Bits Bucket For October 15, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Looks like yesterday’s “bottom” in commodities was just a short term bottom….
Plenty of bottoms left to get spanked.
Cons spending down 1.2% for Sept, -14.4% annualized. CS is 2/3 of the US economy. No problem here, move along folks, nothing to see. Brother can you spare a dime?
We need to keep spending to fix our debt problem!
Hahaha… yet so true and sad…
Some ask me, how bad can it get?
http://www.youtube.com/watch?v=eih67rlGNhU
More bottoms than you see on a Brazilian beach…
Do stock market rallies make sense when the housing market still hasn’t bottomed?
Maybe not…
I posted this and I’ll do it again.
[1] Earnings drive prices and since for many companies they were coming out of the “miracle” of leverage, they will decline. (Also, decline because no one wants to buy their cr@p.)
[2] The multiples people were willing to pay for these earnings were inflated because of leverage. That’s also coming down.
(In case, you don’t understand #2, think of it like a carry trade. You are borrowing short, and betting long. You need a larger margin of safety than the currency markets but there were a lot of entities that were doing this. They are all going bust or deleveraging.)
“Also, decline because no one wants to buy their cr@p.”
I am not sure whether the problem is a lack of desire so much as lack of means. Without the miracle of home equity wealth gains, yesterday’s spendthrift consumer is hamstrung.
Desire is infinite. Means are finite.
This is news to you?!?
“This is news to you?!?”
Oh no, but I don’t claim to understand macroeconomics. Apparently their models lack budget constraints.
I’ll give you a professional hint (as a practitioner.)
Macro is nothing more than micro in disguise.
Understand micro? Then, do the same thing with macro (with some understanding of political garbage.)
Then, bet the markets. You will win.
“Macro is nothing more than micro in disguise.”
Please convince me that macroeconomists believe in a budget constraint, and I will rest my case.
I don’t care what academics do.
My job is to be right not convince my jack-ass peers.
PS :- I used to be an academic.
“PS :- I used to be an academic.”
Hah! I thought I detected a reaction formation.
OK, I just checked in David Romer’s graduate macro text and in the Hall and Taylor undergraduate macro text. The only budget constraint I found was in the latter, and it is only found in a model of household consumption.
Now I know why I don’t think like a macro economist. They don’t seem aware that there is a budget constraint!
They might. The question is, do stock market rallies make sense when the market has yet to price in falling profits due to the recession?
Bingo.
Theoretically the stock market could lead the bottom in the housing market if the stock market properly gauged the scope of the housing bubble (which it didn’t). However what the stock market seems to have largely ignored, up until the last couple of weeks, is the effect that the housing pop will have on the consumer market. I think the stock market has still way underestimated the effect this will have on consumer spending.
I’ve become convinced that anyone who doesn’t read HBB on a regular basis is CLUELESS!!!!
Markets tend to overshoot (overvalue) asset prices on the upside. In a similar vein, markets also tend to overshoot (undervalue) asset prices on the downside.
The current selling is being caused by bank and hedge fund deleveraging, and mutual fund redemptions, IMO. Because of this combined deleveraging and redemptions, we are seeing a lot of “good” stocks with low Debt/Equity ratios being thrown out with the bath water. At some point when the redemption/deleveraging cycle slows down, I expect these stocks to rally. It may not be a broad market-based rally, but you will see it…
Yes I would agree - however I think they’ll be rallying back up to points at or points lower than they are now, because the fundamental basis for their value (revenue and earnings) will go down significantly from where they are now - even in the long run, because recent revenue and earnings are bubble-based, and thus themselves are not fundamentally sound - e.g. see the homebuilders and auto builders, whose sales the past few years have been fueled significantly by artificial home prices and home equity extraction.
For the most part that is. Some companies are exceptions for sure and do not so much have bubble-based fundamentals.
“The current selling is being caused by bank and hedge fund deleveraging, and mutual fund redemptions, IMO.”
Bingo. And there is a direct analogy to the housing market, where ‘deleveraging’ translates into getting foreclosed on loans the buyer can never hope to repay. A huge share of current sales in all asset markets are due to the interaction of falling prices and leveraging.
A word to the wise: Price adjustment can play out far more quickly in the financial asset markets (stocks, bonds, etc) than in the housing market. If last time is any indication, housing prices are not likely to bottom out until six years after the onset of falling prices (for SoCal, that translates into the year 2012 or so).
The stock market can theoretically price-in falling housing or falling profits almost immediately. Say, for example, the market believes that we are going into a horrible depression and housing will fall an additional 60% over the next two years. The stock market can drop 80% today (no significance in the numbers just examples). The issue is not whether an bad event has already taken place, the issue is whether the the market over estimated or underestimated the likliehood and impact of such event. If a bad event is known in advance, the stock market can overshoot or undershoot well before such event occurs. The question is whether the market is overly optimistic or pessimistic at this point.
The question is whether the market is overly optimistic or pessimistic at this point. The market is clueless at this point.
Considering that the market is mostly driven by the media and people who believe in Keynesian economics, I would say that the market is worse than clueless, it believes it has a clue and so makes investment decisions based upon a false economic premise.
“The market can remain irrational longer than you can remain solvent.”
I think at this point, the market is mostly driven(manipulated) by the government ( i.e. Paulson & Bernake ).
I’m not sure if you were trying to be ironic, but that quote is from Keynes.
I should also add that, in my opinion, in a de-leveraging situation, regardless of what the market thinks in terms of the future, as ppl run out of cash, over-shooting on the downside is much more likely because many that may think we are oversold will have no money to put in and may in fact be forced to sell to raise cash. I clearly dont think we are there yet as far as being oversold, but forced sales to raise cash are already occurring.
Yeppers.
I think this is where the Fed comes in to the market — to supply the liquidity to the stock market that debt-burdened households cannot.
Yes, and what could be more perfect to do this with money they steal from those overburdened households.
This doubles as the reason that I am not, on average, a very good day trader. If the market responded solely to facts, I might be. Throw in investor “expectations” (emotions?), government meddling and rules changes, and my ADD and I can’t keep any of it straight.
Seems like trying to sort out a game of he said-she said.
Q: How many kids with ADD does it take to change a lightbulb?
A: Let’s go ride our bikes!
HAhahahahaha! I love that joke. Because it’s so true. And now I must go, because I see a moth I want to look at.
Thanks for the laugh.
I’m going to go outside and harvest the marigold seed husks.
LOL
Love the joke.
I think I’m borderline ADD because I’m definitely easily distracted but yet if I’m “into” something I will tune everything out to the point of driving people insane. I bear all the signs of being OCD though (I don’t wash my hands all day in case you’re wondering.)
Sleepless,
I can totally relate to your comment about ADD, and not keeping any of it straight.
Olympiagal: loved the joke. I have a 14-year-old son who has ADD, and that joke makes perfect sense to me. He’s doing better with it now, but when he was 8-10 years old, I’d tell him to brush his teeth, put on his pajamas, and go to bed. He would inevitably do the 1st task, then get distracted and I’d find him down in the basement looking for some toy that he’d misplaced…
‘He would inevitably do the 1st task, then get distracted and I’d find him down in the basement looking for some toy that he’d misplaced…’
Well, I’ll be! The same thing happend to me just last night! Except I just now remembered I don’t have a basement. Hmmm. I wonder where I was? Oh, well, at least I found my Malibu Barbie and her cute pink shoes.
(Faster Pussycat)
‘I think I’m borderline ADD because I’m definitely easily distracted but yet if I’m “into” something I will tune everything out to the point of driving people insane.’
I have long wondered if we could be siblings separated at birth, but now I’m almost sure of it.
Oly, I think we’re the same age too (90% confident.)
‘I think I’m borderline ADD because I’m definitely easily distracted but yet if I’m “into” something I will tune everything out to the point of driving people insane.’
do you start multiple ambitious projects and stay up until 3 baking brownies & sewing oven mitts for everyone you know? this used to be me, but I’ve chilled out recently.
True story: when I was 7 or 8 I got locked in a school library. I was reading under a table in the children’s area and when I reached the end of my book, I looked up, and the library was empty, and the lights were out and the doors were locked (there was still some sunlight through the windows). I was so shocked! I couldn’t even remember my phone number. Luckily some naughty teenagers who were crawling about on the roof spied me through a window and found someone to let me out. I lack this level of concentration these days…
My son once made up a jingle to the tune of the Jackson 5’s “ABC” song from way back when….
“ABC, easy as 1-2-…hey look, a cow!!!”
‘Oly, I think we’re the same age too (90% confident.)’
That cannot be, because you sound way smarter and wiser and stuff than me. I turned 36 last month. And that reminds me, a sincere thank you to all of you HBBers who wished me a happy birthday and a pallet-load of candy on that day, the 22nd. I checked the bits bucket later that day and saw the posts and was very touched. I even got a tear in my eye and sniffled. Getting old makes you sappy, evidently.
But even so, thanks to you all who wished me a happy birthday.
Shocker.
We are the same age (I’m younger by half a year.)
Only difference I guess is that I’m mathematically inclined, and you claim that you’re not.
On the bright side, I once spent a year reading Finnegans Wake, and I charged it all to the taxpayer.
Best year ever.
BWAHAHAHHAHAHHAHAHHAHAHHHHHHHHHHHHHHHH!!!
‘Only difference I guess is that I’m mathematically inclined, and you claim that you’re not.’
Oh, I KNOW I’m not mathematically inclined. Every single time I add anything it comes out to be fifty-eleven. There could be other differences, too, such as for instance you are a boy, and I am a girl. Also, I have a green flower barrette in my hair right now, and I bet you don’t. And do you like to have a bag of Cheetos for lunch?
There could potentially be even more differences I haven’t thought of yet, but other than that, why! Man! We’re just exactly like twins!
Truly, though, this revelation has rocked my world and I have to go find an aspirin and calm down. Later, when I recover, I believe I will stop calling you ‘fasty’ and start calling you ‘young’un’ or else ‘whippersnapper’.
All I know is that I made the most exciting zucchini and rosemary risotto and you didn’t get any.
Everything else is but a small little detail on that massively important point.
PS :- Everything was made from scratch (including the broth.)
Booo HOOOOOOOOooooooOOOOOOooooo…
I would have to agree that everything else is but a small little detail on that massively important point.
Even the broth made from scratch? Goodness, suddenly I am entirely dissatisfied with my empty Cheeto bag.
How about you tell me all about it, and make it in slow, lascivious detail, like, describe this broth, and where did you get the rosemary, and did you hover over the stove intently, and did you fondle the spoon eagerly; stuff like that.
GET.
A.
ROOM.
I would, but he’s in Manhattan. Plus he won’t put down that spoon.
I have some wicked ADD. Subsequently, the blog never has my undivided attention- I have a minimum of 7 tabs open at all times. And, I never read a long article from start to finish. I’ll read the first few paragraphs, then end up on another web site reading something else, then eventually go back and read more, sometimes never finishing any of them. I’m playing my guitar almost the entire time. And none of that has to do with what I’m REALLY doing which is painting my deck and interior trim, etc. Multi-tasker from hell.
“On the bright side, I once spent a year reading Finnegans Wake, and I charged it all to the taxpayer.”
BWAAHAHAHA indeed! That’s a thing of beauty…
I once spent of a year reading the HBB, and charged it all to a very large corporation that will remain nameless… because I still work there.
OMG! I must have ADD! I hear ya on the seven tabs+ . I infrequently post (or type coherently) here ’cause I’m off somewhere else minute to minute. So much to read, so much to surf, so little time each day……….
“The stock market can theoretically price-in falling housing or falling profits almost immediately.”
You speak as though there is no man behind the current standing ready to dump in liquidity as needed to offset the effects of a stock market selloff on household wealth. Do you have any idea of how the Fed’s best response function to falling stock prices plays into the amount of liquidity they dump in, or how the dumping in of liquidity affects the ability of the market to form rational prices?
I sure don’t…
They also don’t make sense until all the banks figure in credit card defaults! (See this week’s Business Week, for example)
Do stock market rallies make sense when the housing market still hasn’t bottomed?
Lesson #1 “The TREND is your FRIEND”
Lesson #2 “When in DOUBT, stay OUT”
Lesson #3 dot.com bubble Fool me once, shame on you
2008 credit bubble Fool me twice, shame on me.
This fellow says “Big” Government ahead? Does he mean bigger?
Big government ahead…
We’re in the middle of a financial crisis, but most economists say there is a broader economic crisis still to come. The unemployment rate will shoot upward. Companies will go bankrupt. Commercial real estate values will decline. Credit card defaults will rise. The nonprofit sector will be hammered.
By the time the recession is in full force, America’s Democrats will probably be running the government. Barack Obama will probably be in the White House. Democrats will have a comfortable majority in the House and will control between 56 and 60 seats in the Senate.
http://www.iht.com/articles/2008/10/14/opinion/edbrooks.php
And you’re gonna love it!
Given all your snarky comments about Mark Foley, where’s the complaints about his successor?? You’ve been awful quiet so far.
That’s old work Blano. Welcome to 08.
You’ve been throwin’ him out there all year. Trash a Dem in ‘08 for once then. There’s beer in it for you.
Looks like he was banging two, like most good ‘family’ guys do.
http://apnews.myway.com/article/20081015/D93QN0K00.html
2 Affairs?!!! Wheres my good old fashioned hypocrisy?! Oh…. thats right. He’s not a republican who got elected campaigning on intangible garbage like “family values”.
And you’re gonna love it!
BWAHAHAHAHAHAHHAHAHHHHHHHHHHHHHHHHH!!!
lmao…
Hey, quit stealing my lines before I “tresh” you!
I am getting ready for it, just ordered Das Capital. I wanted to read B.O.’s guide book so I can be sure and get my “fair” share from you rich folks.
As we all know, the solution to a broke nation is higher taxes on the people who are broke!
Umm I’m pretty much independent, but in Obama’s defense, I’d just like to say: What part of “only people who make more than $250,000.00 per year” do you not understand?
Or am I missing something? If I am, please cite sources.
I try to stay out the politics discussions, don’t really like either candidate, and lean towards Obama, but I can’t help but point out the that busn taxes Obama proposes would apply to MANY families who make less than $250K. So that “only people who make more than $250K” line is something I do understand, but believe to be a big fat lie.
If he does raise taxes on me ,I’m firing 2 of my employees and canceling the employer paid portion of the rest of their health insurance. Take that Hussein Obama.
“If he does raise taxes on me ,I’m firing 2 of my employees and canceling the employer paid portion of the rest of their health insurance. Take that Hussein Obama.”
Now there’s a winner of a plan!!!!! lmao
You might want to check out his web site
http://www.barackobama.com/pdf/taxes/Factsheet_Tax_Plan_FINAL.pdf
The bottom line is that families making under 250k won’t pay anything more in income or cap gains or dividends. The top 1% will pay 39% income tax, 20% dividend tax and cap gains.
Small businesses earning under 250k a year ie 98% won’t pay anymore taxes and will likely see tax cuts.
This trickle down economics crowd still don’t get it. The rich will invest if and only if they can make a profit. They can only make a profit if there is a consumer. Giving the elite or banks cash won’t fix the problem. We need to cut taxes on small business and middle income Americans and spend money on creating jobs period.
“No tax left unraised”
I’m calling the top in government tampering and intervention with th markets.
You’d think at some point they’d realize it just. ain’t. workin’.
Wonder what Mr. Market has in store today.
RE: Wonder what Mr. Market has in store today.
The local Chevrolet dealer just went under.
26 laid off.
Small stuff compared to big markets.
But big news in a town of 12k.
That is very sad. Same thing happen in my town, a Ford/Chrysler dealership - side by side, went down. I would short every US auto maker if I wasn’t afraid that their first $25 B handout wasn’t just the beginning. They can’t make money making cars and now they can’t make money financing them either.
RE: They can’t make money making cars and now they can’t make money financing them either.
How can there be NOT ONE forward thinking individual anywhere to be found the entire multi-billion buck domestic auto industry?
It’s virtually incomprehensible.
And if anyone thinks the Volt will save GM, then I got a bridge to sell them in Brooklyn.
However, the final end play will be bankruptcy for all 3 with pension and health care obligations dumped on the Federal Pension Guarantee Authority just like the airlines.
These $25 billion fed loans are just to stuff in some high muckity-muks, lifejackets before the ship rolls over and sinks.
“However, the final end play will be bankruptcy for all 3 with pension and health care obligations dumped on the Federal Pension Guarantee Authority just like the airlines.”
