Bits Bucket For October 13, 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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Another lost decade ahead?
Stock prices are back to where they were ten years ago. Will the markets go flatline for the next ten?
“We’re going to need to have higher taxes, no matter who is president, to pay for this mess that we are in. And maybe we’ll get what in the ‘70s they called stagflation because there is so much money floating around out there now, along with a slack economy,” said Carl Birkelbach, head of Birkelbach Management in Chicago.
Flatlining for a decade or more is hardly new. From the time the Dow first approached the 1,000 level in early 1966, it took nearly 17 years for it to crack through it for good.
“It could be another one of those periods,” Mr. Birkelbach said. “And that means that ‘buy and hold’ is no longer applicable. If one is to invest in the stock market, one is going to have to be more attuned to timing
and also selection.”
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081012/REG/810129997/1036
But - I thought you weren’t supposed to time the market!
Futures up big this morning. My prediction (made a couple of days ago actually) is that we’ll see another couple-month bounce, probably up to about 9,500 or so. Then right around Christmas the bottom will fall out again, and we’ll end up in the 6,000s after our next leg down.
I have a former co-worker who is a staunch “buy and hold” believer. I did everything but tell him he is an idiot. And someday he wants to be a financial adviser. Just what the world needs.
I work with somebody that had Morgan Stanley stock. I don’t know how much but I would guess that it was enough to affect his long-term planning. I kept telling him to sell but he said he was a buy and hold investor. His cost basis was at $16 so he was comfortable. I see that MS went below $7 on Friday at one point. He better pray that Mitsubishi comes through in the clutch.
Inflexibility is a killer, both in personal and financial matters. I suffer from it too often. The difference between me and these “buy and holders” is that I take the blame for my own stupidity. I doubt they will do the same.
The Treasury’s new tool is talking now. He just brought up “homeowner preservation”. They are going to work with HUD to protect owners AND taxpayers. We have another fool on the scene. Boo-ya.
We have posted quite a few of his columns here over the course of the bubble. To his credit, besides having done enough work in economic theory to land a Nobel Prize, Krugman has all along stayed far more aware than the average academic economist to what was going on in housing bubble land.
Wall Street Journal
* OCTOBER 13, 2008, 8:10 A.M. ET
Paul Krugman Wins the Nobel Economics Prize
Associated Press
STOCKHOLM — Princeton economist and New York Times columnist Paul Krugman won the Nobel economics prize on Monday for his analysis of how economies of scale can affect trade patterns and the location of economic activity.
Wow…
A New York Times 5th columnist wins a Nobel Prize?
How will this play with the infantile minds of the far-right crowd that jeers anytime Sarah mentions the NYT…
Congrats to Paul!
“Is that like a winning the big teddy bear at the Nobel country fair.”
This was answer to Alad.
Probably no differently than clowns like Al Gore or Jimmy Carter winning…..just a bunch of lefties backslapping and congratulating each other. Though perhaps not so much in this case, as I do like what PK has to say re: economics at times.
Sagesse,
I suggest we give ourselves awards.
The very 1st ‘Know Bull’ prize goes to Ben Jones…
Please send him a donation via PayPal or a check or karats in the mail, so he can afford a ticket to Stockholm.
Hoorah for Mr. Krugman. He’s worthy of the big prize.
He and James Surowiecki of the New Yorker are, by far, my favorite financial writers.
Yes, Surowiecki is a good big-picture writer…
Didn’t Arafat receive the Nobel Peace Prize? If socialist and terrorist win Nobels I wonder who will win next? Also hasn’t Krugman predicted 20 of the past 2 recessesions?
oen-noc hsalkcab
Yeah BP, Kissinger did get the “Peace Prize” so you’re right about a terrorist winning a Nobel
You might want to tell the chosen one as he quotes him on a regular basis. Curious, why would Kissinger be considered a terrorist by the hard left?
The world outside our borders has been very concerned about our erratic behavior, and they can stage elaborate protests when our dear leader shows up, and our press can ignore that it happens all the time, but it’s hard to hide the impact that a Nobel Prize winner receives…
Go read up on the history of Chile and the nice uncle Pinochet, BP. Wikipedia
Calling K a man of “Peace” is like calling the Taliban men of Peace. As long as the rest of the world complies with their view of right and wrong, there won’t be as many decapitations.
Didn’t Tom Lehrer say that political satire became obsolete when Kissinger won the Nobel Peace Prize?
Also, despite the fact that I enjoy many (though not all) of his columns, Krugman won his prize for academic work that most of us wouldn’t be able to understand. Just like I’m sure I wouldn’t understand Stephen Jay Gould’s real work in the evolutionary biology of land snails, but enjoyed the heck out of his Natural History magazine columns. Can’t judge the prize based on what we read, since the work he won for bears very little resemblance to the stuff we see in the paper.
Probably no differently than clowns like Al Gore or Jimmy Carter winning…..just a bunch of lefties backslapping and congratulating each other.
Well thats not as bad as Teddy Roosevelt winning the Noble Peace Prize for negotiating a treaty that directly lead to the Japanese expansion and a war in the Pacific in WWII.
I like some of Krugman’s articles, but his “oil is not in a bubble” piece was pathetic.
“Probably no differently than clowns like Al Gore or Jimmy Carter winning…..just a bunch of lefties backslapping and congratulating each other.”
You just have no idea how much effort is involved.
Curious, why would Kissinger be considered a terrorist by the hard left?
Curious, why would the murder of 600,000 civilians in a neutral country only be an issue for the “hard left” ?
Sorry about that last misplaced post — meant to post this one, but got sidetracked
Wall Street Journal
* ABREAST OF THE MARKET
* OCTOBER 13, 2008
Investors’ New Mantra: Bye and Fold
By TOM LAURICELLA
The frenzy of selling that sent stock and bond markets into a downward spiral over the past two weeks saw investors abandoning anything with the tiniest hint of risk.
It was more than just a response to the credit crisis rippling around the globe. The severity and the scope of the downdraft may have scared many individual investors away from stocks for a long time to come.
For a year now, stocks have been in a decline. Small investors are frustrated that everything they have been taught about the market has turned out wrong. Diversification isn’t working — nearly every corner of the stock market is down significantly and much of the bond market is also in the red. A buy-and-hold strategy has been a waste of time — and money — over the past decade.
…
“A buy-and-hold strategy has been a waste of time - and money - over the past decade.”
Spread the word: Stocks suck. Buy-and-hold sucks. Sell out your holdings at any price. The end is near.
Lol. Opportunity won’t just be knocking on the door, it’ll be trying to rip the door off its hinges.
Those who panic at the bottom will sell out to those who won’t. The beat will go on.
Not ready to reallocate my retirement funds into stocks, but I stuck my toe in and bought a couple of cheap companies. I’m just grateful to this blog - pulled the whole thing out of index stock funds in 2007.
It takes about a generation for the dirty words “stock investment” to be forgotten, so yes, the DJIA will be hopping again in 2029
‘He just brought up “homeowner preservation”. They are going to work with HUD to protect owners AND taxpayers.’
Great — more intergenerational warfare on the way. Gotta protect old rich guys who already got theirs by screwing young families (and a young vibrant workforce) out of opportunity. Is this supposed to qualify as capitalism?
This is not intergenerational warfare. Protecting homebuyer’s equity is more like a vampire or a zombie, it just keeps coming back for more.
“Gotta protect old rich guys who already got theirs by screwing young families (and a young vibrant workforce) out of opportunity.”
Can some of these people just hurry up and die?
There was the post yesterday about the retiree in Seal Beach bitching about her annual property tax bill of $1200. Anyone who bought in that area in recent years probably has a tax bill about four times as large. Anyone renting there probably has a monthly rent around the size of the retiree’s annual property tax bill. If she’s so hard up for cash, she could still probably sell her house for 2 to 3 times the assessed value and move somewhere cheaper.
By all means, let’s just keep shafting the current generation of workers.
Just so long as “Kash-and-Carry” works hard to keep housing unaffordable and devalue my savings since that is clearly what makes ‘merika strong… ARGH!!!
nycityboy.
25.15 on MS on 12/12/08
Me too. I’m looking for banks to get “stabilized”for about 1 month, then retail will fall apart at the holidays, slamming the brakes on, lots of lay-offs, more foreclosures, ….spiral down, down…..
Why would anyone want to own bank stocks here? The only reason I can think of is that for the past 9 months the MSM (CNBC, mainly) has been telling everyone that the problems with financials have almost washed out, and once we’re done financials will lead the market forward. And for nine months now, they’ve been wrong.
On a fundamental basis, the banks are a mess. Those that survive the current crisis are going to do so by virtue of government help (capital infusion), with an attendant DILUTION of current shareholders. So earnings, on an EPS basis will suffer because of dilution.
Secondly, due to DELEVERAGING, the EPS on a go-forward basis are going to look nothing like what they looked like before. Instead of GS being levered 20 or 30-to-1, it will be levered 10-1 since it’s now a commercial bank. So the earnings they will be able to generate off of their smaller capital base will be greatly diminished.
Finally, there is the loss of CONFIDENCE issue. Most of the world now realizes that a lot of the financial products these guys are marketing are CRAP, and have been designed in such a way as to maximize fees and bonuses for the person doing the selling. This certainly applies to GS but it also applies to almost all of the banks out there. If you look at their Trust operations, most of these yo-yo’s have been putting people into products and insurance that is not suitable for them. I have an aunt who is in her mid-80’s and in a nursing home. The trust department at the bank she was working with in Texas had her loaded up with stock mutual funds with enormous counterparty risk. She asked me to take a look at it a couple of years ago, and I had her sister (my mom) pull all of her assets out of that bank and transfer it to someone else who knew what they were doing. This was in June of 2007 (lucky timing on my part).
Anyway, back to the main point: I see no value in bank or financial stocks at these levels. Give them a year or more to bottom out before revisiting these guys…
Not dead,
Just to be clear, I’m not saying I’d buy bank stocks. Just that they’ll go through a stable period while the rest of the economy starts to falter.
I agree with your points.
RE: then retail will fall apart at the holidays, slamming the brakes on, lots of lay-offs, more foreclosures, ….spiral down, down…..
Just read Idaho had its earliest snowfall since 1898.
Nothin’ like a season of big snow to bust a local public works budget.
Huge numbers were cryin’ here in the Northeast last winter.
Only 2 more weeks to Halloween!
Then comes the reality of winter!
I’ve noticed that the animals of the High Sierra are in more of a hurry to get ready for winter, than usual.
One interesting aspect late this summer was much more bear scat than usually seen, as in bears putting on as much weight as possible, for a potentially gigantic winter snowpack.
I trust them most, of any barometer.
Nothin’ like a season of big snow to bust a local public works budget.
Ain’t that the truth.
Cities are apparently paying premiums to get their quarterly allotment of road salt, and what can they do, really, when a big one blows in? They have to get the trucks and crews mobilized, grimace through the fuel costs and overtime. The populace of the snow-goin’ states views a slow or botched cleanup as Exhibit A in a Throw The Bums Out Referendum.
“…..much more bear scat than usually seen……”
There was a lot of “Broker/Banker scat” on Wall Street last week. Another “leading indicator”?
“The more you eat, the more you sh*t”
Woody Guthrie
‘One interesting aspect late this summer was much more bear scat than usually seen, as in bears putting on as much weight as possible, for a potentially gigantic winter snowpack.’
Good. You could sure use the melt water.
Yup, keeping my fingers crossed we get the rain. I love it when it rains here.
Snowfall throughout Wyoming, Nebraska, Idaho, and Montana over the last day or so.
Looks like “global warming” is working its magic!
I hope we have a huge, cold, wet winter. It may be a pain, but there are many folks out west (and in the southeast) who need the water.
“Big snow…” “Bear scat….”
Majorly early acorn drop this year as well.
We’re in year fourteen of the fourteen year drought cycle. Get ready for some serious rains to wash away the outer coating of CA. this winter.
Sighs.
Nature is such an easy metaphor sometimes….
Maybe we’re in for a colder winter than normal, sun spot and solar activity at lowest level in 50 years:
http://www.nytimes.com/2008/10/03/science/space/03sun.html?ref=science
Hey Asparagus…
Agree that retail will be a -hurtin’.
Many here have mentioned ghost-like conditions at Home Depot and the like on weekends.
I can add this nugget.
Went shopping for an office door on Sunday. Lowe’s was empty. They have new buttons on individual aisles so you can summon a clerk/salesman to answer questions while you stare at the mountains of merchandise.
I was looking for a doorknob.
Had to push the help button (and yes, I do know how to screw in a lightbulb and so forth).
