Bits Bucket For October 10, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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G7 to guarantee all interbank loans?
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article4916344.ece
The panic of the governments is getting worse every hour.
Good lord.
It must be great to be able to costlessly guarantee just about everything. Makes you wonder to what purpose insurance companies put those premiums they charge their customers.
My wife is looking to change car insurance companies. She was chatting with an AIG guy today who was assuring her that there was just a little problem with some other part of their company. That has nothing to do with why their coverage is quite a bit cheaper than the other quotes.
Just because they write billions in insurance they can’t cover in other areas is no reason not to trust they will still be around next week in the car insurance game…
Wall Street Rescue May Be Worst Legislation Ever…
“I find it strangely satisfying that Congressman Ron Paul, the little Texan who was soundly thrashed in his Quixotic quest for the Republican presidential nomination – the man who was laughed at and mocked as a kook when he tried to alert us all to the fragile and unsustainable nature of our money system – is now seen by more and more Americans as the one politician who told us the truth. No wonder the system spit him out.”
http://www.lewrockwell.com/orig9/smith-r1.html
Yet the masses still argue over frick and frack.
Don’t forget the millions of dollars the GOP is spending this year—to combat Gay Marriage! Even more shameful are the millions spent by Chr-stian Church Groups (and $8 Million from the Knights of Columbus!) in California! You’d think they’d want to help poor people! Just goes to show you what religions based on idolatry lead to.
Why do you believe it is your duty or business to tell people of any religion what to believe, and how to spend their money? Talk about your intolerance…
If they weren’t using tax-exempt organizations to do their lobbying, I’d agree with you!
Ronin, you are right. This should not be a political issue.
Exactly - very non-jesus behavior by suppose christians to do so much hate group promoting and discrimination against others having the same benefits - I always think of the stories of jesus calling everyone to him including mary magdelan and yet the current crop of christians are so hateful to people who have other beliefs or were born gay
And groups like Vaad L’Shmor Kehillasenu? Also based on idolatry? Find me an orthodox rabbi who endorses gay marriage and that’ll hold water. When Israel recognizes Reform conversions, I’ll take your theology seriously.
I don not get your argument.
I mean are not all fundamentalist, Jewish, Christians, Muslims the same?
Come on now Muir,
Your statement casts countless millions in deaths over the century in the name of the “one true God” into question.
What would happen if they all realized they have been talking about the same God?
“I mean are not all fundamentalist, Jewish, Christians, Muslims the same?”
Well, yes, in the sense that they all exert cult-like control of their followers with instillation of guilt, fear and shame through implementation of repeated chants, prayers and robotic behaviors.
DOC
“The plan bulldozed through Congress last week carries with it dire implications about the future of our country. To redistribute income upward as this does means the game is over. We live in an age looking suspiciously like that of other empires in their late periods of decay, and if you don’t know what that portends, it’s probably just as well.”
Ain’t that the truth. I’m worried sick for the future of my children.
Thanks for that link wmbz. I was just saying something similar to a friend last night.
It’s a shame Ron Paul is off the ballots. I’d love to wake on Nov. 5th and see that he had been elected instead of the two kafuni’s we have to choose between.
I was reading Barton Biggs: Wealth, War and Wisdom last night and he said in the last chapter on page 331, “By definition, the next Black Swan event will be some form of total breakdown of civilized society and the social and financial infrastructure as we know it.”
The civilized society collapse is a wee bit tin foil hat for me, but it sure looks like the financial infrastructure is breaking down. I like Ben’s position on this that he put out last week. If I got it right it was to look for the opportunities right now because this is a once in a lifetime period when we can buy equities and commodities at the lowest prices. Now, what to buy and when is the $64 question …
I think your time is now.
Oil is down to $80. That is $60 off its high of this past summer.
Corn and Soybeans are also down from their highs.
Gold/Silver appear to be the only commodities that have not gone down.
Are they still rationing bags of rice at Costco?
Argent Provocateur is sadly down almost 50% from it’s recent highs…
The Mellow Messiah is off its highs and headed lower today, despite its safe-haven street cred.
“Traditionally, the silver bullet is the only kind of bullet for firearms that is effective against a witch, vampire, monster, or a person living a charmed life.”
http://en.wikipedia.org/wiki/Silver_bullet
Broadly anticipated price movements eventually reverse themselves.
“The Mellow Messiah is off its highs and headed lower today, despite its safe-haven street cred.”
You talkin’ bout Obama?
Oil may very well be headed down to $50, or below…
exactly, oil was in a bubble not dissimilar to housing, but much more liquid.
I heard from an oil and gas guy that oil costs operationally ~$70/barrel. They can’t pump it and ship it any cheaper, regardless of demand.
that doesn’t make sense. if that were true, how was it selling in the 40s just a few years ago?
“I heard from an oil and gas guy that oil costs operationally ~$70/barrel. They can’t pump it and ship it any cheaper, regardless of demand.”
While I believe you heard that, I don’t believe it for a second. Wasn’t too long ago that oil was less than $10 per barrel.
“exactly, oil was in a bubble not dissimilar to housing, but much more liquid.”
I wonder what Paul “oil is not in a bubble” Krugman thinks about the current collapse in crude oil prices.
Easy answer. He’ll probably say demand is down. Thus, price is reflecting a new supply/demand ratio.
Remember, part of the cost of doing all that work (moving oil around the world) is energy, which is going down in cost…
I don’t believe the cost at $70 would stick, even if it were true…
BTW, gasoline prices in my area are curiously high and quite sticky given the current crude oil situation. Gouging… anyone?
We are just now getting around to paying $140 a barrel, as we run a few months behind the spot market…
I’ll have to respectfully disagree, because it didn’t take two months for prices to increase relative to the spike.
How come when gas was $140 a barrel, we weren’t paying true spot market value of around $6 a gallon?
“How come when gas was $140 a barrel, we weren’t paying true spot market value of around $6 a gallon?”
This is a separate issue which has little to do with the point I was making, which was that it DID NOT take a few months time for prices at the pump to catch up with spiking crude.
Furthermore, how did you arrive at $6 per gallon as the “true spot market value”?
There’s around 20 gallons of gas in a barrel of oil, and other sorts of petroleum products, all of which need refining.
My $6 per gallon retail cost was just a guestimate, based upon the meltdown value.
“The civilized society collapse is a wee bit tin foil hat for me,”
Not for me. One of the fascinating things about this “credit crisis” (are they still calling it that?) is all the various scenarios where people are not in agreement with the “rule of law”. It is starting to become a joke, as illustrated by the sheriff of Cook County, who declared on national TV that he wasn’t going to participate in evicting renters anymore, because he wasn’t going to do the job of the banks. Now, while I agree with him in principle, the story on NBC featured a “renter” who claimed she had paid her rent on time for 20 years. So far, so good, until you realize the segment required a translator to interpret her Spanish. Which leads to another breakdown: how do you legally reside in a country for 20 years and not speak the language? She was not old, she was middle-aged and on the young side of middle aged at that.
So I got to thinking about that and how we are supposed to be a country based on the rule of law. Which only holds water to the degree that people agree on the laws and that those laws are enforced. Financial insitutions don’t seem to agree to the rule of law. Illegal immigration flouts the rule of law. The mortgage and real estate industry was used to game the rule of law. Wall Street doesn’t give a crap and neither do our elected officials, the Bush administration flouts the rule of law and holds it in contempt. Now, you’ve got a sheriff who isn’t going to enforce the rule of law and has so stated. Again, I’m not totally in disagreement with him, for the reason that he claims many of the people he’s throwing out are renters who paid their rent when their landlord didn’t. But you see the problem here: in a country based on the rule of law, when the system is so gamed as to invite contempt and that course of events is allowed to continue, yeah, you’re gonna have a breakdown of civilization.
palmetto,
I have to agree with you on that because when you describe it as you have it is clear that we have already experienced such a breakdown. I was thinking more along the Mad Max breakdown lines and that was where I was reluctant to put on the tin foil hat.
I think that there is a tipping point as more people disobey the laws or game the system the experience of the remaining citizens may be one of, “jeez REKing gamed the system and he is raking it in. I may want to do it too.” There is an increased tension that can pull people and even entire institutions toward the dark side. I think we saw this with appraisers who felt they had to “hit the number” or not work. Loss of income is a pretty big motivator even if it is pushing you to do wrong. As a subset the societal mass moves from one side of the fulcrum to the other at some point the scale goes negative or to the dark side for all. It was supposed to be the job of gov to identify and punish law breakers, but gov failed to do that and in some cases gov is guilty as well, as you mentioned.
Some folks may say that the reason more people went dark this time was because of the secularization of the country/world. The loss of religious underpinnings led to a broken moral compass. I believe there is something to this, but on a very rational level. All religions hold canonical beliefs similar to the Ten Commandments of Christianity. Rather than attribute magical properties to the beliefs, I hold that the basic imperatives originated to serve basic societal survival. Thou shall not kill … ok that one will keep the tribe alive longer. Adultery is addressed in the Qur’an 17:32 and we all know what that does to families and the toll it takes on society. Even the Moral Code of the Builder of Communism adopted by the CPSU in 1961 marginally overlap with the 10 Commandments. My point is that the moral compass was in use for a good reason and the result of such a widespread loss of said compass has led directly to the madness we are in the midst of today.
Can we expect the pendulum to swing in the other direction now? We are certainly seeing banks talk about returning to more traditional lending standards.
As I read somewhere recently, the sophisticated and supposedly infallible “mathematical models” failed to take into account the variables of greed and original sin.
Excellent comments by all.
One of the most frightening things about this credit bubble is the potential to escalate social disorder.
Sick, hungry, hopeless people tend not to concern themselves much with congeniality and consideration for other people and property.
The govt has just proven to the world that they reward injustice and criminal behavior where billions/trillions were effectively stolen from law-abiding American citizens (via direct taxes on the people used to pay off the very criminals who got us into this mess). Not for a second do I believe the PTB “didn’t know” what was going on.
“So I got to thinking about that and how we are supposed to be a country based on the rule of law.”
Wrong assumption and wrong History of this country.
Rules are so 20th Century…
Is it against the law to live in this country and not speak English? Due to this little jump in craziness, I must disregard your entire post.
You’re twisting my words, and you know it. I have no need to explain myself to the LaRaza crowd.
maybe it should not be against the law to not speak english, but we certainly should not enable such behavior, ie bilingual ballots, legal docs, signs, phone assistance, etc.
Actually the law in Cook County (and the state for that matter) is that the ‘owner of record’ must give tenants 120 days notice before putting their stuff out on the sidewalk. Most tenants weren’t getting ANY notice at all. The sheriff just wants the owners of record to follow the law.
“Most tenants weren’t getting ANY notice at all. The sheriff just wants the owners of record to follow the law.”
I’d buy that, except the sheriff seems to think what he’s doing could be construed as demonstrating contempt for the law. So if he’s following the law, what’s he worried about and what’s his point? Hmm. Could be some grandstanding for votes, maybe? LOL!
According to the Chicago Tribune, Sherriff Dart is not up for re-election unti 2010. The aritcle mentioned that the requirement for notifiying tenants with the 120 day notice has been routinely ignored. It could possibly construed as contempt if he ignores the eviction order. However the eviction orders are probably not valid because the owners of record are following the legally required notice to tenants.
Opps i met NOT following the legally ….yada yada
RE: The civilized society collapse is a wee bit tin foil hat for me,”
Go tell it to the Icelanders.
Looks like they get a steady diet of self-caught codfish for the next 20 years since the karona is kaput.
Codfish…ugh.
Most of the value of any asset arises from huge gains due to specialization. As trust declines it becomes impossible to trade and those benefits are much more difficult to realize. It’s entirely plausible that when prices get low, they could take more than one’s lifetime to recover.
Also important, is the manner in which a recovery occurs, the largest companies at the turn of the century weren’t the best performers after the great depression.
Good points, bluto.
“is now seen by more and more Americans as the one politician who told us the truth”
I’ll believe that when I read it in the Washington Post, not Lew Rockwell.
Meanwhile, I believe the American public (world public, for that matter) is as clueless as ever. Ron Paul has dropped off the radar completely from what I see, unfortunately. Having the public at large realize that Ron Paul was right doesn’t fit into the plans for one-world socialism (currently being executed).
Ron Paul didn’t have a message the public wanted to hear, and still doesn’t. Remember, just because the HBB thinks he was the best candidate doesn’t mean the MSM or J6P does.
Majority don’t know who he is other than a homemade sign on a lamp post. Anyway, he would never appeal to left or moderate women.
Paul appeals to me, and I’m a conservative Democrat girl. I argued in his favor several times at the Thurston co. Dem precinct committee officer meetings. It came to absolutely nothing, of course, nor would I expect otherwise, but I like to make my views knows clearly and often anyway.
Of course, I do like grumpy old professor-type men, so that could be influencing me. (College was a very formative time for me.)
“Anyway, he would never appeal to left or moderate women.”
Wrong. I’m a lefty and I know many like-minded souls who just love Ron Paul.
People hate to be told that they were wrong. In a little bit there will be ’something’ to put all the blame on. We will then initiate a War on ’something’.
A couple nights ago Neil Cavuto was complaining that McCain proposed $300 billion to bailout the foreclosures. I nearly threw my shoe at the television set. Fox News Channel put Ron Paul in the shadows and favord McCain, Romney, and Huckabee. It’s not all Neil’s fault, I know. But I am extremely frustrated.
I was going to vote for Bob Barr but Ron Paul knows best how to handle this monetary crisis than any of the top candidates.
Allow competing currencies (the dollar, gold, silver, platinum, beanie babies, whatever). Veto all spending and all bailouts and make real cuts in government spending, not merely cuts in the growth of government spending. In two years after those cuts lets talk abolition of the income tax.
In times of universal deceit, telling the truth becomes a revolutionary act.
Up early and am convinced as ever that humans need to be removed from setting interest rates…. too much speculation and greed with humans involved.. the CPI (esp) & PPI are a joke. The Fed discount rate should be market set using Case-Shiller housing index and some factor for rents and that’s it…. that’s bloody it… that’s all that matters… if that means higher interest rates in coastal communities to keep housing prices in check, then so be it… don’t let housing appreciate more than 1-2% per year… that’s bloody it.. keep housing in it’s rotten little bottle as we can see the hell it unleashes when it gets out.. force enterprising middle class Americans to find real careers elsewhere… get our heads back in science and math.. eliminate all real estate related infomercials… do away with the MLS… let the CAR and NAR die a natural death due to lack of interest and financial power..
If we learn nothing else from this incredible rout, we need to learn that it was runaway inflation in housing that caused all of this… that coupled with with the failed policies (monetary, mortgage / invest banking etc) and poor oversight / lack of regulation that fed it… CPI - what a joke.. Alan Greenspan - what a joke… house prices - what a joke…
As I’ve said before, the “Housing Crisis” started in 1997 or so and ended in 2006 or so… that was the housing crisis that we’re seeing unwound today.. I see no crisis in paying historic market prices (or less) for an asset, especially one as important and expensive as housing.. On the other hand, I see a real crisis in paying 2-3-4 times it’s historic market price or value, while being told to shut up and deal with it… that was the crisis..
Oh come on, don’t be such a doomsday person…after all, this is simply the “soft landing” that (nearly) all of the experts predicted.
Please note: many were wearing parachutes whilst they uttered the phrase “soft landing”.
Those that weren’t wearing parachutes were tenured university faculty - who like POTUS - operate beyond the laws of reason and gravity.
Oil breaks $80!
I’m going to ask the dumbest question.
…when people buy “oil”, what are they buying? Is it like GLD or similar, or is a stock like Shell? I don’t understand.
Please help.
(x_x)
^ that’s me, ella. my computer is in a bad mood, sorry.
Oil futures.
A contract to deliver west texas intermediate grade oil to a certain oil hub (Cushing OK or the TEPPCO pipeline) by the settlement date (normally the third friday of the upcoming month), but normally all the contracts that were created are sold back to their creators just before expiration. If someone didn’t want to, though, there are a few traders on both the buy and the sell who can take physical delivery.
thank-you very much.
You mean you can’t run an economy by selling happy meals and McMansions to each other or by shoveling debt from one pile to another and calling the entire process “innovative financial products”?
A year ago Paulson said that this is the strongest economy he’s seen in his professional life. He’s either a fool or a liar and should be removed from office TODAY!
I wonder what our world will look like after the dust settles. Nobody will trust the US anymore as this crisis is perceived to be Made in USA. First the lies to get the Iraq war started, then selling toxic debt to the rest of the world. We’re running out of suckers that will buy into our schemes. Even the dumbest foreigners are catching on. I think we will find foreigners much less willing to finance our debt and trade deficit going forward. That implies we will have to live within our means which will come as quite a shock to most consumers. No more car loans, no more McMansions, no more buy now pay later, no more student loans. All this is really a good thing after an initial adjustment period. Hopefully we will revert back to a sustainable economic model versus the “buy now pay later” model. Oh yeah, now is later, time to pay the piper.
“You mean you can’t run an economy by . . . by shoveling debt from one pile to another and calling the entire process “innovative financial products”?”
Let’s not confuse the intrinsic value of the underlying debt or risk of default with respect thereto with restructuring such debt for optimal economic efficiency. It is somewhat unfair to say that ppl are not paying their debt service because of what happened to such debt on the back side (although I do understand the moral hazard issue, moral hazard is not a necessary element for the effectiveness of a securitization and can be dealt with in other ways). Ppl are trying to point fingers at bogeymen so they dont have to take responsibility for their own actions. I encourage ppl not to buy into it.
This is not aimed at the you, but securitzation has many positive benefits which are often overlooked as the guilty use it for a scape goat.