+1 Yup, just a matter of time.
It is not that there are no people willing to make cars. I think that there are many people who would be able to make a better car than the big 3. The problem lies in labor (UAW) and regulation (NHTSA). You need gobs of money to get a car certified as roadworthy, and that is without all the EPA crapola that a car maker has to go through.
The best example I can find think of right now are the british car makers, that have been propped up by government intervention for years, and they still turn out ugly, inefficient and very expensive cars, that is compared to their hey day of the late ’50’s early ’60’s…
A few weeks ago there was the most arrogant Detroit car executive on 60 minutes all full of himself and confidence. Wish I could remember his name, but it was awful to watch. It was then I decided that they were doomed. Luckily for them, I think they are either too dumb and arrogant to see it coming or have already cashed out and don’t give a @@@@.
I remember the electric car fiasco, and the documentary “Who killed the electric car.” The truth was those cars all had a “prototype pass” to be on the road, as they had not been through the rigorous and very expensive crash tests. The car companies were allowed to have the electrics on the road for a certain period of time, then the prototype pass expired and they had to be removed. They never mentioned this in the documentary. I think electric cars are cool, once everyone else gets one then gas will be really cheap for me.
I don’t know about Ford doing that. The Ford family still controls 40% of the voting stock in the company.
As to blaming the unions for the woes of the industry, how many are there still in the US? Two years ago Ford had 80k+ union employees and almost 1/2 accepted their buyout package. That leaves them around 40k union employees.
Replacements are paid at the B scale $12hr.
I can easily see all 3 going BK probably next year.
When GM was peddling Hummers & Escalades, Ford with their gasshogging F150 & Excursions and Chrysler pushing Hemi V8 SUV’s & pickups, Toyota had the Prius and was busy hybridizing all their models. The Big 3 said there was no future in hybrids at the time. GM killed their EV1, really stupid.
Sad to see the once-mighty Big 3 sink like the Titanic due to shortsighted greed and incompetance.
To set the record straight……
Toyota is good about getting the propaganda out about how “green” they are. If they are so smart, why did they build a brand new factory to build full size trucks in San Antonio? Ask them how thats working out for them.
The EV1 was never intended (or designed) to be a production vehicle. It was a technology demonstrator, much like the Chrysler Turbine cars of the 60s.
IMO……hybrids are overrated. Their name even tells you they are a compromise. There is something fundamentally inefficient in a vehicle that requires you to carry a 400 pound (?) battery pack, along with fuel, and two different means of turning the tires. A lot of people can live with their limitations, but just as many people can’t or won’t.
The best example I can find think of right now are the british car makers
Is there still such a thing? Aren’t all their historical brands owned by foreign interests?
RE: A few weeks ago there was the most arrogant Detroit car executive on 60 minutes all full of himself and confidence.
Pretty sure that was Bob Lutz chief of design and production for GM.
The sad part is, he’s been a noted car guy all his life and well respected by both industry reps and the guy on the street.
Why these guys can’t take the engineering from a machine like the world-class Corvette and incorporate the technologies at lesser levels to the balance of the product line is beyond me.
Then again, this a country that seems to be motivated to purchase an automobile based on Blue Tooth capabilities, GPS availablity, and a video screen for each kid.
Exactly… All existing british car makers are owned by foreign interests. And (except for very, very few models) they are extremely bad… Our carmakers might need the same foreign infusion of cash to save them… In fact one of the big 3 already had that cash infusion, and is still dying…
Don’t forget the cupholders! LOL
Don’t forget the cupholders! LOL
No too many cupholders in our Mini.
They can’t make money making cars and now they can’t make money financing them either.
Actually, for many dealerships, the real problem is that they can’t make money fixing them. There was an article a few months back (I believe it was in the Detroit News) that described how warranty work has dropped off a cliff in the past few years for Ford and GM (don’t remember anything about Chrysler). Service used to be the biggest money-maker for a dealership and the cars have become too reliable too fast.
I remember reading of one Ford dealer whose service volume had dropped by 40-50% in the span of 3 years or something like that. Unlike the Toyota/Honda side of the industry, they couldn’t yet make up the shortfall in the profit margin per vehicle sold because customers still don’t believe the cars are that good.
I was an engineering student in the late 1980s, and had to attend a weekly “industry” seminar one semester as part of the graduation requirement. One week some jackass from GM was the speaker.
During the Q&A session, someone asked “why can’t you make cars that last 100k miles and beyond, like the Japanese?” He responded that the American consumer doesn’t care about the longevity of the vehicle, because he likes to “trade up” every few years.
That answer pretty much summarized the American car industry for me, and I’ve been quietly waiting for its demise ever since then. Looks like it’s not that far off, unless the government decides to keep it on life support as some of the European governments have done with theirs.
RE: why can’t you make cars that last 100k miles and beyond,
Hmmmm….171k on my 5.0L ‘88 Mustang GT; 225k on the 5.0L ‘93 F-150; and 185k on the ‘98 Pontiac GP GTP.
All still running.
Rock ‘n roll w/ Mobil 1 & synthetic gear oil.
and oil is down to $72 a barrel off 50% from its highs….man this is bad for obama ….UH what windfall profits tax on oil companies to fund new social programs.
Gas might come back to $2.50 in NYC but the damage is done
Might be great time to buy that used suv nobody wants..with gas this low and just run it into the ground in a few years.
If we get a breather here, it is time for a sea change. Not for the sake of personal budgets, but for the sake of our freedom. JMO.
I agree wholeheartedly. American corporations have been playing grasshopper for far too many years on oil (and infrastructure, and education, and financing…). Easy to be a grasshopper during summer when things are growing and you can live off the land. But last I checked, world population was still rising. Winter is fast approaching. Time for the ants to take over, before there’s no oil left.
NYCdj, you go right ahead and buy that SUV. Gas may go to $2.50, but it won’t stay there forever. But to be fair, Dems had better not start permanent programs with one-time windfalls. Windfalls should be used for one-time major projects like infrastructure repairs.
Yeah, but we always blow it. We are Americans!!! If gas is expensive, then SUV’s be damned, but as soon as the price falls, like now, watch out. I hope this time is different and maybe the terrible economy and lack of HELOC $$ will restrain it, but we always fail to raise to the conservation challenge as soon as it isn’t an immediate cost issue.
“If we get a breather here, it is time for a sea change. Not for the sake of personal budgets, but for the sake of our freedom. JMO.”
Won’t happen.
If we get a breather, we’ll just see more Hum-drummers, Ford Extrusions, and F550’s on the roads. If the supply of oil magically increased 10-fold overnight, we’d see 2-story tall, 2-lane wide Canyonaros dominating the streets.
People are greedy and stupid and will waste everything in their effort to produce a bigger pile of trash than their neighbor as proof of their wealth. There will be no conservation until every last drop of oil is used up and the streets are filled with rusting Hummer H-Zeros that no longer have a fuel source.
“There will be no conservation until every last drop of oil is used up and the streets are filled with rusting Hummer H-Zeros that no longer have a fuel source.”
Driving those Hummers consumes more fuel, putting an upward pressure on prices, making me pay more for gas even though I drive a little Honda.
That is externalizing fuel costs onto me. Unfair. We should tax fuel based upon the weight of the car. Drive a Hummer? Pay $3 a gallon for tax. Drive a Civic? Pay a $1.20.
That policy would do more to conserve fuel than anything else the govt will come up with.
“Sad to see the once-mighty Big 3 sink like the Titanic due to shortsighted greed and incompetance.”
Yep. Stupid asses need to get smart and go back to limiting all of those born-to-fail wallet emptying hedonic add-ons to their exotic lines and market them to people with exotic incomes.
Greedy bastards had to build behemoth 9mpg SUV pieces of crap and even load-up their more “standard line” vehicles with features we never asked for–that just break and grind out the repair dollars.
Like its a real burden to actually roll down a window by hand, or manually open a sliding door or hatch-lift with our arms…”the horror!!”
Dumb.
DOC
The falling price of gas won’t help the big three, the US consumer is broke and unprepared for future hyperinflation. The era of the SUV is over.
To the guy that said hybrids are overrated.
I’ve averaged almost 50mpg over 117k on my hybrid civic and my wife 45mpg over 90k on a 2001 prius. Her prior car a toyota corolla averaged 22mpg over the same route. I’d hardly call that overrated. We could cut our consumption quickly if everyone bought these and practiced conservation. But keep driving that SUV and sending US dollars to Iran, Saudi Arabia, and Venezuela.
Costs so far
Civic
Brake job at 110k
Oil change every 10k
Valve adjustment 110k
Prius
Brake job at 80k
Pvc valve 30 bucks
Oil change every 7500k mi
This big brand new place just opened and now closed after 4 months .http://www.vvdailypress.com/news/warehouse_8977___article.html/closing_immediately.html
Aww, that’s a good chain too. I love their Wall o’ Guns..
Calling the top in their meddling might even be harder than calling a bottom in anything these days
Who knows what will happen, but this morning, Oil is -4.5%, Silver -4.7%, Copper -6.5%. Gold is +.25%.
Ummmmm, gotta love that cash.
Funny that only the metal with no practical use would be rising in price? (Oh sorry, I forgot about filling teeth…)
Even then its use is better as an alloy, and there are far better compunds, unless that is you want yellow front teeth…
They are called “Grills”
So I guess the question there is, how will drug dealers fare in a down economy?
I’d imagine the price of easily grown marijuana will plummet, and processed drugs (cocaine-meth-heroin) will have to come down to a price the heads don’t mind paying, based upon economic exigency.
“Funny that only the metal with no practical use would be rising in price?”
Its used in Electronics. Do they still use it in Teeth ?
Yes they do. One popular use is to use them as the base metal (with a nickel alloy) for crowns as it gives off a nice yellow base (teeth tend to have a soft yellow tone) that helps the porcelain blend in better. Also with titanium is one of the few metals that is innocuous to humans, as far as not killing us in short order.
Unless that is it is dropped on our unsuspecting heads..
I remember my Grandmother getting gold shots for her rheumatoid arthritis in the 70’s. I don’t think it worked.
Mr. Bear,
Evidently you fail to realize that virtually every integrated circuit device (yes those black thingies) on every circuit board in existence uses gold interconnect. I can say with confidence 99.9% of every electrical device in existence has a fair amount of gold, to say it has no practical use is asinine unless you live in a cave.
Many bears do live in caves. Albeit, I did not realize the extent of demand for gold in integrated circuits. But is it a significant source of demand relative to speculative demand? And is it likely to go up or down in a crashing economy?
“I’m calling the top in government tampering and intervention with th markets.”
I respectfully disagree. I think it’ll be an ongoing thing. Same for new spending programs coming out of the next administration and Congress. I don’t think passing a $700 billion bailout is going to slow that down at all.
700B is just the appetizer
ITEM: Income for the median U.S. household — the one in the dead middle of the income distribution — will probably be lower in 2010 than it was, amazingly enough, a full decade earlier. That hasn’t happened since the 1930s. Already, median pay today is slightly lower than it was in 2000, and by 2010, could end up more than 5 percent lower than its old peak.
When incomes are growing at a good clip, as they were in the mid-1980s and late ’90s, Americans are upbeat. When incomes stagnate, as they did in the early ’80s, early ’90s and in the last several years, people get worried about the state of the country. In the latest New York Times/CBS News poll, 89 percent of respondents said that the country had “pretty seriously gotten off on the wrong track,” a record high.
(”Off on the wrong track?” How’d we manage to do THAT? More important, how do we get back on track again? We’re sticking to our guns on this question. The only way to cure the malaise caused by the credit bubble is to return to the old idea of living within our means and saving a little money for a rainy day. The way to make that attractive to more people is to introduce a currency system that can be trusted. The present one is in a shambles, thanks to years of mismagement by Congress.)
Or how about NOT taxing the interest on what you save?
During the first “stimulus package” I wrote and called my reps suggesting that dropping income tax on interest earned on savings accounts, US Savings Bonds, and CDs for a year or so would be a much fairer stimulus.
Nobody agreed with me.
“Nobody agreed with me”
Thats because it would reward the WRONG people!!!!! It makes me mad to think about it!!!!
They already do that with a 401K, sort of.
I don’t see why capital gains can’t be taxed with some graduated scale, just like income tax. For example, anything under $10K per year is tax free. It would certainly make my taxes easier to file.
Tax churches.
Won’t be popular and lobbyists way to strong for that one to go over, but the wealth of churches is phenomenal. Tax ‘em!
How much extra tax revenue would be generated? Just curious.
Billions and BILLIONS!
-
(Carl Sagan)
Don’t churches own prominent commercial NYC real estate? Some churches are very wealthy. Pat Robertson is in my town, and his 700 Club and affiliated garbage is very well to do. They also have private companies owned by power neckties of CBN that are contracted to do work for CBN’s stuff… a great way to move that non-profit money into for-profit companies.
Don’t you think by taxing churches, it would give them more say in our political system? They have enough say, I don’t want to grant them more powers.
Obamas plan does call for a two tier cap gains dividend tax. No change if under 250k 20% if you make over 250k.
I’d like to tax CEO and Hedgefund manager cap gains and dividends as income because that is what they are. POS get paid 100’s of millions and pay 15-20% tax on it.
the old idea of living within our means and saving a little money for a rainy day is completely opposed to the way the US economy has been running since WWII (at least). Going back that way would amount to an economic revolution.
RE: the old idea of living within our means and saving a little money for a rainy day is completely opposed to the way the US economy has been running since WWII (at least). Going back that way would amount to an economic revolution.
Face it, you live in a country that is largely fat, dumb, lazy, and bored to tears from too much crap TV.
And in order to cope with the resultant depression people literally addict themselves to the consumption of cheap foreign produced trash nobody really needs in order to cope.
WE ARE WAL-MART NATION”
Yeah well, I hope no one is hold their breath waiting for real wages to rise. The short term goal of all the recent meddling might be to manage this deleveraging plunge…but sooner or later the PTB will again focus on the gloablization of wages - their real top priority over the long term.
Testify!
Precisely.
All will be solved when we’re all lucky to get 1 bowl of rice per day. That is, and always has been, the end goal.
What is this “incomes growing at a good clip in the mid-80s and late 90s” of which you speak?
There were a lot of people in a lot of industries that were only seeing 3% “raises”/year during that period. Didn’t matter how well the industry was doing, or in productivity improvements.
But of course, a lot of us were considered “overhead”, and not a “profit generating” center. Nevermind the fact that they continually crowed about having the #1 customer service in the industry….or worse yet, actually screwed things up, and killed off their customers.
If someone actually looked into it, I’m betting that most of the so-called “income increases” went to the upper echelon cretins, and to people in “bubble areas” who needed to be paid more because “the cost of living (due to inflated property values) is so much higher……”
Look for wage deflation in Cali, Florida, Northwest corridor areas.
That sounds a lot like deflation. I’m sure that the hyperinflationistas will have some rebuttal.
You can get to third world standard of living much more easily via hyper inflation. Cut peoples wages and they will scream. Let inflation eat them away and like the proverbial frog in the pot they will do nothing.
I was a millionaire straight out of high school - worked for two months, and got 1 million rubles, in 1995.
OTOH, it’s amazing that the $75 per bbl of oil is considered “deflation”. I guess Einstein was right - everything is relative.
I personally find the “third drop in a row” detail more important than the “larger than expected” drop. All drops are larger than economists expected, aren’t they?
Wall Street Journal
* OCTOBER 15, 2008, 8:44 A.M. ET
Retail Sales Tumbled in September As Producer Prices Fell on Cheaper Oil
By JEFF BATER and BRIAN BLACKSTONE
WASHINGTON — U.S. retail sales took the sharpest drop in three years during September as a weak job market and the credit crunch scared consumers and slowed the big engine of the economy.
Separately, falling energy prices triggered a second-straight large drop in U.S. wholesale prices last month, a government report showed, though a surprising rise in core prices that exclude food and energy may stoke fears that past inflation gains have become entrenched in the economy.
Retail sales dived by 1.2% last month, the Commerce Department said Wednesday.
It was a broad decrease and the third drop in a row. Sales in August decreased 0.4%, revised down from an originally estimated 0.3% decline. July sales fell 0.6%.
Economists expected a 0.7% drop in sales during September, the final month of the third quarter. The 1.2% drop was the biggest since 1.4% in August 2005.