To my point: They announced over the store intercom that A CUSTOMER NEEDS ASSISTANCE IN DOOR HARDWARE.
A clerk RAN to the aisle and found me.
I have never seen a sales clerk move to a customer so fast, for what was really a paltry sale.
The guy ran through the empty aisles.
Customer service at a big box? Sounds like that business model is broken.
“The guy ran through the empty aisles.”
this image breaks my heart a little.
Maybe fewer foreclosures? (postponing the inevitable)
TOLEDO, Ohio - Democratic Barack Obama on Monday called for more immediate steps to heal the nation’s ailing economy, proposing a 90-day moratorium on home foreclosures at some banks and a two-year tax break for businesses that create new jobs.
The presidential candidate also proposed allowing people to withdraw up to $10,000 from their retirement accounts without any penalty for the remainder of the year and 2009.
Obama said his proposals, with a pricetag of $60 billion over two years, can be enacted quickly, either through the government’s regulatory powers or legislation that Congress could pass in a special session after the election.
Packman, I think you are right. Very few people who read this blog are long in stocks. I am among the few, and I really paid the price. I have been selling rallies, like the one today, to recoup my losses and going all into cash/gold and waiting for the real bargains. I believe the Asian economies will continue to grow after an initial shock late this year and early next year. I will be waiting for that opportunity. I am done with US stocks, especially financials, real estate, and cyclicals. There will be long term value in commodities, because the world is not coming to an end- only the US economy.
I have been selling rallies, like the one today, to recoup my losses and going all into cash/gold and waiting for the real bargains.
I don’t understand this line, can you explain?
Real bargains when you invest in another business means “The seller is selling it to me so cheaply, I’ll make my money back in 3-5 years based on dividend payments alone!” Have you seen stocks that offer 15-20% dividends annually? Not publicly traded ones. Your government made that impossible.
Instead, what you really meant to say is “I pulled my money off the craps table, but I’m waiting for 4 rolls before I put it back on.” Admit it. You’re gambling that you might find stocks that are cheap so that you can hope they get more expensive for the next sucker down the line.
I don’t understand buying publicly traded stocks. You’re not buying a piece of the company. You’re not getting any profits, nor do you have any control over how those profits are spent. It makes no sense.
I have no 401K. I don’t need one. “Oh, but my employer matches up to 50%!” No, they don’t. Your employer cut your salary by 33% to offer that match, because your government gives your employer a little bribe to get them to force you to put your money into the largest public gambling ring ever. “If I don’t invest, I won’t have any money when I retire!” Actually, once you take into account the real rate of inflation, I’d venture that almost no one with a 401K will ever have more value once they cash out than when they stuck it in. Real inflation figures are 10% or more, and the stock market has rarely rallied consistently for 10% per annum for a long period of time. That means the market is just a risky place to secure the value of your money, with a heavy risk for complete loss.
Going long in the stock market is akin to W2 employment: why are you putting all your eggs in one basket? W2 employment means you’re stuck with one employer, one market, one direction, one department. Saving in a 401K is the same mess. Don’t do it. Go 1099. Invest in yourself.
“Oh, but my employer matches up to 50%!” No, they don’t. Your employer cut your salary by 33% to offer that match, because your government gives your employer a little bribe to get them to force you to put your money into the largest public gambling ring ever.”
Brilliant. Thanks.
Thanks, ABD, for a breath of fresh air. It’s much better to invest in local businesses, where you can actually talk to the managers, ask for the information that *you* consider relevant, and educate yourself at the same time.
The whole limited liability corp./stock exchange/SEC edifice is nothing but one government-enabled scam piled on top of another.
Ditto your comments also on W2 employment. There’s nothing more ridiculous than the idea of a “permanent” job where you can be transferred/relocated/canned at any time at the whim of some manager.
Go 1099. Invest in yourself.
I am a long time reader of this blog so here are my 2 cents. It appears to me that most people think within the box of corporate employment, prudent savings and investing in the market. Time and again the corporations disappoint them and the markets fail to provide robust returns. People keep repeating this cycle over and over again hoping for a different outcome. I have observed highly educated individuals from top universities get hired for 2 – 3 years with one company only to be laid off. I have friends who have graduated since the early 90s and have had 6 to 7 jobs. Imho putting your future in the hands of corporate efups or market swindlers is a mistake. Starting your own business, building a company, keeping it private is easy and a lucrative proposition.
Some body famous said it’s easy to make money but it is much more difficult to make a living. I agree
Jas, there are many publicly traded companies paying 15-20% dividends. But most are not reliable (business development companies, mortgage reits, airplane leasing, etc.). With the market collapsing, many blue chips will be paying 10+ dividends. MO has hit 8% several times, for example. I think there are better opportunities in the growing economies in Asia, South America, Eastern Europe. Strong dividends with growth potential, as opposed to high but disappearing dividends in a collapsing company. Having said that, I agree that owning a privately-held successful business is the best opportunity for sustainable (and controllable) profit.
I agree that owning a privately-held successful business is the best opportunity Well, I certainly wouldn’t want to own an unsuccessful business, unless I could palm it off on some
suckerbuyer. Beware of tautological reasoning.Downing Pool….Dividends come from Earnings. Do you really think earnings will hold up in a recession?
This whole price/earnings ratio is just another hype number created to lure you in and should have been dismissed as irrelevant from the Enron accounting scandal.
“This morning the Fed issued a Press Release On Unlimited Borrowing. In order to provide broad access to liquidity and funding to financial institutions, the Bank of England (BoE), the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank (SNB) are jointly announcing further measures to improve liquidity in short-term U.S. dollar funding markets. Funds will be provided at a fixed interest rate, set in advance of each operation. Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.”
Got Gold!
RE: sucking in the 70s…
…bad music, bad inflation, bad cars, bad hair, bad fashion, bad Presidents, bad everything…
Indeed the lost decade.
Disagree with the bad cars part of your comment.
It was the decade of underpowered “muscle cars”. Just about any modern 4 cylinder sedan could blow the doors off a 1978 TransAm, Camaro or Ford Mustang.
Just about any modern 4 cylinder sedan could blow the doors off a 1978 TransAm, Camaro or Ford Mustang. My doors can’t be blown off until rust has loosened the hinges and latch, which forms my cue to retire or junk the old vehicle.
Yes; at the age of 16, I bought a 1972 BMW 2002. It was 16 at the time, too. Loved that car. With a metric set of tools, I could do most of the repair work myself.
RE: Disagree with the bad cars part of your comment.
Hey Vic~
Zip me off the HP ratings of the ‘77 Mustang II; ‘78 Firebird Trans AM; and ‘79 Corvette Coupe will ya?
70’s car line-up?
Our families chariots included:
‘72 Vega
‘74 Pinto
‘75 Pinto station wagon
with a ‘65 Ford station wagon that refused to die…
RE: with a ‘65 Ford station wagon that refused to die…
‘65 thru ‘69 was the high point of battle for Detroit Iron.
But as a concession to Vic-I forgot about the 1970 LS-6 450HP Chevelle.
Disagree on bad music as well. “Tell Me Something Good”, “These are the Good Times”… somehow quite comforting in this day and age as they were back then.
Disco. That’s all that needs to be said.
Thank God for “Disco Demolition Night”. The only worthwile thing to come out of the Disco era.
bad music?
I LOVE DISCO!!!!!!!!!!!
Agree. Lots of that Chic and other late-disco era music is still great. I leave the radio on instead of playing my own music just so I can be pleasantly surprised with old Stevie Wonder, Earth Wind & Fire, Aretha Franklin tunes. The older I get, the more I groove. Kinda scary acutally. :O
I second that. Brittany Spears & Christina Aguilera good???
Bad music…the 70’s? Them’s like, fightin’ words. “Exile on Main St.”, “Meddle”, “Houses of the Holy”, and the list goes on and on and on. The 70’s was arguably the best decade ever for music. From Bob Marley to James Taylor, to George Benson and the Bee Gees, the vast array of talented artists in all musical genres is staggering.
To understand the 1970’s and music…
Imagine musicians being the masters of the universe instead of the financiers?
ummm . . .Hendrix?
Hendrix barely made it into the 70’s…
RE: Bad music…the 70’s? Them’s like, fightin’ words. “Exile on Main St.”, “Meddle”, “Houses of the Holy”
LOL…
BB~
When I sort thru my album selection and I come to the 70’s I always go…what the fook happened here.
First Led Zep was always their finest-vintage ‘69.
Same with the Stones…nothin’ beats the their ‘65/’66 “Little Red Rooster” blues era.
I can’t get no…”Satisfaction (1965)” hey, hey, hey!
You were buying the wrong music
Bob Marley
Bill Withers
in addition to those mentioned elsewhere:
Jethro Tull
Doobie Brothers
Eagles
Joe Walsh
Genesis
Disagree with music,
Some great rock and roll during the 70’s.
RE: Some great rock and roll during the 70’s.
Sorry, FriscoGirl, once the Hullaballoo go-go dancers moved on, it was all over!
http://www.youtube.com/watch?v=9kWexhbYaOY
Jethro Tull
Doobie Brothers
Eagles
Joe Walsh
Kansas
Queen
ZZ Top
Carole King
Sorry hdman,
The 70’s had some great rock groups. Disco may have sucked but the rock and roll was great during the 70s.
Bad music? Are you serious? The decade of Bruce Springsteen? The Allman Brothers? The Band? David Bowie? Pink Floyd? Great continuing work from the Grateful Dead, CCR, etc?
Disco sucked for sure, but the rest was fantastic.
Much like the current financial market, the occasional diamonds only sparkle brighter, when compared to the gigantic turd that was the music industry in the late 70s.
Just about every artist in the 70s sold out to disco in one way or another.
Rock and roll is best when young people writing it are pissed off about something. I expect there will be some great rock and roll coming out in the next few years.
RE: The decade of Bruce Springsteen?
Yogurt…Certainly a bright spot in a world of disco.
One of my close friend’s has always been a hard-core Springsteen fan. He tells me he attended “Born to Run” era shows which had 50 people show up. And this was after Life and Time put him on their front covers.
Just goes to show how grim things were.
But I think The “Born in the USA” album in 1984 put him over the top with subsequent albums significantly better than those 70’s productions.
“Disco sucked for sure, but the rest was fantastic.”
I remember walking past my Sister’s bedroom when they had AM radio blasting and Led Zep’s “Whole lotta Love” came on…I thought it was the best thing I ever heard in my whole life. Went straight out and bought a guitar and amp.
Zep
Thin Lizzy
Blue Oyster Cult
Rush
UFO
Grew my hair, played guitar and chased tube-top wearin’ girls…zowweee!!
DOC
“Bad decade.’
I got stoned. And missed it. Also did a lot of skiing.
(Nixon would do that to you….)
I got a Schwinn Sting-Ray on my birthday in 1972, that’s all that mattered.
Fleetwod Mac - “Future Games”
…bad music, bad inflation, bad cars, bad hair, bad fashion, bad Presidents, bad everything…
bad music? Rolling Stones, Led Zeppelin, Aerosmith, Black Sabbath, Deep Purple, what?
bad inflation. Yes.
Bad cars: Pinto, Gremlin, Pacer. Yes. A sister of mine had a Gremlin - POS car.
bad hair - not my hair. It was straight and long, brown, with a few black strands. I was proud. My dad called me a hippie all the time though.
bad fashion. Yes unless you are considering narrow bell Levi’s jeans and work shirts, or cutoffs with t-shirts. Desert boots were cool. This was pre-Nike. Those were the days.
bad Presidents: Let’s see: The crook Nixon who snipped gold from the dollar yes. Ford (”Whip Inflation Now” - clueless) yes. Carter - malaise. Yes.
Bad everything - not really. My favorite part of the 70s was 1977 when I entered college. In the summer the coeds wore skimpy revealing halter tops and jogging shorts. Niiiice!
Debt is whittling away U.S. economic power
By David Leonhardt
Published: October 12, 2008
…
In recent weeks, the dollar has held its own. Stocks in every other major country are down about as much over the past year as they are in the United States, if not much more. The country may not be a haven anymore, but it does seem to be safer.
Robert Zoellick, the president of the World Bank, said that he was recently speaking to a senior Chinese economist, who said that people in his home country - today’s rising economic power - did not see the sky falling on the U.S. economy.
“They know its ability to turn around problems is really unmatched, historically,” Zoellick said, quoting the economist about the United States. “At the same time, they ask themselves, will the United States get at some of the root causes that could determine its real strength over the next 10 or 20 or 30 years?”