Securitization is a good thing, derivatives are not. I see no benefit to society when you gamble on stock prices, because nothing of value is being produced. It only benefits traders who have turned Wall St. into a casino, and encourages even more stupidity.
Greenspan is the closest thing to a scapegoat we have.
True regulated securitizations done right are a positive. As for derivatives, they are not all created equal. Interest rate swaps, caps, collars, etc. play a valuable role in taking advantage in changes in rates. Credit default swaps I tried to stay away from. That is a real mess. Essentially everyone in the financial sector guaranteeing everyone elses obligations. That is why it always bothered me when some say let a few fail. It’s really all or nothing to some extent in this world. A world in which a few trillion is chump change.
“All this is really a good thing after an initial adjustment period.”
Agreed. The “Greatest Generation” that fought and won WWII was a product of tough times. I’m betting/hoping the upcoming tough times will produce another Great Generation.
but we have to get past the present MORON GENERATION to do this.
Maybe actually teach kids to read write and speak English (not Ghetto), and to have critical thinking skills….
“I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.”
Einstein
Happy Meal?
I don’t think I’ve eaten at McDonalds in 3 or 4 years.
I did use to like the qtr cheese however.
Now what were we talking about?
McDonalds is the only stock that I have that is holding up.
I have very few US stocks. I have a utility mutual fund that’s doing much worse than I expected, and I have “Waste Management” (WMI) which is doing pretty well, all things considered.
McDonalds is the only stock that I have that is holding up.
eeek. I wouldn’t say its “holding up”. Not that I have any better suggestions right now, mind you. You could do worse than buying MCD at this level, though.
I went to a private college and paid $2600/semester. This was an amount that a student could conceivably earn himself working part time while going to school. This was at Hofstra University in 1980. (BTW: The final debate will be at Hofstra).
EZ-financing led to a Tuition Bubble.
I went to a public state school. In my Freshman year (1996), tuition was right at $2600 per semester. By the time I graduated tuition was around $3500 per semester and I think that right now it is around $6000 per semester. Tuition bubble indeed.
My degree has paid off immensely, but I knew plenty of people that stayed out of the highly-ranked departments and left with degrees that can’t get them a job that pays enough to retire the loans they loaded up on.
RE: I went to a private college and paid $2600/semester.
I attended the University at Orono ME as an out of state student.
However at the time, for in-state students, the tuition was $50.00 per credit hour.
A typical bi-semester course load was 15 credit hours.
The room & board rate at the frat house including 3 squares a day was $450.00 per semester. If you paid early, the rate got knocked down to $400.
So…………Tuition-$1500.00
Room & Board-$ 800.00
Book & Beer Money $1000.00
Grand Total-$3300.00 per year for a decent engineering, forestry, and biz university
This sum could be earned in a summer if one got a decent construction job or work as a vacation filler w/ OT at the local paper mill.
This was 1972 thru 1975.
According to the inflation calculator, that $3,300 tuition would be $16,187 in 2007 dollars.
Hey HD, that education would come in handy for a Fry Bread stand, don’t ya think? Mine too - I have a master’s degree, a BA and a BS. No misspellings on our signs, eh? Lostie’s Over-Educated Fry Bread.
As soon as Hoz gets that brewery going, we’ll be in the money.
RE: Hey HD, that education would come in handy for a Fry Bread stand, don’t ya think? Mine too - I have a master’s degree, a BA and a BS. No misspellings on our signs, eh? Lostie’s Over-Educated Fry Bread.
As soon as Hoz gets that brewery going, we’ll be in the money.
Hmmm…Navajo Fried Bread washed down with a “HOZ’s Dark”…
Sure doesn’ look like we’re gonna be part of the eat healthy solution.
But at least the sign spelling will be done right-that’s big
in this world today.
Remember the Snickers commercials where the football dude says to groundsman, “Nice job, but who are the “Chefs”"?
I work at a university (started in June). I went to a conference this past weekend and at one point a presenter was talking about the growth of a college (I think it was the Maricopa community college system). I don’t recall now the exact growth numbers, but it was something like a tripling of enrollment in 3 years.
I do recall that he said they hit their 10 year growth projection in 3 years.
I’ve already seen some emails go around about tuition getting “hard to finance”. The response was that local banks are still lending at the same rates generally, it’s just the big international banks (e.g. Citi) that are drawing down how much they lend.
Universities are gonna get creamed I think. People that work there, by and large, can’t conceive of the possibility that they could have layoffs. People work slow, stand around a lot. I overheard a couple ladies talking, one was saying she’s trying to get her daughter on so that she (the daughter) “can’t get laid off”.
I know people do this in a lot of places, but the people I work with are more complacent than avg. about their prospects of continued employment. They don’t try at all to learn new things, just want to keep doing what they do. It’s ironic considering those people get a 90% tuition discount if they want it.
I can’t see state funded universities *not* having their budgets cut in the next couple of years.
Up early and am convinced as ever that humans need to be removed from setting interest rates….
Removing humans from the act of assessing the creditworthiness of an individual taking a large loan for a house, and replacing it with FICO worked great, do you think?
If there is a rule, it will be gamed, whether or not there are humans. Only, humans may be a little bit more (a) non-procedural in their actions, (b) circumspect if something “smells bad”, and (c) diligent because they can be identified if a bad loan happens.
The problem is that the humans making the big decisions are outright rascals and liars, with no accountability from the public. Bernanke actually said in his senate testimony that he couldn’t see a recession coming. Maybe in this case he was actually honest - it was not a recession but a depression.
HAL: The 9000 series is the most reliable computer ever made. No 9000 computer has ever made a mistake or distorted information. We are all, by any practical definition of the words, foolproof and incapable of error.
Bishop: [Bishop is puzzled by Ripley's reaction towards him] Is there a problem?
Burke: I’m sorry. I don’t know why I didn’t even- Ripley’s last trip out, the syn- the artificial person malfunctioned.
Ripley: Malfuctioned?
Burke: There were problems and a-a few deaths were involved.
Bishop: I’m shocked. Was it an older model?
Burke: Yeah, the Hyperdine System’s 120-A2.
Bishop: Well, that explains it then. The A2s always were a bit twitchy. That could never happen now with our behavioral inhibitors. It is impossible for me to harm or by omission of action, allow to be harmed, a human being.
Dave Bowman: Hello, HAL do you read me, HAL?
HAL: Affirmative, Dave, I read you.
Dave Bowman: Open the pod bay doors, HAL.
HAL: I’m sorry Dave, I’m afraid I can’t do that.
Dave Bowman: What’s the problem?
HAL: I think you know what the problem is just as well as I do.
Dave Bowman: What are you talking about, HAL?
HAL: This mission is too important for me to allow you to jeopardize it.
Dave Bowman: I don’t know what you’re talking about, HAL?
HAL: I know you and Frank were planning to disconnect me, and I’m afraid that’s something I cannot allow to happen.
Dave Bowman: Where the hell’d you get that idea, HAL?
HAL: Dave, although you took thorough precautions in the pod against my hearing you, I could see your lips move.
I agree that no *one person or organization* should be price-fixing the interest rates. The problem is price fixing. Let people freely negotiate interest rates and lend hard money. If you remove the infinite supply of printing press funded loans then the market and society can accurately establish an interest rate that reflects the true risks involved.
I’m surprised that no one is questioning the financial sector’s overreliance on FICO. Given the events of the last year, they should be reassessing their model, but the folks at Fair Issac are more concerned about protecting their market share.
FICO is like ebay feedback. It doesn’t mean anything because no matter how good a person’s score, you might just be the first one he screws over.
humans need to be removed from setting interest rates
agreed. i’d love to live to see the day..
Goldilocks, Goldilocks where art thou? A year ago you make a promise to me, but now I suffer your betrayal.
I think we will really know we have hit bottom when Larry Kudlow goes on the air and tells people to “SELL, SELL SELL !!!!”.
I watch his show for a few minutes every night just to get a chuckle from hearing him call the bottom, again and again and again.
I thought that after a while he would get tired of being wrong, but evidently not. The only one worse than him is Don Luskin.
the coke does that
I have never heard him say “I was wrong”….Its painful to listen to him…Drill Drill Drill…Privatize S.S…He is just a neo nut case…
Guys like him never admit that they were wrong, they just keep on making the same predictions over and over again and hope that eventually they will be right.
LOL
Oh, I’m still out here, Combo.
I just got munched by the bears….
I just got munched by the bears…. I admire your sense of humor, even if I shudder a bit at your story.
LOL!!! (in a sardonic way)
Ah, black humor, the best kind…
Glad you’re doing better, Allena!!
I’m glad you’re mending too. Sorry for inflicting Sarah Palin on you
She’s payback for “our” Great Deregulator, nso.
So does the dollar crash?
So far not, except the Yen, since Europe is bleeding at least as bad. And if the dollar doesn’t crash, as most of us (including myself) expected, what exactly does that mean? So far, it’s been nice seeing oil and the Euro drop…but this seems odd, considering the mess that we’re in.
I’m just trying to sort this out as to where we’re heading.
“And if the dollar doesn’t crash, as most of us (incliding myself) expected, what exactly does that mean?”
It means cash is king. If means if you have cash and others don’t then you get to call the shots.
Trillions of dollars have disppeared from the world economy, trillions more are destined to follow. This makes the remaining dollars scarce, thus more valuable.
It’s really that simple.
True. All the fancy jargon aside, a dollar today buys you almost 100% more equities, and 5-100% more house depending on the area than that same dollar last year. Early next year, it will likely buy you even more. I am not worried about the dollar, I am worried about the lack thereof. As far as a comparison to other Countries they do not seem to be doing much better. I am worried about many things, the declining value of my dollar is not even on the radar. From my perspective it is becoming more valuable every day.
“I am not worried about the dollar, I am worried about the lack thereof.”
That’s all I’m concerned with. Just need to generate some more dollars and I can handle the rest.
Thanks, Tim. I think you have it right.
I second that opinion.
Right on Combo….
“…seeing oil and the Euro drop…but this seems odd, considering the mess that we’re in.”
I dunno know if it’s “odd”. We debated for months about the fate of oil, for my part I went as far as buying some DEE and DUG around the Fourth of July. As for the Euro - try as they might the E.U. could never measure up as there’s longstanding deep seated problems there. Now those problems will come out.
Both developments aren’t really “odd” at all.
I suspect that the dollar hasn’t crashed because that isn’t what was being used mostly as currency. It was the AAA rated CDO, and that currency has collapsed.
Every dog gotta day. The dollar’s day is down the road.
So far not, except the Yen
yeah whats up with the yen?
Yen is strong because, unlike China, Mexico, Malaysia, etc. - the Japanese economy is not solely based on the coattails of the American economy, which of course is collapsing. The Japanese actually produce things for themselves and for other non-American countries (like China for instance). Also Japan is not in debt. Also Japan didn’t have a recent housing bubble like most of Europe - they had theirs in the late 80’s (still feeling the pain of it BTW), so their housing prices are quite low right now, relatively speaking.
Watch out for Japan. IMO they may likely be the one strong economy to emerge from these ashes over the next few years.
That being said - their weak point (and our strong point) is agriculture.
Another Japanese weak point is importing all their energy.
I generally agree with this, however the statement that “Japan is not in debt” is not true. 3-5 years ago their national debt as a percentage of GDP dwarfed ours. I don’t know where they are relative to everyone else today, but the Japanese are no different from the US and Europe in this respect.
You are talking about the Japanese government. The Japanese people are among the highest savers per capita in the world. That’s a fact.
The parallels between the days before our own economy [in Argentina] collapsed and what’s going on today in America today are very hard to ignore.
Our local television seems to be getting some kind of sick kick out of all this.
They showing the comparisons, even editing politicians and economists speeches showing how similar they were to the ones the American politicians and economists are using right now. In some cases, they even said the exact same line, the only difference being the language.
About the article “Letter Re: What Are the Economic Collapse Indicators to Watch For?” I’d like to make a few comments.
Some of the signs we could actually verify during our own 2001 crisis;
*Limits to withdraw amounts per day. This happened just one or two days before banks actually closed.
*Sudden inflation. A few weeks before, but careful, it only turned into hyper after banks closed.
*Rumors of default. Those had been going on for a while and that’s when we slowly started investing elsewhere and slowly moving the money out of the accounts.
*Limits to moving fund out of the country
*Limits to the transactions. At the end you could just withdraw like $250 per week, if you found an ATM with money. Otherwise you had to suffer the terrible lines at he bank.
It’s just impossible to know exactly when it will hit, when banks will say bye bye, but careful, timing is everything.
what’s that from?
Thanks all for the comments, it is starting to make some sense now.
NYTimes has a pretty good article this morning on the similarity and differences between the Japanese RE bubble in the late 80’s and its aftermath vs. the one US is facing now. I thought it made some good points, even though it is always dangerous to take the two and assume the outcome would be the same.
Some of the points:
1) A severe and prolonged recession always follows such a RE bubble / financial crisis.
2) US is doing in one year what Japan didn’t do for eight years.
3) Japan actually recovered most of its taxpayer bailout funds after selling off bad debts and RE holdings after economy recovers some years down the road.
http://tinyurl.com/3t5dvk
October 10, 2008
Memo From Tokyo
Scarred by Past Woes, Japan Sees U.S. Bailout as a First Step
By MARTIN FACKLER
TOKYO — As America’s financial crisis has deepened, Japan has found itself gripped by a sense of déjà vu.
The unfolding drama on Wall Street and in Washington has brought an outpouring of comparisons by Japan’s press and policy makers to their own country’s banking meltdown in the 1990s and its costly government bailouts. Overwhelmingly, the conclusion seems to be that last week’s $700 billion rescue package is only the first step in an arduous journey toward financial recovery similar to the one that Japan made a decade ago.
“America is walking the same road as Japan, and that road will be long and hard ahead,” said Hirofumi Gomi, a former commissioner of the Financial Services Agency in Japan, the industry watchdog that oversaw the banking cleanup. “There is a lot more pain and turmoil coming.”
The similarities with Japan are striking. Like the United States today, Japan in the early 1990s faced a banking and real estate crisis that undermined the entire economy and required large government intervention. Some of Japan’s most venerated financial institutions collapsed as snowballing losses from failed business and property loans plunged the nation’s financial system into paralysis.
But the differences are also pointed and revealing. The United States reacted far more quickly than Japan, committing taxpayer funds just over a year after the subprime mortgage problems surfaced in summer of 2007. Japan took nearly eight years to pass a sweeping bailout, a delay that contributed to a long economic slump that Japanese call their “lost decade.”
“long term”?
I am reminded of an old monologue.
How long can you tread water?
Bill Cosby’s ‘Noah’ bit. Classic comedy at it’s best.
“Noah, it’s the Lord.”
“Right. Who is this really? Am I on Candid Camera?”
Turning Japanese, I don’t think so.
Japan was awash in cash money, and savings…
We are a nation of adult-children that owe $13,451 on their credit cards, a balance that is more of a balancing act. We tend to have almost nothing in the bank, as evidenced by our negative savings rate.
The Japanese sort of ran in place for a long time, but keep in mind this was during the 1990’s, when China didn’t matter as far as being a competitor, and Japan still produced quite a few consumer goods considered the best in the world, in a world that didn’t suffer economically as they did, and were still buying their wares.
What exactly are we planning to export, when we run in place for a decade?
I just read that national debt, as a percentage of GDP: Japan at 160% of GDP, US at 68%. So apparently in Japan the gov’t is spending like a credit card totting US shopper on a Christmas break from prison.
Do you honestly believe any government statistics from our politburo?
“1984″ wasn’t 24 years ago…
You can’t just pick and choose gov’t stats you like and reject those you don’t like to support your viewpoint.
Apparently, all government stats are the same, some just more so than others…
You can’t just pick and choose gov’t stats you like and reject those you don’t like to support your viewpoint. What do you mean, “can’t”??? Nothing has stopped him from doing that so far.
I seldom quote government statistics, as they are meaningless.
Does anybody really believe that inflation is around 4%, as per their shaky accounting methodology?
how about food exports?
Rough estimates, but in 2006 US GDP was $13.76 trillion. National debt is over ten trillion. So how did you get the figure that US debt to GDP is 68 percent?
“I just read that national debt, as a percentage of GDP: Japan at 160% of GDP, US at 68%.”
The critical difference is that Japan’s debt is almost entirely financed internally, whereas USSA’s debt is about 50-55% externally financed. When foreigners finally come to their senses and realize the USSA is going to monetize all of its debts, and stop buying our worthless treasuries and dump most of what they are already holding, that’s when armageddon (misspelled I know) begins. True, it has already begun, but it will really get rolling at that point. Neil, please pass the popcorn.
Got diversified assets?
When you further realize that the GDP number is grossly exaggerated via faulty inflation adjustments (far below even the official CPI), counting “paying yourself rent when you own”, and a half dozen other tricks. Just like they lie to make inflation look low, they lie to make GDP look high. They also lie about our debt by not including future liabilities (SS, Medicare, FDIC, Fred & Fan, etc)
Further more you are looking only at government debt, if you look at the whole of society (individuals, businesses, local governments, etc) then then our TOTAL debt load is much higher. Further more, if you base it on TOTAL DEBT per PERSON (because ultimately individuals must pay the debt via taxes, consumer prices, etc) then you will see that we are SCREWED.
Most of that debt supported spending by the Japanese government to restart/keep their economy rolling along. Japan experienced something very similar to the US, but the stock/property bubble occured simultaniously. At one point based on similar property values, the Kyoto palace was worth more than all the land on Manhatten.
“We tend to have almost nothing in the bank, as evidenced by our negative savings rate.”
There it is again, you’re making another case for cash.
