assignats, which were first issued in 1790 to help finance the French revolution, were backed by mortgages on confiscated church properties. Although the stolen underlying collateral did have some value, the revolutionaries saw no reason to limit how many Assignats were printed, which resulted in massive depreciation. Within three years, price controls were introduced and failure to accept Assignats, initially an offence subject to six years in prison, was made a capital crime. By 1799 the currency was completely worthless.”
Actually, Louisiana Purchase was only four years later. Louisiana had actually gone back and forth between Spain and France, and with France barely in control Napoleon probably figured it was better to get $ from the US and let them worry about Spain later - which occupied American forces off and on for most of the 19th century. (I do know/remember a little American history, if not French.)
Still bullish and the longer this nonsense goes on, the “worse” the rally is going to be.
Please send Abbey Cohen a 20# trout…fillet
My fair lovely lady,
You may very well be right, BUT there is massive Hedge Funds unwinding. Please look at the correlation with EuroYen carrytrade and the S&P500.
As long as banks and financial firms are liquidating assets, it seems to this simple country boy that there will be plenty of opportunity to get long.
There are always stocks to get long in any market - as I have said I know nothing about tech - but I have never seen the stock market rally without banks.
Where can one look at something like EuroYen carrytrade?? Thanks.
Blano,
What was the name of the stock analysis book you mentioned reading? Any others you recommend? Gracias.
One that I recall is Technical Analysis by Jack Schwager. I also have “Technical Analysis Plain and Simple” by Michael Kahn, and I’m currently slogging my way through “Options Made Easy” by Guy Cohen.
Hope that helps.
For prices on the currencies Yahoo finance or marketwatch or bloomberg etc.
EuroYen vs S&P500 last 3 months on yahoo.com
http://tinyurl.com/2lvgnp
Thanks!!
Does anyone know what kinda coffee they serve at the FED open market meetings?
“We have an economy in a tailspin . . . and a company whose performance has not met your expectations or mine,” he told shareholders. “I share your concern and disappointment and how it has affected your investment in Starmucks. I promise you that it won’t stand.”
PS, edited names by me
Starmucks broadens plan to energize business
New espresso, coffee machines being rolled out; new customer Web site
http://www.marketwatch.com/news/story/starbucks-broadens-plan-energize-business/story.aspx?guid=%7B3E2CA467-3460-4B8E-B879-710B2D74EEC8%7D&dist=hplatest
“…Nivon bought more than 500,000 Bear Stearns shares on March 13 for $55.13 apiece, just days before Bear Stearns agreed to be acquired for $2 per share….”
They must have listened to Mr. Cramer.
It causes me to wonder if Mr. Lewis ever did any due diligence with his Billions or did he just listen to Mr. Cramer.
WaMu: Skip customers; save the execs
Link
America’s Money: In their own words (scroll to the other 12 stories)
“People are still lining up to purchase entry-level properties, and paying absurd amounts, up to $700 per buildable square foot. And this is not an ocean view, just plain Main Street type land. When I ask them why, they still say it’s the Palisades and it can’t go down.”
http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/8.html
More hedge funds imploding.
http://www.bloomberg.com/apps/news?pid=20601087&sid=awn9QytrU9Lc&refer=home
Fasten your seat belts.
Ssec getting pummeled!
“We’re experiencing a massive de-leveraging event”
We are about to find out who’s been swimming naked.
The deleveraging is making the Nikkei continue up.
Buy back the shorted stocks to close out the ‘carry trade’. Gald I am not in that blood bath. Swaps are trading under bonds. This is real brutal in Japan for carry traders tonight.
“…Endeavour’s investment team also includes George Polychronopoulos, 44, a former head of fixed-income trading at Bear Stearns Cos…”
Another firm contaminated by Bear.
“As long as we have the support of our banks, this is survivable”.
–
Oh, well, go ahead on then.
Too late, for rate cuts.
http://www.youtube.com/watch?v=6Nsy1Z4y2vE&feature=related