Germany’s bailout plan is now 470bn Euros. I am sick about the government, wasting taxes as in the US. There is no doubt that the German parliaments (Bundestag and Bundesrat) will pass the legislation.
The German stock market is up to Thursday’s close, not more.
–
Democracy = Domination of Money – Spengler
All major democratic govts are controlled by bankers and financiers, emulating those in New York City, and Germany is no exception.
Germans have suffered before and they will deal with it much better than Americans who haven’t suffered for a very very long time.
You should read Spengler. I have read everything he wrote that I could find in English. Man And Technics is a small philosophical monogram.
Jas
–
Democracy = Domination of Money – Spengler
All major democratic govts are controlled by bankers and financiers, emulating those in New York City, and Germany is no exception.
Germans have suffered before and they will deal with it much better than Americans who haven’t suffered for a very very long time.
You should read Spengler. I have read everything he wrote that I could find in English.
Jas
Spengler had some interesting things to say, but the unfortunate fact that he was a huge influence on the thinking of Hitler is going to dissuade a lot of people from touching any of his books with a ten-foot pole. And that’s probably not a bad thing.
I guess I shouldn’t leave the country any more. I leave for a week and the Armageddon takes place. I think I will take next year’s vacation states’ side.
I still won’t touch the stock market. I’m done with it. It is done with me. They can still make this thing bounce like a ball. I’m going to do what I do best, be a good little squirrel watching after my nuts.
Is Paris burning?
Paris was fun. We turned on our TV set on Sunday and Monday. After that we left it turned off. We wanted to relax. But then we would walk by a newsstand or see a TV set and go, “wow”. I had seen that the DOW was down to 9,200 at some point. I thought, “holy cow. The meltdown is taking place.”
Friday we stopped into a small brasserie in Paris for a beer. It was 7:00 Paris time. The bartender pointed to the TV and I saw the headline that, “the market drops below 8,000″. We were pretty shocked. The bartender turned the TV to an English speaking channel so we watched for about 3 beers. That equals about an hour for you Non-alcohol types. I was drinking slower because we were drinking really strong beer.
We finished Friday night with a shot of Jack Daniels. We were shaking our heads, still knowing that the Manhattan market will still think “it’s different. It’s special. The foreigners will save us.” mgnyc99 knows what I mean.
I got home last night and read the Bits Bucket. I saw a lot of gold discussion, sometimes heated. I kept waiting for somebody to make the one point that I thought was the most valid. Let’s start making a list of countries where their citizens would have been highly rewarded for buying gold and silver. These countries have seen huge drops in their currencies recently. I am still catching up but in the near past I see that list as being:
- Russia
- Brazil
- Iceland
It seemed so fitting that I was in Paris, visiting Napolean’s tomb and Place de la Concorde (remember the guillotine) while this whole thing finally melted down. And we had some of the best pizza I have ever had.
NYCB,
It’s more interesting to be in a foreign country, when meteoric events are happening back @ home, thanks for your word pictures…
Good observation about collapsing currencies vs. what would have happened if an Icelander had their money in Gold.
Let’s look back in Krona, shall we?
The exchange rate for much of the year was 75 Kr. to the $, and it’s now around 100, after reaching as high as 127 to the $, a week ago.
Imagine your currency devaluing (hyper-inflation) as much as 70% in just a few months time?
Gold has never failed when pitted against hyper-inflation, and it’s gone to battle hundreds of times…
Oct. 13 (Bloomberg) — After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.
Jeeez…. a true panic in Iceland. Unreal.
October 32 (’shroomberg)- After a 4 decade spending spree, Americans are flooding the Wal*Mart one last time, stocking up on more junk as the collapse of the banking system threatens to cut the country off from imports.
I have been reading an ongoing description of the events in Iceland on a gold blog. The writer holds gold but the public has only begun to awaken to the fact that their currency is worthless outside the country. He describes a deepening sense of panic and despair as the country runs out of food, fuel, etc. It’s a preview of what is coming here.
RE: He describes a deepening sense of panic and despair as the country runs out of food, fuel, etc. It’s a preview of what is coming here.
180 million guns says it’ll be different here.
You can already sense a creeping panic and desperation in what’s currently going on in the election process with the sign burning and voting fraud ramp-up.
deepening sense of panic and despair as the country runs out of food, fuel The Icelanders will be reduced to rowing their boats out and casting their nets into the sea for their food, and returning to their huts built over geothermal sources. Oh, the horror!
300,000 people need their own Costco. 300,000 people don’t need their own currency.
Grow up Iceland, join the Euro. Even better, find a nice Scandinavian partner country and merge with them. I would say Norway (see, they got the oil and they’re probably closest to you). You will be swallowed by the big boys otherwise.
Wow. Over the course of the past year, I’ve read several articles describing Iceland as the “happiest” country in the world, the most “prosperous”, etc. How quickly things change. A check back in a few years might reveal one of the most “depressed” countries in more ways than one.
I’d be happy too if I could borrow billions of dollars and never have to pay it back!
Welcome back, CityBoy. As a result of the imploding commodities bubble, you can add most of Latin America to the list.
Thank you. It’s good to be back. I loved Paris but the joys of my own toilet are something special. All of you that have traveled to Europe know exactly what I mean.
It is funny how these currencies are losing value “against the dollar”. At what point does the dollar really tank when the world realizes the wizards behind the dollar are Paulson, Bernanke and now this Kashkari dope?
“I loved Paris but the joys of my own toilet are something special.”
You don’t have to travel to Europe to feel that way. The older I get, the more I appreciate my own bed and bath.
My favorite Paris story involves being deep in the bowels of the subway with my wife and a few friends, when my waterworks had a sudden urgency to let loose, mid-ride.
Merry pranksters that they are, they upped the ante on me by saying:
“Try not to think of large bodies of water, like Lake Baikal, or Lake Tahoe or Erie.”
“You ever wonder how many gallons of water is in an average-sized pool?”
“They say our bodies are 86% water”
I somehow made it above ground to a pissoir…
On Friday night we found out our train suddenly didn’t go where we thought it did. That was fun. The train we had taken every night, now didn’t go to our destination. As you may know I like to have a beer or two. We were waiting for some bus and I could wait no longer. I whizzed in a driveway, partially hidden by a stone gate. About 10 minutes later my wife let loose in the shadows of a train platform.
When in Paris, do as the Parisians. Necessity truly is the mother of invention.
Necessity truly is the mother of invention. Apparently the French have not seen the necessity of inventing an adequate supply of public toilets. LOL.
I whizzed in a driveway, partially hidden by a stone gate. About 10 minutes later my wife let loose in the shadows of a train platform.
Some of my favorite memories of foreign lands are desperate attempts to find shelter, transport, more booze, or a place to urinate without fear of imminent arrest.
I remember the streets of both Paris in London spelling of urine and cheap perfume. Maybe all big cities smell that way.
How funny. There are virtually no public toilets in California - everyone runs in to McDonalds, or the fast food equivalent. I can’t believe you complain about Europe when the US has got to be the worst for public facilities.
“Is Paris burning?”
No, but Iceland is melting down.
i thought it is a great time to buy?
not looking so bad for moving all my $$ out of the market last year.
it is all everyone talks about in nyc and i mean everyone
it amazes me how these masters of the universe were caught off guard
“it amazes me how these masters of the universe were caught off guard.”
They were too close to the action to see the big picture and the only information they got about the Real World was from each other, thus it was highly distorted.
And then there’s hubris.
Hubris????!
NO!
Couldn’t be!
Cue:
Aliens [during the drop to LV-426]
Hudson: “I’m ready, man, check it out. I am the ultimate badass! State of the badass art! You do NOT wanna fu*k with me. Check it out! Hey Ripley, don’t worry. Me and my squad of ultimate badasses will protect you! Check it out! Independently targeting particle beam phalanx. Vwap! Fry half a city with this puppy. We got tactical smart missiles, phase-plasma pulse rifles, RPGs, we got sonic electronic ball breakers! We got nukes, we got knives, sharp sticks… “
“……the .45 Long-Slide with laser sighting……..A Phased Plasema Rifle in the 40 watt range.”
“Hey, just what you see, pal.”
I hear a lot of this these days. ‘How could they not see what was going on,’ etc.
As I was following things closely, what almost everybody misses is this; it was a freaking MANIA! People were caught up; out of their minds with it; swept along, thinking we were in some new age. Money rained from the sky. Of course it looks ridiculous now. But at the time, people came on this blog and insisted that not only were we wrong, we were insane!
The first big radio show I did, I got the first question. It was something like, ‘what makes this a bubble.’ My immediate answer was, ‘it’s obvious on the face of it.’ Then I went into historical prices, speculation, etc. But the first response should have been all that was neccesary. Yet we went on for an hour with these economists, etc, talking about how they weren’t making any more golden gate views!
What many forget, I think, was the rationalization that occurred. Baby boomers owning 5 houses, Sept 11th and feeling more secure. A new asset class. It was all BS, but it seems a mania needs theories to help people believe the emperor has on clothes.
Remember when lots of folks really believed we were all going to do our grocery shopping on the internet?
I think 9/11 was the actual starting point of the housing bubble, here in the USA.
The cocooning effect, combined with fear, was a potent potable for a patriotic public that couldn’t say no to our leader’s request to go out and buy something.
So they did…
And even today, with all that has happened, many people still don’t see the mania. It’s still different in some places. I should know. I live in one of those places. This is not common sense or financial planning for these people. It is religious belief and nothing will change their mind short of complete destruction. Then they will blame “negative thought”. The Mania is still alive because humans love manias.
Ben, I think that is a point that many overlook when analyzing what has occurred. I had a conversation with a friend’s wife about a year and half ago, at this point we were already seeing problems in many markets with foreclosures. When I mentioned all of the problems that California was having the response I got was “California Real Estate will always be a good investment, I can’t see any circumstances under which it drops in the long term.” This type of thinking is more like a religious belief than anything else.
You saw the same thing during the dot-com era and my guess is that at some point in the future we will see it some other asset class. This type of herd behavior seems to be an integral part of human nature.
“Then they will blame “negative thought”. The Mania is still alive because humans love manias.”
Humans also love mantras. Sloganeering. I hear you on that “negative thought” concept. I see it ALL the time. Cheerful desperation. “We’re going down, things suck, but just think happy thoughts and that leg that was blown off will magically regenerate.”
“I think 9/11 was the actual starting point of the housing bubble, here in the USA.”
I disagree, unless you really mean September 11, 1997. In my home state, in retrospect, the bubble was already forming at that time. The reaction to 2001 just expedited the process.
We bought a house in L.A. in early 2001, and the market didn’t seem to have any urgency to it. We looked at dozens of houses over the span of a month’s time until we found one, and beat em’ down $15k off the listing price.
There were certainly regional bubbles all over the place, but not the big enchilada.
I concur, prices started to bubble before 2001, but perhaps the events of that year kicked it into overdrive. In 1996 I began shopping for my first place - at every interaction with sellers throughout 1996 and 1997 they used the word “investment” repeatedly/prominently when making their sales pitch. The first seedlings of this mania had already taken root.
Fast forward to 2002-2003 - the “rapid” appreciation experienced by buyers of the mid-nineties vintage was in turn used to justify the greater leaps that followed.
The point about 9/11 was that after the tech wreck right before that, I think boomers especially were thinking to HELL with stocks, we can’t trust the stock market, and real estate was the only good investment left. Besides, it was so REAL -big, tangible, useful, visible. Here we were getting lot of out of state investors buying up houses that were meant to be affordable starter homes for locals and turning them into rentals.
I felt that way at the time but luckily I also felt it was too late and I was too short of cash to take advantage of it.
Remember when lots of folks really believed we were all going to do our grocery shopping on the internet?
We use Peapod (online grocery for Stop & Shop) for 95% of our grocery shopping. It goes on a 5% cash-back American Express card and is delivered every Sunday morning. Stop & Shop also sells the cheapest gas around here. They give .10 off the per gallon price for every $100 spent on groceries, via your loyalty card. A fill-up on the SUV this weekend cost me $40 (normally cost me $60+ at 3.50/gal)… I paid 2.10/gallon because of the loyalty rewards on the grocery shopping I do. The only time I go into a store is when we buy bulk at BJ’s…
All the gas I buy also goes on the AMEX card. 5% cash back on that as well. Between food, gas, and incidentals on the card, we’re looking at over $500 back in March. These are things we buy every day anyway…
“Delivery charge for groceries… $15. Never having your 2yo or 4yo have a meltdown at the grocery store… priceless.”
“Remember when lots of folks really believed we were all going to do our grocery shopping on the internet?”