Wall Street Journal
* OCTOBER 15, 2008
U.S. Plan Adds New Risks
Government Draws Criticism for Taking Nonvoting Shares
By BOB DAVIS and JUSTIN LAHART
WASHINGTON — Though the government’s latest rescue plan halted a market free fall, critics say the U.S. didn’t drive a hard enough bargain with banks in exchange for equity infusions, and may waste taxpayer dollars.
The broad contours of the U.S. rescue are similar to financial rescues that other nations — from Korea to Sweden to Japan — have put together over the past 20 years. Each involved using public money to infuse banks with new capital, take bad assets off their hands and guarantee them access to credit.
Many economists say that after months of ad hoc steps, policy makers finally have got the outline right, but critics focus on two details: Treasury’s decision to take preferred shares that don’t carry voting rights and to allow banks to keep paying dividends to investors. The critics argue that government money may be used to pay private investors, rather than boost lending and help stabilize the global financial system.
“We face a substantial risk that by not having control of the institution, that the institution won’t use proceeds in a manner that leads to long-term stability,” said Louisiana State University economist Joseph Mason, an expert on the Great Depression. Nobel laureate Joseph Stiglitz was more blunt: “As we pour money in, they can pour money right out. We don’t have a veto.” Mr. Stiglitz is an adviser to Democratic presidential candidate Barack Obama.
PB, does your emphasis suggest the fact that Stiglitz is advising O’Bama mean that he can’t be trusted to comment objectively on public policy?
No — rather that Obama, who like McCain does not know much of anything about economics — at least has the good sense to pick qualified economic advisers of different political stripes (e.g., Stiglitz is a Democrat, Volcker is a Republican).
PB, Obama does know a thing or two about economics. He doesn’t have formal qualifications, and he doesn’t pretend to have any idea what, for instance, “Pareto efficiency” means, but he has an intuitive understanding that economics is more about history and politics than about mathematics, and that any discipline having to do with the decisions of imperfectly rational beings carries with it a great deal of model risk. As you mentioned, he’s shown the good sense to turn to some excellent advisers (including Stiglitz and some behavioral economists like Eric Johnson, both of whom are sort of black sheeps of the econ dept at Columbia U.), and that in itself is a sign that he has his own opinions on the subject. As you know, the study of economics tends to stagnate for long periods of time while the mainstream thought of the day becomes a sort of religion. Then some crisis happens which that religion is unable to explain, and that prophets that were derided during that long period of time before the crisis are suddenly listened to. I believe it was Keynes who said, “Economics are most economical with their ideas; the tend to make the ones they learned in school last a lifetime.” Or maybe it was Galbraith. In any event, it’s time to give serious thought to some new ideas, and Obama seems to understand that. McCain doesn’t have a clue.
“…the study of economics tends to stagnate for long periods of time while the mainstream thought of the day becomes a sort of religion.”
How right you are. I guess that is why I don’t fit the mainstream of my profession very well. I never did much care for religion.
“As you know, the study of economics tends to stagnate for long periods of time while the mainstream thought of the day becomes a sort of religion. Then some crisis happens which that religion is unable to explain, and that prophets that were derided during that long period of time before the crisis are suddenly listened to.”
Gee, for a second there, I thought you were talking about science. Everyone knows academic scientists are never biased.
/sarcasm
Dubya has access to smart folks too, but he appears to be driven by born again visions of his destiny, the reason for his existence. He can still do considerable damage right up to Jan 20, 2009.
Correction - Volcker’s a dem.
http://en.wikipedia.org/wiki/Volcker
Don’t be fooled by his willingness to raise interest rates in the early 80’s, which is viewed by some as a republican-ish move.
I stand corrected, though I am near certain that I read in William Greider’s book (”Secrets of the Temple”) that Volcker was a cigar-chomping Republican when Carter appointed him.
I found the following passage of one of the articles linked to the Wikipedia thread quite interesting. Many believe the crash in bond prices in early 1987 set the stage for the Black Monday stock market crash (Oct 19, 1987).
VOLCKER OUT AFTER 8 YEARS AS FEDERAL RESERVE CHIEF; REAGAN CHOOSES GREENSPAN
By ROBERT D. HERSHEY JR., SPECIAL TO THE NEW YORK TIMES
Published: June 3, 1987
…
Mr. Greenspan shares the free-market views of the White House and has long been an important presence both in Washington and the Wall Street community. [ Man in the News, page D1. ] Still, the news stunned the financial markets, which had come to regard a third term for Mr. Volcker as highly probable. Bonds finished with one of the biggest losses on record, and the dollar tumbled. [ Page D1. ]
Efforts Seen as Minimal
The President’s selection of Mr. Greenspan followed a letter from Mr. Volcker saying he did not wish to be reappointed after eight years in the job. But it appeared that White House efforts to persuade Mr. Volcker to remain were minimal.
The “US didn’t drive a hard enough bargain” — indeed. Non voting shares, 5% interest on preferred shares, no limits on dividends, etc. Very unlike what the UK is doing on their banking intervention. Very unlike what Warren Buffet did when he recently invested in Goldman Sachs and drove a much harder bargain. The fix is in. The media is cooperating by averting its gaze and chattering about the irrelevant. From crony capitalism to crony socialism.
From afar, the bailout appears much like handing out free play monies to friends.
Professor,
How much money do you have to shove up your friend’s arse to make it come out of his ears?
No, socialism is when I get a piece of the pie.
This is still crony capitalism and what happens when an investment banker is the Treasurer.
I love pie.
socialism is when I get a piece of the pie NO PIE FOR YOU, COMRADE!
No, socialism is when you have to stand in line for a day in the hopes of getting a piece of pie.
I thought that was communism
Though the government’s latest rescue plan halted a market free fall,
Who are these asshat reporters that incessantly refer to our rigged economy where interest rates are set by representatives of private banks as the “free market”?
Goldbugs, a serious question for you. Why is it that many of you belive with such fervor in the security of gold?
I understand that historically gold has been a good hedge and store of value, but that was based in a time that seems long since past. I don’t understand how hoarding the metal will protect you in difficult times today? Sure, it was good in a preindustrial/pre digital age era, but today, I am not so sure. It has rallied as of recent, but adjusted for inflation, it is still very much below its highs over 25 years ago. Moreso, if we were to have a catestrophic economic collapse, your gold would either be confiscated by the government or you would need an army to protect your gold from the roving hoards of theives and starving masses.
I guess I sense a hubris in the behavior of goldbugs that at times seems almost fanatical as realtors during the housing boom. Gold is a non-productive asset class, same as housing, it doesn’t produce anything. Sure it is a nice shiny metal, it has some industrial uses, but so does platinum, and many other metals on the periodic table. Just because something was used as a store of value for thousands of years, does not mean that it will be that way in the future. For thousands of years humans believed the earth was flat, increase in knowledge and technology changed that, humans belived that many things had value once upon a time, but that has changed, much of what we believe has value now will someday either be worthless or of some nominal value. I believe that it is a human global cultural artifact for the lust of gold.
Physical gold is hard to get ahold of, yet the price hasn’t really moved, and I believe much of the scarcity is can be attributed to goldbugs hoarding and creating a self fulfilling prophesy. Think about it seriously, if we are getting to the place where we need to carry satchels of gold around to buy bread, do you really think that any of this is going to matter?
BTW, oil has fallen below $72 and deflation seems more likely.
Oil falling paradoxically has the opposite effect, it creates inflation. It allows more moneys to be spent on other goods. Goods that may be in shorter supply.
Maybe, if oil were falling on its own. If people have less money, and that may have something to do with oil falling, they will not start buying more and more and more crap.
a few typos, working on a blackberry can really cause trouble
.
BTW, I don’t want to start a flame war, I am really trying to understand how gold would be of much value in a total economic collapse. I understand useing PM’s as hedge for a portion of your portfolio and that is smart, but the reason to really think that gold is the end all be all doesn’t make sense. If you can’t use dollars anymore, I think we will have MUCH bigger problems than simply hyper-inflation, think world war and the end of civilization as we know it, gold or no gold.
To those not affected by the disease, we appear on the surface as loony as people that live their lives currently based upon something that may or may not have happened, almost 2,000 years ago, the difference being that our faith is tangible and has never failed as money, vs. their faith, which requires extreme leaps of faith.
Every Goldbug is by definition a saver, and we are no different than king combotechie, except he feels salvation is best served by giving his savings to a money market fund, to shepherd.
In 1975, the world had been off the Gold Standard for 42 years, and cash was king, except in Vietnam.
If you wanted out of Saigon, one-way tickets out of hell looked like this:
http://www.usagold.com/gold/coins/pics/gold-bullion-kim-thanh.jpeg
I am in the same situation trying to understand if I need to have actual gold in my possession, if I could get any, and not wanting to be part of a blog flame. Despite its unavailability locally, I agree that a doomsday scenario where gold is supposed to be the cat’s meow is exactly when my investment in bird and deer hunting guns will be a much better return than any PM. What also worries me is that with all that is going on, any traditional analysis should have gold over $1,500 but it is not. If traditionally it is sacred, but it is not serving in its traditional role as a safe haven, then I am hopelessly confused. As it is I feel like a freak for always having 30+ days of food, drinking water, and heating fuel on hand…..
I don’t think it is freakish at all to have some stores. Many who have lived in disaster prone areas would agree with you. It doesn’t mean you think the world is going to end.
Most people could not remain comfortable in their home for three days without the system working perfectly.
This is exactly why PM are priced so low with no availability. They don’t want you to have a safe haven. If there is no obvious place to park your irredeemable dollars, you will hopefully stay in stocks, bonds, T-bills, etc. Gold/silver is the only place left where value can’t be trumped by “the man”. Physical prices prove it. Paper is a joke (right now). On average, silver is about 20-25 bones for a round… Gold is 1200 (see eBay). Those with the metal set the price- paper ETF’s would make me nervous.
I’ve thought about throwing in some $ to get 1000 oz of silver and demanding delivery instantly from SLV (you can still do that, right?) to get better pricing and see how long, & how many excuses they come up with… I’d love to see a big portion of the holders demand physical.
I agree in some stores, food, water, maybe a few gold pieces to barter for, but if it all goes down, gold will be nearly worthless unless you have an army to protect it. The entire world we live in is based on the security provded by empire, if we go MadMax, all bets are off.
Dude, a failure of the currency does not mean we’re living Mad Max style, you’ve been watching too much TV.
It would be disruptive to be sure, but life would go on. And people would need currency, and something would fill that need. History tells us the most likely candidate to be precious metals.
It’s true that if you hold physical precious metals you have to worry about it being stolen, but how is that any different than now? The largest single act of theft I’m aware in the last 100 years is when the U.S. government stole gold from the masses in exchange for 20 dollars per ounce, then revalued those dollars by almost 50%. Since then the dollar has continued to lose most of it’s remaining value. Maybe the “roving hoards” you speak of are a problem, but they aren’t nearly so efficient a bunch of thieves as the govt you rely on for protection.
No need to think Mad Max, think Argentina. I’m sure many there *wished* they were holding gold before their currency collapsed. I personally keep 10% in gold.
Got Bouillon?
http://www.21food.com/userImages/ginger520/ginger52053103427.jpg
Shizo, who is “they”? Maybe it is just goldbugs feeding on themselves creating a self fullfilling prophecy? Maybe the the “They” ARE the goldbugs. 1200 on ebay? that is hardly an accurate gage, one oz of beanie baby was over $5000 a few years ago on ebay, hardly a store of value.
I don’t hate gold, I just think that there a specuvestor hubris to the whole gold market. Why is it that gold dealers and goldbugs sound like a cross between Lyndon LaRouche and Realtor.
For someone who doesn’t want to flame you sure are arrogant and ignorant. Why do fiat-hoarding fedophiles sound like a cross between George Bush and a Lehman Bros. exec? And why do you care what goldbugs do?
fedophiles! That is the best one yet… (thanks for the laugh that made my day)
OCM,
Call up your broker and tell them you want out of the market. After listening to the retarded response you’ll get: dollar cost averaging, any 10 yr. period = profit, long haul doctorine, ect., you’ll understand the term “they”.
Are people bitter because they missed the gold’s ascend? I do not think of myself as anything that people will understand.. I cannot be classified unfortunately. I really do not think I am a gold bug. I hate capitalism. Have a unique lifestyle and a calling in life. I do invest in personal relationships… I can learn a new language in two months. I spend hours a day dealing with the biggest and hardest challenge in the world.
I bought some gold coins I think in 2005 for around 560. Now I can go back and get more than 900 of those green dollars for same coins. I hear other people have lost money. Why, wasn’t it obvious? There was and still is so much wealth in the US, but it is not used for education, arts, relationships, emotion, understanding, teaching each other, and simply having a good life. People who do not know who they are want to impress with their Porsches. I might sell out and get one, but ONLY because I like to drive fast. I will make sure mine is scratched and missing a bumper or something…. Please, do not attack watcher. When communists took over in 1940’s - they took everything from you - businesses, houses, whatever they could find and see. If you were smart, you got to keep some of your silver ware and/or gold. Just hide it well.
After Ike, here on the Gulf Coast of Texas, you got an inkling of what things would be like if the system shut down. Very tense in College Station… not a gas can to be found for sale. People had up to five red plastic cans lined up on bungee cords on the top of their vehicles. You’d see people filling up huge generator tanks with fuel at the few gas stations that were open. I read a book in line at a station for a couple of hours on a promise from the clerk that a truck was coming to fill the underground tanks. Chatted with another guy who needed gas for a generator. The truck never showed up.
I think that if gold makes you feel secure, buy some. But value is set by concensus, and if things get really bad, people are going to be operating by the “tuna” standard and not the “gold”.
RE: As it is I feel like a freak for always having 30+ days of food, drinking water, and heating fuel on hand…..
Let all the lemmings go off the cliff, while you munch away on your beef jerky and Gorp.
One recurrent theme in all my readings on WW II, is that when soldiers and civilians found themselves in deep doo-doo…the dire nature of the circumstance nearly always involved an acute lack of food.
If you can’t use dollars anymore, …the end of civilization as we know it.
Talk about hubris…
Dollars are important, but not that important. It wouldn’t be the first time a major currency has failed. Humanity will go on without it.
Didn’t mean it to sound like that
, but to smugly think that becuase you have chest full of gold ducats you are somehow immune and will walk around living well while the poor ignorant masses suffer is naive and delusional. It is unlikely that you will be able to hold onto your gold if dollars became worthless, and you would have to flee to some distant land, carrying your treasure like Blackbeard the pirate always trying to stay one step ahead of confiscatory government policy or roving bands of theives. That is hardly a scenario most would want to live, so again, before one roots for the destruction of the dollar and “fiat currency” be careful of the law of unintended consequences.
1947: Switzerland.
Somehow, my father got to go to University and receive his degree in finance, and he was just another Displaced Person (DP) after the war, and there were millions of Europeans in the same boat, wondering where their next meal was going to come from, living hand-to-mouth existences in the shell-shocked war-torn aftermath, but over in Switzerland, my dad was eating 3 squares a day and going skiing or hiking in the mountains on the weekends…
Ne Plus Ultra
I’m not rooting for anything, in fact I’ve even said before I own exactly one gold coin, half ounce. I also have a little silver, but nothing major.
The weaknesses of fiat currency are real, for one to point them out is not the same as rooting for failure.
And as I point out above theft is a risk, of course. The problem with the dollar-cheerleaders is that they for some reason think the dollar somehow protects against theft when in fact it gaurantees it. In contrast, with precious metals theft is not a certainty.
Not a good comparison, after Europe was destroyed by war, no one had the power to destroy the entire world in 30 minutes. The US going down isn’t Argentina or France, or Germany. 300 million people with the largest arsenal on the planet aren’t going to sit hungry while global bankers are chuckling at their misery. Giant empires don’t collapse without a spectacular cloud of destruction that will have incredible global consequences.
This isn’t some silly “too big to fail” argument. The US very well could fail, but to think you’ll be skiing eating “3 squares a day” and sitting pretty living of gold coin in some far off land is terribly myopic and delusional.
To smugly think that becuase you have bank account full of fiat currency you are somehow immune and will walk around living well while the poor ignorant masses suffer is naive and delusional.
It is unlikely that you will be able to hold onto your standard of living if dollars became worthless, and you will be unable to flee to some distant land making it impossible to stay one step ahead of confiscatory government policy or roving bands of theives.
That is hardly a scenario most would want to live, so again, before one discounts the destruction of the dollar and “fiat currency” be careful of the consequences.
Fixed that for you.
OC, you gotta consider different possibilities. If there is a MadMax scenario, gold might not be of any benefit (I would disagree, but for the sake of argument lets assume thats true).