Lol.
King,
You aren’t even a teensy-weensy worried about the printing presses and/or mouse clicks (bad money) co-mingling with your savings? (good money)
Gresham could write quite a thriller about this Law.
Not worried a bit. I’m just sitting back, relaxing, and allowing events to unfold.
It’s almost as if the economy is following a well-worn script.
1974, right?
Closer to 1874, actually.
!874, 1974, whatever, throw in 1933 why don’t you?
We got through those tough times, we’ll get through these.
These years offered great buying opportunities, no?
But, it’s different now!
“But, it’s different now!”
It’s different in the same way, or it’s the same in a different way.
It’s all in how you want to look at it.
its was the same after 1987. economy will struggle for a few years, right itself and markets will steam ahead. i never thought i would see a financial crisis twice in my lifetime but twice in 20 years means we will probably see it again down the road. for the youngsters, remember everything that has gone on…it will happen again.
I remember 1987, and this is no 1987.
Back then Wall Street was about the only game in town, in terms of the world-wide stock market.
Sure, there were stock exchanges all over, but pip-squeak versions of what we have now.
This is like 100x 1987…
sure it is-now everything is just executed in minutes, up or down as opposed to the massive sell orders that piled up and took about 2-3 weeks to process. its just quicker.
aladin,
talking bout the stock market.
I was talking about the fear, not the stock market.
I’m just sitting back, relaxing, and allowing events to unfold ??
Yep….Patience grasshopper…Patience
“What exactly are we planning to export?”
Services? paper “assets”? houses? cash? We have been gutted and most people don’t get it yet and are still thinking we will “come back”. Looking to those who did the gutting for solutions. The only way that we will ever “come back” is to quit pretending we are the world, that we don’t need to manufacture anything of substance and quit pretending that it is only ideas that are important and not “We the People”. Otherwise we are just a figment and a hollow figment at that.
As it is now we are a huge morass of factions that are all about to go “oh shit” at the same time. Those very same factions who are overwhelmingly dependent of the very broke US government in one form or fashion. “We” are also about to find out just how much of a strength “multiculturalism” really is. Oh yeah that is another thing that the slaughterers “sold” to “us”.
Beware the dialectic.
overwhelmingly dependent of the very broke US government in one form or fashion ??
Not just the US but stae and muni also….If you want to VOMIT !! just read the front page top of page of the San Jose Mercury News yesterday…If I new how to provide the link I would…Maybe someone here can…It is one of the most disgusting examples of abuse of compensation that I have ever read…It makes me feel like leaving the State…
japan kept their entire industry, the us - not really. so no parallel there….
“Things got worse and worse. Finally there came the awful day of reckoning for the bulls and the optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the beginning, were now about to suffer total amputation-without anaesthetics. A day I shall never forget, October 24, 1907.”
Jesse Livermore
Yep, that was the day when the stock market ran out of money, when J.P. Morgan had to come to the rescue, when cash was king.
Those who do not learn from history are doomed to repeat it.
“when J.P. Morgan had to come to the rescue, when cash was king”.
Very true, one big difference between now and then… The dollar was backed by something other than faith.
It is also part of what helped usher in the Federal Reserve.
Speaking of learning from history…
It is also part of what helped usher in the Federal Reserve. Do you mean there might actually be a good reason for the existence of a central bank? /irony
What is it about October that produces all the best crashes?
It’s the Fall.
I believe at this time, yet I have no proof, just intuition, China is selling US bonds (treasury and GSE) and pluggin the money into their capital markets. A cash burn to calm the soon to be rioting masses. I read that police already had to quell a stampede of angry pitchfork and torch crowd in Hong Kong.
Capital markets around the world shutting down, the selling….dis-orderly.
The bond market is not “behaving”, and the ten year yields are climbing in the face of the global selloff….the selling dis-orderly.
If deficits dont matter, than neither do earnings…
steady as she sinks, lifeboats have already been deployed. The hard landing has hit the USS Economy amidships.
“You can now buy the free float of the entire Russian energy sector with the market cap of Coca-Cola, and still have change to buy all the Russian banks,” Merrill Lynch & Co. emerging markets equity strategist Michael Hartnett said in a note to clients today. ‘ ‘
looks like iceland goes to the anglo’s
Don’t mix the Russian stock market capitalization with the sovereign resources of the Russian government.
is that like oil and ice water?
Uncle Vlad the the thumbreaker gettting all excited about the sex trade in iceland already?
what happens in iceland….
Throw in some randy UK Sailors after Brown decides to out-Thatcher his predecessor and invade, and you might have to requisition cod-pieces.
“steady as she sinks, lifeboats have already been deployed. The hard landing has hit the USS Economy amidships.”
But they promised us they’ll have a steady hand on the tiller.
China does not appear to be selling, they just aren’t buying treasuries which is a kiss of death.
I am buying in some shorts in the US and Europe . This is just for a short term trade, I expect a 150 pt S&P 500 rally. The risk reward is favorable. (It was favorable 2 days ago and I was wrong so I could be wrong again.)
Boy hoz…That would be a 20% pop…Tempting…
Hoz,
Where have you seen that China’s not buying Treasuries? It makes sense, but I haven’t seen anyone admit that.
Hank Paulson is no J.P. Morgan, it would appear.
The Fed has talked forever about taking the discretion out of the interest rate setting process, and using some kind of automatic inflation targeting rules.
Yeah, OK, I’ll hold my breath in that corner over there along with the people waiting for Nasdaq 5000.
LOL!
You must be aware that there are hundreds of thousands, if not millions, of Cargo Cultist types in the Alt-A Bay Area who, until recent events at least, were appearing to do just that.
Since I just got back from the Bay Area, I’m well aware of the attitudes of the Shallow Alto denizens.
It was all very entertaining.
I had to look up Cargo Cult. So, Tan Man Angelo was going to show up with his magic appreciation and rain Escalades down on everybody? They may as well wait for the Great Pumpkin.
BB is the cargo dropper of last resort, and the cargo in this case is cash dropped out of helicopters. Unfortunately, broadly anticipated cargo drops have little real effect.
Get in line to be paid to borrow the dollars….Takers? Anyone???
Didn’t we do this already in 05?
“and using some kind of automatic inflation targeting rules”
But who can be trusted to calculate the rate of inflation?
But who can be trusted to calculate the rate of inflation?
No one needs to calculate the rate of inflation, because inflation simply means one thing: creating more money.
Inflation does NOT mean “prices going up.” Prices go up because of inflation (the creation of more money). There are only two cohorts in the inflation game: the Fed, who injects liquidity (creates more money/debt), and the banks, via fractional reserve banking, who create more money/debt.
Let’s say it again, friends: inflation means monetary creation. Inflation does not mean rising prices. Prices rise because of money created, i.e. because of inflation.
” … inflation simply means one thing: creating more money.”
And deflation simply means one thing” destroying money that was created.
The housing bubble was inflationary. We’re just heading back to normal now.
In a room of deep thinkers, you might get your point across, but the average consumer is only thinking about what gas costs, and his personal money supply.
If this constitutes “deep”, you must not think very often.
All right, we get it. Inflation does not technically equal rising prices by definition. Inflation causes rising prices.
Is there an instance where inflation did NOT cause rising prices? If that causality link is never broken, then causality may as well BE definition. In which case, the thinking, deep or not, is already done. J6P need not know that any thinking was done at all.
And that’s MY deep thinking for the day.
Of course rising prices can arise without an increase in money supply. For example, an increase in demand, or a decrease in availability.
And therefore an inflation of prices can occur without an inflation in money supply. Either is an example of inflation. One is not “real inflation” and the other “fake inflation.”
In most cases people refer to rising prices as inflation, and this is a correct useage.
Others have a stricter definition of the word, and try to tell those who now pay twice as much for an item that that is somehow not real inflation.
Is there an instance where inflation did NOT cause rising prices?
Computers (and other electronics) are a good example. The technology improved fast enough to push prices down more than inflation pushed prices up.
Net result: inflation with lower nominal electronics prices.
That’s one of the failures of the CPI, it doesn’t measure the degree to which prices would have fallen if not for inflation.
if not for.
boolean logic dont work this time.
the fricken genius is J6P. That’s the krill.
Save the Krill !!l, whales the useless.
(please, if you dont understand what I just said)
learn
There are many types of inflation. What you are talking about is inflation of the money supply “money supply inflation”. Inflation can also refer to rising prices “price inflation” or just to blowing up a party decoration “balloon inflation”.
Increased money supply tends to lead to higher prices but the relationship is complex and certainly not linear – just look at stock or commodity prices recently, or the long-term trend in IT hardware prices. If one wants to measure the change in price of a basket of goods it is certainly not possible to do so just by looking at money supply.
Is the number of/demand for goods not a factor in the amount of inflation as well? If half of the US population were to disappear but the amount of money in circulation were to remain the same, would that not also be inflation?
If half of the US population were to disappear but the amount of money in circulation were to remain the same, would that not also be inflation? Nice thought experiment. Your scenario would have huge amounts of food in storage, and only half the mouths to feed for the first year or so. Price of food might well fall in that case. Since the US burns a good chunk of the world’s oil production, price of oil worldwide might plummet due to lack of demand. After the Black Death wiped out about 1/3 of Europe’s population in the 14th century, there were many changes in local economies due to lack of people with roughly the same amount of money / wealth / property available to the survivors.
Soon there would be a drop in production. As always supply and demand will drive prices. The only problem is monetary inflation via printing presses that result in someone getting something for nothing. Something for nothing is generally considered theft if it isn’t voluntary.
Large scale theft results in misallocation of resources and reduction in productivity.
Prices exist in the first place only because people have assets they want to exchange for other assets. Inflation is a secondary phenomenon. Supply & demand of assets are the primary drivers of price.
With nothing to govern the creation of irredeemable currency the inevitable happened. A credit-based boom occurred. Now, as these things always do, it’s collapsing. Neither Obama or McCain has said a word about restoring integrity to the U.S. dollar. It’s doable, and somewhere among their expensive panels of advisors should be at least one brave soul to insist it’s brought up in next week’s final debt between the presidential candidates.
WOW if we didn’t pass the $700B bailout the market would crash 20% to 8300……
Where are the Clueless media on this issue?
Yeah, didn’t that come with a money-back guarantee?
Is McCain the real bailout candidate? I guess one could argue he is at least following Adam Smith’s invisible hand of selfish interest, as a bailout would help prop up the value of Cindy’s unknown number of investment homes.
I suggest he and Sara Barracuda stay on message trying to link Obama to terrorists. Economic policy does not become them.
I was also 8 years old at the time Obama was alleged to have been the mastermind* behind the Weathermen…
* as per Sarah Palin
Uh, no. Obama was in college at the time, when Ayers was still at it in the 1980s.
But, il n’y a pas de quoi..
When did Obama actually meet Mr. Ayres?
Professor Ayres was given 1997 Chicago’s
“Citizen of the Year” award by…wait for it…
Nixon apologist, WALTER ANNENBERG.
Ayres=maybe involved in bombing a bathroom.
McCain=Definitely involved in bombing numerous entire Vietnamese villages.
just sayin…
I suggest he and Sara Barracuda stay on message trying to link Obama to terrorists. Economic policy does not become them.
It’s a lose-lose situation for the Grumpy Lil’ Penguin.
Obama economic team: Paul Volcker, Robert Rubin and Lawrence Summers. Warren Buffet and Jared Bernstein have been sympathetic to his policies.
McCain economic team: Carly Fiorina, Meg Whitman,
Phil Gramm,John Thain, and a bunch of supply side idealogues I have never heard of.http://www.usatoday.com/news/politics/election2008/2008-09-18-econteams_n.htm
DO the Volcker! DO it now!
http://www.nytimes.com/2008/10/10/business/10morgan.html?ref=business
Can Morgan Survive?
“Once again, questions swirled about the fate of Morgan Stanley, despite the bank’s efforts to quiet them. Short-sellers, those investors who wager against stocks, took renewed aim at the firm. At midnight on Wednesday, regulators lifted a temporary ban on short sales. Mr. Mack had angered many hedge funds by lobbying for the restriction. Much of the concern centered on Morgan Stanley’s deal to raise $9 billion from Mitsubishi UFJ of Japan. Despite repeated assurances from Mr. Mack and Mitsubishi executives, some investors worry that the decline in Morgan Stanley’s share price, coupled with the steep sell-off in the Japanese stock market this week, might prompt Mitsubishi to reconsider its investment. Morgan Stanley hopes closing the Mitsubishi deal will help ease the burden on its shares the way Warren E. Buffett’s $5 billion infusion helped stabilize Goldman Sachs.”
“Fears that the deal would not close were evident in the bond market, where Morgan Stanley’s 10-year debt sank to 64 cents on the dollar on Thursday, down from 96 cents a month ago.Meanwhile, Moody’s Investors Service said it put Morgan Stanley’s A1 long-term credit rating on a review for a possible downgrade. Moody’s also said it cut its outlook for Goldman Sachs’s Aa3 long-term rating to negative.”
Watching the crumbling cabal hammer at the spot price of gold would be hilarious if it were not so futile. Talk about fiddling while your financial system burns. Hammer away, evil cabal. You certainly can’t think of anything else to do so for you it is game over, man. Game over.
The Gold to s&p ration is now greater than 1:1.
When I started buying AU in 2001 the DJIA/gold ratio was greater than 40:1. Today it is 9:1. Yes, it is going to 1:1 also. Seems to me the DJIA is the barbarous relic.
Sucks to be a white precious metal right now, though.
Oh please. Happy Days are here again!
Let’s sing a song of cheer and then
Learn how to grow your own potatoes and weed in your backyard
Weed will have more value than gold, IMO
It always did.
can you ship me a QP mr. insane?
Imagine how you’d feel about the cannibles if you were in the stock market!
Donner Party of 14?
We can now seat you…
Bitter Queen, party of one, your table is ready…
Looks like another Wall day on Rough Street.
Here’s a question for the all the exceptionally smart cats on this forum.
Was talking to the wife last night how Credit Default Swaps make money for people who pay their premiums and then win the jackpot when corporate bankruptcies occur. Doesn’t this put these people in a position to encourage and potentially manipulate these companies into destruction? Wouldn’t this even be even more likely if the purchaser of the CDS ‘insurance’ doesn’t own the underlying asset (bonds).
Basically it appears that over the past few years a bunch of folks (investment banks and hedge funds) took out life insurance policies on companies with which they potentially had no actual investments in and would only stand to benefit if these companies failed hence it would be in their best interests to encourage the downfall of these companies. How they would accomplish this is the real trick. Stock price manipulation? Collusion with high level managers? I wouldn’t put anything past these scumbags.
I’ve just been trying to get a grasp on how CDSs could be used to encourage economic devastation. It’s my opinion that these things truly are as Mr. Buffet said, financial WMDs and what we’ve seen over the past month is their mass detonation. Does my assessment seem remotely on target?
Check this out:
An auction to be held today will determine the size of the payments buyers of default protection can claim after New York- based Lehman filed for the largest bankruptcy with $618 billion in debt. Lehman’s $128 billion of bonds were trading yesterday at an average of 13 cents on the dollar, indicating credit swap sellers may have to pay 87 cents.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX_FLjiKfbic&refer=worldwide
13 cents on the fiatsco! Major scroomage dead ahead.
hey great job for a bunch of guys whose job it is to manage money. i know people who worked there for years back in 80 and early 90’s. Hope they are not caught up in it.
I suspect those financiers in the know about CDS’s, those who have skin in that game, have already priced CDS payouts and defaults into the current markets, hence all the turmoil, fear & uncertainty.
It is interesting that so little media coverage has been given to today’s CDS auction. E.g., I was unable to find anything at the WSJ online site regarding this rather important event.
My experience with them (which is in essence just an agreement from the provider thereof that they will take on certain obligations of another entity if a credit event, such a bankruptcy, occurs with respect to such other entity; e.g. akin to a springing guarantee) has been limited. However, in my experience, rather than being akin to taking out a life insurance policy on someone else, the premiums were paid by the person who owed the underlying subject obligation (the “Obligor”) to either get their reserve requirements down (e.g., if you can get someone else to take a first loss on your obigations, your requirements to set aside reserves for those obligations are lessened) or because the creditors the Obligor dealt with required that their obligations be backed by a credit worthy entity. The problem created is that by doing so en masse, the bankruptcy of one institution hits the new obligor under the credit default swap. Thus, the concept that subprime or any other risky area can be contained was laughable at the time it was made, and has been proven dead wrong.
The difference with insurance policies is the entity selling is required to actually have assets to pay off the policies.
To sell credit swaps require no actual assets.
Tim wrote that CDS premiums were paid by the person who ow[n]ed the underlying subject obligation My readings about existing CDS say this is not necessarily true. We do not know how many CDS were taken out by persons who owned nothing related to the obligations. We still don’t know exactly how many CDS are floating out there, in any case.
To elaborate on the CDS as insurance metaphor: When life insurance policies were first offered, people could take out policies on anyone at all. In very short order, covered individuals started turning up dead under suspicious circumstances. Not requiring that covered individuals give their permission for anyone to take out a policy on them was an inducement for opportunistic beneficiaries to murder them. There are many ways to abuse insurance policies.
My only experience has been with respect to entities somehow related to the Reference Obligation or that were trying to lessen their reserve requirements, but I have only seen about four. The total market may be much different than the subset that has crossed my desk.
I would also add that the ones I have seen just place the swap provider on the hook for the Reference Obligations once the credit event occurs. Thus, unlike an insurance policy that has a big payout if somone dies, once they are triggered the swap provider just becomes an additional obligor. I do understand that Settlement Amounts if the swaps are terminated early however might be a different story. Anyone with any insight into the broader uses that may exist? My deals were new deals rather than unwinds or payouts.