Well, gee, Ben… that would allow me to spend even more time on this blog…
I personally fix the start point as May 1997, when they eliminated Capital Gains taxes on profit from selling your house.
Immediately followed by the big push by the banks for HELOCs…..everybody remembers the advertisements “use your equity, and write it off on your income taxes”
The elimination of Capital Gains was the primary catalyst/enabler, IMO. Real Estate wouldn’t have been nearly as attractive an “investment” without it.
‘But at the time, people came on this blog and insisted that not only were we wrong, we were insane!’
Ahhh, Ben, I remember…those were the good old days…where are all those idjits now? (That was rhetorical. I know where the ex-trolls are—working at the Dairy Queen and crying inside, or else on their knees in an alley somewhere and crying inside, etc etc.)
I want some trolls. Bring me some idjits! I mean, look at me! I’ve been reduced to mocking taxmybootay over grammar, fer chrissakes, because of the troll scarcity! That’s pathetic!
I’ve found that the bubble began blowing in NY/CT/VT/MA/NH/ME in the aftermath of 9/11. Yet, down in Delaware, the natives will tell you it began there in 1996-7. I try to understand those bubble starting point intervals and I come up with nothing.
We do most of our grocery shopping on the Internet.
Of course, we do supplement that with a monthly trip to Costco for bulk stuff. But we only go to the local grocery store in person for emergencies, such as running out of half-and-half for morning coffee.
Around here, at least, most of the supermarkets now have online ordering and free delivery. Even many of the the specialty grocers. It’s a huge time saver.
Comment by Olympiagal
2008-10-13 09:21:29
“Ahhh, Ben, I remember…those were the good old days…where are all those idjits now? (That was rhetorical. I know where the ex-trolls are—working at the Dairy Queen and crying inside, or else on their knees in an alley somewhere and crying inside, etc etc.)
I want some trolls. Bring me some idjits! I mean, look at me! I’ve been reduced to mocking taxmybootay over grammar, fer chrissakes, because of the troll scarcity! That’s pathetic!”
–
Sorry Olympia gal.
There IS a price to be paid in a deflation.
So sorry.
Ben,
You know, you look at how things happened and lots could have been done to stop the bubble in its tracks.
There wasn’t any will to do it because we were in a mania is the most probably answer.
I don’t know why I didn’t get swept up. I tried to get family members to sell at the peak or near it. Still trying in a couple of cases.
Hard to believe we had such as strong clear bubble right after the last three bubbles without any recognition. S&L bubble, Tech and LTCM. And there we go into the housing mania.
Anyhow, following the classical deffinition of insanity, the government is preparing to print money and give it to the banks.
Certainly, it will be different this time.
“They were too close to the action to see the big picture and the only information they got about the Real World was from each other, thus it was highly distorted.”
There is a name for this sort of behavior: groupthink.
There is a name for this sort of behavior: groupthink I prefer Ben’s term for this: MANIA!
If they were not “caught off guard” then the sell off would have happened earlier and they would have been “caught of guard” then. It is the paradox of markets, if everyone sees it coming then the crash will happen sooner; therefore, the vast majority can never see it coming.
Ditto NYC. I can’t touch it, I keep getting burned. I don’t know what “value” is anymore.
I don’t know what “value” is anymore.
I call this the Ouija Board Economy.
This is about half of what is fascinating about these bubbles: what is “value”? What is “value” to me, and how can I guess what is of “value” to others? What is the value of music you download, or information, or organic produce, or consumer goods which are used, etc. If determining value of small things is hard, it is even harder with a big, sometimes abstract market! We start acting like ouija board players: we’re all involved but we don’t know what the board’s gonna say next. We’re all rich, yay! We’re all gonna die, ahhhh! etc. Instead of “the invisible hand”, rather a billion invisible hands are on the steering wheel.
A big part of the world economy is based on a flipping mentality. We’re assuming, hopefully, what some other guy would be willing to pay the next time around. One thing I have noticed about people, is that we often poorly estimate what others want or need, often assuming other people are different than us. Like a few years when 3 out of 4 people surveyed in my city said they couldn’t afford to buy the home they were living in if they were new to the market. Yet that was assumed to indicate that homes were fundamentally a good investment. I would ask my friends: if you (generally professional couples with no kids) can’t afford little starter homes, who will? This was the question that made people go a bit blank, stutter, and then get annoyed and start with the magical explanations for the bubble. Then they repeated the same handful of explanantions, almost word for word. It was eerie. Now they all “know” housing is in trouble. Hands on the oiuja board.
You hear about someone making $2,000 for a figurine on Ebay, or half a million for a house, or early retirementon a dot-com, and you want in! You don’t want to be left behind! There’s an aspect of a) panic b) gossip that shows up at a micro and macro level. It’s what makes a mania. Panic & gossip are a big part of current election and political process, (like the bailout) too. Is it a medim is the massage situation? Is this internet related? Is the internet a bit ouija board-y?
Coping with panic & determining fundamental value are key, so it’s not surprising that software and investing robots are being developed - designed to avoid human psychology. I am not convinced that’s a great idea, I think it’s just another way of making the process abstract and reducing the idea of personal power and responsibility.
we watched for about 3 beer
I like this unit of time measurement.
The best guess I have heard is that it will take six months for the hedge funds to deleverage themselves. So it will be at least that long that we can expect all sorts of unpredictable swings up and down in the stock markets. I don’t care for investing in markets that are so opaque and unpredictable.
The hedge fund deleveraging period should be a good chance for buy and hold investors to gradually accumulate assets at fire sale prices.
Extreme volatility could be your best friend if you have the stomach and a few bucks. Being that some on the board seem to think that they can predict a rally, then a pullback, etc…one should look in buying some DJX puts and calls with say March expiration. A small 10 or 20K position can do wonders if done right. It is not really knowledge, mostly luck, but if you are down 50-100-150K why not throw 20K in and see where the chips may fall. I did:)))
As I am getting older I am appreciating how important it is to recognize when I am out of my league or beyond my depth. I don’t have expertise, nor the time to gain the expertise, to be playing the market so aggressively.
And relatively small, passive fish should not be hopping into the pool when the whales are thrashing around in it. The smartest thing I ever did financially was to get the hell out of real estate when I could not figure out how everybody else was making money in it.
Prudent and wise approach no doubt. It depends on one’s situation in life and variety of other factors. All I was saying was that volatility presents opportunities. Whether you try to take advantage of them or not AND possibly be worse off after trying is another story:))
Who has the Peter Schiff book that I started sending around last September? Send it to Mr. Jones, please.
just got the new warren buffet book -snowball-
i would like to be on the list to recieve the schiff book please
have not posted in awhile as i have been working alot
hope all is well with everyone
I have an account’s with Schiff’s company. That hasn’t done much good the past year. I would not have high recommendations for them. I’ve not been impressed.
Hey, that’s funny, I was going to open an account with them this morning!
Schiff may appear to be wrong in the short term about asian stock markets outperforming the US. But I think his analysis of the global economy is correct, and am looking to purchase foreign stocks directly on foreign exchanges. Is it their service or their advice that disappointed you?
I opened an account with them A week before the crash I went with their recommendations, unrealized loss of 10%
Guess it could be worse
They seem as incapable as anybody else of admitting when plans need to be changed. I wanted out of an oil stock and let them talk me into holding it. They have made some really, and I mean really, bad recommendations. Plus I had one call from them that did not seem ethical to me. Somebody called me out of the blue and tried to get me to make a trade. Not only did it seem sleazy to me but the trade would have been disastrous. All in all I have not been impressed by the organization.
Thanks for sharing your experience NYC. I appreciate your help.
I find I trust people’s ideas the most when they aren’t trying to sell anything, other than reasoned opinion.
I respect most of what he says, my problem with him is the idea that world economies are completely disconnected from the U.S.
Among other things, I think he discounts the impact of politics in economics. His idea about the scenario where the Chinese no longer want dollars but instead want more goods for themselves is great in a free market, but we don’t live in a free market. We live in a highly politicized market where leaders seek power and make decisions behind closed doors.
If it makes you feel any better, I too opened an account with Peter Schiff/EuroPac a week before the crash. They advised a whole bunch of stocks and I said I wanted to go mostly foreign currency funds (MERK) so they put me just 30% into stocks instead. Then came the crash!! Schiff has a weekly podcast that might make you feel better about his moves. He commented this week that he has a lot of angry customers but he had a reasonable argument as to why one should stay put with his stock choices….
I opened an account with them in July and I am down significantly. I know that it has been a rough period, but a number of their recommendations are down 50+%. I am concerned that maybe they have the correct macro view, but when it comes to picking individual stocks they do not know what they are doing. The thing that really annoyed me is I just received their latest newsletter where one of their analysts recommended maintaining a significant allocation to cash. In August when I was working out my portfolio with them not once did they mention keeping anything in cash.
NYC, sounds like you have had a similar experience with them.
Da*@! same thing with me. did the newsletter say anything about being in foreign currency (proxy for cash) or actual US dollar/money market? it seems to me the customer service might be the problem. they took no time to ask what my investment goals were.
Graduation day is coming…
It will look a lot like the early 70’s, just after mellow yellow ripped apart the chains of manipulation ($35 per troy oz) and quadrupled in price in just a few years.
The short squeeze on Comex is going to be shades of 1979-80, when the Hunt Brothers had their fling and flamed out…
Gold lease rates have blown out. Their chart looks like the popular TED spread chart that is widely circulated. I am torn between expecting the feds to close comex and force cash settlement, and the mother of all paper squeezes. I figure they will close COMEX, since laws and rules are for little people, not big rich Wallstreeters.
Can you two educate me a little on what you’re talking about
Where can I go to see the chart you’re talking about and how would I tell when the short squeeze would hit?
Thanks in advance!
Class, dismissed.
In other words, you have none, apparently, nor a clue. How’s that Columbus Day Massacre coming along?
I only make bold predictions to give people like you, a little ammo to fire back at me.
Keep tellin’ yourself that, Emporer…
I was at a seance last night and we conjured up the Emperor, and he said that that shat had already splat.
Gold lease rates have soared because the banks don’t trust anyone to return the gold they are borrowing. To argue that it is as you say, would be like saying apartment rentals are soaring because house prices are about to explode….. Its no different than the TED chart, no trust, high risk, high rate of return expected. Gold doesn’t make it any specialer (my new word).
Hey genius, lease rates allow the gold carry trade to exist. Without being able to borrow cheap gold selling forward is impossible. The shorts will have to cover. Try to keep up.
Is it any different then currency carry trades?
PS thanks for raising the level of dialogue, I’ll inform my family I am now a “genius”
Central banks all but stop lending bullion
Financial TImes ^ | Oct. 7, 2008 | Javier Blas
Posted on Thursday, October 09, 2008 7:16:13 PM by Travis McGee
Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.
The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association.
Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven years.
Traders said the jump reflects the fact that central banks – mostly European – have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis.
“A number of central banks have been cutting back on their gold lending,” said Tom Kendall, a precious metals strategist at Mitsubishi in London.
John Reade, a commodities strategist at UBS, added that there had been a lot of talk about some central banks being unwilling to lend their gold because of a redoubled focus on the risk of borrowers not returning it.
“There is very little appetite for unsecured lending at the moment,” he said.
Central banks usually do not ask borrowers to post any guarantee – or collateral – to secure bullion loans. “The key word now is safety,” an official from a Europe-based central bank said.
In normal circumstances, central banks lend gold into the market – providing key liquidity – to earn a small return on what otherwise is a non-yielding asset.
Other factors are also pushing lease rates higher, including more investors’ positions no longer available for lending, according to Philipp Klapwijk, chairman of GFMS, the London-based precious metals consultants.
Traders said the general dysfunction in money markets, with US dollar rates significantly higher, was contributing to volatile gold lease rates. Demand for physical gold and small and medium-sized bars had been strong, removing supplies from the market that otherwise could have been lent, traders added.
The US Mint onTuesday said it had run out of half-ounce and quarter-ounce American Eagle gold coins following “unprecedented” demand.
Gold prices on Tuesday rose $19.3 to $880.6 a troy ounce, having hit an intraday high of $890.6 an ounce. Bullion prices hit an all-time high of $1,030.8 in March. In euro terms, gold prices rose on Tuesday to a record high of €654.22 an ounce, above March’s all-time high of €651.24 an ounce. It also hit a record in Australian dollars.
Investors are seeking refuge in actual gold coins and bars as fears about the safety of their savings increase. Some have even been selling their positions in gold futures, as this is a less tangible form of the metal. Since the collapse of Lehman Brothers three weeks ago, bullion prices have risen about 20 per cent.