But that’s not the only possibility. Other currencies have failed in history. Rome failed, Germany failed the USSR collapsed. It happens. Life goes on. Some people think gold may provide some financial protection in such a scenario. If you evaluate times in the past when such a thing has happened, there’s good reason to accept that gold would be helpful.
If you just manufacture some crazy “it’s different this time” theory where gold won’t help at all and want to live your life according to that, well that’s fine too. Whatever floats your boat.
We all evaluate the information available (or some choose not to) and make our decisions. You’ve made yours and that’s cool, but buying PM’s isn’t all that crazy if you consider certain historical events and consider similar events to be possible in the future.
Moreover, a new paper currency will spring up to replace it — just like every other time in modern history.
Which could buy you more of the new paper currency?
The old paper currency or precious metals?
“I guess I sense a hubris in the behavior of goldbugs that at times seems almost fanatical as realtors during the housing boom.”
I keep telling them the same, but to do so is about as productive as questioning a religious zealot about the tenets of their faith.
P.S. One way to tell a zealot: Any one who dares to question them gets flamed.
My sister used to be involved in direct marketing for a now-defunct company (Equinox). She used to make her hapless relatives watch product marketing videos at holiday gatherings. Goldbug’s confidence in the superiority of their logic reminds me very much of my sister’s confidence in her former employer. The founder of the pyramid scheme ended up in jail, to my recollection…
My sister used to be involved in direct marketing And where did she wind up? Are her hapless relatives still on friendly terms with her?
We are way past it. She deprogrammed herself by going back to school for a law degree, and is now (mostly) happily settled into a new life.
There can be life after cult membership!
I’ve always hated the ‘Goldbug’ moniker, who would want to liken themselves to an insect besides, say Kafka?
I have a better name for us…
‘Barbarous Pirates’
PB, I am glad she is in a better place but wonder if the programing she got in law school was any better….. I am still fighting to escape it and my student loan for it.
C’mon!!!
All formal education is “programming” to some extent but surely you learnt something out of it?
A little? A tittle? Perhaps even a soupçon?
I have a hard time believing that any intelligent person didn’t gather some level of insight in just about any graduate program.
Now, student loans, that’s a different argument altogether.
I was mostly kidding, but they do (try to) teach you “to think like a lawyer” and I am pretty convinced, that for the most part, that is counterproductive.
Once again, c’mon!!!
I had a lawyer couple as very close friends (still friends but no longer living in the same city.) We hung out all the time. Very intellectual types, and we’d talk intricate points of law all the time, and so I too learnt to “think like a lawyer”.
Surely, this can’t be a bad thing?
It definitely enlightened me on the space between “Platonic” notions of truth and “legal” notions of truth, or where sharp legal rights may do the “wrong” thing.
Can’t say it’s hurt my abilities to negotiate legal entities either (even though I don’t have that much use for it.)
But the knowledge is still there even if I don’t use it.
I just don’t buy it. I have never seen a situation where learning is bad, and I never will. I would be willing put my personal wealth on that statement.
FPSS, I tend to agree with you on the value of a good education. I define it as one in which you acquire the abilities to think critically and exercise dispassionate judgment. I disagree with you on the value of “legal thinking”. From my standpoint, it amounts to infinite word parsing, selectively culling contradictory evidence, and starting out with a foregone conclusion. May the greater con man win. He/she frequently does.
In hard science, you are not permitted to throw out evidence which contradicts your (predetermined) conclusion. In science, you start with a hypothesis which is pummeled to death with empirical testing, and its value becomes clear over time. In a public forum.
IMHO, the good souls starting law school are unaware of this premise, and become disillusioned once they do “get it”. Too late: they’ve paid their money. The folks who are not disillusioned were likely scuzzes to begin with, get a thrill out of casuistry, or are driven by malevolence gone underground.
Sorry if I offended anyone. I dislike lawyers and note that many of them detest what they do for a living.
“I just don’t buy it. I have never seen a situation where learning is bad, and I never will. I would be willing put my personal wealth on that statement.”
Unfortunately, FPSS, most “educational institutions” do far more telling people what to think than how to think.
Unfortunately, Jane, institutions that “teach” science generally aren’t much better at this. If you don’t believe the current scientific dogma, fat chance you’re going to get any funding. What you’ve stated is how science ought to be, not how it actually is.
“almost fanatical as realtors during the housing boom”
I’m starting to get that feeling to. During the housing boom there were non-stop commercials about housing. Remember the “I buy houses” commercial? The same thing is happening with gold. It seems to me there is a frenzy building with it, so what happens to the price when the frenzy turns to panic? will it end up like tech stocks or housing?
“I guess I sense a hubris in the behavior of goldbugs that at times seems almost fanatical as realtors during the housing boom.”
“I keep telling them the same, but to do so is about as productive as questioning a religious zealot about the tenets of their faith.”
Come on PB, you’re more sensible than that.
First of all - there’s nothing wrong with being fanatical about something - as long as that something is not wrong. For instance was it wrong for HBBers to constantly argue in 2006 that we were in a housing bubble? It wasn’t obvious to the general public at the time, so to a large portion of the populations, HBBers appeared to be zealots/fanatics/whatever, because we stuck to our guns, and now we’ve been proven right (to most people anyhow).
In the case of PM’s - it’s not possible to prove the case right or wrong unless we truly do have a dollar currency meltdown. So why all the claims that goldbugs are zealous cultists? This to me smacks of intellectual elitism.
Heck in aladinsane’s case - he’s already been proven right, to some extent at least! In his father’s case the situation was exacerbated by a military war - but who’s to say we won’t have the same situation in the U.S. before long? We are far from being a neutral country, and we have lots of folks around the world who really don’t like America. It’s not inconceivable. I hope and pray that it doesn’t happen, but there’s always that chance. Who here realizes that Hitler actually had designs on the U.S. mainland in 1941? It could have happened.
Keep in mind that most “goldbugs” on this board, myself included, don’t exactly have 100% or even 50% of their savings in gold - typically it’s anywhere from 5% to say 30% or so. So what’s the worst that will happen? If you have say 20% of your savings in gold, and gold drops by 1/2, then woo - you’ve lost 10% of your savings. Well guess what - the lion’s share of America just lost 20% of their savings is just a two-week period!!!! Should they have invested it perhaps in something more safe - like maybe housing?
As a side tangent - I have been developing a theory as to what the new bubble is. The new bubble, in my opinion, is the U.S. dollar itself. When it busts - watch out.
P.S. I wrote that before reading the thing about Jim Rogers below. I swear.
Good post to cool the passions! I think some are upset to have missed the one asset that has performed well in the past 2-3 years. I have almost doubled the money I spent on gold. However, I would be very afraid to put ALL eggs in one basket. I am kind of surprised at Aladin because I am sure he does not have 100% in gold. He must have some real estate, some cash flow, etc. He has too much erudition to advocate 100% positions. He is right about having a passport and a VISA to a country outside of the US. Also, gold is not for the regular Joe Schmoe. If you do not have food, than b y all means, provide that first. But let me tell you, there are many, very many rich people in the world. People with gold usually have other large amounts of cash or assets. Or accounts in Euros, Swiss francs, and dollars in other countries.
SHOW ME BETTER PLACE TO PUT MY MONEY, and I WILL GLADLY get out of gold and pay you a commission should I make money as compare to gold. Seriously. Gold is a terrible investment, and I cannot even call it that!!!
Check into Everbank world market CD’s - a good way to invest in a different hedge against the dollar.
“Why is it that many of you belive with such fervor in the security of gold?”
Because there is nothing else to believe in. Not stocks or bonds or fiat money or property. And if all your hopes are piled on one thing, you had better believe in it as hard as you can because its all you’ve got.
Not stocks or bonds or fiat money or property If gold isn’t property, what is it? God?
No, you are all you’ve got.
Gold: 666
Financial Panics: 0
(just my guess of how many times mellow yellow has come up victorious when pitted against fear, in the last few thousand years…)
Comment by aladinsane
2008-10-15 07:17:35
Gold: 666
Financial Panics: 0
I knew you were Satan with all your GOLD worshipping l!!!!!
‘Manna from Hades’ would be more appropriate i’d say.
(and please don’t tell home-land-security that i’ve been consorting with Arabic Numerals)
It is good to question Gold.
As someone mentioned, Gold is an unproductive asset, almost exactly like houses, except that you can’t (easily) make more of it (have to dig hard).
The trick to owning any non-productive asset is to forecast future demand for such asset, as that is the sole source of any “growth” in value.
In other words, if less people want it next month, then it’s price *will* go down, since on it’s own, it doesn’t produce any money.
Right now, the main drive for gold going forward is fear. Fear of currency collapse, fear of stock market, fear of govt intervention/hyperinflation.
And yet, in the real economy, money base is quickly shrinking. We’re staring into deflation, which is due to de leveraging and declining total debt/credit. Essentially, there is simply less money to go around.
This creates a “wedge” situation. If fear is constant, then the fact that money is in decline asserts that Gold *must* drop in price simply because there’s less money to buy it. For gold to go up, the rate of increase in fear must exceed the rate of decline in money-availability.
In a sense, we’re in a “bubble” of gold, but like any bubble: the Market can remain irrational much longer than you can remain solvent.
It is also true that bubble is in the eye of the beholder: (1) Are we building a gold bubble that will eventually burst (when fear subsides or currency-deflation becomes too extreme to support the gold prices), or (2) Are we actually unwinding from the great fiat currency bubble built over 60+ years and Gold is the actual indicator of true “value”?
Economics aside, there’s also true issues with owning gold physically that anyone should deal with:
1. Theft is a non-trivial problem. My family have actually lost physical gold because we’ve been burglarized. The total loss ratio is 100%, which is much worse than simply owning, say, GE stocks. Crime is going to get worse if economy really worsens to a point that gold is useful.
2. Govt confiscation is outlawing is non-trivial too. Just look at governments in history during troubled times. Look at what happened during the Chinese Communist Cultural Revolution, where owning gold is illegal and it’s confiscated. Part of current gold’s value is it’s liquidity because there’s a market, if the market disappears as it becomes illegal to trade gold, then by virtue of being forced into black market, gold *will* lose it’s liquidity and have to pay a premium to trade.
3. When gold is one day finally more useful than all the other fiat out there, we may very well be facing global world wars and social collapse. Which countries whose govt cannot pay it’s police and military is able to maintain peace for long? In that scenario, owning gold may very well be like having a red target painted on you. You may need to swallow it or bury it to keep it.
Notice #1 - #3 fulfills the irony that “when you truly need something, you can’t/don’t/are unable to have/keep it anymore”.
So, these are issues to contend with when you want to own gold.
My advice is own some/enough gold to buy a ticket out of where-ever you are, but don’t bet your whole worth on it, because it will not save you during extended unrests.
You make very good points, all of which must be weighed in consideration of how much gold to own (anywhere in the range of 0-100%, depending on your views). The validity of these points is why IMO it’s best to not have the bulk of your savings in gold, just a smallish percentage (often you seen 20-30%, which I think is about right).
Question about your parents’ burglary - can you give any details? E.g. was it happenstance that a random burglar came upon it, or was it someone who knew it was there? Was it protected and/or hidden?
FWIW though - there is one key counter-point to all 3 of your above points - secrecy. If you don’t advertise to the world around that you have gold (which only a fool would do), then generally:
- You won’t get it stolen from you (unless by extreme bad luck).
- The government won’t confiscate it, if they don’t know you have it. There will always be a black market regardless of what the government does (including in USSR and China).
- You won’t get killed for it.
test?
Why do I believe?
Mostly because I have no other choice. My gold is buried (metaphorically) in my back yard. All property can, and historically has been confiscated by the government.
Fiat currencies are subject to stealth theft by inflation.
Is gold safe? Maybe not. But it is the best idea I can come up with.
Paper assets value can fall to zero, gold will not. pretty simple in the long run. Are you that confident in the invented paper assets that are out there? Derivatives are one example, but there are many, and they create them out of thin air. Gold at least has performed as currency for a long time. It will again as a last bastion of wealth or even just value. When the time comes I will bet that selling it or exchanging it will be quite easy, hard times do that.
In the long run we are all dead.
– John Maynard Keynes –
I personally care little about whether all paper currency is eventually worthless. If you want to carry your specious argument to the extreme, then gold will also be worthless, once the human race goes extinct. For purposes of me and my kin, these long-run scenarios are exercises in intellectual masturbat!on.
Gold is a non-productive asset class? What do you call Federal Reserve Notes, whose value shrink year by year? Sure, they are nice green rectangles but those fiatscos pay no dividends.
I get a sense of hubris in the technocrati that they have conquered the laws of economics that is as fanatical as bankers during the Ponzi finance boom. For hundreds of years smart guys created fiat currencies, fractional reserve systems, etc. etc. and they always failed, every one, every time.
Physical gold was not hard to get ahold of until the government begain hoarding it and artifically depressing the price, stimulating demand. And why does your enlightened government hoard the barbarous relic anyway? Fiat-hoarders never answer that question, and neither do politicians. Think about it seriously, if we are getting to the place where we need to take wheelbarrows full of paper money around to buy bread, how advanced are we?
Oil at 72 is deflationary? Sure, but even if it is you should remember that during the deflationary Great Depression the value of gold rose.
But hey, just ignore those raving goldbugs. What do they know anyway, it’s not like gold has outperformed every other investment class for going on ten years. Put your faith in smart guys and stock markets, fiat and politicians, bankers and billionaires. They have your best interest at heart, all the time. And don’t worry that you will have to join the Roaving Horde of Starving Masses because we are enlightened, advanced, and Americans. It’s different here.
Oil at 72 is deflationary? Sure, but even if it is you should remember that during the deflationary Great Depression the value of gold rose.
Be careful that if we truly enters depression, at the cusp of “max fear”, If the underlying currency economy still exists after depression and is believed to continue to exist, gold will drop after that, and quite precipitously. There’ll be a lot of people who have gold that now need to liquidate either to consume or to rebalance.
The selling will start and then accelerate (selling begets more selling, until panic-like proportions) just like any other bubble, before you know it, it’ll be far lower than it’s max fear price.
Gold is valuable until it is not.
They’re not making more gold, but they’re also not making more land remember? Be careful about putting gold up there in a “it can only go up” forever pedestal, we’re all so familiar with that.
The question to ask is whether we’ve reached max fear yet. I don’t think we’re there yet, but doesn’t mean everyone shouldn’t keep what I said i mind. Would we be there in June 09? Dec 09? how about 2010? You need to devise an exit strategy if you own significant amount of gold.
Max fear, max pain, black scholes, blah blah. Tell it to Iceland, or Zimbabwe. You talk about having an exit plan for gold? Gold is the exit plan.
I think the government keeps a stash of gold because of recent history. In case of war, government may only be able to import war supplies with payment in gold, like has happened in the past. That’s how we got so much gold in the first place. Strategic reserve. Rightly so. Not an “investment”.
It isn’t going off the gold standard that got us in this mess. It is crazy leverage and bad bets leading to bad debts. We could have done that on the gold standard just as easily.
Personally I think the whole “asset appreciation” mentality is a curse on our society. When we think we are rich because we have this idle asset or that, yet produce nothing, we fall in on ourselves. Welcome to 2008.
“It isn’t going off the gold standard that got us in this mess. It is crazy leverage and bad bets leading to bad debts. We could have done that on the gold standard just as easily. ”
You are correct–because we DID do this once before, while on the gold standard. It was 1929-33.
“Sure, they are nice green rectangles but those fiatscos pay no dividends.”
San Diego median home price in November 2005 = $517,000
San Diego median home price in August 2008 = $350,000
Suppose someone had $517,000 in fiatscos available in November 2005 which they could have either spent on a home then, or waited until August 2008 to make the same purchase. Assuming the median is a reasonable proxy for market value, and that they could have rented a home during the interim at the same monthly payment (or less) than what they would have paid on a $517,000 loan, they could have earned a fiatsco ‘capital gain’ of $167,000 = over two years of pretax income for the median San Diego household.
Is this really that complicated for you to understand, Watcher?
OK PB, using the same logic…
Nov 2005 gold was on ave about $480/oz
Aug 2008 gold was on ave about $850/oz
So if I take $517K and invested in gold 2005, I’d have 1077 ounces of pretty metal. Fast forward to 2008 and take the 1077oz times $850 = $915,450 for a net gain of $398,450.
$167K or $398K….. hmmmmmmmmm.
Ill bet the good citizens of Zimbabwe and Iceland had a few hundred ounces of that worthless shiney metal.