I don’t think anyone knows (or at least is willing to say) who actually holds the bulk of these instruments and from what I have heard, many may be on both sides of the deals so “net” positions are even harder to discover. The most reliable analysis I have seen tells me that a lot of this present crisis is due to lack of trust and actual knowledge about who is holding what and what their net positions might be. The numbers are staggering.
Lehman CDS settled at 10 cents on the USD. Bag it and tag it; the financial system is dead.
RE: It’s my opinion that these things truly are as Mr. Buffet said, financial WMDs and what we’ve seen over the past month is their mass detonation. Does my assessment seem remotely on target?
I’m hearing numbers anywhere from $62 to $112 trillion of these CDS contract originations are out there.
At the moment we’re just gettin’ hit with the marking flares from the Pathfinders.
The big line of bombers carryin’ the 4,000 lbs. blockbusters are just over the horizon.
Only if you expect they expect to be around to pay you off.
Actually, it would be nice if they ever even considered, the remote minor and almost inconceivable possibility that they might have to pay off. That would be a major good sign.
Rumor has it the LEH CDS auction will settle at around 15 cents on the fiatsco. That’s a China syndrome scenario.
AP
Worried Asian investors pray amid stock plunge
Friday October 10, 8:04 am ET
By Yuri Kageyama, AP Business Writer
Asian investors too fearful to do much else but pray amid stock plunge
“I no longer want to keep watch of the market,” the 50-year-old man said. “It’s just too heartbreaking. The bottom is not in sight at all. What I do now is just sit and pray.”
“It’s painful,” she said. “It turns out that I was stupid to follow the herd. Everyone around me was trading shares and I thought I could make a fortune, too.”
http://biz.yahoo.com/ap/081010/as_miserable_investors.html
Perhaps this might be useful:
The Trader’s Prayer
May I never be facing north when the market is headed south,
and may locked limits always be on my side.
May the money left on the table be someone else’s
and may my pockets be deeper than the correction.
May I always be five minutes ahead of the market,
and may my runner always have a clear path to the pit.
And if this one is a winner, I swear I’ll quit!
The stock market correction and bank failure process together is one of the brightest pieces of news ever, but the media and the general public is portraying it as a horrible thing. I definitely do not agree.
First, banks do not offer anyone anything that is considered “competitive” between banks, other than maybe a .125% interest rate difference on CD. Before the US government decided to destroy investment reward by making dividends tax-heavy, and destroy simple bank savings by forcing the Fed-maligned interest rates, people did just fine putting their money into savings accounts, which were then used to finance loans at reasonable interest rates (12%-16%). 6% interest rates on mortgages and auto loans is ridiculous. Even when mortgage rates were over 18%, houses didn’t cost more than 3X a single-income HHI.
When people can save money in a simple savings account and earn 6%, the macroeconomy flourishes due to savings. When people can’t and won’t put money in a bank account, the macroeconomy relies on Fed-induced inflation. This causes malinvestment and excess growth.
The same is true when stock investments do not return a reasonable dividend. Shareholders do not bask in the glory of profit when they are not issued dividend share payments annually. Instead, they’re always thinking of “when should I sell?” Owning stock is not about thinking about when you will sell, but how much profit you’ll make annually.
This entire mess is the fault of the Democrats and the Republicans. No, no the politicos, but the voters. The boomers who overspent, the Gen-Xers who overspent, but both who overvoted. Overvoting is significantly worse than overspending.
The best solution are these failures. People MUST learn that the stock market is NOT a morally structured facility to support profitable companies. People MUST learn that their bank accounts of any sort are just complicit sharing of the fractional reserve monster that causes consumer goods to skyrocket in price but not in value, while wages sluggishly attempt to catch up, too late in most cases.
I have no stocks, other than private shares in private companies that issue an annual dividend. I have almost no bank accounts, other than a few revolving CDs that I’ve not liquidated in years because I am generally too lazy. It’s insignificant money, anyway, maybe 1 year’s income.
My money goes to reasonable places: real estate when it is obvious I can return a profit right away (I’m looking at a 6-flat in Chicago that I might be able to pick up for 80X rent), my businesses or other businesses where I can see a return of at least a 15% dividend annually after a few startup years, gold, silver, and infrastructure that can make me profitable or save me time in the future.
People who worry about 5% versus 5.125% on CDs or stocks that compare at 16:1 P/E or 15:1 P/E are just killing themselves. Why won’t you folks learn?
Why won’t you folks learn? Those of us who can’t afford to ignore a year’s worth of our income have other irons in the fire than you seem to have.
A year’s worth of income is insignificant? Only if you’re unemployed and make zero.
Some lines of reasoning are a few irons short of a fire.
Having had hard earned money evaporate in dot-bomb and the great 08 crash, I don’t think I can ever trust the stock markets again. I seem to think there are millions of others like me.
US Treasury considering insuring all bank deposits in US banks no matter the amount, apparently due to large withdraws from small community banks due to fear those won’t be saved in favor of larger and more prominent banks:
U.S. Mulls Backing All Bank Deposits: Report
10/10/08 - 01:17 AM EDT
The U.S. is weighing two steps to repair ailing financial markets by guaranteeing billions of dollars in bank debt and temporarily insuring all U.S. bank deposits, the Wall Street Journal reports.
http://online.wsj.com/article/SB122360336021121827.html
The 1st annual $100k ultra-marathon bank run is planned for next week.
All participants must be exceptionally fiscally fit to be able to partake in the run…
There will be staggered water-stops every 100 feet or so.
…temporarily insuring all U.S. bank deposits…
2 questions:
a) define “temporary”
b) insure with what? More fiat money?
a) 60 years?
I am guessing many of the New Deal programs that have recently gone belly up — FSLIC and FNM to name two — plus other New Deal scams still waiting their day of reckoning — OASDI to name one — may have been envisioned as temporary measures to get the U.S. through the dark days of the Great Depression, but will admit I don’t know for sure.
Great idea I think, especially for now and for small business.
But you know what will happen? Scam banks will be set up just to game the Fed backstop. Mysterious moneys will flow into such banks at strange intervals. The money managers will plead incompetence and invest the funds in the Cayman Islands. Said entity in the Caymans will go “bust” and Uncle Sam will make the moneys whole.
I quite liked the upper limit of $100k/$250k because at least it didn’t make the above scenario worthwhile. I understand that small businesses might want more coverage, but I think it should be based on, e.g. the number of employees, or revenue… something that caps bad stuff from happening.
This is like buying fire insurance after your house is on fire. Riddle me this, if the average joe is insuring the average joe’s bank account then why have the insurance at all? If we have a system wide failure like they are predicting then all the insurance does is prevent the prudent from getting out of the way.
Banks are not easy to set up and take quite a while to be approved by the Fed, so its not a likely place for scammers to try.
WSJ Op-ed Page
* REVIEW & OUTLOOK
* OCTOBER 10, 2008
Dodd and Countrywide
The Senator should take the witness
I saw Kelsey Grammer on T.V. last night saying that Dodd and Frank should be put prison for this mess. He also stated that we need to vote out all the incumbants in office.
LOL! He sure had a different opinion of personal responsibility and prison after he had too many drinks and flipped his car.
Speaking of which, how’s Ted Kennedy?
I turn to Mr. Grammer whenever I want advice on morality, politics, or finance.
/sarcasm
Methinks the good Congress members are far too quick to pat one another’s backs for successfully passing a $950 bn bailout (tax) bill, while extremely reluctant to admit culpability for the rule changes that destroyed our nation’s financial system’s ability to function properly, which created the need for a bailout.
And for those who claimed the bailout was the one true way to save the world economy from a financial disaster, what gives?
We were too late. If they had passed it on Monday as originally planned, all would have been well. Those few days of delay made a difference. NOW you know why Paulson was in such a hurry. He knew. Next time we’ll know better.
Respectfully disagree. Pissing in the wind, Monday or Friday.
If there is anything to be enjoyed in all of this it would be the fact that our congressmen/women and senators have been shown to be what they truly are: economic illiterates. I would venture to say that many of them never saw what was coming because they didn’t know how to recognize the symptoms. It’s a shame that 600 or so people with business and legal backgrounds had absolutley no clue as to what was awaiting our country. Now they are lead around by Paulson as a bull is led around an auction market. They offer no advice, no counsel, no ideas of their own. Messrs McCain and Obama are included in this club as well.
It’s been said that whoever wins this election may wish he hadn’t but I don’t think that’s the case. Whichever of them wins will just hand the economy off to advisors and the treasury secretary and go about their business trying to appear intelligent for the masses.
Oh, after the myriad arguments I’ve witnessed here over the last two years I sided with ComboTechie and stayed tied up in cash. This strategy seems to be coming to fruition. I may be buying things at a much deeper discount than I had ever hoped for!
Mugsy, wanna go in on a mobile home park?
Which mobile home park, ouro?
I did too. Mostly because I was afraid to invest in ANYTHING!
WSJ Op-ed Page
* OPINION
* OCTOBER 10, 2008
We Have the Tools to Manage the Crisis
Now we need the leadership to use them.
By PAUL VOLCKER
…
The inevitable recession can be moderated. The groundwork can be laid for reconstructing the financial system and the regulatory and supervisory arrangements from the bottom up. The extraordinary interventions by the government (and taxpayer) should be ended as soon as reasonably feasible.
That rebuilding will be the job of another day — of a new administration here in the U.S., of finance ministries and central banks working together. It must draw upon the strength of the now chastened private sector. It will require more understanding of the risks embedded in so-called financial engineering and of the perverse compensation incentives that have exalted risk over prudence.
There is, and must be, recognition of the essential role that free and competitive financial markets play in a vigorous, innovative economic system. There needs to be understanding, in that context, that financial ups and downs — and financial crises — will be inevitable, even with responsible economic policies and sensible regulation. But never again should so much economic damage be risked by a financial structure so fragile, so overextended, so opaque as that of recent years.
Mr. Volcker was chairman of the Federal Reserve from 1979-1987.
Can someone please stop Bush from speaking and let Volker speak instead? Things are bad enough!
Volcker is the head of Obama’s economic team. Jus’ sayin’…
Whom does McCain consult with? Mark Zandi?
Douglas Holtz-Eakin, whoever that is. Some guy who was the director of the CBO from 2003-2005.
An issue for a future generation of leaders to sort through, once the dust settles on the current crisis:
What did the Working Group on Financial Markets do over the past 20 years since Ronald Reagan established it (1988), and did it help or hinder the ability of the free market to properly function?
The savings rate for Americans has been negative for many years. Many Americans save a great deal of money and readers of this Blog are some of them. Their savings was netted down by Americans who plunged into debt. The good news is that these folks who lofe debt are being cut off from mortgages, second mortgages, credit cards, and auto loans. This will cause the measure of savings to go up as debt bubble pops.
There is alot of good news in this credit bubble finally ending and the shame that is now being attached to those who built it.
John McCain would like to use your savings to prop up the value of someone else’s home(s).
RE: the shame that is now being attached to those who built it.
Doesn’t seem like there’s much remorse or shame bein’ shown by the honcho’s from AIG.
What was that spa bill now?
$23,000.00?
Everybody’s gettin’ just a little tune-up for Round #2.
Most of these people who engineered and eagerly participated in this debacle, from the appraiser’s to the derivative physicists are complete sociopaths now counting their blood monies stashed in the Cayman Islands.
They could give a ratz azz about any of the damage they’ve done.
–
12-Month Asset Deflation (Scams & Real Estate) Has Already Exceeded 80% of the GDP!
It is close to 90% of the GDP for the latest 4 quarters. THIS HAS NEVER HAPPENED BEFORE, EVEN DURING THE EARLY YEARS OF THE GREAT DEPRESSION TO THE BEST OF MY KNOWLEDGE OF THE 1929-1933 PERIOD.
The US economy will be in full-fledged depression by late 2009 and in 2010 President Obama will propose a $5Tr. Fair Deal program for a 5-year period in an attempt to jump-start the economy for the 2012 re-election. Of course, he will propose a new stimulus plan as soon as he is in office next year but it wouldn’t do much to avert the depression.
It is the debt, Stupid! (For more than 10 years).
Jas
Ben, the housing issue has been trumped.
Recall my back-of-the-envelope estimate that the loss in home equity would be $5 trillion, down one-third from $15 trillion to restore affordability? With perhaps $2 trillion in real losses, the rest paper losses by folks like me with paid off houses.
Well, I’m told the stock market is down by $8.4 trillion, and it isn’t done.
And while some of that will be funny munny for the plutocrats who just use it to keep score, much of that will be real losses, money held by or promised to older people (age 50+) for their retirement. Younger, poorer generations generally don’t have anything unless they were in on some scam, or smart enough to live less extravagently than their parents.
Perhaps overpriced houses weren’t the worst investment after all — if you paid cash. At least you can live there. Fairly priced houses, like mine was when I bought it, are better still.
…overpriced houses weren’t the worst investment
after all — if you paid cash…
But here is the problem — operating costs:
(i.e. Taxes, insurance, maintenance, etc.)
Even if a benevolent uncle were to hand you a paid off
property for free, you need (at least here in Orange County, Ca.)
3%-4% of the “purchase price” per year in cash to keep
the doors open.
Even now, at current values J6P can’t come up with enough
cash to sustain that illusion of wealth. And, given the
current cash crunch, J6P is going to have an even
harder time.
In effect, the cash paid for a house is attached to a real
negative interest rate. I suppose you could rationalize
and subtract a reasonable cost for shelter from the 3%-4%,
but at the end of the day your net ROI is still negative.
Look for R/E prices to continue to spiral downward.
As many have already stated on this forum, its probably cheaper
to rent except in some very rare circumstances.
We haven’t even begun to see the ramifications of this massive destruction of wealth. I work for a company, which has lost 50% of it’s market value in the past 12 months. We have heard nothing yet from any of the people who run the company. It is almost like they are in shock. We will undoubtedly be going through painful downsizing in the next month or two. There will be millions of people who will lose their jobs in the next 6 months. This housing mania and the ramifications of it will be written about in the history books for years to come.
this was already history. last time was 1987-1991.
I think it could be worse than that. I think our structural economic problems are on a considerably larger scale.
As one of the younger, poorer generation, I keep telling myself that at least I have 30 years or so before (theoretical) retirement. The money I have managed to save has a horrible interest rate due to this war on savers. The money I’ve saved for retirement is locked into the stock market/401k, so there goes that …. No house because they are all overpriced.
So I try to see the positive - no debt except for that school loan, and lots of years to rebuild, once all the dust settles.
I do worry about those who are retired or close to retiring.
Don’t worry about them, except your own parents, if you were fortunate enough to have parents who merit your concern.
They spent the last few decades worrying about themselves.
As the paper promises evaporate, there may come to be a real difference in well being between those who piled up future help with past kindness and selflessness, and those who asked “who says you can’t have it all?”
I don’t understand your attitude regarding 50+ and your assumption they are selfish.
All the ones I know have zero debt, never had a credit card or if they did, just one. Their houses are paid off and while not living the easy life, they are comfortable. All they ask for is for something they were promised — their SS and reasonable medical care.
I don’t think it was the older people who participated the most in this current debacle.
“I don’t understand your attitude regarding 50+ and your assumption they are selfish. All the ones I know have zero debt, never had a credit card or if they did, just one.”
You hang out with the right over-50s. Too many aren’t like them.
Eat your parents. The selfish can all work at Wal*Jobs and McJobs.
your ok jen,
just file all this away as a learning experience. my mind is not as sharp as it was back in my 20’s but everything comes back pretty quickly when it happens. the most obvious difference was that interest rates were much higher and they were a great tool to re-ignite the economy initially. I think all interest on debt was tax deductible or it was just being phased out. oil was a non factor, gold was about 400…japanese were huge buyers of real estate then.
Thanks! I like to think I’ll be ok, considering …
My parents were a rarity … didn’t invest in the stock market and don’t believe in debt. They both have pensions thankfully, but live on only one of them - save the other for necessary big purchases, but just in basic savings accounts. House paid off. They are thankfully doing ok.
Their inaction in the past financially seemed to work in their favor
Hi Jen,
I am in a similar boat to you in some ways. Unless the interest on your loan is forgiven, or maybe deductible, paying down your student debt may give you the highest rate of return. It is also a very stable and not-confusing investment.
Last year I finally paid off mine, and we are working on my husband’s now, and we are establishing a little cash savings for emergencies and one for a home. I was impatient a couple of years ago to get investing and take big leaps forward, but when I realized I was up against a credit bubble, and the regular investment choices seemed to be priced high, I decided getting rid of debt, learning to be frugal, and building security were the best investment I could make. I am also taking the enforced waiting period to learn about investing, which I believe will take me years and years to understand, so best to start! I believe opportunities will be around again, so I am practicing patience, although I am not in the position to swoop in and buy up things at a low price like combotechie, I think freeing myself to be ready for future bull markets is the best thing to do.Let’s just be glad we’re not old…
Hi Jen and Ella,
I also come from similar situations as both of you. In late 2006 I was impatient with some of the money I had saved up, and at 26 years old decided to invest about a third of it in the S&P. When I saw how much the market was going up in the summer of 2007 I got nervous and asked the HBB members what I should do. They gave me the sound advice that one should not invest any money in the market that is needed for the next 5 years. Fortunately I listened to them and sold my shares. Now I am getting married in two months and am so thankful I can pay for my wedding, since my money is in a savings account.