“And it really doesn’t matter if I’m wrong
I’m right…”
Paul McCartney
Mr. Paulson and his Mini-me Kashkari planning ….
They’re not fixing any holes, Hoz. They are working hard to create bigger holes.
Welcome back…but don’t talk abut holes, i hit one doozie of a pot hole Saturday, and i am surprised the tire didnt go flat and cv joint is still in one piece…..
I foresee a lot of unfilled holes while driving in NYC.
And though the holes were rather small, they had to count them all, so they’d know how many holes it takes to fill the Albert Hall.
The Beatles
Unlimited Liquidity.
that is straight out of the Bernanke playbook. This is all-out, unencumbered inflation. Monetization cannot be far off.
MTU got the FED backstop, and didnt allow MS to fail. I was hoping for a better deal, but I think some arms damn near got twisted off.
wave three up cycle has begun.
four
This Kashkari guy is speaking now. This is the best we’ve got? Not only is he yet another unlikable and unsympathetic figure. The plan that is being outlined is so complicated that there is no way it will ever have a chance for implementation. This is just such a clusterf-ck. But I’m sure the sheep are hearing this and thinking, “they will save my home”. I’m breaking out the bottle early this morning.
kashcari another goldman alum here to screw up this mess worse
we are in deep doo doo
Another man that looks like a giant peni$ that is supposed to save us. Can’t we get one guy that doesn’t look like a giant peni$ that is telling us he will save us? Is that too much to ask?
“Another man that looks like a giant peni$”
Wow, you are SO right with that metaphor. Wish I’d thought of it. Actually, I did, but couldn’t articulate it as well as you. Kudos.
I was just yelling the same thing while at lunch with my coworkers the other day. Maybe in some Freudian way, a giant talking ding-dong is supposed to be comforting?
Funny, my coworkers don’t ask me out to lunch very often.
“Maybe in some Freudian way, a giant talking ding-dong is supposed to be comforting?”
No, not really. It’s supposed to be a warning that we’re gonna get the shaft.
I missed him on TV, but I did see a photo. Correct me if I’m wrong, but does he have a shaved head a la Paulson? Whassup with that?
Secondly, I would expect him come up with something that has complexity that parallels securitization. If you can’t dazzle ‘em with brilliance, baffle ‘em with bullsh*t.
Mini-me.
There were two side-by-side pictures of Paulson and Kashkari on another site.
The caption was mini-me.
Dang near fell out of my chair!
Leigh
All saviors have shaved heads these days - didn’t you get the memo? See Adrian Fenty for example. For instance he’s in the process of saving the DC educational system by taking over all control.
“… We have assumed control. We have assumed control. We have assumed control.”
(OK - nerdy flashback to 2112 there)
Shaved heads are apparently lots cooler than thinning hair.
Depends on the individual. My cousin has been shaving his head bald lately. I’m not even sure he has thinning hair. Most people in my family have remarked, unbeknownst to him, how awful it looks. I’d agree that it does not fit him at all, but if he likes it, so be it.
I would only do it if I had a bald spot. Otherwise shaved heads are so commonplace that they are boring. This fad has been around for almost a decade.
I had an intern back in 2000 that some guy in the work group asked her out. She said she does not go out with bald headed guys! Ha!
From a high level, listening to Kashkari speak, I heard:
1. We are asking the industry to self-regulate during this process.
2. We are going to have all the same people who got us in this mess manage the problem.
3. There are obvious, huge conflicts of interest here. Don’t worry, we’ll take care of it.
4. We’re creating tons of new government jobs that are going to be high paying.
5. You have no need to worry, we are doing everything can.
This is frightening.
yeah, it is frightening. But take a look at Kashkari and ask yourself if this is the sort of person we want representing the US financial system to the world. He’s 32, comes from the culture that created this mess, spewing incomprehensible BS that basically means more of the same and looks like a cross between a gangbanger and a member of the WWE with Spock ears. The fact that Paulson would even consider putting this guy front and center, demonstrates the contempt Paulson has for the US and its monetary system.
Ugggh. None of those are good reasons to prejudge him. I couldn’t care less what he looks like. It’s his ideas that are the issues.
That being said, from a communication standpoint, a quick four person focus group to examine Kashakari’s photo would probably have helped Paulson better anticipate the negative reactions and allowed them to take a better one…. once more poor planning on Paulson’s part.
You have no need to worry
ha! The only reaction to have when someone tells you this is ‘yikes’. If the pilot says this over the intercom…
(knock wood)
Reinflate the bubble
Some £20bn of taxpayers’ cash is likely to be pumped into RBS, with a further £17bn to be put into HBOS and Lloyds TSB.
Lenders have been working hard to continue to deliver a flow of competitive mortgages into the market
Michael Coogan, Council of Mortgage Lenders
UK banks’ £37bn bail-out unveiled
This would give the government a significant stake in the banks, and the government has attached some conditions to this investment.
These include “maintaining, over the next three years, the availability and active marketing of competitively-priced lending to homeowners and to small businesses at 2007 levels”.
http://news.bbc.co.uk/1/hi/business/7667072.stm
As I now own the banks as a UK tax payer, I’m not very happy at the way they are spending my money.
Hasn’t the UK learned its lesson by now about the futility of bubble reflation?
No, we are forever blowing bubbles, like a ten pound lady of negotiable affection.
I’m dreaming dreams,
I’m scheming schemes,
I’m building castles high.
They’re born anew,
Their days are few,
Just like a sweet butterfly.
And as the daylight is dawning,
They come again in the morning.
‘m forever blowing bubbles,
Pretty bubbles in the air.
They fly so high,
Nearly reach the sky,
Then like my dreams,
They fade and die.
Fortune’s always hiding,
I’ve looked everywhere,
I’m forever blowing bubbles,
Pretty bubbles in the air.
West Ham club anthem, owned by an Icelandic ex-billionaire.
Here we go, here we go, here we go!
Here we go, here we go, here we goooo-oh.
I’m gonna have this in my head for hours now.
The great reflation is to be attempted
UK bailout unveiled
“RBS and Lloyds TSB/HBOS will return mortgage and small-business lending to 2007 levels, which is much more than they are currently lending.”
Ok they do that. Who are the borrowers and what means to they have to service the their part of the contract? For RBS and Lloyds to meet their goal, how much lower will they have to drop their lending standards? How far below the bottom of the barrel credit quality of 03-06??? This reflation talk is so f_cking ludicrous… ….
…fighting a loosing battle. Sad that this is all our financial gurus and politicians are capable of. It’s like trying to cure a crack addict by giving him more crack. Doubtful that this will end well.
Loose indeed.
Mike and I are both from Miami; all grammatical errors, misspellings and confusion of words are exempt from criticism, we’re in the front line.
Global financial war possible.
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/10/AR2008101002441.html
“The ramifications of Iceland’s misery are probably more serious than people realize. The country’s bank assets are more than 10 times greater than its gross domestic product, so the government clearly cannot afford a bailout. This is going to be a large default, affecting many parties. In the United Kingdom alone, 300,000 account holders face sudden loss of access to their funds, and the process for claiming deposit insurance is not entirely clear.”
Can anyone think of another country in that situation?
“Iceland’s promise to guarantee domestic depositors while reneging on guarantees to foreigners may be just a first step. British Prime Minister Gordon Brown’s decision last week to sue Iceland over this issue may escalate the crisis. The use of counterterrorist legislation to take over Icelandic bank assets and operations in the United Kingdom also has a potentially dramatic symbolic effect.”
I could see every other country in the world getting together and promising to provide equal treatment for each other, but not the United States.
Iceland = 2008 updated version of Thailand, circa 1998?
“Iceland’s promise to guarantee domestic depositors while reneging on guarantees to foreigners may be just a first step.”
I don’t blame them. All countries should be doing that, at this point. Charity begins at home.
Much as I agree with “charity begins at home”, I don’t think contract law should be rewritten in the process.
“I don’t think contract law should be rewritten in the process.”
I don’t think so, either, but when you’re just trying to survive, all bets are off. Besides, re-writing contract law is exactly what’s going on, everywhere. Rules and laws no longer apply when everyone’s breaking them, bending them, spinning them, twisting them.
3 hours ago:
http://www.belfasttelegraph.co.uk/breaking-news/world/europe/icelandic-assets-seized-to-repay-british-savers-14000851.html
Wouldn’t want to be a U.S. company owning assets in China right now.
Think about what this means for Peter Schiff and John Williams and everyone else who understands the financial problems in and the resulting economic predictions, yet fail to consider the political aspects. They all promote buying assets overseas, yet never discuss how to prevent them from being seized in the event of a US default.
This is a tough world to live in when the only property you can claim is that which you hold on your person (or in your home).
Property rights enable vast economic growth, so long as the world
governmentsmafias continue to violate property rights in unpredictable manners we will see reduced economic activity.It’s turning into a…
“Possession is 9/10’s of the Law” kinda world.
An overseas overseize
does that include gold stored overseize?
It might be best to have your Gold in a private overseas vault, not a vault in a bank.
But I knew that already…
That’s one way to bring mfg back to the US.
The use of counterterrorist legislation to take over Icelandic bank assets and operations in the United Kingdom also has a potentially dramatic symbolic effect.”
Wow. I guess an invasion of Iceland would now be fully justified.
“I guess an invasion of Iceland would now be fully justified.”
uh, not to be an alarmist, but is it possible that the Archduke Ferdinand just went down?
Many reasonable people think so.
Iceland is the modern day archduke.
“The most important thing about financial panics is that they are all temporary. They either die of exhaustion or are overwhelmed by the heavy artillery of government policies….
…He argued that financial panics tend to feed on themselves until one or more of three things happen: 1) prices fall to depths that bring investors back into distressed assets; 2) exchanges are closed, or 3) central banks spring into action.”
Mr. Stephen Roach
http://www.iht.com/articles/2008/09/30/opinion/edroach.php
The Central Banks are spending a lot of ammo.
We already have seen all of the above ( 1) - 3) ) at various times or places over the past thirteen months, with no clear end in sight.
What gives?
Ask yourself this. Are the underlying conditions that created this “difficulty” easing? Are home prices stabilizing, and people are starting to pay their mortgages? Are jobs being created so that people can afford the houses, or are jobs being destroyed?
If this so called crash is going to stop, several things need to start happening, and one of them is that jobs have to be good paying and failry plentifull. Until that happens, most people will just hunker down, send the keys to the bank, or just ignore collection calls.
Without jobs, no money, no investment, no savings, no production, no exports, no cash balance. Expect the next president to enact some pretty steep trade barriers, specially job related ones, and see how GATT reacts… He might not even care. It will send the rest of the world into a tailspin. Right now they are working together, but I would bet against that happening to much longer, and once one central banker leaves the herd, the rest follow.
Just my .0002.
Which brings up a subject not discussed in a while….
Months ago, there was a lot of discussion to the effect “You thought the Subprime resets were bad, wait until the Alt-A sh#t hits the fan”. At the time, the charts indicated this would happen in 2009.
Still on schedule? Moved up due to the banking crisis?
OH, No!
We are on schedule.
I think it would be premature to say “Mission accomplished!”
and they are linked to LIBOR !!
“and they are linked to LIBOR !!”
Commander in Chief Paulson and Lieutenant Bernanake will simply lob an “emergency edict” in to that requirement and de-link them! All with Congressional approval of course.
Right on Pinch. What are the odds of wages quadrupling? Zilch. Or how about housing prices falling another 30-50%? Likely.
Dammed zombie, it just won’t die, keep shooting till the ammo runs out.
We are in the midst of what the academic Charles Kindleberger called the “revulsion stage” of a crisis - indiscriminate and contagious selling of distressed assets that leads “banks to stop lending on the collateral of such assets.”
======================================
Mark to Gag-Reflex?
I personally prefer to call it the “regurgitation stage of deleveraging.”
nice!
We went from the Bull market to the Bulimic Market.
Remember a few days ago how I was talking about NZ turning into a financial Iceland, and the role big Aussie Banks played there, perpetuating the carry-trade?
Canaries of a feather talk together…
=======================================
But Finance Minister Michael Cullen said today he had to move quickly yesterday because he had been working with Australian ministers and needed to make the announcement at the same time as they did about their own guarantee scheme.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10537163
I’m expecting to hear that GS or other of the biggest banks will be giving equity stake in exchange for bailout cash one of these mornings before the market opens.
For the traderific among us:
Is the correct trade to buy puts in anticipation of this, or to wait until it happens and buy them on the surge of initial euphoria before the morons realize they’ve been had through dilution? I favor the latter.