On PBS Newshour yesterday, they showed a Zimbabwe supermarket with nothing whatsoever for sale, on the shelves…
They must be hiding it somewhere else.
No food, not even for the people with gold to pay for it?????
People with Gold left Zim. long ago…The fools left have billion dollar notes with nothing to buy.
” Always have a few gold coins to bribe the border guards”
OCMetro,
Gold is not simply an inflation hedge like you presume. It’s also a financial crisis-war-Armageddon hedge. There are no 100 pct bulletproof safe havens just degrees of risk. Gold in the current environment (see Iceland and other small foreign countries/currencies) seems less risky than most other asset classes (stocks, bonds, money funds, real estate, and commodities). I don’t know where it goes from here but it’s comforting to have insurance during financial storms.
Something’s wrong with wordpress. My comment’s not showing up.
It is good to question Gold.
As someone mentioned, Gold is an unproductive asset, almost exactly like houses, except that you can’t (easily) make more of it (have to dig hard).
The trick to owning any non-productive asset is to forecast future demand for such asset, as that is the sole source of any “growth” in value.
In other words, if less people want it next month, then it’s price *will* go down, since on it’s own, it doesn’t produce any money.
Right now, the main drive for gold going forward is fear. Fear of currency collapse, fear of stock market, fear of govt intervention/hyperinflation.
And yet, in the real economy, money base is quickly shrinking. We’re staring into deflation, which is due to de leveraging and declining total debt/credit. Essentially, there is simply less money to go around.
This creates a “wedge” situation. If fear is constant, then the fact that money is in decline asserts that Gold *must* drop in price simply because there’s less money to buy it. For gold to go up, the rate of increase in fear must exceed the rate of decline in money-availability.
In a sense, we’re in a “bubble” of gold, but like any bubble: the Market can remain irrational much longer than you can remain solvent.
It is also true that bubble is in the eye of the beholder: (1) Are we building a gold bubble that will eventually burst (when fear subsides or currency-deflation becomes too extreme to support the gold prices), or (2) Are we actually unwinding from the great fiat currency bubble built over 60+ years and Gold is the actual indicator of true “value”?
(Wordpress erroring out again)
This creates a “wedge” situation. If fear is constant, then the fact that money is in decline asserts that Gold *must* drop in price simply because there’s less money to buy it. For gold to go up, the rate of increase in fear must exceed the rate of decline in money-availability.
In a sense, we’re in a “bubble” of gold, but like any bubble: the Market can remain irrational much longer than you can remain solvent.
It is also true that bubble is in the eye of the beholder: (1) Are we building a gold bubble that will eventually burst (when fear subsides or currency-deflation becomes too extreme to support the gold prices), or (2) Are we actually unwinding from the great fiat currency bubble built over 60+ years and Gold is the actual indicator of true “value”?
(Final attempt)
This creates a “wedge” situation. If fear is constant, then the fact that money is in decline asserts that Gold *must* drop in price simply because there’s less money to buy it. For gold to go up, the rate of increase in fear must exceed the rate of decline in money-availability.
In a sense, we’re in a “bubble” of gold, but like any bubble: the Market can remain irrational much longer than you can remain solvent.
It is also true that bubble is in the eye of the beholder: (1) Are we building a gold bubble that will eventually burst (when fear subsides or currency-deflation becomes too extreme to support the gold prices), or (2) Are we actually unwinding from the great fiat currency bubble built over 60+ years and Gold is the actual indicator of true “value”?
Economics aside, there’s also true issues with owning gold physically that anyone should deal with:
1. Theft is a non-trivial problem. My family have actually lost physical gold because we’ve been burglarized. The total loss ratio is 100%, which is much worse than simply owning, say, GE stocks. Crime is going to get worse if economy really worsens to a point that gold is useful.
2. Govt confiscation is outlawing is non-trivial too. Just look at governments in history during troubled times. Look at what happened during the Chinese Communist Cultural Revolution, where owning gold is illegal and it’s confiscated. Part of current gold’s value is it’s liquidity because there’s a market, if the market disappears as it becomes illegal to trade gold, then by virtue of being forced into black market, gold *will* lose it’s liquidity and have to pay a premium to trade.
3. When gold is one day finally more useful than all the other fiat out there, we may very well be facing global world wars and social collapse. Which countries whose govt cannot pay it’s police and military is able to maintain peace for long? In that scenario, owning gold may very well be like having a red target painted on you. You may need to swallow it or bury it to keep it.
Notice #1 - #3 fulfills the irony that “when you truly need something, you can’t/don’t/are unable to have/keep it anymore”.
So, these are issues to contend with when you want to own gold.
My advice is own some/enough gold to buy a ticket out of where-ever you are, but don’t bet your whole worth on it, because it will not save you during extended unrests.
One principle always applies - be it with WordPress, bubbles bursting, (or gold?
).
Patience Grasshopper - patience.
Your post came through above (along with my response).
I 100% agree with you!
If I’m starving and offered a loaf of bread or a chunk of gold, I know which I’m choosing and it won’t be yellow and hard.
We Are Facing an ‘Inflation Holocaust’: Jim Rogers
“…What about all the people in countries that minded their manners, saved their money, didn’t get overextended and now all of a sudden they’re being asked to bail out a bunch of guys on Wall Street who were incompetent at best and some of them crooks?”
“I thought it outrageous that anybody has to step in a bail out a bunch of 29 year olds driving Maseratis,” he said.
There are not many safe havens in the volatile markets, he said.
“I have an enormous amount of cash and I’ve been using it to buy more Japanese yen, more Swiss Francs, more agricultural products… there’s a liquidation phase going on, where everything is being liquidated. They’re selling everything in sight.”
“In a period like this the way you make money coming out of it is to own the things were the fundamentals have not been impaired,” Rogers added….”
http://www.cnbc.com/id/27097823
I absolutely agree with Mr. Rogers assessment. The total amount of sovereign debt that has to be issued in Europe and in the US is now equal to $7 Trillion. By the time this rolls, few will be buying Euros or dollars.
I am in favor of the commodities at these prices, but I am not yet a buyer. China’s oil consumption was up 46% from last year. Anybody seen the price of milk come down?
Another observation, ignore the three month LIBOR. It is no longer a meaningful number. It is now cheaper and easier to borrow money from the Central Banks than interbank loans. There is no reason for the rate to come down.
“It is now cheaper and easier to borrow money from the Central Banks than interbank loans.”
There is a lot of consternation about banks not lending to one another. But if they can borrow from the sugar daddy central bank at a lower rate than they can from each other, why would there be any interbank lending to speak of, whatever?
“Another observation, ignore the three month LIBOR.”
Not that the fact that the LIBOR rate sets the rate of some tens of trillions of dollars should matter in any way.
Doesn’t the LIBOR heavily impact ARM resets?
“Rates on about $10 trillion in corporate loans, mortgages and student loans worldwide are pegged to Libor, usually with a markup of several percentage points, according to University of Edinburgh professor Donald MacKenzie.” BizYahoo
“…Libor is an indicative rate: it’s the rate at which banks would lend to each other, if they were lending. If they stop lending, they still need to report some interest rate to the Libor committee. But it might well bear very little relation to banks’ cost of funds in the real world…” Felix Salmon
“There are no real term funding markets except for central banks. The Libor is meaningless.” Nouriel Roubini
Salmon & MacKenzie seem to be saying LIBOR is a fictional construct used to rip off borrowers.
Rogers is a very smart man, however I always wonder what is the motive is in what anyone says, especially billionaire brokers. He has bet quite a bit on the collapse of the US. He has moved to Singapore and believes in a grim future for the US, he may be right, and certainly the US is set for a very painful fall.
I guess I still wonder that if the US did collapse what would really happen. I mean if you have a population of 300 million facing the total destruction of their way of live, but have the most powerful military force on the planet, I think it is naive to think that they would simply sit there and take a daily beating from the worlds markets without retribution at some point? Hypothetically, I mean if someone and their family is starving and they have lots of guns but no money or food and their neighbor has lots of money and food but no guns, you don’t think they wouldn’t take what they needed by force? History has shown this to be true of lots empires, and empires may collapse, but they don’t collapse without LOTS of collateral damage.
Sometimes, I think those who are smugly rooting for the destruction of the US for its profligate ways are fooling themselves in thinking they will come out unscathed.
I think those, like Rogers, who are betting on the collapse of the U.S. underestimate that catastrophic global consequences that will come with the end of this empire. There will be no safe havens.
“…Every panic is marked by a sense that the financial system is close to complete collapse. Never were such feelings more marked than during the panic that started in London in December 1825. “If the difficulties which existed in the money market had continued only eight-and-forty hours longer …” William Huskisson, the president of the Board of Trade, told the House of Commons, he sincerely believed “that the effect would have been to put a stop to all dealing between man and man, except by way of barter.” Or, as a director of the Bank of England put it during the midst of the crisis: “We must ask not who is gone, but who stands?”
Yet even in 1825 the authorities belatedly succeeded in quelling the panic in that incident by borrowing money from France and distributing a stash of old banknotes found in the vaults of the Old Lady. In the 20th century, the end of the panic tended to coincide with decisive government intervention: Roosevelt’s bank holiday of March 1933, the launching of the Bank of England’s “lifeboat” in December 1974 and the nationalisation of Japan’s Long-Term Credit Bank in October 1998, which was accompanied by a $500bn capital injection into the stricken banking system.
There is good cause for concern. Our modern credit system is more complex, more interconnected and more leveraged than in earlier times. On the other hand, the measures taken by the authorities to allay the crisis are far more extensive than on earlier occasions. Witness the wild scramble by governments around the world to guarantee bank debts, provide loans against dubious securities and inject capital into stricken financial firms….
…The current panic will pass as others have done beforehand. This does not mean the aftermath will be pleasant for the wider economy. Emergency measures may allay the panic but they cannot correct the credit excesses that are the root cause of the crisis.”
Edward Chancellor (Director of GMO)
http://www.ft.com/cms/s/0/86a4cec0-99f4-11dd-960e-000077b07658.html
That close!
We’re ok though.
“Witness the wild scramble by governments around the world to guarantee bank debts, provide loans against dubious securities and inject capital into stricken financial firms….”
This is the important lesson of the crisis. Desperate situations lead to unfunded insurance claims payments.
Two local happenings over the last few days that have my radar up about a complete meltdown:
1. The priest at a local church saw people praying in front of the church’s statue of Mary the other night. The next morning, he discovered, they weren’t praying, but digging up and stealing the flower bulbs that surrounded the statue.
2. Went apple picking this weekend. Place charges $20 for an “official” empty bag that you then fill with apples. In the parking lot, people were emptying the bags of apples in their car and then selling their slightly-used bags to people arriving for $15. It was quite a hot market.
The priest at a local church Story reminds me of one I heard from old Mexico (? 16th or 17th century). A statue in a newly constructed Catholic church was very popular among worshipers & pilgrims. The priest was very satisfied until an earthquake hit. The statue & its facade fell down, revealing a solid gold ancient Aztec idol the worshipers had actually been revering.
Wait…they were deflowering the Virgin Mary?!?!?!?!
(Sorry, I had to say it…)
Rogers is not betting on the collapse of the US. He is betting on growth. Asia Pacific economies are growing (demographics and product consumption) while Western economies are maturing.
And their growth is based on?….
selling to the U.S.
(not completely - but in very large part)
Witness the SSEC, now down 70% from its peak. Nikkei is down 75% from its peak of 18 years ago. Mr. Rogers’ neighborhood is not nearly as robust as he would have you believe.
The Asian economies have one big thing going for them - lack of debt, to outside economies at least (there’s a lot of internal debt).
However they have a lot against them as well - primarily the dependence on foreign economies, but also the lack of agriculture and simply the lack of ingenuity (in the case of China and SE asia) that the U.S. has - I’ve witnessed this firsthand on many fronts.
IMO he may be right about the dollar, but he’s way wrong about commodities. Demand for commodities drops and also becomes very localized in economic depressions. I venture he’s probably lost a ton of money recently betting on oil and food.
Yeah, you can invade someone, and survive by bleeding them. Better find someone richer than you are though, or it’s something of a losing proposition… Kind of like eating Wachovia - Yay! We Won!
“In a period like this the way you make money coming out of it is to own the things were the fundamentals have not been impaired,”
One ‘fundametal’ isn’t hard-wired into our rickety-tickedy financial system, and seems to be holding it’s ground while the floor is falling out under everything else…
Barbarous I tell you!
I am hopeful and optimistic that this great country which was the bread basket to the world will survive this crisis, learn from it and straighten itself out. I would not bet against the US. The government is trying to lessen the pain people will suffer. To that extend all I can say is the road to hell is paved with good intention.
Argentina was the bread-basket to Europe, and when their currency got devalued by 2/3rds in 2001-2002, it made exports worth 3x as much, in Argentine Pesos.
If you were a big corporate concern, it was a no-brainer…
Export so much food @ high rates of pay, that people in Buenos Aries were going hungry, because they just couldn’t pay what the outside world was willing to pony up for foodstuffs.
Zimbabwe was the bread basket of Africa. Today they starve.
Please stop making sense.
I would like to believe we are different here this time. We are Americans. God loves us. The Chinese will give us the money to buy the food the south Americans will grow it for us and the Arabs will reduce the price of oil so that the food can be delivered cheaply. Then we can sit in our couches, play with the Chinese made toys, eat a lot, get fat buy Mc mansions drive a Japanese SUV’s and be special as the evangelical’s have always told us. All we have to do is vote for the republicans and get blessed all over again
Last week I jokingly mentioned having an over/under contest for the actual cost of the bailout beyond the $700,000,000,000 Paulson wanted but you weren’t allowed to lump in forthcoming requests for bad car loans. Well, I take it back:
http://www.cnbc.com/id/27193257
“…In his Greed and Fear newsletter to clients dated October 9, CLSA’s equity strategist Chris Wood said it was “somewhat shocking” to find investors not taking more comfort from growing official actions to alleviate the credit crisis, but added that at the same time it was healthy since it is part of the cleansing process that will be the consequence of this continuing cycle of debt liquidation.
“It is also rational since those in authority have been so wrong in just about every official pronouncement they have made on the credit crisis during the past 18 months that investors should not be expected to believe any longer in the immediate efficacy of their policy actions,” Wood wrote…”
Finance Asia
Old joke from the floor.
Q: How do you say F**k you in Yiddish?
A: Trust me!
live=life, no more posting via BlackBerry for me. T9 gets you into more trouble than RE investors at a donald trump seminar.
Isn’t posting from a Blackberry kinda like texting from a phone?? Just sounds like too much work to me. I can’t stand texting.
Does anyone have any thoughts on the possible implications of this news for Manhattan real estate prices? Is it still different there?
BULLETIN
U.S. STOCK BENCHMARKS OPEN DOWN MORE THAN 1%; DOW SKIDS 100-PLUS POINTS
U.S. Oct. Empire State index falls to record low -24.6
By Greg Robb
Last update: 8:35 a.m. EDT Oct. 15, 2008
WASHINGTON (MarketWatch) — Manufacturing activity in the New York area deteriorated sharply in October, the New York Federal Reserve Bank said Wednesday.
Sell Every Rally!!!
To the Tune of Climb every Mountain TM MormonTeaCo.
It’s pretty amazing how quickly the jammed in the 20 pct bear market rally between the cap-injection announcement/leak and press conference. Mr. 6Pack is left wondering when and if it will come back; it might, depending on the news….
Or how about this:
Crane’s NY, October 14. 2008 4:42PM
Report: New York City to shed 165,000 jobs
The city comptroller’s office now projects the city could lose as many as 165,000 jobs over the next two years, more than double the figure it gave in July.
The Confidence Men…
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101402793.html
Banking on Their Confidence
I can’t believe the Washington Post actually called these guys confidence men. It brings a tear to my eye.
But - it’s almost as if…. the Washington Post doesn’t know what a confidence man is (?). Ummm…. guys….
I can’t believe the Washington Post actually called these guys confidence men At least the Post didn’t call them Pig Men.
http://nytimes.com/2008/10/16/business/16bank.html
And JP Morgan is considered one the good banks.
“JPMorgan Chase, the investment bank, reported third-quarter profit of $527 million on Wednesday, suffering a steep decline amid the turbulent markets but avoiding a loss. JPMorgan’s profit, which was 11 cents a share, fell 84 percent from the quarter a year ago, when it reported $3.4 billion, or 97 cents a share. Analysts had expected on average a loss of 29 cents a share. Revenue fell 5 percent to $16.1 billion from $14.7 billion, and JPMorgan warned that it would continue to struggle amid challenging markets.’