I’m hoping that next year my husband and I can put aside some money (while saving for a house) to invest in beaten stocks. These downtrodden years will be the best opportunities to make money, not when the market is at its high. The catch is that its harder psychologically to enter because confidence is low, but I will need to be brave. I’ve learned from the past several months that diversification is key (I worked at Bear Stearns two years before its crash and never thought it would go down, but fortunately wasn’t paid enough to have stock options), but above all, to keep any money needed for the next five years in cash.
hey, Rachel, congratulations on your wedding, that’s exciting. Sounds like you were dodging bullets with the S&P and Bear Sterns!
We got married and went to Europe last year after we waited 10 years. I had been getting more and more tight with the purse strings, but when we gave up on buying a house and getting heavily invested in a market that I couldn’t make sense of, it freed us up to do these 2 things while we’re young. I am glad we did it - we couldn’t have if we had tied ourselves to $750,000 in debt (which is what houses cost where I live) - and we would have no savings either. This whole mess has been quite good for us actually, because I had such a high downpayment target that I thought I had to meet, I started saving like crazy. We used to spend 100% of our income and now we save about 50% which is a huge reward with no risk! I only have a few small investments myself, one in water infrastructure and the rest is locked a 4.65% savings which expires this month, unfortunately.
Like you, I feel like there are opportunities coming up. I just hope I can learn fast enough to make good decisions. I have been trying very hard the last couple of years, but I am not a natural - I am risk averse. So I guess I will have to try to be brave, too.
I used to check this blog every day, just to be extra sure it wasn’t crazy not to buy a house, since everyone I know believed in it so strongly. It was hard to resist the fear of being “priced out forever”, actually. Even though now it seems easy.
http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=anUDEEEP1_M0
too much treasury debt interest rates will rise and inflation will be back. A double whammy first Deflation followed by Inflation.
Jim Rogers on Bloomberg today agrees with you. At least about the inflation part.
“Happy Birthday to You!
Happy Birthday to You
Happy Birthday Dear Deflating Alt-A Bay Area Housing Bubble
Happy Birthday to You!!”
[Cheers, whistles, hoots, hollars, raspy chants and a marching band]
This week marks the 3rd Anniversary of that initial hissing sound. The event that marked it was spying my first “Price Reduced” sign locally in what was probably more than a decade.
IIRC, it was on a condo in the East Bay where they’ve overloaded those former industrial blocks in Emeryville (near the border with Berkeley) with crappy shoeboxes.
I think the sign was removed shortly afterward because the realtor community came down hard on the one trying to get her commission sooner, rather than later.
Here at the HBB, I’ve been fond of a few sayings over the years. In 2005, after a July visit to Petco Park and environs and seeing the future, I said:
“Downtown San Diego condos for everyone!!”
In 2006, with new Comrade Chairman Helicopter Bernanke at the controls, I implored him to get serious and at least try a shot across the bow:
“‘Do the Volcker’ and drain the liquidity cesspool before we all drown!”
In the spring and summer of 2007, after those Bear Stearns funds began to implode, I asked:
“Hey - all you hedgie and banker Pig Men: How’s your model lookin’ today?!”
In 2008, there’s probably even more to say, it seems, but there’s just an enormous amount of damage to survey.
“Happy Birthday Dear Deflating Alt-A Bay Area Housing Bubble!”
happy birthday… and still in its infancy. Can’t wait to see the landscape here (Bay Area) 5 years from now, when its a little bit older.
but of course, “it’s different here”. In fact, Zillow says that the building I’m in has gone up in value.
Sure it has…..
zillow has never been right in my area. i think they need some kind of disclaimer from when the snapshot of value was taken or no one is going to using that site anymore.
And now, perhaps, another seismic financial chasm opens up:
Tell me about the expected rate of return on invested principal embedded in the assumptions about how all these nearly bankrupt towns, villages, cities, counties, and states plan to fund the retirement plans for policemen, teachers, firemen, doctors, lawyers, garbage haulers.
Now that’s it’s PROVEN that a prudent man would just stop paying on the largest financial transaction of his life.
All these “invested pension assets” ever do is shrink!
How can all these places not go broke???
It’s a labyrinth of inter-connectivity feeding off itself, but it isn’t hep that there is no food left…
In New York City, the expected rate of return is 8 percent per year, beginning with a “market value restart” in early 2000, when all the pensions were enhanced.
No, I’m not kidding.
The deal passed the state legislature 212 to 0. They have been passing pension sweeteners, one after another, right up to this summer.
Giuliani pushed part of it — eliminate employee contributions FOR THOSE WITH MORE THAN 10 YEARS SENIORITY. Paid for some tax breaks and pork in 2000, when he planned to run against Hillary for Senate. Ended up with a divorce and a trophy wife instead.
“Ended up with a divorce and a trophy wife instead.”
What photo-enhanced picture were you looking at? Looks like “lots of miles” on that botox babe!
Best expression I ever heard was, “She looks like she was rode hard and put away wet.”
Can’t be an ambitious pol and go too young…only in Hollywood is that not so risible.
I want a capital loss carryover bailout. Please make me deduct any losses, even beyond $3000, against my income, please! I’m sure Uncle Ben and Uncle Hank can find some loose change somewhere.
More seriously, can someone tell me how capital loss carryover works? Say I have a capital loss of $10000 this year:
1. Can I deduct $3000 from my income? (MFJ)
2. If I magically have a capital gain of $5000 next year, can I deduct the whole amount, and carry the remaining $2000 to the year after next? Or do I deduct $5000 against my next year’s capital gains and $2000 against income? Or am I limited to deducting $3000 against my next year’s capital gains only? This would really suck.
Yeah, I know you aren’t a tax attorney but I’m sure a lot of us are in this situation (except maybe the gold bugs).
Found the answer for myself at http://www.irs.gov/publications/p550/ch04.html#d0e14660 . It wasn’t as hard to read as I had imagined. 1. is true, 2. 2nd scenario - $5000 against next year’s capital gains and $2000 against income.
I still want my bailout.
I was working off a half year’s salary in losses before the last week.
That’s a deduction change I can get in front of.
Almost sorry my latest debt-operated small business stock portfolio has zero basis. If they even invite me to the crash party, it will be like the stockholders meeting (I kid you not): Headers: email sent 1:30 pm. Body: Don’t forget the yearly stock holder’s meeting today at 11:45.
I think we need a little depression every 50 years or so to clean out the cruft.
But this would help out savers and investors! And, as we learned, they’re the most hated group in America, along with the “wealthy people” that Obama keeps attacking. (The 5% that pays 50% of the taxes, says Obama, are the source of all inequity.)
I think inequity is going down by the hour. Perhaps one good thing will come out of this.
circuit breakers breaking beserkers.
get ready for the shut down.
interesting observation, just in case anyone is watching.
the timing of the post almost coincides to the momment of the announcement of delay in the Presidents remarks this morning. Additionally, multiple failures across a broad spectrum of informational tools were signalling incoherently.
This is the big one for me. I, like many others, use a broad array of informational tools to gather information. If these tools break down, or are compromised, this wil create more negative and isolationist attitudes among the common people. Yes, I am a common, a plebe, a serf, a pawn of pain.
These forums are important, and I try really hard to honestly speak. Not always respond to comments, but speak. I am not ignoring you by design.
The freedom of speech will overcome the tyrrany of the minority who are engaging in confiscation of property rights. This is dangerous territory. I hope everyone understands that in order to go forward two things are gonna happen.
1. Station in life is not a function of entitlement or birthright.
2. Tinkering with “the global industrial financial and military complex’ will not fix it.
I give,
a tinkers cuss
Whoa nelly, hold on tight, it’s Lehman CDS day. No more restrictions on shorting financials either.
This is going to be one for record books.
California Tales:
Here’s some data from the ol’ drive down to Santa Barbara.
[1] (Mon) Guy in Monterey Aquarium yelling at his broker. How hard could it be to tell that the market had crashed?
[2] (Tue) Woke up late next morning in Monterey B&B. Suit angrily attacking his breakfast. Took two “breaks” calling “someone”. Could see through screen door him screaming at someone. Didn’t take a genius to figure out that that market had crashed again.
[3] (Tue noon) Tour guide at Hearst Castle talking about how William Randolph Hearst kept building through the “crash” which was “just like today” except that “our brokers don’t pick up the phone”. Don’t need to be too psychic to figure out the implications.
[4] (Tue late noon) Tour guide #2 at Hearst telling the “Europeans” that if “not for you, we would be unemployed.” (Hint: that’s coming down the pipeline.)
[5] (Wed) Walking down State St. in Santa Barbara (= Fifth Ave. in NYC.) “Rich” man screaming at broker while drinking white wine at lunch time. Hmmm… can I safely assume a market crash?
I think I should take more vacations. I am beginning to enjoy myself.
Pussy Galore…
Isn’t watching us fun?
Great observations, and yes, without foreigner visitors, the California tourism industry goes down 65%, almost overnight.
Wow - why go to an aquarium to yell to your broker?
Especially the Monterey Aquarium, possibly the best one on the West Coast?
C’mon, man - you’re scaring the fish!
Some people have no sense of decorum.
Yeah, that’s blasphemous as far as I’m concerned. That place is sacred.
Am I the only one that gets hungry looking at the exhibits?
Not really.
I was well-fed before going in but the anchovies always send me over the edge.
RE: Item 4
How much more of this before the E.U. flys apart?
Already, the Germans seem to be saying, “Hey, we were boring and played it relatively safe. This ain’t our mess. Why should we bail out our neighbors?”
Good article on NPR on German Sparkasse yesterday:
http://www.npr.org/templates/story/story.php?storyId=95567816
Paints a stark contrast to investor owned banks in Germany and the rest of Europe.
I’m one of those that is betting on EMU (european monetary union) collapsing.
No way is Germany going to pay for the sins of Spain, Ireland, Italy and Greece!
Germany is in the cross hairs, make no mistake. I, too, bought this bill of goods.
The Hoz Thesis, Baltic collapse Nordic Panic Euro crumble got out bid by the Iceland Collapse-Ireland Guarantee-Euro panic
those guys are fighting two fronts already.
Broker: What you are after dealing with one.
Item 3, Hearst was broke during the crash, Marion Davies bailed him out so he could continue building his castle.
Schwarzenegger is now running radio ads selling bonds to finance California’s short term borrowing:
buy california bonds dot com
When I first heard the ad on KFI this morning I thought it might be a parody until I realized it probably wasn’t - and it wasn’t.
Hey, how about that Prop. Z?
I laughed so hard at all the asinine Props being proposed when I was in the Bay Area recently.
How about Prop. F’d?
RE: Schwarzenegger is now running radio ads selling bonds to finance California’s short term borrowing:
What’s he worried about?
There’s a story in the Beantown Glob this AM, that Pelosi and Co.
are floating a second $150 billion “stimulus” package to be distributed to states to keep all those parasitic “$360k nurses, $250k fireman, and $120k small town beat cops”, noted by a fellow poster yesterday, from getting laid-off.
What does a government nurse do? Seriously. I can understand a fireman or cop (although not at that salary), but a nurse?
RE: but a nurse?
Must be the head of the union.
Must give head to the union.
How can McCain keep calling people “homeowners” who have 0% equity in their homes? We need that “defense of homeowner” law that defines a homeowner as someone who has free and clear title to a home, with no liens or mortgages.
Stick a fork in him.
show me the title!
There used to be a cartoon - Hatlo’s History- that would depict great monetary loss as winged sacks of $$$ flying off to money heaven.
Retirement is now different for a lot of folks.
Of course cash is King.
I also expect the King to be sneaking into Countess Silver’s chambers pretty regular like.
If you catch my drift. And I think you do.
“Greenspan Sees First Half 2009 U.S. Housing Recovery”
http://www.cnbc.com/id/27115235
I really think this guy gets a kick out of being a total a**hole!
’ssshrubery just read from the teleprompter how he plans to lead us down the path of hyper-inflation, except he doesn’t know this, as somebody else wrote the words for him.
Every time the Texas Rodeo Clown speaks, the market dry heaves.
One would think he’d learn to shut his yap.
“Every time the Texas Rodeo Clown speaks, the market dry heaves.”
Yeah, bring out the person whose administration is deemed most responsible for the ongoing mess to calm the situation. That should work out well.
Hey, rodeo clowns are pretty brave souls, so don’t smear them like that, I mean, would YOU run out in front of a big angry bull and try ot get it to chase you…
OK, maybe they’re not so smart, maybe it’s a good analogy after all…
I meant to impugn no real rodeo clowns, living or dead. The clown in question resembles those brave souls only in tragi-comic ways.
I bet he’s crossing off the days until he can get back to clearing brush in Crawford.
If he wasn’t such a total and complete plum, I’d almost feel sorry for him….
Think futher south, the Shrub bought land in Uraguay. And seriously, you don’t believe he clears his own brush, do you? I bet his hands are soft as a baby’s behind.
No, he is moving to Dallas in January.
I like the part where he said they were watching for fraud/theft.
I’m just glad this sh*tstorm happened before January 20, 2009.
Ain’t he the guy who said on national TV a couple of weeks ago that the financial world as we know it was about to end unless the bailout was passed? The bailout passed a week ago; what happened to the relief rally?
For what it’s worth, 10-10 is police code for:
Fight In Progress
Out of service, off duty
Permission to go on common channel (car to car transmission, rather than through dispatch)
Negative
Transmission completed
Welfare check
Other non-Criminal Event
On Break, Subject To Calls
Possible Crime {Shots fired, suspicious person etc.} (New York City)
Person with felony warrant (Michigan)
http://en.wikipedia.org/wiki/Ten-code
Obamanation–Where’s be my 10-10 (welfare check.)
RE: Weird scenes inside the Gold Mine
I do the grocery shopping for my 86 year old widowed mother.
This AM, things were eerily weird at the local supermarket.
The fruit and produce section was 75% empty. In the isles there were noticeable gaps in various inventory.
Earlier this week a dude at the gym had mentioned noticing the same thing.
It appears the food delivery wholesalers are gettin’ wacked due the inavailability to secure short term monies to pay their suppliers.
Think I’ll trundle over to Costco this weekend and score a few cases of canned Spam and tuna.
Our local stores still seem pretty well stocked. A stock up trip to Sam’s Club does sound prudent, however.
Don’t forget to stock up on rice.
(only half kidding…)
Oh yeah, and Navajo Fry Bread ingredients:
* dough (white processed flour and water, no yeast)
*something really fatty to fry it in (goat butter?)
*something really really sweet to put on it
Utah;
I got fat living on fry bread.
I think you can make it on a portable burner too!
Recipe: butter on top with honey!
That’s why I stay away from Navajos, Ouro, they’re nice enough people, it’s that dang fry bread.
But one of my favorite spots is Fry Canyon in SE Utah.
something really fatty to fry it in (goat butter?) That’s a recipe for Belagana Fry Bread. Traditional Navajo Fry Bread should be cooked in lard.
hd74, i was grocery shopping last night and noticed the same thing: lots of empty shelves, hard to find what you want. It was a strange feeling; imagine if you went to the store and just had to buy whatever was available.
let me tell you, I remember when there was only ketchup on every single shelf in the stores in this ex-communist country… Tomato soup, just add water..
thats where we are headed…what country?
Norman in England mentioned one consequence of the global credit collapse, as reported by The Financial Post: Grain shipments stalled in credit drought (”There’s all kinds of stuff stacked up on docks right now…”)
http://www.cnbc.com/id/27115235
“Former Federal Reserve chairman Alan Greenspan said the U.S. housing market will begin to recover in the first half of 2009, according to an article he wrote for Emerging Markets magazine published Friday.”
Well, that makes me feel a lot better. All is well.
It is not funny any more, the Jusice sytem was after poor John Gotty… when right in our eyes the Organized Crime Sindicate called CEOs, FED and government SEC, organized the teck boom and then housing boom… If you wont to convince contrary , please explain how come those guys with Harvard degrees did not know what was coming and people in this site with no financial degrees knew …
I forgot to mention “big heist”…
sum uf us haz degreezes,
Dear mrktMaven . thank you, I have degree too, but it is from XSoviet Union and it is not Enlish language spelling degree. You are real American , you just pay attention to the form but not sustance… that is why we have this mess… thank you
gal,
Thanks for your contribution. Please excuse Mktmaven’s rudeness…
LOL, comrades. 2 funny.
You are really funny too MOL…
That’s one of the funneest xchanges I’ve read in this blogg. Thx to all threee of you.
An thanks gal for the post.
but who is John Gotty?
Dear Lost in Utah, unfortunately I don’t use spell check usually, but in order to find out who’s who I go to Google, I highly recommend you, and again I’ am sorry for misspelling (languages that I am more familiar with fortunately don’t need spelling checks). I will try to make spell check handy for me, so academics with spelling degree like mrktMaven, will not be offended and use all their irresistible humor…
Bought coin dealers’s last non numismatic gold 20 coin for $900 yesterday. He says nobody will sell him anything; even 50 above spot, whatever that means between dealers.
Italian pol (Bernascoli (Sp?))says G7 will try to shut down (?) financial system to set up new “rules”.
Going to my banks to clean out what little cash I havent converted to PM. Must admit, I am much calmer about the turmoil since I chose this path a few weeks ago. Less stress; lost 10 pounds. I leave the entire stock/bond markets to those with more stomach lining for such. I pray I’m wrong.
Expect a coordinated currency devaluation and capital controls.
All currencies can’t devalue simultaneously.
Even if you devalued all of them against commodites and the precious, as long as the relative valuations don’t change, nothing changes AT ALL.
This is game-theoretic. Everyone can’t win.
Here is the article:
NAPLES, Italy, Oct 10 (Reuters) - Italy’s Prime Minister said on Friday there is talk of suspending markets for a temporary period while the global financial crisis is sorted out, but there is nothing concrete in this idea yet.