–
dude,
Time to buy puts was long time ago and there were couple of additional opportunuites over the past 6 months.
Those who react don’t make much money; those who anticipate do.
Jas
Thanks Jas, I’ve been making money all along the way. The question is with regard to this specific case.
This sounds like a risky plan. A properly functioning banking system is supposed to provide insurance against idiosyncratic risk that a particular borrower will not repay a loan or that housing prices will continue to decline. Are homeowners supposed to now pinch hit for the insurance services the broken banking system cannot currently manage to provide at mortgage loan sizes that work for both buyers and sellers?
* MARKETWATCH
* OCTOBER 12, 2008
Mortgage Lending for Sellers
By AMY HOAK
It’s much harder to get a mortgage today than it was a couple of years ago. That’s why some home sellers are stepping in and financing deals on their own.
The concept of owner financing isn’t new, though it wasn’t as popular when mortgage money was easier and cheaper to come by through traditional lenders. But in today’s tough real-estate markets, being able to finance the sale of your home can give a seller an edge. “There are a lot of good buyers out there that can’t get loans,” says Dawn Rickabaugh, of Rickabaugh Realty, in Pasadena, Calif. “When you eliminate the hurdle of qualifying for a bank loan, you’ll double the amount of buyers interested,” she says. Ms. Rickabaugh also oversees the owner-financing Web site NoteQueen.com.
Loans that are most difficult to get — including jumbo mortgages and financing for commercial properties — are ripe for seller carry-back scenarios, Ms. Rickabaugh says. But it can be done for any property type, and sellers can finance all or part of the loan, she says.
Seller financing can help buyers who may be having trouble getting a loan because they are self-employed or work on commission. It also can help someone barred from a traditional mortgage due to scarred credit, if it can be explained, says Dorcas Helfant-Browning, a broker in Virginia Beach, Va.
–
It is idiotic for sellers to get into financing business if the economy could worsen significantly. During mostly good times since the 1950 it wasn’t as big a risk because time healed all wounds.
There is lot of trouble for housing that lies ahead. We are in the second or third inning.
Jas
Let’s agree right now that we can look forward to many stories over the next several years about seller financing that went bad.
–
Agreed! — Jas
Sounds like rent-to-own. Sucker pays more than they generally would on rent, knowing that they are working towards owning. This allows them to say that they are a homeowner I guess. But few actually ever make it to the own point, so the real owner just keeps reselling it. Like low end car lots, recycling lemons over and over to the next sucker.
“That’s why some home sellers are stepping in and financing deals on their own.”
I’m rootin’ for ‘em. Better their money than my taxes.
I spent some more time last night looking at homes in SW Florida — Fort Myers and Cape coral. It’s unbelievable what they are offering for less than 100K. Short sales (paperwork intense + time constraints) are competing against bank owned (less paperwork) foreclosures for buyers.
Anyways, I called a couple flipper buddies and there was no interest, nothing, nada. They are all exhausted or wiped out. Take your time. Do your due diligence.
SE Florida the same.
I posted on it. Brickell condo market saw first new building where asking price was less than 125 sq/ft.
Total collapse.
Some here saw that certain condos would have a negative net worth.
Yep.
HOA fees of $700 + $600-700 towards taxes = $1300-1400 a month.
Rents $ 1500.
OOOoops!
Previous sales $450K.
Result:
Hudson: “That’s it man, game over man, game over! What the fu*k are we gonna do now? What are we gonna do?
Burke: Maybe we could build a fire, sing a couple of songs, huh? Why don’t we try that?”
What is it that makes Miami HOA fees so high? Typically a 2bd 500k condo (which is still a low price intown, huge bubble here) in Denver has a $425 HOA fee, yet same sized unit in Miami is running $800 plus. Is it because there are so many ppl not paying? Is it the insurance? You are correct though, even at $100 per square foot and water views you cant get those to cash flow.
HOA covers insurance which is astronomical.
There are shortages with people not paying, but that is not reflected in the HOA fees. that is actually another issue!
With a building going into 30% + foreclosure, the difference is made up in special assessments.
This is actually a very, VERY BIG deal that is way under reported.
Surprised it has not been brought up more in this blog, this will be a factor.
Another HOA shoe yet to drop is liability. As people sue the HOA (perhaps for not collecting dues from people, raising their rates, or for not maintaining the building), the HOA dues will go up–raising the rates and continuing the HOA death spiral.
I’d love to see ever HOA community become severely devalued. People who made these crazy legal entities (”to keep property value up”)
‘Nuke the site from orbit; its the only way to be sure.’
Loved that movie.
Fed = international lender of last resort?
Wall Street Journal
* OCTOBER 13, 2008, 5:47 A.M. ET
European Central Banks to Offer Unlimited Dollar Short-Term Funds
By TERENCE ROTH and PAUL HANNON
LONDON — The U.S. Federal Reserve on Monday will begin providing unlimited dollar funding under its swap facilities with three major European central banks to ease strains in the financial markets.
The European Central Bank, the Bank of England and the Swiss National Bank said in a joint statement that the terms of their respective currency swap arrangements with the Fed have been altered “to accommodate whatever quantity of U.S. dollar funding is demanded.”
The Fed’s system of swap agreements allow global central banks to draw dollars from the Fed to feed into their banking systems, where demand for dollar liquidity has been especially high at a time when banks hoard dollars to guard against counterparty default.
The central banks said they will supply U.S. dollars at fixed interest rates to provide one-week, 28-day and 84-day funding operations to keep banking systems liquid. The new arrangements are valid through April 30.
I wish someone would explain the Brit/EU/US plan. What does it mean that the gov’ts will be guaranteeing bank debts? Last night, the NYT said they would be guaranteeing their loans, which I took to mean inter-bank loans. Then the Times ran a retraction saying the guarantees are for bank debt. How is this supposed to avert future Lehmanns?
Wall Street Journal
* AHEAD OF THE TAPE
* OCTOBER 13, 2008
Policy Blunders Have Created Crisis of Faith
A lack of trust is at the root of the financial crisis, not only between banks but also increasingly toward the world’s policy makers.
Central bankers and government officials are dealing with a crisis of a scale not seen in most of their lifetimes, a crisis unfolding with terrifying speed and fueled by obscure financial instruments of almost unimaginable complexity and reach. There have been creative steps all along the way, particularly by the Federal Reserve.
But there have been missteps, as well, that have eroded policy makers’ credibility.
…
‘Lack of trust’ is just a fancied up way of saying dishonesty…
“A lack of trust is at the root of the financial crisis, not only between banks but also increasingly toward the world’s policy makers.”
http://www.nytimes.com/2008/10/13/business/13morgan.html?hp
Looks like the Mitsubishi/Morgan deal will happen, albeit at revised terms. The question now is how long before Goldman stay independent? (I mean with another partner other than Warren Buffett).
Mr Market is behaving as he normally does when the Fed dumps in a flood of liquidity which he does not know how best to appropriate.
!חג שמח / Happy Sukkot!
I hope your sukkah doesn’t get foreclosed on!
I call BS on this story
1. You don’t need to own a home
2. You don’t need a car in NY
3. You don’t have to live in NY you can commute in
http://news.yahoo.com/s/bw/20081013/bs_bw/sep2008db20080916715099;_ylt=AkeZO1l4ihbC395zU1yMacys0NUE
Paul Krugman won Nobel in economics today. Unlike past laureates (Joe Stiglitz) he actually noted that the rise in house prices was a problem several years ago (but later than most of us here did).
Here in Chicago, the budget shortfall keeps increasing in size, and da mayor is proposing to tax, ticket, and sell his way to bureaucratic salvation:
The city’s budget shortfall has ballooned to $469 million — $49 million more than it was in mid-August — because revenues continue to plummet. And if Daley doesn’t seal the deal to privatize Chicago’s 35,000 parking meters by year’s end — and get at least $150 million from the transaction to apply to the 2009 shortfall — more layoffs and more tax increases will be needed.
Car drivers and parking scofflaws in particular will take it on the chin.
Bill Maher was just making this point: tax cuts on income just resurface in parking ticket increases, etc. He referred to it as “making our day to day lives miserable instead” (not an exact quote).
Couple of interesting -shocking really - commentaries I’ve heard and read since last night. Shocking not so much with what they say, but just the fact of who was saying them and the context.
- Did anyone else get Chuck Butler’s (president of Everbank) monthly Review & Focus newsletter? Wow he slams Paulson and Bernanke, and market manipulation in general, quite hard. It was amazing (and refreshing) to see that coming from a bank president. FWIW - I am really starting to like Everbank a lot, and am currently buying some more foreign currency CD’s there.
- Went to a really nice concert last night, done by the the Korean American community at GMU in Fairfax. Lots of traditional Korean music as well as more recent orchestra pieces. After the intermission, the emcee talked some - and totally went off on a political tanget talking about the state of affairs and history, including about the tulip bubble, the south seas bubble, and in general talking about how we’ve lost our moral compass recently with regards to greed and conflict. It was really bizarre to see this guy doing this at what was quite a formal concert. I really like the Koreans in general (though I’m not exactly impartial since my wife is half Korean). They’re really gotten the shaft in political arena in Asia through the ages, but have made the most of it, and in general are really good folks.
People are starting to speak out about the truth…
The same thing was done in the 1930’s, but they didn’t have the internet, so word traveled a lot slower.
Word of mouth is a lot slower than word of web.
“Word of mouth is a lot slower than word of web.”
exactly. people can’t catch even up with themselves, so we just set up all these weird tools to monitor ourselves, find out our reaction and then react to our reaction. Like when they televised the DJIA and bailout vote simultaneously, or those weird CNN instant tracker things to measure voter reaction in real time.
I wish Marshall MacLuhan had stuck around for a little while longer.
“Did anyone else get Chuck Butler’s (president of Everbank) monthly Review & Focus newsletter?”
I was fishing around for an online link to the latest edition of his newsletter yesterday and couldn’t find it. Do you have one?
P.S. His newsletter reads like the views of a HBB regular; not sure whether he is one…
Unfortunately even I can’t get an online copy apparently - on the website it has online copies available for “potential customers”, but that’s only a sample copy, and you have to request it.
Go to the website, to the Research and Planning -> Market Commentary page. Like I say though that’s only a sample and I presume they just send it in the mail. Interesting. Perhaps he feels like his commentary is different enough that he doesn’t want electronic copies going around, so no one can point to him as inciting runs on other banks or something.
Agree with what you’re saying about him sounding like an HBBer. He apparently has good business sense.
As a customer we receive the dead tree version. There was something I wanted to post yesterday but could not…
You could always re-type it
(I’ve wanted to do that occasionally, but figure eh it’s just not worth it.)
We’d been thinking about writing in Ron Paul. I found out today that in NC, you can’t write-in a candidate that was in the primary and lost. You may wish to check out your state’s laws. If you can’t write-in the candidate you were planning, you still have time to research the Constitution and Libertarian Party candidates, or choose to write-in someone who didn’t run this year.
Saw a friend who lives in a condo. He has neighbors who had planned on putting their condo on the market this spring, however, after last week, the neighbors are putting the condo on the market ASAP, because they are afraid of what’s down the road…..
I for one am so thankful for the financial wizards and geniuses like Greenspam,Rob Petetopay Paulson, and Kashand Karry. The lives of every Amurikan are so much better, so fast! Sure hope they can turn back the hands of time. (Shouldn’t be a problem for the Big $$$ Boyz.) Imagine…a pack of Lucky Strikes for a quarter, roast beef dinner with potatoes, gravy, and dessert for fifty cents, a new Corvette for $3200, and a slightly used,(may have mold, termites,and skeletons)5 BR/4 BA 4000sf McCrapshack overlooking the blight, for only $$$895,000.00!!!
Reflate my house at the bailout market, then, let me sell to some other sucker/serf. WHAT A DEAL. It just has to work!
Come on mormon, we are all having such a good day today. Are you saying 70’s style everything except houses? Can they really keep these prices up with all these new games?
aladinsane guarantees all messages, from now on.
Not so fast, Laddie. Your actions may put my posts at a slight disadvantage. Maven guarantees all messages too.
My guarantee includes all of my foreign accounts.
It’s a yo-yo market rally.
sell this rally PB ? My guess this is similar to the last FED fix rally for a few months then pesky home prices keep falling and back to the bear market.
You can bet on sustained volatility, but not a sustained stock market rally.
MARKETWATCH FIRST TAKE
Nine to one
Commentary: Monday’s rally satisfied definition of a 9-to-1 up day
By MarketWatch
Last update: 4:56 p.m. EDT Oct. 13, 2008
Editor’s note: The following First Take is real-time analysis and opinion by the MarketWatch commentary team.