“Good” can mean many things.
JP Morgan has always very been good at what it does, which is to use its government influence to get ahead in the banking industry.
However I don’t think that’s so “good” in an ethical sense.
I was using good in the sense that they are still solvent. An 84% drop in earnings is pretty stunning no matter how you slice it.
It may be considered stunning, but not to me (having been through the telecom bubble firsthand). By comparison to other banks though it’s doing pretty darn well. In large part since they knew it was coming, which in large part because they had a hand in it.
I think it just got a little more out of control than they anticipated.
Also keep in mind - in the business world what’s really important is not profits, and it’s not even revenues. It’s market share. Any given market - be it homebuilding, internet sales, vacuum cleaners, banking, etc. - is generally of a given size. That size may ebb and flow due to market conditions (bubbles, recessions, etc.), but there’s very little one company who’s in that market can do to affect the size of the market it self. Some, but not much. However what a given company can do is increase it’s market share, such that when the next ebb or flow comes - it’ll be right on top.
And that’s what JPM, Citi, and BofA are doing in spades right now - increasing their market share.
In short - sometimes a company can win even in a lose-lose situation.
Found this in the Yahoo! Finance page after checking the Dow before going to bed (it’s bed time in Japan now)
LA came out as the worst place!
Furniture store plans a second store in Madison, WI
http://www.madison.com/wsj/home/biz/309502
Meanwhile, housing starts are still down….
http://www.madison.com/tct/mad/topstories/309446
….but the monthly article that “loans are still available…”
http://www.madison.com/wsj/home/biz/309540
With numerous plant closings, there is worry the unemployment funds could be used up…
http://www.channel3000.com/money/17717619/detail.html
Part of yesterday’s discussion regarding instruments made me think about local notices that piano stores in the area are closing down. I found this article from a year ago.
http://www.madison.com/archives/read.php?ref=/tct/2007/10/20/0710200271.php
A national music products industry report blames the housing slowdown last year for a 9 percent drop in all U.S. piano sales in 2006. Acoustic piano sales alone dropped 18.4 percent in the U.S., according to the 2007 NAMM Global Report put out by the International Music Products Association.
But in Madison, there continues to be a strong interest in piano, according to Connie Jones, president of the Madison Area Friends of Piano, a 15-year-old nonprofit group promoting the piano. Jones called Madison a “very viable keyboard market.”
It’s a city where music product sellers like Ward-Brodt Music Mall, 2200 W. Beltline Hwy., continue to thrive.
“Madison is a very strong keyboard market and there’s no reason why all of us cannot be successful,” said Michael Faulhaber, president of Ward-Brodt
Of course, Ward-Brodt has recently announced they are closing the piano portion of their store.
http://www.ward-brodt.com/index.php?option=com_content&view=category&layout=blog&id=88&Itemid=118
I play the piano, and have a 7′6″ grand piano in my small living room.
I think the drop in piano sales are due to the overall dumbing of America, bad parenting, hip-hop music (which de-emphasizes hard work and dedication over gimmicks and celebrity), and the lack of musical education in schools.
While there’s little I loathe as much as hip hop and rap, you can’t blame that on them too.
There are plenty of other instruments that are much cheaper to buy than pianos.
For me it’s lack of space. I want my parents’ piano when they downsize so I can teach my son to play (and take up lessons again myself), but I don’t have room in my rental and - well - we all know that I can’t buy a house right now.
We bought our kids a Roland electronic piano to practice on. It cost $1400, and is pretty small. After a few years the kids lost interest, so I might try to sell it one of these days.
“……bad parenting…….”
I beg to differ…..
Both my daughters were in orchestra, but have quit, with my permission. They like playing, but don’t have the time (or the desire) needed to improve their play, vs. the time they need for their other (and IMO) more important classes. To me, you either have an “ear” for music, or you don’t. You can “learn to play”, but at some point, the time needed to practice to get better reaches a point of diminishing returns.
My instrument went into my parent’s closet on my last day of high school. Never played it again, nor had the desire to. I don’t feel like my subsequent life or career ever suffered bacause I didn’t play anymore.
Honestly, it’s the amount of time you spend with your rear-end parked on a piano bench, during your younger ears. To attribute musical ability to talent or a “special ear” is to diminish the years of hard work serious musicians put in.
I’m glad I grew up in a pre-internet, pre-video game era. The most interesting thing there was for me to do from the time I came home from school at 3:30 or so ’til dinner at 7:30 was to practice the piano! I don’t know if I would have learned to play in today’s environment.
“Honestly, it’s the amount of time you spend with your rear-end parked on a piano bench, during your younger ears. To attribute musical ability to talent or a “special ear” is to diminish the years of hard work serious musicians put in.”
Reuven, some of what you say here is true, but not all of it. When I was a music graduate student back in the early 90s, some of the worst students I had were the best pianists. All they could do was play what was written down for them, but they couldn’t do anything else - couldn’t write music, couldn’t analyze what was written, couldn’t sing, couldn’t hear or understand the most basic differences between certain chords or certain timbres, etc. The list goes on.
The worst part is that a huge majority of people who teach music are pianists who think that you can’t be a musician if you’re not a pianist. Thank God I was blessed with a theory teacher who wasn’t a pianist but was a brilliant musician and composer.
I’ve commented to my friend about the Grand Piano bubble. How many people went out and bought a McMansion, and then stocked with with a Grand Piano to look good? Then when things turn bad, it’s time to deep six some of the expensive things. Good bye grand piano! There are quite a few of these showing up on the local craigslist. From disklavier rigs to more expensive conventional ones.
And for what it’s worth, all rap music isn’t bad. Like any genre, the early stuff is great and there are hidden gems in the underground. I can’t say I know of a rap song about the housing bubble though.
I wouldn’t say rap music killed it. The personal computer may have hurt it a *bit* now that it’s possible to get 96khz 24bit samples for music production, pirated from the internet. Rock music still has piano in it, as does some rap.
“It is appallingly obvious that our technology exceeds our humanity.”
Albert Einstein
See everythings going to be fine………. or maybe not
WASHINGTON (AP) — The country hit fresh economic potholes Wednesday as President Bush sought to reassure anxious Americans that the government’s latest rescue plan will eventually bring relief.
A day after announcing a $250 billion cash infusion into the nation’s banks in return for a stake in those institutions, Bush and his Treasury Secretary Henry Paulson said the plan should stabilize the system, induce banks to lend again, and — in time — help improve the economy.
“President Bush sought to reassure anxious Americans that the government’s latest rescue plan will eventually bring relief.”
If fiat money is backed by confidence, as it is in the US, and this sub-moronic aging frat boy is at the helm of the US, “this sucker’s going down”. Whatever this snowflake says, I believe the opposite. Ya just can’t go wrong. Biggest. Liar. Ever.
Guess it depends on the definition of “eventually” and “in time”, phrases which seem to keep popping up.
“An error made on your own is safer than ten truths accepted on faith, because the first leaves you the means to correct it, but the second destroys your capacity to distinguish truth from error.”
John Galt
What I really want to see know is the result of your own home dentistry accompanied by your explanations of how you avoided error.
He said nothing about “truths” accepted on sound reason.
Headline from marketwatch.com
U.S. ECONOMY
Shoppers on strike
September marks worst month for retail sales in three years.
Where is the evidence of a strike? They’ve merely gone from spending 110% of their income to 105% of their income, on the way to 100%. When it falls back to 90%, we’ll call it a strike.
The Govt in NJ is proposing a huge bailout for subprime owners.
There’s talk that the govt is planning a similar bailout of main street that it did for wall street.
All the bail outs target people that are underwater, took on too much debt (credit card, HELOC and mortgage) and would probably massively inflate our govt debt and future tax.
I was an honest hard worker who’ve worked, saved and not spent recklessly for the my whole life.
The people who’re hundreds of thousand dollar in debt, miles behind my carefully planned small money pile, is now going to get “equalized” and be reset to zero.
I’m so upset that I want to:
I want to stop working, rack up my Credit Card, HELOC, cash out to buy gold and bury it somewhere, declare “hardship” and then wait for the handout.
Why shouldn’t I?
“Why shouldn’t I?”
I think this is the one thing the government dident think about when they started down this bail-out road. This mess is going to get alot bigger than they think it will.
I would do the same, if i knew they would include me in their catch net. But there is reason to believe they will attach certain dates to their rescue plans as they have done in the past. So be careful if you decide to do this.
New World Order: Consequences of defaulting on mortgage:
1. Pity
2. Free housing for 6-12 months, maybe longer depending on foreclosure moratoriums, etc.
3. No tax consequences
4. No social stigma
5. No ethical dilemma, banks aren’t suffering from defaults, they’re getting Billions of dollars of capital injected to continue loose lending
5. Eventually new lower payment courtesy of federal govt intervention sponsered by fellow taxpayers.
What’s not to like?
Any article you can point me to on this? I’m terrified… Went and looked at a short sale/foreclosure yesterday…
Mentioned the house before…. but wow, when I saw it in person it was depressing.
Was a 4/3 on a beautiful piece of property, but property itself had never seen a rake or mower in some time, despite them living there…. Inside, beautiful hardwood floors older than the current owners, but smelled of pet mess …. I have cats and dogs and you couldn’t tell, they simply didn’t care. Two holes in the ceiling from water issues when they, I hope, tried to redo their bathroom themselves…. if a contractor did that work…. geeez…. I mean there were cobwebs on light fixtures that half fell out of the ceiling as well as the fire alarm system. They painted AROUND the headboard of their bed and their computer desk….. almost NO furniture other than beds and a cheap dining table…. and the largest plasma tv I have ever seen…. I can’t even give you a guesstimate of how large it is and my friend has a 70 something…. this dwarfed it, didn’t know they made them that big…. Well, both the realtor, the fiancee and myself could not understand how someone could plunk down 700k and then let that happen…. our realtor actually suggested it was someone with an interest only loan who bought something they just couldn’t dream of affording and didn’t really care about as anyone who really paid that much wouldnt let what happened to that house happen to it … lights didnt work, garbage piled everywhere, a warped floor from the water events mentioned, and I think water even poored into the central air system due to weird water damage I noticed in the basement…
RE: Went and looked at a short sale/foreclosure yesterday…
Mentioned the house before…. but wow, when I saw it in person it was depressing
Yeah-until you actually take in a few of these “distressed” properties before the bank sends a clean-up crew to tidy up-you really can’t believe how some people live.
My best inspection ever was a 2-unit FHA/HUD foreclosure with the upper floor occupied by 3 young women on welfare. They had 5 toddlers between them who were running around the unit undiapered, and going whenever and where ever it suited them.
The urine and feces stench was enough to gag a maggot.
The dishes looked like they were washed on a monthly basis.
Doing the laundry did not appear to be a high priority.
It appeared clothing was secured by visiting the local Good-will store and buying a bag of clean and pressed garments for $5.00.
Soiled clothing was merely thrown into the bathtub.
The mound rose to the top of the ceiling.
The stench was masked by an overflowing cat litter-box.
In the LR, Oprah was blaring on the TV; ashtray’s were filled to overflowing; everybody had a beer going. It was like 11AM.
The scene and smell was so disconcerting I could barely take my notes. I remember tucking my arms into my sides so I wouldn’t touch anything.
To this day, the entire episode still sticks in my mind.
Gotta luv the Section 8 crowd.
I once was working off a debt I owed to a landlord, and I agreed to clean out a Section 8 apt. The stench from the refrigerator that took me about 4 hours to clean (4 hours for just the refrigerator!) was so bad, I still gag when I stick my head into an unplugged refrigerator - 10 years later!
What is the official clothing for socialists?
Is there a uniform?
Do I have to be one? Will non socialists survive the change?
Dam dem dar showshillists.;)
It appears that shaving one’s head is a good start nowadays.
And tatoos. Lots of tatoos.
I thought that was just the current fad style, regardless of political affiliation.
And retro black rimmed glasses too…
The 100 year old debate about Socialism being in opposition to Capitalism is no longer relevant or useful. Real economic change is much more complex and interesting than all that. At this point even the more modern Keynesian economics are ancient to the point of being merely quaint. Check out Fengbo Zhang says in regard to arguments about Socialism. We’re all using a mix of policies and have been for a while now, so let’s talk about that instead of some musty, old fairy tail theories.
good point, Mole Man. (Is your first name Adrian?)
If you ask most people, they can’t give you a working definition of fascism, socialism or communism. Mostly they’re just used for name-calling these days. We might need new language to describe ney hybrid systems?
It seems to me that rather than creating new words, we should defend the definitions of existing words.
For example, one pet peeve of mine is when people use the term “free-market” to describe a primarily govt run industry (e.g. utilities) and then decry the ability of free-markets to function efficiently.
Utilities run pretty well
Electricity is up and running 99.9% of the time.
Now let’s compare that to when Enron and others started trading on the free market which was largely unregulated. Seems to me California and a lot of other westerners got burned.
Big ears and big teeth.
Or two empty skulls. I’ll take the teeth.
I have spent most of my entire life not caring about politics.
Now it’s getting into my comfort zone and i don’t want it in my living space.
I don’t do well in big groups and I’m kind of lazy.
I will be the first to fail under socialism.
I’ve spent most of mine caring, and now I don’t. Nobody represents me anymore. I need to focus on other things.
“Nobody represents me anymore”.
That’s how I have felt for years… There is no real pride or joy in always having to vote against something or someone.
Were you represented before, or did you just suffer the illusion that you were represented?
THE CRASH Risk and Regulation
What Went Wrong
How did the world’s markets come to the brink of collapse? Some say regulators failed. Others claim deregulation left them handcuffed. Who’s right? Both are. This is the story of how Washington didn’t catch up to Wall Street.
“…The meeting of the President’s Working Group on Financial Markets on an April day in 1998 brought together Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt Jr. — all Wall Street legends, all opponents to varying degrees of tighter regulation of the financial system that had earned them wealth and power.
Their adversary, although also a member of the Working Group, did not belong to their club. Brooksley E. Born, the 57-year-old head of the Commodity Futures Trading Commission, had earned a reputation as a steely, formidable litigator at a high-powered Washington law firm. She had grown used to being the only woman in a room full of men. She didn’t like to be pushed around. …
Unlike the commodity futures regulated by Born’s agency, many newer derivatives weren’t traded on an exchange, constituting what some traders call the “dark markets.” There were now millions of such private contracts, involving many of Wall Street’s top firms. But there was no clearinghouse holding collateral to settle a deal gone bad, no transparent records of who was trading what.
Born wanted to shine a light into the dark. She had offered no specific oversight plan, but after months of making noise about the dangers that this enormous market posed to the financial system, she now wanted to open a formal discussion about whether to regulate them — and if so, how.
Greenspan, Rubin and Levitt were determined to derail her effort. …”
Once in a decade the WaPo gets it right.
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343.html
Banking Crisis Has Made Even the Swiss Uneasy
“…If UBS were to collapse — as has already occurred with banks in Britain, Germany, France and Belgium — it is unclear if the Swiss government could amass enough money to rescue it, analysts said. UBS has more than $1.75 trillion in assets worldwide, a figure about four times as large as Switzerland’s gross domestic product.
“Swiss banks have always operated on the basis that they have an implicit guarantee of the state,” said Manuel Ammann, director of the Swiss Institute of Banking and Finance in St. Gallen. “But these large banks impose substantial risks on the Swiss economy, simply because of their size.” …
WaPo
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101402647.html
A Swiss Miss would be tasty for mellow yellow.
Remember the Thousand Point Up Day?
The Greatest Sucker Punch Ever.
Clearly, the Boyz need to eat our lunch as their’s already has been
Nothing will beat the optimism outta them like a couple more violent swings like that.
Get this: Fidelity sent me an email - the first point it made was, get this - “Market volatility is normal”.
Apparently the force is not with the market today…
Facts are desperately inconvenient.
Just because you monetized the banks doesn’t mean they will start lending, and there isn’t enough money to monetize ALL of them.
I wouldn’t close any short positions just yet.
Ripley: These people are here to protect you. They’re soldiers.
Newt: It won’t make any difference.
I just heard Barack say on the radio that he doesn’t support cutting the cap gains tax because “nobody has any capital gains anyway.”
Only those who were wise enough to see this coming and were on the “short” side of the transaction. We cannot start “helping” the prudent now can we… how can we bailout the “foolish” without stealing from the “wise”.