Asked what European Union leaders might discuss if they meet in Paris this Sunday, Silvio Berlusconi told a news conference: “There is talk of suspending markets for the time needed to rewrite (international finance) rules.”
http://www.guardian.co.uk/business/feedarticle/7848732
Question for fiat-hoarders: how will you get your fiat out when the money markets are closed?
Serious question for both of you.
Do you guys ever worry that they may declare gold illegal for transactions? (pain of confiscation and jail time.)
I mean this could never happen right?
Citizens of the Soviet Union weren’t allowed to own Gold coins, and if one was caught with them in their possession, the penalty was confiscation and possible gulag-time.
(it could and did happen)
Question to the gold-hoarders:
How are you going to use your gold when paper cash markets are closed? Are you willing to use lead to protect your gold?
I have enough cash to cover a month’s normal expenses. If there is no cash, I’ll immediately quit spending like everyone else; you’ll never know that I have PM’s by looking at me. I don’t expect roving bands; home invaders, however, would be in for a treat….an exciting treat. With plenty of food, H2O, kitty food, etc.; tens of millions will be hurting long before I am. The PM’s are more for converting back to fiatscos once they reset to the new world order value; think the unthinkable and prepare for it, yet, live like things will work out and you’ll be ok. You give me the odds and I’ll call the bet.
Gold-bugs can shove their gold up their azzez. Weed, ciggys and hooch are the only real currencies now.
You forgot to mention da fish — simple mackerel economics in action.
Holy mackerel! Thanks for the good read.
“He says nobody will sell him anything; even 50 above spot, whatever that means between dealers.”
What that means is that even lowly 1oz Krugerrands, which traded @ or around the spot price for a few decades, aren’t available from the public, even when you offer them $50.00 over the going Spot price, as enticement.
I just got off the phone with a Bullion Brahmin in L.A. who has a retail store there, and we hadn’t talked in 3 days, and I asked today how the situation was?
He said much worse than before. Absolutely no physical metal available, walk-in volume and phone-call volume have gone up considerably, this windfall of interest in buying his wares being of no financial windfall for him, as he has nothing to sell, and has actually transferred his inventory to a secure off-location vault, as he’s not tempted to part with it, just to bail out Johnny Come Lately 6 Packs?
Ted Binion had a secure hole in the ground and look what happened to him. As a gold-hoarding seditionist, I feel like a target is on my back even though mum has always been the word. Beware the Roaving Hordes of Starving Masses.
I don’t doubt the reports as being absolutely true, but why the heck is Gold, Silver and Copper being hammered today in the face of the economic crisis and physical metal vacuum? is there really that much decoupling, I’m getting skeptical…..
Also - if there is nothing for him to buy, and he’s not willing to sell, how does he keep his doors open?? Sounds like a really good Wall St business model.
He’s in a quandary…
Imagine building up a business over 25 years, only to have it come to this?
A financial stand-off, where he should be making money hand-over-fist, but instead, it’s dead.
And imagine having to answer the same J6P questions on the phone, over and over again?
It must really bite to have been “right” but suffering nonetheless.
My coin guy was angry too. Said too many people in the area around his shop have too much money to need to sell their PM’s; said he would welcome all the banks closing, then he said “Wait a minute, then I wouldnt be able to get my cash out that I need to buy people’s stuff with!” Probably moved cash from the vault to his personal stashing place last night.
Do you think it might be a good idea for me to buy gold in Europe while I’m here and take it to CA? I have no idea where to go though - any input would be appreciated.
You can buy PM’s in small pure bar or coin form in any country on earth. You can bring it back, but, you’d better buy from reputable dealers or coin shop people. Buy in small amounts, let coin dealers take their bite. Pay in cash, and if asked, its going right into SD box. Tell no one; those that do become victims. Safes are not for me. Having a SD outside the country is a luxury. Canada is good. If you meet anyone you know at a shop, carry an old ring and say you’re trying to sell it. They’ll feel your pain. Only buy PMs in quantity if you have all the consumables you NORMALLY USE for 6 months in your back closet. Youll feel and truly be more secure and, if the SHTF, you’ll stretch it to 12 months. Dont forget about your pets. Unless you rotate religiously (a la LDS’s), only buy non perishables. As you see, I believe that PM’s are essential but near last on the list. Have enough cash in small denom cash.
thanks for the input, CCisco!
not true. Plenty of maple leafs available. you have to make a large buy though.
Where? ….Apmex,Tulving,NWMint etc etc,and out…Only place I saw anything was $6 over.
joanne_landon@yahoo.com and I will give you my broker’s name/number.
Local Observations:
First a mid-summer bear attack.
Then very early yesterday morning, on my way into Bakersplat to have my mouth reconstructed, a 22 car train derailment. Yee HAH!
And to top it off, gentle readers, I saw Jesus in my dental x-rays. Well and truly. Sorta.
http://open.salon.com/content.php?cid=20317
Portents, people. Portents.
I have reason to believe it is officially All Over.
I have reason to believe it is officially All Over. Nah, it’s not All Over until Jesus speaks to you through your dental work.
wow, what a sign. You did have an angel sitting on your shoulder during the attack after all. I know i had one on mine during my pitbull attack. I think you should try to sell it to the tabloids, at least that will give them something to report that is true and not fabricated. Lol! You should be able to knock Britney Spears off the front page!
Happy Birthday!
Do you mean this sucker went down??
wow, what a sign. You did have an angel sitting on your shoulder during the attack after all. I know i had one on mine during my pitbull attack. I think you should try to sell it to the tabloids, at least that will give them something to report that is true and not fabricated. Lol! You should be able to knock Britney Spears off the front page!
Happy Birthday! and many more!!!!
sorry for the double post, it got stuck in limbo, so i dident think it went through.
you could sing for them:
I got jesus in my jawline
gimme what I want
etc.
etc.
etc.
on second look this particular Jesus looks a bit like the guy from the ‘Scream’ movies though. Not that that means much - having grown up in a Catholic country I’m quite familiar with scary Jesi.
Not exactly your year, is it? Shame we missed you guys in Pasadena.
Jeezily I say unto you, holy luck Batman!
–
My Crude Oil Forecast of 15 Apr 2008
> Date: Tue, 15 Apr 2008 11:24:20 –0400
to: jas_jain@hotmail.com
Subject: Re: Unrelenting Inflationist
(One of the Unrelenting Inflationist was Bud Conrad)
> Jas, I was just curious what your forecast is for year end oil prices. I greatly enjoy your commentary. Thanks, XXX.
Jas’ reply: “DOWN. > 100 20%; 80-100 40%; < 80 40%”
XXX (10/10/08): “Great call, Jas.”
Thanks. I try my best at looking farther down than most.
Proud Deflationist,
Jas
LOL.
Jas oil forecast for oil in 2006: $20
Jas oil forecast for oil in 2007: $10
Jas oil forecast for oil today: $40
Sounds like your price forecast is rising. Proud inflationist?
–
You really are disgusting and most can see it for themselves.
Jas
Jas,
Why so angry? I am merely quoting from your article “peak debt” which you wrote in Sep 2006.
(During the coming global depression, within this decade, the price of crude oil should fall below $25 a barrel and there will be glut due to sharply falling demand.)
That article is found by clicking on your signature link. You stand by it don’t you, even though oil went to $150 after you wrote it?
Give him a break… A little inflation never hurt anyone.. Even if they are proclaiming themselves otherwise.. LOL….
Where is the 10 year Treasury with a 2% yield?
In the most tumultuous week in financial history, the one investment that should have provided some modicum of safety was slammed. In this market US Treasuries are the last refuge of the incompetent.
Treasuries sure don’t show any deflation expectations. In fact US Treasury swap spreads widened. Swap spreads widening is an indication of risk of ownership.
As for gold etc., beat up on the PMs, I don’t own any - I don’t ever trade them. The reason I don’t trade the PMs, they are very easy for governments to manipulate. Especially gold since it is used as an indicator by the Federal Reserve as an indication of future inflation.
Speaking of deflation, do you have any thoughts on how come gold is headed south into the long weekend?
Maybe it is sell anything and ANY price right now.. any other thoughts???
Certainly there is more paper unwinding. Who knows where and how much? For all I know the paper price of AU could go to 0. But the real stuff? Well…
Hoarding pushes gold leasing rates up:
The cost of borrowing gold has surged to its highest level since May 2001 as central banks appear to be hoarding the precious metal.
http://www.canada.com/ottawacitizen/news/bustech/story.html?id=1230de0a-dc72-436e-b6f8-48239f96a5a0
Not sure what the Ottawa Citizen is but there was a great Wall Street Journal article yesterday on this. They say the rate rising is not a function of hoarding as described in that article but rather a function of the risk of Leasing it and not getting it back. They just don’t trust each other and need higher returns to justify the risk, just like in lots of other markets, “paper” and otherwise. Not sure who is right, but its not as simple as portrayed in that article.
probably people raising cash to payoff debts, margins, etc
I am open to any ideas and change in my stands and if cash is king for a few days or so, so be it. I only bought gold in the 500 and 600’s. Possibly some in the 700’s… not in the 800’s or 900’s… There might be a brief moment for those with cash to buy some things at a discount.. BUT WHAT TO BUY???? There is no physical to be found… Paper price of 600 means nothing, if there is no gold around. It is very possible that there might be months of complete confusion where things are priced out of whack completely - such as houses or luxury items (such as grand pianos north of 100 grand or art or fancy sport cars) that can be picked up for little money. ( I remember during the collapse of the Soviet Union, I could take 2000 dollars in cash and go and buy a brand new LADA (still a decent car for the time) and still have money left over from the trip. Many people of my country did it.
Would people part with their gold for little money? no idea.
Should I buy stocks.. Maybe. I really do not like getting screwed as a shareholder all the time with all these corporate dinners and retreats. If I know the business really well, I would, but I am not interested in knowing business, what a waste of quality time. Maybe I will pick a Stradivarius or two, and learn to play it, because if it just sits there the wood would die really fast… Combotechie, what would you buy??!?! Stocks? houses? Gold?
In high inflation all of those are ok (they should keep some value), but they are all terrible…. just trying to cover your behind, not really to make money… Gold might be the winner though.. just my thoughts..
gold may be A winner, but it won’t be THE winner.
Cool, a winner is better than no winner.. But who will be the “gold” medalist?
Maybe some quality real estate? Or companies that can structure their business in a way to stay ahead of the inflation? (I think that is almost impossible). So Bronco, what is your winner? Or will you know it when you see it? I believe that you make the most money when you buy right. Unfortunately those chances do not come around often. But we will know when see them..
Let the party go on….
just for the record, in the last year I have not been buying much, rather spending dollars on trips and fun … I looked around and that seemed to me as the best value at the time…
tutto, I wish I knew what the winner would be– that is something that is only known in hindsight.
I agree with the traveling/experiences usage of cash. Do it while you can…and you will never get that year back if you don’t use it. It is gone for good.
How are those long Treasuries doing at 2%?
The only reason the dollar looks good is because it is weighted against Europe currencies. Europe is toast. Against solvent countries the dollar is down 8% over the last 3 weeks. There are few buyers of Treasuries other than flight to panic mopes.
Nov. crude down 7.1%, or $6.12, at $80.47/brl on Globex
REAL ESTATE
Puttin’ on the brakes
Even the wealthy are nervous about the housing market these days
By Amy Hoak, MarketWatch
Last update: 7:01 p.m. EDT Oct. 9, 2008
CHICAGO (MarketWatch) — Barbara Corcoran recently got a call from an individual so rich and famous she thought it had to be a joke. But this random call it wasn’t a prank: The person, so shaken by recent events in the financial markets and so uncertain about what it would mean for him, called her for advice because he was about to buy a $47 million property in New York and he was nervous about completing the deal.
“He was as frightened as a first-time buyer — asking all the same questions,” said Corcoran, founder of The Corcoran Group, a New York-based residential real estate firm. She spoke during a recent conference call with reporters about the state of the real estate market, hosted by the real-estate Web site Trulia.com.
I went to deposit a check at my bank this morning. It was a bank check from our old landlord, returning our security deposit. The cashier told me she would have to call and verify funds. I pointed out that it was a BANK check and I was depositing it, not cashing it. She said she’d still have to call. Talking about “banks not trusting each other”!
I didn’t want to get in to the fact that the bank verifying funds is the same one who cut the check. What do you think they’re going to say? Guess I probably should have cashed it!
There have been many scams involving fraudulent bank checks. They clear differently than regular checks and take longer.
I think was was due to Indy Mac failing. Alot of scammers jump at the chance to rip off the banks.
Sitting here thinking about all the opportunities everyone’s saying will be coming to buy stuff cheap - stocks, houses, cars, whatever.
I decided I don’t want a house. I have a good car. Not interested in gambling (stocks), and I don’t need anything, not that money can buy, anyway.
What to do? I’m gonna miss out!! I feel kind of panicky!!!
Utah; get a tricked out bus with internet etc.
I bet those 200k rolling palaces could be 95k by now.
Do they make 4X4 buses? If so, I might be interested…
Buy a house (or two) in your favorite town, at the bottom, which easily cash flows. Then, you can rent it out and take off any time you like.
Well, Bear, the trick is to figure out which town…but I’m getting closer. But it’s nowhere near bottom. I’m staying in my old house and was joking with the contractor saying I was going to buy it back when they were done with it. He said it would be very expensive. He obviously hasn’t a clue as to what’s going on.
In the mid 1980s, you could buy any house in Moab for about 25k. These same houses, I mean exactly the same, are going for 225k right now, but I’m seeing reduced signs. The house I’m staying in, after a very extensive remodel, might someday sell for what I sold it for two years ago at the peak, 300k.
Moab - Ha! one of the three speeding tickets I have gotten in my life… Talked my way out of many more… The police guy had me step in his car thinking I had been smoking grass. I think he smelled the musky odor of the air conditioning when I restarted the car to open the window… otherwise if it was not for the pot suspicion I might have gotten away with it.. I was going so fast though, I was stuck behind these trucks and took off when I had the chance. Close to a 100. So I told the cop i was going that fast probably, he said - you must have slowed down because I only got you going 93. Nice guy, after some negotiation he agreed to lower it to 90, so it would be much cheaper. I ended up paying 75 for the ticket… Ticketing people in the desert does not make sense… There should be no speed limit there…
Well shoots, if you were going that fast through Moab you missed the whole dang thing.
A bong?
I don’t need anything, not that money can buy, anyway. I envy you. Those of us who don’t grow all our own food need to eat on a regular basis. Or at least, we want to eat.
Oh c’mon, Tresho, get a clue and go anerobic, like me.
Then you don’t need a still - that would have been my suggestion.
I think you mean anorexic. Or, do you go without breathing too?
I think she means without exercise. I second that motion.
LOL! You guys ever heard of things that live just on air? You know, plants and such? Anerobic…
Oh never mind. They probably need carbon dioxide or such…
(Reminds me of the scene in one of the Pink Panther movies where Pete Sellers and the mad evil organ player (I hate organ music, esp. Bach’s Little Fugue in G Minor) are cracking up while pulling out all his teeth while on CO2.)
U.S. Treasuries Fall on Concern Bailouts to Boost Debt Supply
By Sandra Hernandez
Oct. 10 (Bloomberg) — Treasuries fell on concern the U.S. government will sell more debt to finance a rescue of the financial system as confidence in financial markets deteriorated worldwide.
Ten-year notes were on course for the biggest weekly drop since June as speculation mounted that the Treasury will take further action to shore up the financial system, driving borrowing needs higher. Some traders sold government securities to raise cash for margin calls, or payment demands on assets purchased with borrowed money, as U.S. stocks sank.
“The U.S. Treasury will need to sell a lot of bonds over the coming months to finance the burgeoning federal budget deficit,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “And why should you buy today when probably you can buy at higher yields tomorrow? I’m not a bond bull anymore.”
Silver has been working underwater all day.
Imagine this guy being held upside down by his ankles
And his wallet and watch and gold pen and coins and bills fall out..
Into a pillowcase held by the Artful Dodger.
Today is another “shakeout” day.
It’s the new thing.
it DOES seem like they are going after everyone and everything one-by-one…
If “they” (PPT) can manipulate gold/silver to keep people from using it as a hedge becasue they scare J6P into beliving it will fall as well into the abyss… Then the banks can fill their coffers to the brim using taxpayer $’s. After the banks are (somewhat) whole again, loans galore!
Credit Remains Tight
An indication of whether those moves have been embraced is the credit markets. They haven’t budged. It is very expensive to borrow money right now — if you can get it at all — because banks still don’t feel confident enough to lend money. They aren’t sure they will get it back.
The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, is a case in point. It widened to 4.59 percentage points on Friday, according to Bloomberg figures. That is the biggest spread since Bloomberg began compiling data in 1984. To give an idea of just how much the financial crisis has affected credit, the TED spread was 1.16 percentage points a month ago.
TED spread was being discussed three days ago on NPR, but so what? Most Americans can’t balance their own checkbooks, let alone comprehend what various financial benchmarks and trends mean in their lives. Kind of sad seeing the big moves to cash as our currency continues to be devalued. No matter which way Joe six-pack turns he’s taking it in the kisser. Anyone got tickets to one of those $400K AIG resort gigs? I need a vacation.
Most Americans can’t balance their own checkbooks, let alone comprehend what various financial benchmarks and trends mean in their lives. So THAT’s how all those economically illiterate Congresspersons got elected!
I am starting to think were getting close to a upswing and i would like to wet my toes a bit. Can someone here please recommend a good book to me on investing in the stock markets? any help would be greatly appreciated!
Try not to catch yerself a falling knife. The good news about the pace of the crash: The quicker the market bottoms out, the lower the risk of buying too soon.