ANNANDALE, Va. (MarketWatch) — Finally: a broad-based rally.
The stock market was up hugely Monday, with the Dow Jones Industrial Average gaining an impressive 936 points. That was the biggest-ever gain in terms of points, though “only” the fifth-largest in the Dow’s 112-year history in terms of the percentage gained in a single session. See Market Snapshot.
But it wasn’t just the blue chips that rallied Monday. So did most individual stocks.
…
But don’t break out the Champagne just yet.
Why? Just take Sept. 30.
That day also satisfied the definition of a 9-to-1 up day, and yet the Dow plunged 2,400 points in just eight trading sessions immediately thereafter.
Here is a brief outline of the dilution solution Oct. 13 (Bloomberg):
In exchange, Royal Bank of Scotland and HBOS will cede majority control to the government; give Brown seats on their boards; the right to halt dividends and power to limit executives’ bonuses. RBS Chief Executive Officer Fred Goodwin and HBOS CEO Andy Hornby will also step down.
The dollar is dropping today against many currencies (exceptions in the table below include CHF = Swiss franc, KES = Kenyan shilling, and ZWD = Zimbabwe dollar) — a reversal of last week’s flight-to-quality move into $US.
A word of explanation: If USD is listed on the left, the quoted exchange rate (”VALUE”) is the price of $US in the other currency. If USD is listed to the right, the quoted exchange rate is the price of the other currency in $US. To get from one form to the other, one finds the reciprocal (i.e., USD-EUR = 1/1.3529 = 0.7392, so it costs 0.7392 Euros to purchase $1.00).
CURRENCY VALUE CHANGE % CHANGE TIME
EUR-USD 1.3529 0.0121 0.9043% 13:38
GBP-USD 1.7278 0.0236 1.3833% 13:38
USD-CHF 1.1402 0.0014 0.1273% 13:37
USD-SEK 7.1808 -0.0280 -0.3877% 13:38
USD-DKK 5.5100 -0.0482 -0.8672% 13:38
USD-NOK 6.2613 -0.0576 -0.9116% 13:38
USD-CZK 18.3720 -0.1755 -0.9462% 13:38
USD-SKK 22.6300 -0.2480 -1.0840% 13:38
USD-PLN 2.6224 -0.0462 -1.7294% 13:38
USD-HUF 186.6400 -6.9600 -3.5950% 13:38
USD-RUB 26.2370 -0.2074 -0.7845% 13:38
USD-TRY 1.3900 -0.0330 -2.3226% 13:38
USD-ILS 3.6141 -0.0698 -1.8947% 13:38
USD-KES 75.0000 0.7000 0.9421% 12:07
USD-ZAR 9.1689 -0.2934 -3.1002% 13:38
USD-MAD 8.2624 -0.0438 -0.5279% 11:47
USD-ZWD 202.0200 18.0300 9.7996% 11:09
Data source: Bloomberg
what is your point? currencies are always fluctuating. need to point to a trend.
My point is that the big jump in stock prices today is being funded in part by a reversal of a flight into $US in last week’s selloff. Sorry if you have to look closely at the table to see this, but I am frankly too unmotivated to make this any more blatantly obvious than I already did.
Not all of us were able to divine that from your graph, PB. An extremely small explanation for the data would have been nice.
The dollar is dropping today against many currencies (exceptions in the table below include CHF = Swiss franc, KES = Kenyan shilling, and ZWD = Zimbabwe dollar)…
Thank you PB.
For how many more decades is Japan’s ‘lost decade’ likely to continue?
Author sees long, painful recovery
By Jim Wasserman - jwasserman@sacbee.com
Published 12:00 am PDT Monday, October 13, 2008
Story appeared in OUR REGION section, Page B7
If you’re among millions seeking comfort during this crisis rooted in the U.S. mortgage meltdown, Robert Shiller’s new book, “The Subprime Solution,” may not be for you.
Shiller offers no sunny forecast. The Yale finance professor, and creator of the Case-Shiller Index that tracks home prices, says the subprime crisis that appeared last year may be “the first act of a long and complex tragedy.”
“We may well experience several years of a bad economy, as occurred, for example, after the profligate mortgage lending booms in both Sweden and Mexico in the early 1990s,” Shiller writes. “There could even be another ‘lost decade,’ like that suffered by Mexico in the 1980s after its spending spree during the oil price boom, or by Japan in the 1990s after the bursting of the 1980s bubble in its stock and housing markets.”
To all you obama fans, how do you like this:
http://www.cnbc.com/id/27161922
Nobody here is a real Obama fan. Many think he is simply the best choice of the options presented. If you have a better, viable choice then we are all ears…
nosingle, that is the problem. Your proclamation of viability is the crutch everyone uses to continue this charade. We have to start somewhere to change the two party strangle-hold. If our forefathers shared your ‘we cannot do anything’ attitude we would still be pledging allegiance to the crown.
I’m a real Obama fan, and have been from the start. The positive way to view this plan is that for less than half the cost of what Nancy Pelosi is advancing this is more of a direct stimulus plan.
The correction as a whole isn’t going to be changed by that kind of thing, but some lives and companies might be given a chance they would not have had otherwise. The can-do attitude that drove this proposal is kind of impressive even if the impact is hard to know and the funds would come from the general public.
Nobody here is a real Obama fan.
I am an Obama fan, but voted for Ron Paul and I otherwise voted Libertarian every office I could. I want the Democrats to control all three parts of our government. Unfortunately it takes time to pack the Supreme court.
Give all the power to these Democrats so that we can have 4 years of severe socialism instead of 8 years of more socialism. The American public will be so sick of central planning that they will revolt. That’s my wish. But I just do not want to put any sanction for the Democrats by paying taxes when I could be using loopholes or not incurring capital gains. I certainly will be happy when I can say “don’t blame me, I voted for Ron Paul.”
PETER BRIMELOW
Veteran advisers think it will pass … eventually
By Peter Brimelow, MarketWatch
Last update: 12:15 a.m. EDT Oct. 13, 2008
NEW YORK (MarketWatch) — Never seen anything like it? Neither have five octogenarian advisers — but they say it too will pass. Mostly. Eventually.
…
“We are far ahead of schedule … This major bear market could see a firm bottom with Dow 4,000 to 5,400, and a yield of 6% to 8%. This would also call for an S&P 500 yield of 5% to 7%, and a range of 360 to 480. Those lows might come in 2009 or 2010. A worst case might be a bottom around 2012 after four disastrous years of an Obama administration. Investors are scared to death of a strong move to socialism.”
“with Dow 4,000 to 5,400, and a yield of 6% to 8%.”
I’ll buy that dip
They will love it!
I also understand he has come up with a new never before tried tax angle, and that is to raise taxes on all you evil rich folks. Pass it on to the more “deserving”, but that’s nothing wait until/if he gets elected, it won’t be long before the word “reparations” pops up and that is a sure fire way to ‘bring’ the country together.
He is the lesser of evils, especially with Sarah Barracuda thrown into the deal.
“He is the lesser of evils”
defeatest attitude
He is the lesser of evils
Never heard of Ron Paul.
California cities issue fines on foreclosed properties
Some towns want to hold lenders responsible for maintaining the properties
* McClatchy newspapers
* guardian.co.uk,
* Monday October 13 2008 17.45 BST
* Article history
The scene is familiar in neighbourhoods throughout California’s San Joaquin valley: A dead lawn, debris in front and a murky swimming pool in back, sure signs of a foreclosed home.
To prevent eyesores, some cities are taking steps to hold lenders responsible for maintaining foreclosed properties.
Homes that are not kept up “affect both the quality of life and the economic state of a neighbourhood”, said Brian Calhoun, a Fresno city council member.
A California state senate bill passed in July allows cities to fine owners of neglected foreclosure properties up to $1,000 a day.
Here’s one “fantasy” of mine:
Courts will allow, and people will win,
1. lawsuits from homeowners against neighbors who foreclosed and had lied on their mortgage application.
2. lawsuits against banks that made these mortgages
The “damages” are based on the theory that people either paid too much for their houses based on nonsense comps (because the value was set by people who actually couldn’t pay the price) OR people paid too much property tax because of inflated assessments.
‘Don’t Panic, Stocks are Safe!’
http://www.youtube.com/watch?v=MTCKxye9_so&eurl=http://paul.kedrosky.com/
Mr. Paul Kedrosky has the wonderful movie of Prof. Irving Fisher on YouTube
Heh heh — “The lesson is that if you are going to buy stocks, buy them with your own money, and not borrowed money.” One of history’s most famous economists missed something entirely basic about asset price valuation, which is that stocks bought on leverage drove the price of the entire market to unsustainable levels.
By an extension of Fisher’s logic, anyone wealthy enough to buy a home outright without a loan should be protected against falling prices. My sister and BIL are conducting that natural experiment right now, as they are the proud owner of two homes in the midwest free and clear.
Just looking at the olde market today. Looks like the government in europe decided to print several trillion euros.
I hope that Paulson/Bush just sit for a little while and let people flee the Euro. That should help us out more than an inflationary gesture by our own government.
Also all the borrowing to pay for this crapola should have some effect on the rates.
“Also all the borrowing to pay for this crapola should have some effect on the rates.”
US Treasury interest rates on the 10Yr are yielding 4.01% up from 3.40% 10 days ago. (This means bonds dropped ~ 4%).
Since the US bond markets are closed, it is hard to determine if this is either a good sale price or a great sale price. The government still has $1T in bonds to sell.
additionally,
there can only be one reserve currency, you cannot rule by committee.
Whoa Nellie — I wonder how many folks followed this fellow’s advice, before the selloff continued straight on through to the end of the week?
PETER BRIMELOW
Something to celebrate, sort of
Commentary: Dow Theory’s Schannep turns bullish, calls end of bear market
By Peter Brimelow, MarketWatch
Last update: 2:39 a.m. EDT Oct. 8, 2008
NEW YORK (MarketWatch) — A disastrous day, so I’ll start with some cheerful news: Jack Schannep has turned bullish.
The editor of TheDowTheory.com said last night in an email to subscribers:
“Today’s collapse in the stock market is what we have been looking forward to all year — the end of the bear market! … Yes, today we reached capitulation and that is the time to buy. I suggest investing 50% into the market now, equally between SPDR S&P 500 ETF.”
Dow rocketing up 715 points, with less than a half hour trading to go. Funny thing, NOTHING has changed since Friday. Scam market.
traders delight, eh?
Up, up, and away! DOW industrial’s up 825 with less than 5 minutes till close. What’s changed since last week? Nothing!
DOW, notching up another quick 150 points in a minute’s time! What a joke!
At this rate of increase, we could have DOW 67,500 by tomorrow’s close. Something smells kind of rancid, to me.
Daytraders sell and buy day to day I’m more interested in what the S&P will be at this time next year.
Alad’s PPT Cruiser pulled up to Wall St. early this a.m., equipped with a blower.
I’m guessing this will be a good night for strippers in nyc.
Looks like our bovine brethren used up all their powder in two euphoric days.
Dow rocketing up 715 points, with less than a half hour trading to go. Funny thing, NOTHING has changed since Friday. Scam market.
Then stay out. In 20 years I’ll pass by the dog food aisle and see that you are eying that Alpo as I head for the steaks.
Friday- Dow crashes on negative economic outlook.
Monday- Dow rockets on cheers of global government intervention.
Friday- Oil crashes on negative economic outlook.
Monday- Crude strengthens on global banking bailout.
Schizophrenia.
During the 1929 crash, the stock market went up many times and in some cases could be said to have rallied. Today it looks like the panic phase of the decline is over and then it will just drift downward for many years in a slow and steady decline. These world class economist simply deny that the credit bubble has popped. They will throw money at it and eventually produce inflation in the things we need while maintainig a deflation in stock and asset prices. They will just take the mess that Hoover created in 1929 and add inflation as another ingrediant. People will have jobs but not be able to afford food and housing.
A grim future until folks figure out that these economist need to get real jobs and the Fed needs to be closed.
“and the Fed needs to be closed.”
Ahem,
Amen and amen, forever and ever, amen…
What everybody forgets:
“Who wouldn’t panic if the firemen burst into your house with hoses and fire axes?”
The time to panic was last November - the market dropped when it should have gone up. Then you pay your taxes and enjoy the show. Now no profits to pay taxes upon.
Almost all assets are in a bubble that burst. It is not very wise to include bursting bubbles as deflationary.
All the government has to do is to deflate the dollar. This is what the government is trying to achieve in a gradual manner.