And he’s correct. Besides, CG’s were slashed 50% by dough head. We don’t need to borrow and repay anymore $$$ to finance giveaways to the wealthy elite.
How many poor folks have you worked for comrade? You know the “elite” didn’t get their money by being stupid; they will just go on strike. Go read a little about the great depression and the New Deal. If your messiah wins and he passes his five year plan of tax measures I will downsize my company and go on strike. I just have simply wait out his silly ideas till the new guy comes in and fixes things. I am young and can wait 4 or even 8 years for his wealth redistribution ideas to crash and burn. What are your plans?
Comment by BP
” I just have simply wait out his silly ideas till the new guy comes in and fixes things.”
-
Ripley: Did IQs just drop sharply while I was away?
“What are your plans?”
To sit back and watch angry knuts and kooks boycott, throw tantrums and dream of “fixes” that never materialize.
RE: From the street…
I heard a rumor that Lehman’s, Fuld, just got his lights punched out by a disgruntled denizen at a NYC gym.
Anybody got a link to a published story?
It was reported on CNBC, but they have didn’t have anything to substantiate it.
You can google it, and find the story on CNBC, but if it were true, I would think Fuld would sue the pants off the puncher.
Personally, I think there’s more than one big swinging dick that deserves a good punch in the kisser. I mean, if we descend into Mad Max territory, one good thing might be that these jerks won’t have the protection of the courts, protection they don’t deserve. Of course, neither will anyone else, but then again, how many of us are safe under the law anyway? More likely it is used against you than to your benefit.
I mean, if we descend into Mad Max territory, one good thing might be that these jerks won’t have the protection of the courts, protection they don’t deserve.
They’ll end up hiring burly thugs to protect them.
Wasn’t there a similar report a week or two ago??
It was an op-ed in the NY Times suggesting that a punching Fuld might alleviate the crisis, more or less.
Dosent this guy have body guards like Bernake has? He should have the money for them.
A quick search on Google suggests your story is an urban legend.
RE: A quick search on Google suggests your story is an urban legend.
Not surprising.
I couldn’t imagine any of these any of these financial fraudsters showing their faces anywhere without heavy security.
All just rumor based on fantasy.
This is off topic… but there are a lot of smart people on here who may have interesting feedback.
Question for all those on the board about “buying vs selling”.
If I open a gas station and offer to buy silver coins with gallons of gas, who pays the sales tax?
Later that same year I offer to buy food, clothing, housing, etc with silver coins…
You see what I am getting at, there is no difference between “buying” and “selling” except that traditionally one side starts with dollars and the other side ends with dollars. I hear radio ads offering to buy gold/diamonds… what if I placed an ad offering to buy “gas”…
If all you ever do is “buy” things with other “things” then obviously there is no “income” because you cannot “generate income” when all you ever do is “buy”.
The point is that in a “barter” economy there is no means for the government to determine “income” or “sale price” and therefore no means to tax. So a highly-organized local barter economy based on say… gas coupons redeemable on demand could operate outside the governments “dollar system” and therefore outside the “tax system”.
It is impossible to calculate the tax on these items because the price fluctuates by the second in the “paper market” and you do not know the instantaneous “dollar” value of your “barter” transaction.
Now if only I could convince my employer to “sell” me dollars in exchange for my labor.
Dan,
I suspect taxing authorities look at this differently than you do. Fair value. You owe the tax.
The German magazine SPIEGEL just published an article in English about how the credit crisis is hitting Germany. It’s amazingly shockingly accurate.
http://www.spiegel.de/international/germany/0,1518,584374,00.html
“In machine building, Germany’s most important industry, with its 950,000 employees, customers are cancelling orders. Sales are declining in the automobile industry. To offset the drop in demand, Opel, Ford, BMW and Mercedes-Benz have taken to closing some of their plants for weeks at a time.
Software maker SAP, based in the southwestern German town of Walldorf, has reacted to a decline in demand with a hiring freeze.
Publishing houses, like Gruner & Jahr, affected by declining advertising sales, are following suit. Lufthansa is seeing declines in its business travel and cargo business. Real estate brokers report that some customers are even canceling closings at the last minute, either because of crisis-related cold feet or banks changing their minds about previously approved mortgage loans.”
The amazing fact is that Germany actually still has industry that produces stuff. Let’s take some inventory what we have in the US: there is the huge service sector that consists of selling happy meals to each other, a toxic debt industry (ie. Wall Street) that floods the rest of the world with worthless investments, a housing industry that builds McMansions very few can afford, an automobile industry that is dying, an airline/manufaturing industry that is downsizing and a pharma industry that is still doing relatively well.
In all things look pretty grim.
Those statements are not based on facts. Machine building in particular is a huge industry in the US, and we are one of a small number of countries that actually compete with Germany in this important international market. As far as the auto industry dying, Tesla seems to be doing quite well. What you are seeing is the ordinary process of companies that produce desirable products doing well while those that produce what is no longer desirable fade away. Even together housing and finance are barely a fifth of the economy, so even if they completely crater they aren’t going to be able to do much more than lead a recession.
Tesla hasn’t even sold a car yet, much less made a profit.
I’ve seen a Tesla roadster on the street, with Illinois license plates. It surprised the heck out of me, partly because I didn’t hear it coming.
I saw that Tesla too. Over in Palos Hills.
Germany, like Japan, has an economic model built around the manufacture of highly engineered, high quality products. They subsidize it, so they get more of it.
That model is great for maintaining a relatively high earning middle class, but not so good if you want to make billions running a hedge fund. To each his own.
Now that is a slowdown. Canceled orders, less travel, closed factories. Thank you Germany.
I’ve hit my limit on hearing about the dire state of mark-to-model accounting, shadow CDS markets, TARP, FDIC limits, bank issued preferred shares, credit markets freezing, blah, blah, blah…
When the world’s largest exporter goes off a cliff like this, expect bodies, lots and lots of bodies.
Declining enrollment in Sarasota County (FL) schools. Decline is averaging 100 students per month.
http://www.heraldtribune.com/article/20081015/ARTICLE/810150350/2055/NEWS?Title=Low_student_count_jeopardizes_funding
Well, the whirling blades of death are busy shredding all the fresh new money the treasury stuck into the banks.
The big plans from Paulson are going to keep falling on their backsides.
What are the banks to going to do? They look out there and everyone has too much debt. Do the banks want to take the capital out and become insolvent if the debt doesn’t get paid back again?
I’m guessing no.
Also seems like 50% or more of the country is bankrupt and the other half are cutting back and saving. So, the desire for new loans are from the people in a debt death spiral.
The only way this fixes itself is deflate away the bad debt. Or incomes have to rise to dervice the debt. Even if we tried to monitize the debt, we have to increase productive capacity and that will take years to accomplish. Otherwise we go into a inflationary death spiral too.
The governement needs to spend the effort to handle the failing banks and bankruptcy procedings. Do things to make the transition smoother.
“Or incomes have to rise to service the debt.”
Real incomes will not rise in this cycle. This event is the greatest wealth transfer in human history. Globalization of wages is the PTB’s overriding priority and while certain individuals may indeed prosper - the era of society-wide prosperity known as “Fordism” is dead and getting deader.
We see this in our cities and towns, where once stable areas have given way to gated communities and ivory towers sprinkled amongst deteriorating neighborhoods.
Global capital has new appointments now - and those appointments are not with J6P.
Lots of bad assets are getting written off entirely or sold for pennies on the dollar. There would be a lot fewer banks still around if that weren’t working.
At least 80% are technically bankrupt by end of 2008. IMO
They still will try to save and get better prices or cut back.
Save $$$; Gro your own.
And herein lies the PERIL of thinking stocks are cheap. The E side of the P/E ratio is about to go heavy negative.
A rocket ride to financial Hades getting lit.
Bon voyage
People are slowly coming to the realization that most of the business on Wall Street was about “making money”. In a literal sense, and not a figurative sense. These people had the audacity to use financial engineering to create money out of thin air by using gobs, and gobs, and gobs of credit.
The worst part of this is: these people thought their talents were so special (and they were so close to the source of the money creation) that they paid themselves HUGE salaries and bonuses for the special talents that they had. And why wouldn’t they? They all had Ivy League pedigrees, and operated in only the best social circles. The very air that the breathed was “special”.
By the time this newly-minted money trickled down to the barber shop on Main Street in Peoria, Illinois, it had changed hands 50 times already. That’s why house prices in Peoria stayed relatively stable. But these guys (and gals) had first crack at it and they made sure that they were able to pay top dollar for a bottle of Dom Perignon at the strip club, or top dollar for a penthouse apartment overlooking Central Park.
The inflation in prices people pay for things in NYC has been the highest in the country, because this is where people were the closest to the source of this seemingly unending torrent of new cash. But, now that the spigots have been turned off, I am afraid that the deflation in NYC is going to be harder than anywhere else in the country, and rightfully so.
You sow what you reap…
should say “you reap what you sow”. Where’s my proofreader?
IT’s trickle down wellfare and just like trickle down economics it won’t work. Better to create a middle class by cutting their taxes and creating jobs building infrastructure ect. Then at least we would be getting something for this 700 billion dollars.
LOL. According to a Bloomberg report, by subsidizing corporate borrowing, the FED is having the unintended consequence of crowding out private capital in the CP market:
“The Fed can drive everybody else out of the market” for buying commercial paper unless market yields drop, said Robert Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors Inc. in Vineland, New Jersey, who used to work at the Atlanta Fed. That could end up “assuring that markets won’t restart,” he said.
This is guaranteed.
As a private lender, I make my own decisions at what level of interest rates I choose to provide liquidity. If they undersell me, I’d be a fool to match their quotes because I will go bust and they will not.
The analogy would be an insurance company. Each company picks what level at which they will provide insurance. Just because somebody undercuts you doesn’t mean you should lower your standards.
(In fact, Buffett understands this. VERY long ago, he told his groups that nobody would get fired during times when competitors undercut them but if they ever “dropped” underwriting standards, he’d fire them. Buffett just picks up their lunch after they go bust.)
As I said, this is totally expected. This should not be surprising to anyone past Econ 102. (it’s a little more advanced than 101.)
You issue private loans? What kind?
I don’t. I meant “a private lender”.
Geez! Tough crowd.
Now I have to write a formal thesis each time I make a quick post to explain some facts?
What goes around, and all….
Sigh.
Veritably, you speak the truth.
Damn you, damn you.
sheesh. sorry, I am a blogger of very little brain. I had a chat with google and got sorted.
“Fed…crowding out private capital…”
This is something I have suggested here a number of times already. If the 800 pound gorilla in the market underprices everyone else, pretty soon there is only one supplier. The price of money is the interest rate, and the Fed’s loans are made at rates that undercut the market.
Yes, you have said this a number of different ways.
At the current rate of intervention we should all just buy treasuries and let P&B make all the investment decisions. They know what’s best, after all. P&B could use the spread to fund public works projects. It’s in the plan, le bon plan.
As demand for the commoner metals has lessened in the Far East, scrap-metal purloiners state-side have had to make off with twice as much metal in their heists as before just to keep up, due to plummeting prices for their short-term gains.
I watched a lot of news last night and I saw Peter Schiff on at least 3 different programs. No Rubini. Maybe he was at a bar somewhere laughing. It reminded me of the time Schiff was talking about RE with a bunch of REtards, I think it was Faux News? About 2 years ago, and they were laughing rudely and shaking their heads patronizingly at the predictions he was making. All of which have since come true.
There was one man who fascinated me with the extraordinary hideousness of his hair, it was like dank ramen noodles stuck to his head, coiling and bobbling about his pallid ears.
I wonder where he is now? Probably in his mom’s basement playing with paper dolls and fantasizing about the good old days.
Anyway, there were no patronizing head-shakes at Schiff last night, that’s for sure.
Speaking of news, I’m going to watch the debates tonight with enthusiasm, and beer. A big glug for every statement of ‘my friends’. Ahhh, heckfire. Why wait. I’ll just go ahead and start drinking as soon as they start talking. Are the VP candidates going to be there? I forgot if they are.
One thing I wonder is, when McCain’s not looking do Cindy and Sarah pull each others hair and tell each other to get on their OWN side of the car? Or do they share clothes like good sister wives should? I swear I saw the same earrings on each of them at some point.
“their OWN side of the car?”
That would be a tense car ride. No one would scream under the bridges. I would hate to sit next to Cindy. You just know she is one of those people who is always freezing and demanding the heat be turned up. Also, she’d be offended about something (she’d be the type to offer to sit in the back seat and then get all mad that Sarah takes her up on it, which you know she would). If pressed, I would sit next to Sarah. We both like 3/4 length sleeves, so that’s something in common right there.
‘We both like 3/4 length sleeves, so that’s something in common right there.’
Well, jeeze, you’re like freakin’ twins, then!
Can you skin a moose, too? I can skin a moose. Well, actually, I never have, but I bet I could since I can skin a deer. I learned how to from my poacher dad. I learned it in home school, and unfortunately I’m not kidding. A moose would be bigger, but would have the same fiddley red bits inside, surely, and in the same order, more or less.
I also read about clouds one day, from an old encyclopedia. That was about it for that reading stuff that year. And unfortunately, I’m STILL not kidding. (We were sent back to Evil Public School later on. It was still Evil, but
evidently less evil than disturbing my dad by running around the place while he was trying to read his gun magazines and Book of Mormon. Priorities, man.)
But I digress.
I think you are so right and that it would be a very tense car ride. If pressed, I would sit between Cindy and Sarah and then sing Christmas carols loudly and prettily. Sweet Baby Jeebus likes to hear Christmas carols, youbetcha, all year round, and of course you must sing loud so He can hear you over the sound of the motor.
You can tell us apart by our collars. I don’t like Star Trek collars. I skin carrots quite well!
Everyone should have a year to read about clouds and run around. I took a year off school, too! It was not always idyllic, sometimes very crazy, but I got to meet a lot of different characters and you learn to make your own fun and not expect the world to do stuff for you.
If pressed, I would sit between Cindy and Sarah and then sing Christmas carols loudly and prettily.
what are you waiting for? this is an important job and you’re perfect. they need some joy in that camp. don’t forget your camera, lady.
The parties responsible for this mess insist that nobody could have seen it coming… both candidates are trying to take credit for warning that it would happen… and the only guy(s) who saw it coming is not involved with the decisions on how to fix it. It is a stunnning ommision by the congress to not invite contrarian opinions from the actual experts like Schiff.
That long haired realtor is married to brenda butner.
What a laugh he was.
Ho hum, another day, another paper silver price drop of 6%. Meanwhile the price to buy physical silver is running about 60% over spot.
If the spot prices goes into the single digits I plan to buy 1000 oz bar, and will post the experience here. Negotiations are ongoing; the largest hurdle to avoid is the paper trail. This can be overcome by swapping gold for silver. The second largest hurdle is digging a yet even-larger hole in the yard at 3 am with a backhoe to avoid the attention of the Roaving Horde of Starving Masses. Just planting a tree, folks; nothing to see here. Carry on.
I expected them to keep slapping silver down to $10; just to prove who was in control.
You know, of course, this is an illusion.
There is no metal trading hands at these prices. However, if Wall Street is liquidating your account anyway, this is a great time to give away your SLV, GLD, long positions of whatever type, to the FED for peanuts.
In the first place, this short-shelling ™ silver will only promote hoarding and discourage open markets.
Second, keeping a lid on silver prices means that mal-investment will take place elsewhere instead of the production of more silver.
Owning PM is like wearing those sunglasses in the movie about the “Aliens” in L.A.
Will you hold SLV all the way to 5? 3? 1? Wouldn’t you rather have the physical metal? It is going up.
Tulving had 200 cases of silver boxes last week. 100,ooo Oz.s in a week for 6 over spot. Apmex had 20K ozs yesterday,and was sold out this morn. Wonder what the masses will do when they wake up,and the dollar falling ,and no where to turn? Did you buy food?,supplies, even a small bit of PM’s….NO? why not?
Does it really matter if you have already taken a (roughly) 50% haircut in the last 7-8 months? That sure is putting your money where your mouth is.
Silly question, but if paper silver is so messed up relative to the physical commodity, why don’t you just open up a futures account and take delivery and sell in the spot physical market?
Is it possible that the purchase of large quantities of large Silver bars is much, much closer to spot and that the coin/small bar market is where the disconnect is? Don’t know, just asking.
Comment by watcher
2008-10-15 09:30:23
Ho hum, another day, another paper silver price drop of 6%. Meanwhile the price to buy physical silver is running about 60% over spot.