And what if I’m right about my prediction of 4,000? Careful, there, good buddy.
Could be a short-term upswing. There was after October 30, 1929. And then it dropped through the floor for real.
http://www.amateur-investor.net/Stock_Market_Crash_of_1929.htm
Careful, is all I’m sayin’….
IMHO, the best books for learning about the stock market:
“Reminiscences of a Stock Operator”
by Edwin Lefèvre
(1923)
Available as a downloadable pdf on the net.
The next best series of books:
“Learn To Earn” (1995), “One Up On Wall Street” (1989) or “Beating The Street” (1994)
Peter Lynch
Reminiscences of a Stock Operator by Edwin Lefevre - 1923 First Edition
Price: $3,950.00 USD
Description: Reminiscences of a Stock Operator by Edwin Lefevre - 1923 First Edition - Fictionalized briography of Jesse Livermore. Highly recommended investment book ever written. 1923 First Edition by George H. Doran, second printing.
1929 by Galbreith.
Dermot O’Leary of Goodbody Stockbrokers: “It is finally dawning — on the European central bankers at least — that although inflation rates remain high, the deflationary forces associated with the de-leveraging process which is now in train, means that deflation has the potential to become the chief policy concern in pretty quick order.”
So, there is overall consumer price inflation, asset price deflation, and tight credit (?)…I’m not seeing the effects at my banks yet. Mortgages rates are still pretty low, they haven’t raised the interest on our CCs or credit lines and the interest they are offering on my savings has gone from 4.65% to 3% in the last year.
I’m seeing a few savings incentive programs, that don’t involve paying higher interest (like, every time you use your debit card, the bank rounds up the purchase to the next dollar amount and puts the difference in a savings account for you). I am more interested in interest, myself.
I thought banks turn to personal deposits for stability in tough times. Am I just being impatient, or do I have to compete with the government for my bank’s attention now? Not complaining, just wondering if I’m playing a losing hand. Note: I’m in Canadian Dollars and I am passing gold by, for better or worse.
I suggest you read the book “Bank Heist” by Walter Stewart. Read it and let us know what you think.
P.S. You’re flush is beaten by a full house.
OK, thanks. I will need a poker manual, too, now
How did we come to this given only 6% of mortgage holders were/are subprime? I don’t get it. I understand that more prime bagholders are defaulting, but even so, how did it get so bad?
HELOCs and credit cards for consumers, derivatives for financial companies.
This is not a “subprime crisis”, which is a ridiculous term coined by the MSM because they needed a scapegoat. They were just the canary in the coal mine. Thanks to insane housing costs and debt to income ratios, now we are all subprime.
I prefer to call it “The Great Unwinding”.
“The Great Deleveraging”
Minsky Moment.
Kondratieff Winter.
Maalox Moment
Lip,
Are you watching to what’s happening to the insurance industry-Both of our professions? It looks like the third leg of the FIRE economy is the next to go down! Put on your hardhat and head for the bunkers.
“This sucker is going down!” (GWB)
God, I look the smell of de-leveraging in the morning!
Met a guy who was a chef, he did private dinners for AIG. Said he’d charge $1,000/day for his cooking. Did dinner parties for 12 that would cost between 15 and 20k, everything flown in fresh from Europe. Got a 20k bonus once.
He said it was disgusting and he’s glad to see their ship sink. Only did it cause his son had cancer and no insurance.
“everything flown in fresh from Europe”
Because we couldn’t get anything fresh a little closer to home?
“Because we couldn’t get anything fresh a little closer to home?”
That would take away from the novelty, you know…
Inexcusable.
Why? If the market will bear it, so be it.
Or did you mean inexcusable on AIG’s part?
He said it was disgusting and he’s glad to see their ship sink. I wonder what that chef put into their food {g}
Fred is hereby revising his S&P target (posted 2 days ago) from a tad under 600 by 2/28/09, to 400, and you’ll be able to buy 3 S&P’s with 1 oz. of gold. I’m probably wrong. I hope I’m wrong. Best to all.
Don’t short me, Bro. I’m chicken little.
Oct. 10 (Bloomberg) — U.S. stock exchanges may seek to impose a temporary ban on short sales for individual stocks that plunge as regulators seek to rein in short-selling.
whatever happened to Spook - he was always saying, “Don’t tase me, bro”…
another ban? are they doing this because goldman is getting hammered?
Stock market bulls = whiners. Didn’t they notice the market crash was unmitigated during the short sale ban?
I posted a clear explanation of why banning short-selling is actually the worst thing they can do.
It removes the “guaranteed bids” and causes a “gap down”.
Mor*ns, all of them, total effin’ stupider-than-a-rock mor*ns.
Right — I read that stock market volume dropped severely and the bid-ask spread increased to reflect the higher transaction costs after the short sale ban. Meanwhile the market tanked the most since 1987, in a selloff that would be difficult to blame on sidelined shorts.
The US Treasury market is now the last bubble and it is going the way of previous defaults. The swaps are increasing. The TIPS are widening and there is sporadic trade in the 10 yr and 30 yr. In the face of what should be a flight to panic, this is “forget about buying Treasuries”.
Fortunately the bonds are closed Mon for Columbus day and will stop trading today at 2pm CST.
Irrational exuberance in 1999, irrational pessimism in 2008.
OK - so only loosers buy treasuries. So were do I put cash?
Seems mortgage lenders don’t like our sheriff’s position on doin’ their dirty work:
A mortgage lender wants a Cook County judge to force Sheriff Tom Dart to get back to the business of evicting people from foreclosed homes.
On Wednesday, Dart announced his eviction moratorium, saying he’s willing to face contempt-of-court charges for not following court eviction orders.
Accredited Home Lenders filed a lawsuit Thursday to get Dart to obey an order that calls for the eviction of Shirley McFarland of Dolton from her foreclosed bungalow.
Sun-Times link
Uncle Aurick is suddenly looking a bit sickly. What gives?
Paper gold.
Can’t by bullion at that price - no sale.
Dow down 458 points at 10:40 am PST, yet Marketwatch headline reads “Back From the Brink”. Huh??
They must be comparing today’s movement to the 500+ point drops that have occurred on other days over the past couple of weeks. “It ain’t bad…”
I think it’s just a delay in updating the headlines. CNN had the same thing this morning.
Friday, October 10, 2008 - 12:23 PM EDT
Market still falling Friday
Philadelphia Business Journal
The stock market was registering yet another disturbing drop Friday, with the Dow Jones industrials off 454 points, or 5 percent, at midday.
In wild day on Wall Street, the Dow opened lower by a whopping 9 percent before recovering partially. The plunge had been presaged by losses approaching 10 percent in Asian markets and nearly as bad in Europe.
In a speech Friday, President Bush said much of the staggering decreases in stock values has been “driven by uncertainty and fear,” the Associated Press was reporting.
If you are moving completely out of stocks today (S&P down over 33 percent from the peak last year) it would not be a good move. S&P yields 2.36%, which is better than a 2 year note. A two year note is dollar-based. Suppose the US switches to a different currency? Radical things happened the last 2 weeks so you should be prepared for surprises. A stock is part ownership of a company. Buying a group of stocks below their historical P/E means you buy undervalued stocks.
A stock is ownership in something real - a business. It’s not a currency, it’s not fiat money. It’s not the US Dollar. It’s merely an alternative asset to precious metals and bonds. I like corporate bonds now. Yield on VWESX is around 6.7%
B.i.M,
We told you specifically to bail out of stocks last summer and you pooh-poohed us pretty hard, and it turns out you were debt wrong.
And now you are trying to tell everybody to back away from the lifeboats?
“A stock is ownership in something real - a business.”
What if the business’s balance sheet is underwater (assets less than liabilities) and anticipated future profits are negative for the foreseeable future. What would be the proper value of a stock in that case?
Just cuz 65% of the stocks in the S&P500 are rated junk, you think they might have a problem. Nah, not to worry. Buy on the current last years PE. It has to really suck to be long and down 40%+ on the year and no relief in sight.
I am buying just to take some of the best profits I have made in years, I would not like to be long here. I will still be short if this market rallies 20%.
Since stockholders have limited liability, the value would be “liquidation cost” — what you expect to earn after you sell, and negotiate with the bondholders.
In theory, this is zero but in practice since the stockholders get to appear in backruptcy court as the representatives of the corporation and negotiate with everyone, it is decidedly positive.
Thanks — great answer. Of course, the fact that the liquidation value is greater than zero offers meager comfort to investors who caught falling knives which whose value will converge to liquidation value.
Do you honestly think that the vast majority of companies are well positioned to deal with a currency change? The P/E is based on current earnings… what about future earnings? If earnings fall by 30% then the stocks have to fall by another 30%.
Besides, the government can easily confiscate shares of stocks as they nationalize one company after another. You cannot trade stock certificates for food on the black market.
Dan — Didn’t you hear that we have entered a new era where fundamentals like earnings and price don’t have much effect on stock market valuations?
Looks like they are very much on the way to nationalizing FIRE. They can keep it. FIRE is on ice for the foreseeable future.
Who can they lend to, other than the clueless and the true believers in bailouts (who are in some cases the same people)?
another -20% off of current expected earnings is currently already in the noontime S&P valuation. Probably not enough baked in but they are picking away at it. A 14 multiple is quite low by historical standards….
Gold is down $80 today… wow.
AU going to 0. And not available at any price. Heh.
That was the shizo…
Marketwatch says it’s down $31 and change. Where did you see that?
goldprice.org says -73.
Today might be one the last gasps of paper metal manipulation, via future markets…
As I stated, there is NO supply of physical metal anywhere in the world, none.
Silver, which has been in the shortest of supply, has dropped 20% in value based upon the Spot (paper) price.
It’s almost comical and makes a farce out of usual supply vs. demand pricing…
“As I stated, there is NO supply of physical metal anywhere in the world, none.”
That is like saying there is NO supply of loanable cash anywhere in the world. This statement is not literally true — the gold and cash are, figuratively speaking, under mattresses all over the planet. This is a flight to quality move, not a rush out of fiat currency and into precious metals.
“As I stated, there is NO supply of physical metal anywhere in the world, none.”
Isn’t there some in a vault in NYC?????
Don’t worry, many will sell at $650. It’s supply and demand.
I’ll take 3, please. That price include shipping?
Introsspection shows that I will not be ready to sell until the price drops below $400. Call me then.
Introsspection shows that I will not be ready to sell until the price drops below $400. Hold out until the price goes below $200. Don’t just give it away!
Silver under $10, and completely unobtainable.
SLV down 20%, where is Mormon Tea? Probably drinking straight whiskey.
The Mogambo Guru no longer rants about buying gold, silver and oil, just gold and silver; an historic moment in crisis inverting??
….inverting = investing! Maybe things are inverting a la Poseidon !
Anecdotal report from Maryland:
Went into Bank of America yesterday around 3:50pm to close my account. After waiting for a teller, the teller told me I needed to speak with a “banking representative.” Walked back over to the registration kiosk and the woman asked me my business.
“I’d like to close my account.” I said.
She asked my name, I told her, she told me to take a seat (there were about four other people waiting ahead of me).
Up above near the ceiling were several LCD Televisions tuned to MSNBC which at that point was detailing the Thursday selloff.
“Isn’t this the wrong kind of news to show in a bank?” I asked. The banking rep smiled uncomfortably and then went about her business.
An older man walked through the doors and immediately looked up at the TVs.
“Yeesh. 70 Points lost in 15 seconds!” he said.
Overweight gentlemen standing along the wall: “Yeah, but I just consider this the time for great buying opportunities. In fact, I’m closing on a house later this week! If you have 20% down, there’s money out there for you.”
Me (29 year old unemployed): “That’s certainly true if you think this is the bottom.”
Older Gentleman: “I think we have a long way to go.”
October 10, 2008 2:06 P.M.ET
BULLETIN
U.S. STOCK AVERAGES DROP 6% TO 7% IN AFTERNOON PLUNGE
From bad to worse
Afternoon sell-off strikes again after wild gyrations
Q. How many 7% plunges are needed for the stock market to drop by 90%?
A. (1-0.07)^n = (1-0.90)
0.93^n = 0.10
n = log(0.10)/log(0.93) = 31 days and change.
BTW, I don’t believe this is a likely scenario.
crash crash crashity smash crash ….. crash!
Rats, only cans left
Mars completed its purchase of William Wrigley this week. $23B in cash most borrowed. Mars made no effort to back out of the deal.
Good companies will always get moneys. It is the other 65% one wonders about.
Next weeks scenario guess:
GS gets taken over by the government next Tuesday. Mr. Buffett’s debt is now back to par from 95%. Shareholder dilution is 70%. Current GS debt goes from 60% to 95% of par, Swaps drop to 5%.
The Treasuries primary goal is to protect GS. So the first to be nationalized.
“The Treasuries primary goal is to protect GS.”
On what do you base that conjecture?
Incestuous relationships.
You didn’t exactly see the “bailout czar” come from any other firm, did you? Surely not all the other bankers are incompetent, right?
MIT hires MIT, Chicago hires Chicago.
GS hires GS.
This is news now?!?
Does anyone know what happens when you attempt to withdraw large amount of cash, greater than 50k less than 100k? Are there forms and if so, what forms are they?
I would prefer nothing be reported…
You become very paranoid; and, constantly touch the pocket with the money in it.
You can pull out $9999 without being reported, but “structuring” your withdraw to “avoid being reported” is also a “crime”. So I would take $7K out from different branches every couple of days to avoid “obvious structuring”. Be sure to vary the amounts in the withdraw too. Grab some from the ATM.
Or just let the government know you took out the money.
Be sure to keep the receipt, otherwise it is a “crime” to have that much cash on hand and they will steal it from you. A truck driver lost his life savings that way (he didn’t trust banks so kept it in his truck). $20K+ was taken as “drug money” until he proved it “wasn’t”. He was unable to prove it “wasn’t” because he never had a bank account.
Land of the free… where are all of those brave men when we need them?
You can pull out $9999 without being reported Nope, my bank reported me for a $5000 cash withdrawal, and they’ve know me for years.
They are probably doing suspicious activity reports (SAR) on almost everything.
An MSB must file a SAR when it knows or suspects that:
*
The funds come from illegal activity or disguise funds from illegal activity;
*
The transaction is structured to evade BSA requirements or appears to serve no known business or apparent lawful purpose; or,
*
The MSB is being used to facilitate criminal activity.
Hmm, money from “Savings”: check box 1. That just smells illegal there.
Hmmm, running our bank out of money. Let’s just check box three just in case
Why is sell/spot at 7% on gold but 45% on silver? That much of a markup just to count more coins?
I suspect that because everybody can afford $15 for an ounce of prevention, is the reason the big premium, compared to the precious few that can afford Ne Plus Ultra.
That seems the only logical reason.
Kinda like people who will buy the 20 shares of $5 stock that has no value and ignore the $100 stock that has gobs of earnings to back up it’s price.
(which isn’t to say silver doesn’t currently have value, just seems expensive due to it’s relative “affordability”…or something like that)
Info I googled…
According to the World Gold Council (and others) there are between 4-5 billion ounces of gold remaining in the world http://www.gold.org/discover/knowledge/faqs/index.html.
I say ‘remaining’ somewhat unnecessarily, as it is estimated that 95% of all the gold mined in the history of the world is still around. Quite simply, gold is not used up, rather, it is preserved. This also use to be the case with silver, but times have changed dramatically since WWII.
According to the Silver Institute and GMS, there are only 671 million ounces left of identifiable silver bullion left in the world. http://www.silverinstitute.org/publications/index.php (World Silver Survey 2004).
Crisis becomes global crash
Reuters
World equity markets plunged again on Friday, ending a week-long dive that matched falls seen in the Great Crash of 1929. Wall St stocks were down sharply, while London’s FTSE 100 and European indices also tumbled and Japanese shares touched 20-year lows. Fears of a worldwide recession put pressure on global policymakers as they met for the G7 summit this weekend in Washington - 19:18
Was I dreaming, or did Congress just pass a fix-everything bailout package just one week ago?
Financial system close to collapse, UK warns
By Chris Giles, Economics Editor, in Washington
Published: October 10 2008 16:54 | Last updated: October 10 2008 16:54
UK authorities insisted on Friday that action, not words, was needed from this weekend’s meeting of the group of seven leading economies if there was to be any hope of saving the world financial system from collapse.
As financial markets stared at the abyss, the UK delegation to the meeting sought to raise the stakes in an effort to avoid a mere agreement on a set of broad principles.
Describing a world in which wholesale money markets were now refusing to lend to banks, even overnight, the UK authorities warned that the world was on the edge of a collapse of the financial system.
They insisted that a bold and clear commitment to action to should replace general principles for individual country actions.
EDITOR’S CHOICE
Lex: Global market rout - Oct-10
Lex: Asian market rout - Oct-10
Full coverage: Global financial crisis - Sep-25
Video: What traders expect next after share crash - Oct-10
Wall Street in biggest fall since 1987 crash - Oct-10
The Short View: Market sell-off - Oct-09
Old 700 Club: money sucking fear
New $700 Billion Club: money sucking fear
This is really scary stuff here. Watch out if hot head McCain and Sarah barracuda manage to get into office by hook or by crook. One possible success strategy might be to send a mob of angry voters into such a rage that they can no longer think rationally.
updated 38 minutes ago
Rage rising on the McCain campaign trail
* Story Highlights
* McCain-Palin supporters increasing their attacks on Obama during rallies
* Some supporters have yelled out “treason,” “kill him” and “terrorist”
* McCain and Palin have not asked their supporters to calm their attack
* Obama says Friday: Anger and division are “not what we need right now”
McCain seems hell bent on finishing the disaster begun by his would-be predecessor.