The 2009 Budget Deficit may be 12.5% of GDP or $2B. More than 2X the previous record of 6% set in 1983. Whee, time to panic from the dollar, but few will listen.
Oh, and yes, I am still extremely bullish on silver.
I have been long SLV for a LONG TIME.
The recent COMEX washout was truly brilliant strategy for the Fed and PPT. Many a thoughtful broker has INSISTED that they had no choice but to liquidate your account exactly at the bottom, so help us God.
I don’t employ leverage in my “investments”, thank you very suck.
Now, physical silver is physical silver.
I never said I didn’t have any in a safe someplace.
But you can “buy” a fraction of an (audited by real people), Pile of serial numbered bars in Merry Olde EnGland for $10.50 an ounce??
This is not a number at which any physical silver can be purchased.
One of the reasons I invested some of my $$$ in SLV is that I have this feeling that one fine day soon when the Russian battleship Peter the Great sails into Tripoli, with intent to “liberate Lebanon”, if there is a President Obama, in two weeks silver is $5000 an ounce, and I’m worth north of 200 million mortgage-backed dollars.
Ought to buy a pop-tart or two.
well good luck. You and the other Gold Bugs are very brave.
WOW. I must have missed that smiley/snarly/winking thingy in that post….
Douglas Adams, soothsayer:
http://www.clivebanks.co.uk/THHGTTG/THHGTTGradio11.htm
This is a Dolmansaxlil Galactic Shoe Corporation film. ’Adventures in Aggressive Marketing’ Take a planet. Any planet. Take, for instance, the planet Bartrax or Hurtringfirm. Or Earth……or Kievoliv or Azlaan. Or any of the many planets we have currently declared marketing on…
We will see what can really be achieved by looking at the planet Brontitall.
[The sound of happy, laughing people can be heard]
…Mere centuries ago, a happy, prosperous, busy planet all right. Ha-ha-ha-ha-ha, oh yes. Not a care in their world:
PEOPLE:
Hello. Hello. Hello. Hello. Hello! Hello. Hello. Hello! Hello! Hello! Hello!
BRONTHOS:
Morning. Ah. Happy?
MAN:
Oh terribly happy today! Thank you, yes. And you Bronthos?
BRONTHOS:
Oh, indeed, so yes.
MAN:
ha-ha-ha-ha-ha
BRONTHOS:
Oh, are you, busy?
MAN:
Oh yes, yes, yes. And healthy and bright eyes, clear skin, feet in good nick. Isn’t life a wonderful thing?
BRONTHOS:
Ah! Oh yes, super!
COMMENTATOR:
[On recording] Oh, yes. Only one, tiny little thing wrong here - they’re not making money for the Dolmansaxlil Shoe Corporation.
CROWD:
So?
COMMENTATOR:
[On recording] So, on the far side of their moon, we set up a Dolmansaxlil Shoe Shop Intensifier Ray. And suddenly the people are gripped by an insane, irrational desire to build…
[The Ray is fired]
COMMENTATOR:
[On recording] Shoe Shops! Ha! In every road, on every street corner, in every city shopping precinct, shoe shop after shoe shop.
…Every year the shoes in the shop are either much too wide, or much too thin - or in extreme cases even joined together at the heel. Ho-oohhhh, yes, how we laughed up on the backside of their moon. How we cried with laughter when every last shop on the planet was turned into a shoe shop. How we coughed and spluttered with mirth when the people tried to revolt and we had to send in the foot warriors.
PEOPLE:
[Mass panic]
FOOT WARRIOR:
Do not panic! Lay Down your arms. We just want you to relax and enjoy your shoes.
[Gunfire]
PEOPLE:
[Mass screaming and panicking]
FOOT WARRIOR:
They are very stylish and fashion-conscious. Be Cool. Step out in style. Relax and enjoy your shoes.
[Heavy gunfire]
PEOPLE:
[More mass screaming and panicking]
FOOT WARRIOR:
Relax and enjoy your shoes. Relax and ennnnjjjjoooyyyy… yyyyouuuurrr shhhhooooeeessss…
[The power in the room goes off]
HIG HURTENFLIRST:
Hey-what’s happening? Why are the lights going out? Foot Warrior!
FOOT WARRIOR:
Sir?
HIG HURTENFLIRST:
Go to the emergency power supply.
FOOT WARRIOR:
Can’t sir. I think I’ve got gangrene in the feet.
HIG HURTENFLIRST:
Well then just seize the prisoners.
FOOT WARRIOR:
Sir. Wahh Ooo-ogh.
[ FOOT WARRIOR falls over]
(didn’t realize it would be such a long post
)
I learned English with Douglas Adam’s books and that old BBC radio series.
There’s a bit right after that where some complete idiot gets taught about the shoe economy by a computer. Every time he gets the answer right he may press a button that gives him a nice tingly feeling (or maybe a VERY nice tingly feeling???)
At the end of the session the computer reminds him to press the other button and the computer gets off.
ha ha, you have a good memory! the computer class is amazing - the computer won’t let the student move on to the next lesson until he has reached the conclusion the computer wants, and the student doesn’t actually care how the conclusion is reached, he just wants to say the thing that will let him push the button. (The right answer is always to buy more shoes).
The archeologists who are uncovering the civilization that has been destroyed by diverting the entire economy into shoes (most of which don’t fit) use a device on themselves called a “crisis inducer” which causes you to panic and therefore to be more productive & useful. The whole chapter is a parable.
US Treasuries still tanking. Treasury CDS are flat to lower.
“… When a few badly-sold mortgages in the US can set off an international banking crisis, then international supervision is clearly wanting. The challenge is to create effective institutions for finance, on the model of the institutions that exist - and perform an essential function - in international trade. That is far from the demand of anti-globalisers and statists: it’s a recognition that markets require institutions if they are to work.”
Oliver Kamm
http://timesonline.typepad.com/oliver_kamm/
Seeking Shelter: The World’s Only IPO, Courtesy China
It seems appropriate that the only IPO pending during this global economic crisis involves bomb shelters.
China’s Renhe Commercial Holdings Co. was unable to price an initial public offering Thursday as planned. The company hopes to keep the offer alive — one person familiar with the matter said today that it cut the amount it hoped to raise to US$435 million from US$658 million and would postpone a listing on the Hong Kong exchange until Oct. 22.
Rehne’s business wouldn’t have many competitors among listed companies: It converts air raid shelters into underground shopping malls.
It’s also notable as the world’s only ongoing initial public offering, according to data provider Thomson Reuters, as central banks, governments and businesses struggle to bring the unfolding credit crisis under control.
Renhe needs cash to proceed with the US$555 million plan to convert civil air defense bunkers at six Chinese cities into wholesale malls. Renhe’s main asset is a 40-year right to develop the shelters, though Beijing can revoke that right in times of war.
With no IPO, Renhe would be US$283 million short of what it needs to complete the project. Renhe has been unable to get bank loans to facilitate its plans.
“The only thing Renhe is not considering at the moment is pulling the deal,” one of the people familiar with the matter said.
In an effort to salvage the deal, the underwriters — BOCI Asia Ltd., HSBC Holdings PLC, Morgan Stanley and UBS AG — are prepared to take up any leftover shares not subscribed by investors, and are considering several options, the people familiar with the deal said.
“The market now is so bad that people are not looking at a recovery in six to nine months’ time, but in the time frame of three to four years,” one investment banker said. “So it’s either do it now, or don’t even think about coming back to the market later.”
If Renhe is able to pull off the IPO it will be the first in Hong Kong since August. But the deal has been in limbo as the Hang Seng Index plunged 20% since it was launched.
“I’m surprised it took the company so long to realize the current price range is not going to work in this environment,” said one fund manager.
Wall Street China Journal
The Weakness of the Treasury’s New Bailout Plan
“…If you’re running an insolvent bank, and you get a slug of equity from Treasury, your shareholders will thank you if you use that equity to take some very large risks. If they pay off and you make lots of money, then their shares are really worth something; if they fail and you lose even more money, well, there was never really any money for them to begin with anyway.
Brad Setser has it right, I think:
A world where the government guarantees the ability of privately owned banks with potentially troubled balance sheets to raise wholesale funding is neither desirable nor necessarily stable for long.
I asked Brad to clarify, and he wrote back:
If the guarantee is credible then an institution with little or no equity has the capacity to raise wholesale funds to gamble for redemption.
And those bets are a potential source of instability.
Regulation theoretically can limit this risk, and right now there is enough fear that I am not sure that it is most immediate risk — but conceptually, the incentive to make big bets with the government’s guaranteed money is there.
This is a real risk, I think, especially when you’re talking about banks like Morgan Stanley whose books are very opaque and which can lever up substantially within minutes should they feel like it….”
by Felix Salmon
http://www.portfolio.com/views/blogs/market-movers/2008/10/13/the-weakness-of-the-treasurys-new-bailout-plan
This was the fifth best day in the stock market…ever.
Hope you are happy to be in cash.
Hope you are happy you were in stocks a year ago.
“Hope you are happy to be in cash.”
Lol, as if we’ve seen the final bottom.
Wall Street Journal
* OCTOBER 14, 2008
‘Smart Money’ Stays on the Sides
Hedge-Fund Chiefs Like Cohen, Paulson Move to Cash to Ride Out Storm
By SUSAN PULLIAM
Some hedge-fund titans have yanked most of their money out of the stock market, a bearish sign amid Monday’s euphoria and an indication of how the hedge-fund business is changing amid chaos.
In recent days, Steven Cohen, the hedge-fund manager who runs the $14 billion SAC Capital Advisors, moved about half his funds, or about $7 billion, into money-market and other short-term securities, eliminating much of his fund’s exposure to the stock market, says a person close to the fund. Mr. Cohen plans on sitting on the sidelines for the rest of the year — trading a small portfolio himself but keeping shuttered most of the stock portfolios of his other managers.
Israel Englander, who runs the $14 billion Millennium Partners fund, has shifted about $6 billion from the stock market into cash, a person close to the fund says.
Meanwhile, John Paulson, manager of $35 billion Paulson & Co. — who made a spectacularly successful bet against the housing market last year — has much of his fund in cash equivalents.
The retrenchment by Wall Street’s “smart money” crowd is part of a larger effort by hedge funds that have put a total of as much as $400 billion into cash equivalents recently, according to David Kostin, an analyst at Goldman Sachs Group Inc.
Tomorrow I expect major profit taking from those people who bought Friday. 10% is sweet. But if I bought Friday I certainly would not want to take a short term gain. Obama would get to spend some of my money and I don’t want to give any sanction to my hero during the next 4 years.
“just walk away” should be replaced by “just stay and stop paying”
Just stop paying your mortgage
http://www.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html
Oct. 13 (Bloomberg) — The seizure in credit markets caused banks to stop lending to each other, sent U.S. stocks to the worst week in 75 years and prompted an unprecedented effort to cushion global economies. It failed to convince Wall Street analysts to change forecasts for record profits.
Alcoa Inc., the biggest U.S. aluminum producer, and Bank of America Corp., the second-largest U.S. bank, posted the steepest retreats in more than two decades last week after third-quarter profits missed predictions by 28 percent and 69 percent. For the fourth quarter, analysts say companies in the Standard & Poor’s 500 Index will earn about $241 billion, the most ever.
“It’s absolutely ridiculous,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees $30 billion. “Analysts are playing catch-up. It’s crystal clear that you’ve got a weaker economy for several quarters. That’s inescapable.”
guess Japan didnt get the memo.
Hoz, coulnda doenzit whit outya.
Perhaps Hedge Fund Analyst will soon grace us with his posts again. I think of over-leveraged hedge funds as the likely source of future asset fire sales.
Number of hedge funds could halve in ‘09
Mon Oct 13, 2008 6:48pm EDT
By Svea Herbst-Bayliss
BOSTON (Reuters) - Turmoil in financial markets could halve the number of hedge funds by next year, and the survivors will likely charge less for their service, an industry executive said on Monday.
Ultra-wealthy investors, who fueled a doubling in hedge-fund industry assets to about $1.9 trillion in the last three years, are now increasingly fearful about hedge-fund failures and pulling their money out, fast.
“I think people are nervous,” said Robert Elliott, senior managing director at Bessemer Trust, a New York asset manager that advises clients with at least $10 million in assets.
“They have seen noteworthy blowups and don’t understand them,” he told the Reuters Wealth Summit. “Hedge funds could be the next hiccup and people could say this is another example of poor regulation.”
Wall Street Journal
* OPINION
* OCTOBER 14, 2008
We’re Laying the Groundwork for Recovery
The necessary policy tools are in place.
By BEN S. BERNANKE
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