This sucks. Toying with an angry mob. How presidential.
The scariest thing is that one might guess there is a Roving advisor in the background suggesting these desperation strategies just might be the only ticket into office.
Is this really that surprising considering that the person currently in office actually got to that office in the first place?
Yep, I heard James D–k head Carval say that if B.O. didn’t win it could get ugly out there, the natives are very restless. Couldn’t care less myself, but it may be entertaining.
It is already ugly.
Can we see an update mentioning McCain moderating from the platform Friday night?
Perhaps the most sickeningly disgusting attribute of the current Republican party is the incessant fear mongering no matter what the subject, and the stoking of racial tensions. Karl Rove is a scumbag.
You guys think this is some new gop tactic? Divisive self righteous themes are their stock in trade. They toss the electorate some cheap, cheesy, no-cost/low BS pseudo-controversial fraud like flag burning and hand the keys to the tax payerfunded vault to the wealthy elite.
Not new, just worse, no? McCain was at the podium when that guy yelled “kill him” and he let it slide. I don’t think he’s going to win, anyway, but it would be nice if he didn’t set fire to the stage before stepping off. Looks to me like whoever wins is now going to start their term off with a bunch of super mad people, so a guaranteed division next term.
The last clip I heard he was just mocking Obama for not visiting France more often. And accusing Obama of hating government regulation. What? Is he going to start demanding that Obama commit to drinking a latte every morning?
(oops, McCain was at the podium for “terrorist”, Palin was there for “kill him”. Sorry, my friends).
What’s really sad is that people buy into it. Unbelievable ignorance and stupidity.
Lost,
Like in the market, prices are set in the fringes. Most people do not “buy it”. The crazies always make the headlines.
Are you trying to tell me something in a nice roundabout way, Blue?
Nothing like a 500 point rally from the day’s low…
maybe its the PPT trying to get it back above 10k before the close?
is it possible that Mr. Paulson is using some of that 700bln to buy stocks, lifting the markets? i heard that he was given full authority to use those funds to prevent financial instability. is the stock market excluded from this?
Nothing like going dow down 44 at 12:20pt
back down 99 one minute later
34
71
63
80
103
all in two minutes
109
86
Can’t Paulson use Markit data to figure out what to pay for mortgage assets bought under the bailout plan?
latest news
[$INDU] Dow Jones Industrial Average falls back under 8,000
Value of Lehman debt set at 8.625 cents on dollar
Auction to settle credit derivatives on failed broker may trigger larger payouts
By Alistair Barr, MarketWatch
Last update: 3:13 p.m. EDT Oct. 10, 2008
SAN FRANCISCO (MarketWatch) — An auction to work out the value of Lehman Brothers bonds for derivatives traders valued the debt of the bankrupt brokerage firm at 8.625 cents on the dollar, according to Markit and Creditex, the administrators of the auction.
3:25 eastern time, Gold down 40, DJIA back to 8,500, mark it, I hereby call the bottom, TODAY. Boy those were some scary times weren’t they……….. Not!
time to sell the pop?
Selling into the rally has been everybody’s favorite pastime, we’ll see what happens in the next half hour.
that was a joke for PB
A lot of folks apparently did just that (no joke!).
Amazingly, gold and the DJIA have traded trajectories at the end of a rough week. And the G-7 nations are going to issue a statement today. The financial news just never offers a dull moment these days…
I’m against cruelty to animals and the idea of a poor maltreated debt cat bouncing off the pavement…
It just turns my stomach.
Does that mean you are for Prop 2?
Sometimes i’m in need of a prop, but of my own devices.
c’mon, man! this is a family blog.
There’s a PPT Cruiser double-parked in the loading zone, and it will be towed away immediately, if not moved.
The license plate is ‘PT BARNUM’
Do you smell manipulation in the air. Smells pretty strong
Beware the iron grip of the bear’s jaws.
Keep hitting refresh. -500, +275, +11
For the love of god, man, which is it??
Glad this week is over.
Specialists were long a trunk load of shares caused by a few days of selling. There is no way they were going to carry them on their books on monday. In the last hour as they saw the downward pressure drop, the specialists went ahead snapping every ask, regardless of where the ask was. That put green arrows on the screen. CNBC and Co screamed that it was a reversal and bottom. The public heard CNBC scream, added that to the “we are at the bottom” and “we must be at the bottom” or “We will be at the bottom sooner than you know” screams and decided it was a perfect buying opportunity, joining the specialists. Now the public was snapping asks no matter where the ask was. CNBC picked up the rallying cry and in minutes there were only buy orders coming onto the SuperDOT was full of buys, specialists were slowly offloaded their long positions going into cash for the weekend. Since the offload ended about 10 minutes before the market close the and the market stopped rallying ( specialists were no longer painting tape green ) and normal selling pressure continued bringing the market back down. Finally at MOC orders hit and here we were back to -120
What I don’t get is if “they” can manipulate the market back up to the opening bell level, why not do it every day, to make sure the stock market always goes up. What is so special about the Friday close?
Best to end the week on a high-note heading into Columbus Day Monday, heading off uncertainty @ the pass.
Dang, this is one roller coaster ride. Up and down, up and down with a few curves thrown in. Looks like it’s one bumpy ride
I know. I had to take some ginger pills to calm my queasy stomach.
I know. I had to take some ginger pills to settle my queasy stomach.
OK, I didn’t worry about Y2K, I didn’t buy all the fear mongering after 9-11, even though I was shocked and angered.
But this actually has me thinking about going out this weekend and stocking up on supplies, something I’ve never done. Advice, please.
http://market-ticker dot denninger dot net
Don’t stock up on gold (either black or yellow), as you are likely to be able to buy them for less next week.
Got bubbling crude?
I should’ve stocked up on SUVs!
Stock up on snacks for sure.
I had orange fingers this week from all the cheese puffs i ate trying to ward off the new evil.
Who wants soup when your are scared?
Something crunchy like nuts, get stuff you’ll want to eat.
Thanks, Ouro, but there’s very little I don’t want to eat, except meat, and my dogs take care of that. Omnivores R Us.
I was thinking of snacking up on stocks. Or is it still too early to buy the dip?
There’s a picture of an ATM run at a bank in Kiev, in today’s L.A. Times…
About 25 chickens in line.
If the equities have bottomed out, then why the 100 pt drop in the closing minutes?
MarketWatch
October 10, 2008 4:04 P.M.ET
BULLETIN
Swinging into close
U.S. stocks volatile but still on track for weekly drop of 15%-18%
U.S. stocks are mixed in late-afternoon trading after free falling at the open. A few strategists call equities’ bottom.
Roubini’s as bearish as I’ve ever seen him. See his comments from yesterday:
http://tinyurl.com/4ht4wf
Is this a signal a bottom is at hand?
Prof, you crack me up, you really do.
I don’t know if that’s a signal the bottom’s at hand, but if that happens that should put us close to the bottom. If the bottom’s lower than that, I’m not sure I want to go there.
Financial Times
Japanese insurer Yamato Life collapses
By Michiyo Nakamoto in Tokyo
Published: October 10 2008 06:56 | Last updated: October 10 2008 10:20
Yamato Life Insurance on Friday filed for bankruptcy with Y269.5bn ($2.7bn) in liabilities, becoming the first direct financial sector casualty in Japan of the US subprime mortgage crisis.
The Japanese life insurer said it was unable to close its books for half-year reporting after a sharp and rapid fall in the value of its equity holdings led debts to exceed assets by Y11.5bn.
October 10, 2008 — Updated 1136 GMT (1936 HKT)
Commentary: Why there’s a crisis — and how to stop it
By David Smick
Special to CNN
Decrease font Decrease font
Enlarge font Enlarge font
Editor’s Note: David Smick, a global strategic adviser, is author of the new book, The World Is Curved: Hidden Dangers to the Global Economy (Penguin Portfolio). He is chief executive of Johnson Smick International, a financial market advisory firm based in Washington. It publishes The International Economy magazine.
David Smick says the $700 billion ballot failed to restore confidence in the markets.
WASHINGTON (CNN) — At this point in the credit crisis, at least one thing is certain: most policymakers lack a clue of what is really at stake. Those with some knowledge are driving policy looking through the rearview mirror.
Begin with the U.S. Treasury’s $700 billion bailout package. This was presented as some magic pill which, if gulped down, would quickly restore financial stability.
The “shock and awe” of the sheer size of the taxpayer-funded bailout would somehow restore confidence. Instead, stock markets collapsed and credit markets remained frozen.
and the shelves were empty.
take it,
or leave it.
taxation without physical reperations?
its visceral, its real, its global, and no its not contained.
Aw shucks, if only the DJIA could have closed higher than the opening level, we could rest assured a bottom was in. Aside: I sure miss TxChick with her defense of technical analysis.
latest news
[$INDU] Dow industrials post 18.2% weekly decline, worst on record
MARKETWATCH FIRST TAKE
Dow falls ‘only’ 128 points
Commentary: Stock market missed turning in a Key Reversal Day
By MarketWatch
Last update: 5:00 p.m. EDT Oct. 10, 2008
The following First Take is real-time analysis and opinion by the MarketWatch commentary team.
ANNANDALE, Va. (MarketWatch) — For a brief and all-too-fleeting moment late in Friday’s session, it looked as though the stock market would turn in what’s known as a Key Reversal Day.
But, alas, it was not to be.
A Key Reversal Day, at least according to the standard definition, occurs when the market hits a new intraday low and then closes higher. Many technical analysts consider them to be bullish.
Barack ‘Osama’ on Rensselaer County ballots I knew his cover would be blown some day.
NY Times
McCain-Palin Supporters Gone Wild
By LIZ GANNES, GigaOm
Published: October 10, 2008
Video interviews by confrontational Barack Obama supporters at John McCain rallies are shooting up the YouTube charts, revealing angry and nasty anti-Obama sentiment that is in turn motivational for the Democratic presidential contender’s supporters. You almost feel like Joe Francis is behind the camera asking girls to flash him. And watching brings the same voyeuristic and embarrassed emotional response.
Somebody please decipher this new “new” plan.
I love it when they don’t mention homeowners.
That must be good for us, right?
I’ll take preferred for 10%. Thanks.
“Looking Ahead: A Reverse Tsunami
This afternoon I co-led a forum on the financial crisis with my Evergreen colleague Peter Bohmer. I had a flash as I was preparing: at some future point we could be in for a reverse tsunami.
Here’s the idea: A real tsunami begins with an outward flow of water. If you’re standing on the beach and suddenly the water line retreats 10 or 20 meters, it’s time to race for higher ground. Now consider the opposite phenomenon. The massive Fed/Treasury spending spree to hold the crisis at bay, thus far unsuccessful, is being financed by a massive capital inflow. Some of this comes from foreign CB’s eager to do their part, but a big part is the result of global capital flight to the supposedly least risky currency. Suppose we get out of this alive and calm returns to the markets. Most of those people are going to want to bring their money back—that’s the reverse tsunami. How do we finance that? The Fed’s balance sheet will be wall-to-wall junk.
OK, just getting to that moment will be a big victory.”
Peter Dorman
“The Fed’s balance sheet will be wall-to-wall junk.”
Is that sorta like the moment when all the swimmers notice the waters have receded from the beach and wonder what will happen next?
On October 10, 2008, Meridian Bank, Eldred, Illinois was closed by the Department of Financial and Professional Regulation of the Illinois Division of Banking and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
and
On October 10, 2008, Main Street Bank, Northville, Michigan was closed by the Michigan Office of Financial & Insurance Services and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
Meridian Bank, Eldred, IL October 10, 2008
Main Street Bank, Northville, MI October 10, 2008
another 2 bite the dust.
Palin Brushing Up On Foreign Policy
“Republican vice presidential nominee Sarah Palin sought to silence those who have criticized her lack of foreign affairs experience Tuesday by announcing plans for a weeklong, 10-nation tour of Walt Disney World’s Epcot. According to Palin, the trip—her first past Frontierland—will include speaking engagements at Norway’s famous Viking ride, sausages at Germany’s Kaufhaus, and, time permitting, a fact-finding mission to Future World. “This ambitious trip should finally demonstrate that I am ready to assume the vice presidency, whether by standing in long lines at Morocco’s Tangierine Café or by sitting down face-to-face with Mexico’s Three Caballeros,” Palin announced during a campaign stop outside a Chinese restaurant in Tulsa, OK. “All of our neighbors deserve good diplomacy, from the Universe of Energy down to the French pavilion.” Palin also promised a visit to the American Adventure exhibit before returning home, adding that she hoped to learn more about her own nation and the diverse peoples within.”
Onion
I used to think that Dan Quayle was the riskiest VP in U.S. history, but now I see that Sarah Barracuda could put him to shame if she gets the post.
Oct. 10 (Bloomberg) — U.S. exchanges may seek to impose a temporary ban on short sales for individual stocks that plunge, as regulators seek to rein in a practice blamed for forcing down shares of financial companies such as Morgan Stanley. …”
This is to be known as the Goldman Morgan Rule.
Will the TARP Succeed? Lessons From Japan
Takeo Hoshi, Anil K Kashyap
NBER Working Paper No. 14401
Issued in October 2008
NBER Program(s): CF EFG ME
—- Abstract —–
The U.S. government is hiring asset managers to purchase up to $700 billion of toxic real estate securities that are the center of the current credit crisis. Buying up assets, if done properly, might address the collective under-capitalization that is the fundamental problem plaguing the financial system. But, experience with financial crises in other countries suggests that success is by no means guaranteed. Japan was the largest other country where the banks were seriously undercapitalized and where asset purchases were a critical part of the government’s response to the problem. The U.S. bailout plan is similar to the Japanese approach in that it does not clearly identify the capital problem as critical and instead proposes using AMCs to remove distressed assets from bank balance sheets. When Japan used AMCs, their effectiveness was limited in part because they did not purchase enough assets. AMCs did not help recapitalization, either, and Japan had to come up with different mechanisms to use public funds for recapitalization. Both these risks are also present for the U.S. plan. ”
http://www.nber.org/papers/w14401
Something to ponder…
Nobody on here was all that surprised when a “all of the sudden, nobody could have predicted it” economic meltdown happened rather quickly, all of the sudden.
The very same thing is happening to us vis a vis climate change. Don’t worry about trying to stop it, it’s well on it’s way. Maybe it’s 6 to 12 months out, but then all of the sudden, it’s here…
Food production will be most effected by the next crisis, and it’s time for you to go out and buy a minimum of 3 months worth of canned/dry food, and bank it @ home.
If you don’t eat food, just disregard my advice…
That would be me, I’m anerobic.
But hey, advice well taken, if I just had some place to put it…maybe I could buy smaller type stuff, like popcorn, will probably be needing lots of that (where’s Neil?).
Not buying that due to the blog’s superior financial forecasting success on the trajectory of the housing market, Aladinsane’s dire near-term outlooks for climate change and Uncle Buck must also necessarily come to pass.
Can you blame these guys? They have thrown every policy tool known to man at the markets since August 2007 with little to show for it, aside from an increasing perception that nothing they deeply believed would work actually does work.
Wall Street Journal
* OPINION
* OCTOBER 11, 2008
The Government Is Contributing to the Panic
It’s time to let markets do their messy work.
By JONATHAN MACEY
Despite all the hard work and good intentions on the part of our public officials, when economists and historians look back on the current financial crisis they are likely to conclude that government intervention prolonged and deepened it. In particular, officials at the Federal Reserve, the Securities and Exchange Commission and the Treasury Department are to blame for publicly losing confidence in the very economic system they are supposed to protect.
The Fed, the Treasury and the SEC appear to be in a state of panic. A crisis mentality led the custodians of the U.S. capital markets publicly to jettison their lifelong commitments to the capital markets in favor of a series of short-term regulatory quick fixes. Even more troubling, for the past several months the doyens of U.S. fiscal and monetary policy have ignored the most fundamental principle of central banking, which is that the primary responsibility of central bankers is to promote stability and to maintain confidence in the capital markets. Our central bankers appear to have suddenly lost confidence both in their own abilities and in the standard tools of fiscal and monetary policy.
This guy’s honest insight is a ray of sunlight in a room darkened by disinformation.
The Bear Stearns bailout, the restrictions on short-selling and the government’s new $700 billion commitment to buy toxic mortgage-based assets all share the same fundamental flaw: They prevent the market from imposing discipline on banks guilty of massive over-leveraging and excessive risk-taking. Moreover, they punish prudent managers who invested conservatively, kept their companies’ debt at reasonable levels and worked hard to raise new capital when necessary. The SEC’s attack on short-selling punishes savvy traders who invested resources and effort in identifying companies with too much debt and unrealistically valued assets.
Letting markets work is messy and costly. Nevertheless, the only sensible way to deal with the current crisis is to force the companies who created the mess to bear at least some of the costs of their mistakes. Most of all, if the markets are to get back on track our regulators must put an immediate stop to their current practice of publicly demonizing the markets and work to restore confidence in the system.
Mr. Macey, a law professor at Yale, is the author of “Corporate Governance: Promises Made, Promises Broken” recently published by Princeton University Press.
OCTOBER 9, 2008 It’s Time for Banks To Put Their Chips On the Table
One suspect player can ruin a poker game.
http://online.wsj.com/article/SB122351071819917433.html
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This was interesting in that it counted up what the Fed has dumped into the system, and how the banks swallowed it whole while still panting.
No wonder there is a sense of policy panic.
The great advantage for Congressmen to demonize free markets is that it helps deflect attention from the measures said Congressmen supported which helped to screw up the market’s ability to do its job. Exhibit A: subprime lending to help low income households join the Ownership Society.