If the spot prices goes into the single digits I plan to buy 1000 oz bar, and will post the experience here….(snip)
Looks like you better be ready to buy and maybe quite soon.
I’m hating this meltdown . My nephew is calling me weekly wanting me to
save him . Now the nephew wants me to co-sign on a car loan so he can refinance that car note . I already send him money ,so I’m going to say no to co-signing on a car note . At this point I’m thinking that my nephew is
headed for BK . Yep, he is in the construction trade with a wife that won’t get off her fat ass and get a job . I’m done , but this is a reminder to me
of how much some people are struggling . I can’t support this Nephew
every month ,yet he acts like I should ,(I’m already shelling out money to
others ).
Does he know about the “others”?? He’s gonna keep asking as long as you’re already sending, unfortunately sometimes the only answer is complete cutoff.
I told him about others and he just keeps talking and talking up a storm . I think my Nephew should become a salesperson the way he doesn’t give up .
I’d hang up the phone but I’m ol’ school like that.
Never ever ever ever throw good money after bad no matter what the social consequences.
‘Never ever ever ever throw good money after bad no matter what the social consequences.’
Yeah. There’s plenty of annoying and perpetually needy nephews/relatives in the world, but money’s precious. You can buy candy and beer and shoes with it. And by ‘you’, I mean ‘YOU’. Your nephew will never do anything so wise with the money you give him.
Hey, I just had a good idea: save up your money and buy a new, smarter nephew with it.
Problem solved!
Good Lord, I need to say a prayer of thanks that I come from a family of savers. But I am waiting for my wife’s brother to disclose his bankruptcy status any day now, despite the fact that he is the highest earner out of all the siblings (medical doc).
My cousin calls my mom all the time.
My mom used to give her 100.00 a month. I wonder how much it’s gone to now.
Perhaps you can offer to subsidize the purchase of a bicycle, i lieu of continued ownership of the car.
It might save his health.
HW and Ann, you guys are better people than I am. I couldn’t deal with relatives like that. I’d be telling them to wait for their birthday or Christmas, and even then it wouldn’t be much.
My mom is olde world from the murder she wrote generation. She shares much.
Down down 684 691 699 702 706 711 716 720 one minute later….722 725 730 735
“murder she wrote generation” hee hee. is the this the generation after the perry mason generation, grandchildren of the father brown generation? I love random classifications systems.
George Bush: “This measure is not intended to take over the free market but to preserve it”.
William Westmoreland: “We had to destroy the village in order to save it”.
“We had to destroy the investment banking sector in order to save it.”
Shrub( chewing on a pretzel ): “They are trying to bankrupt my daddy!”
“I’m Shrub…I have an MBA…I approved this message”
Mission Beach this morning under a full Hunter’s moon. Toes in the sand. Three really good things about California: Blondes, brunettes and redheads. Not all markets are crashing.
So we have a new Canadian government. (It’s the same as the old one, though). We have all been promised a $5,000 tax break on new houses by the winning team, which should ward off any ecominic malaise lurking about.
At the voting station, an old mama who didn’t speak much English came over and asked me how to vote (while I was voting). So I showed her how to mark a little “x” on the ballot. Then she asked me who to vote for. Before I could go mad with power, I sent her over to some election staff. Seriously, though, why go to vote if you don’t know what you want. It’s not that fun, and we don’t even get a little “I voted” sticker.
“Meet the new boss, same as the old boss”……
Ella,
that sounds like a chinese name. Met a cute 20-year old in Beijing with that name.. Almost married her.
Ella, elle l’a.
Oh good, now every new house seller will raise the price by $ 5,000.
latest news
Bernanke: There was no choice involved in Lehman’s collapse
FUTURES MOVERS
Crude falls 4% on economic worries, OPEC update
Petroleum cartel cuts 2009 growth forecast for global oil demand
By Myra P. Saefong & Polya Lesova, MarketWatch
Last update: 1:01 p.m. EDT Oct. 15, 2008
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell below $75 per barrel Wednesday to touch their weakest level in more than a year after a group of key oil producers cut their oil-demand forecast for next year, fueling concerns that the global financial crisis will lead to a sharp slowdown in economic growth and further declines in oil consumption.
Dangalang — The 4% drop in oil stuck at day’s end. How many 4% drops add up to a 50% drop? The approximate answer given by the so-called “rule of 72″ is 72/4 = 18 of them.
The exact calculation is given by
(1-0.04)^n = 0.5
n = log(0.5)/log(1-0.04) = 17 (after rounding).
There goes the incentive for us to become energy self-sufficient.
Looks like they are going off a cliff today, mbeep! mbeep!
The anti-PPT showed up at the end it looks like.
***WARNING STOCK MARKET ADVISE AHEAD***
“Sell early; sell often!” tm MormonTeaCo MMVIII
It’s so easy as:
1. Uh-oh Bad News.
2. Better sell at the market.
3. New lows again.
Rinse, lather, repeat!
4000, 5000 why not
I’m not sure how this translates to the Dow, but I’ll start thinking about buying when the S&P gets to 750 and seriously consider it at 600.
For money I won’t need for 10 years.
But I’ll ask my wife if long term bonds might, in fact, turn into stocks, and stocks might turn into wallpaper, in droves, post Chapter 11.
Sometimes I open my Wall Street Journal and am at a loss for words. Here’s the opening line of an article that ran today:
In an article called, “No Quick Fix for Housing Prices” it says:
The Treasury Department’s rescue plan for the U.S. financial industry doesn’t directly address the root cause of the crisis: falling home prices.
Now, I know that “business conservatives” have different opinions from “wack job conservatives” in that, for example, they tend to support bailouts to keep the party going.
However, saying the root cause of the crisis is “falling home prices” in the Wall Street Journal is disconcerting.
What kind of a grand piano do you have? Steinway, Boesendorfer, Yamaha, Fazioli? What are the hardest pieces you can actually play?
773
Retired Professor of Finance Michael S. Rozeff wrote up a small paper, The T-Bone Steak Indicator, linking the price of gold to steaks & suits, & carpenters wages. Limited supplies, over a long period of time, in relation to everything else. Gold Is the traditional benchmark for financial measurement. The zero mark. Zero marks can be manipulated by accident or on purpose. The question is, can you tell? In any event, mad-max or not, after reading about the T-bone steaks - I can
Some ppl in here use guitars in place of steaks.
What is surprising, of those who are anti-gold & also say gov. will confiscate it. If gold is so old & outdated, such an unimportant relic, why would the gov. need to take it, let alone have a big vault of it?
Protecting your gold from the starving masses is not any different than protecting everything else you have. Having gold or not changes little to a pillager of your stuff. Is this why that old, “rule-of -law” idea is so important? As opposed to rule-of-whim, & lacking in any type of order of operation? Is this where, “fuzzy math” leads us to? 1+1=0 ?
Rozeff is, the man.
Look it up on lewrockwell.
Now, about those striking Argentine farmers…
There’s a book, written in 1940 by someone who worked on Wall Street in the 20s called “Where Are the Customers Yachts?” by Fred Schwed
It was reprinted a few years ago by Wiley and I found a copy on Amazon used.
It reads like it was written last month, not 68 years ago. Very little has changed.
Read that recently, and couldn’t get the image of Frasier out of my head. Tres droll.
That is a great read.
UPDATE 1-Bernanke sees regulatory role in fighting bubbles
Wed Oct 15, 2008 2:14pm EDT
WASHINGTON, Oct 15 (Reuters) - Economic policymakers may need to use their regulatory authorities to anticipate and restrain asset price bubbles, such as in the housing market, that cause big economic problems when they burst, Federal Reserve Chairman Ben Bernanke said on Wednesday.
“Obviously, the last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the U.S. economy. And there’s no doubt as we emerge at the current crisis we’re all going to be looking very hard at that issue and what to do about it,” Bernanke said in remarks to the Economic Club of New York.
One debate that needs to take place is about the role that monetary policy and supervisory regulatory policy should have in fighting asset bubbles, he said.
“I do believe the latter does have a significant role to play in constraining excessive leverage, excessive risk-taking and the other elements that lead to bubbles,” said Bernanke, who has previously said it is hard for policymakers to burst an inflating asset bubble.
I can see Mr. Bernanke running around with a needle in his pocket looking for bubbles to pop.
Will the feds cockamamie, ad hoc, make up rules and laws as you go along approach to put a floor on house prices work? Is the fed just delaying the final out come?
What are they really afraid of? They are a bunch of wooosies.
This afternoon I saw former Fed governor Wayne Angell on CNBC’s Fast Money, and he said that “we cannot survive a deflation of stock prices on top of a deflation in housing prices”. I like Angell and I believe he speaks his heart on these issues. But, I’m wondering “who” he is referring to when he says “we cannot survive…”
This is all a rear guard action, a fighting retreat, they’re trying to keep the frogs from jumping out of the pot all at once.
“Did you really think that we want those laws to be observed? …We want them broken… We’re after power and we mean it… There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What’s there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced nor objectively interpreted - and you create a nation of law-breakers - and then you cash in on guilt.”
Dr. Floyd Ferris
AIG Bonuses, Retreats Violate State Law, Cuomo Says (Update4)
By Karen Freifeld and Hugh Son
Oct. 15 (Bloomberg) — New York Attorney General Andrew Cuomo is investigating “unwarranted and outrageous expenditures” at American International Group Inc., which received an $85 billion federal bailout last month.
In a letter to AIG’s board of directors, Cuomo demanded the company stop “extravagant” expenditures and recover millions of dollars in unreasonable payments, or face legal action.
Cuomo cited a $5 million bonus and a $15 million “golden parachute” AIG awarded its chief executive officer in March. Martin Sullivan was AIG’s CEO at the time. Cuomo said the company also spent hundreds of thousands of dollars on “luxurious retreats” for executives, including an overseas hunting party and a golf outing.
“The party is over,” Cuomo said today at a press conference on Wall Street in lower Manhattan. “No more hunting trips. No more luxury resorts. They are not going to have the party and leave the hangover for the taxpayers.”
Take the money back that they clearly stole from wage earners and tax payers. Then deliver the perpetrators to me.
Financial Times
New storm hits markets
By Chris Giles and Javier Blas in London and Krishna Guha in Washington
Published: October 15 2008 19:21 | Last updated: October 15 2008 23:19
Growing evidence that the worldwide bank rescue plans have come too late to avert a deep global recession drove down stock markets in Europe and the US on Wednesday.
The S&P 500 index fell more than 9 per cent, its biggest one-day decline in percentage terms since the stock market crash of 1987.
Special audio edition post for those that are behind at work and must immediately stop blogging, like me. Headphones, hut!
Bogle!
http://www.onpointradio.org/shows/2008/10/how-to-fix-the-economy/
Bogle!
http://www.radioopensource.org/candid-capitalist-john-bogle/
Bogle!
http://www.pbs.org/moyers/journal/02152008/profile3.html
Wall Street Journal
OCTOBER 16, 2008
FDIC Chief Raps Rescue For Helping Banks Over Homeowners
By DAMIAN PALETTA
WASHINGTON — Federal Deposit Insurance Corp. Chairman Sheila Bair on Wednesday criticized the federal government for failing to take more aggressive steps to prevent Americans from losing their homes, highlighting a rift between her and other senior U.S. officials over terms of the $700 billion rescue package.
The government plan will help stabilize financial markets but it doesn’t address home foreclosures, the root of the crisis, she said in an interview with The Wall Street Journal.
“Why there’s been such a political focus on making sure we’re not unduly helping borrowers but then we’re providing all this massive assistance at the institutional level, I don’t understand it,” she said. “It’s been a frustration for me.”
Ms. Bair didn’t single out government officials or leaders, but her criticisms brushed on decisions made by both the Bush administration and Congress. For example, she described painstaking efforts made by lawmakers in crafting the federal Hope for Homeowners program to make sure it limited resale profits for borrowers who received affordable home loans.
Ms. Bair, who was nominated by the White House and confirmed by the Senate in 2006, has frequently criticized government and industry efforts to prevent foreclosures. She has long defended her focus on consumer protection as a key role for the FDIC, which is charged with protecting bank deposits.
Her comments Wednesday came amid growing tensions with key figures in resolving the financial crisis, notably Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, according to people familiar with the matter.
I finally figured out my roll on the blog.
simple but true.
I post an idea to buy something, I buy it, then I sell it…..if I dont sell it almost instantly for a 20-40% gain it collapses.
yours truely,
the village idiot.
(I took my $128 loss today on TMM, hope you didnt go big!!)
I suggest closing unneeded San Diego golf courses, whose perpertual watering requirements are an ongoing drain on scarce water resources.
Sanders serves notice of sharp budget cuts, water rationing
By Matthew T. Hall
UNION-TRIBUNE STAFF WRITER
October 15, 2008
SAN DIEGO – Mayor Jerry Sanders warned of deep, imminent budget cuts and water rationing across San Diego yesterday, while also stressing the importance of a new City Hall and an expanded convention center.
…
After earning laughs by saying he has begun shaving in front of the sink instead of in the shower to save water at home, Sanders quieted the crowd by calling water rationing “likely” because “our water suppliers will soon force our hand.”
“We’ll have to establish household allocations for water use and penalties for excessive water consumption,” he said. “Whatever allocation formula we come up with, it’s certain to make people angry.”
About the city budget, Sanders said his aides are projecting a $43 million deficit in the current fiscal year, which will mean that “we almost certainly will need to curtail programs and close facilities that enjoy broad public support.”
My daughter has hijacked the TV and is watching “Aladdin.” Am I missing anything exciting in the debate yet??
October 15, 2008
Dow 7,000, here we come
Why anyone would expect the huge Monday rally on the stock market to be a signal that the market has bottomed out is beyond me. GDP is down, the recession is just taking hold and the broad faith that many investors around the world had in the U.S. is fundamentally shaken and unlikely to ever return to its old levels. Much of the foreign capital that kept U.S. stock prices high is not coming back. Beyond that, there’s this great point:
We got into this crisis because power was overly concentrated relative to knowledge [of the dangers of subprime lending and securitization]. What has been going on for the past several months is more consolidation of power. This is bound to make things worse. Just as Nixon’s bureaucrats did not have the knowledge to go along with the power they took when they instituted wage and price controls, the Fed and the Treasury cannot possibly have knowledge that is proportional to the power they currently exercise in financial markets.
That’s from economist Arnold Kling, who writes about economic issues with unusual force and clarity.
Is it too late already to roll back those questionable city pension benefits? I am definitely voting for Mike Aguirre in the upcoming election, given Sander’s opposition to him.
Bad News at the City’s Budget Committee
Oct 15, 2008
Alison St John
…
The city of San Diego will have to find ways to cut $43 million before the end of the fiscal year.
Chief Operating Officer Jay Goldstone says property, sales and tourist tax revenues will fall short by $35 million, and unavoidable revenue increases are up $8 million.
Goldstone: You may see recommendations to close facilities, modify hours of operations, and we need permanent fixes, permanent reductions, because we’ve got the problem going on into the next fiscal year.
Wow — the honorable Jerry Sanders has appropriated my favorite descriptive term for the titans of Wall Street (”kingpins”). I am quite flattered. And by the way, how come a paltry $43m out of $700,000m in rescue monies is not available for helping to keep America’s Finest City afloat?
Sanders: ‘We Have to Rescue Ourselves’
Published: Tuesday, October 14, 2008 2:01 PM PDT
In a rare major speech, Mayor Jerry Sanders this afternoon said the city’s current budget suffers from a $43 million deficit and, for the first time, offered to be a leader in the Chargers’ quest for a new football stadium.
The mayor’s speech, titled “Overcoming Financial Challenges,” warned that he will likely have to cut programs and close popular facilities in order to close a projected $43 million deficit for the current fiscal year, which began July 1 and ends June 30, 2009. The deficit was brought about by decreasing revenues in tourism and property and sales tax, he said.
“In this era of $700 billion bailouts, $43 million may not seem like a lot. But, believe me, for a city that is already on a tight budget, it’s huge. Unlike the kingpins on Wall Street, no one is going to rescue us. We have to rescue ourselves,” he said, according to a copy of his remarks.
“…and, for the first time, offered to be a leader in the Chargers’ quest for a new football stadium.”
Nothing like priorities.
There has never been a better time to buy a home in San Diego.
Sanders Issues Emergency Speech on City Finances
Mayor Jerry Sanders speaks to reporters after his speech Tuesday.
Wednesday, Oct. 15, 2008
In what was essentially an emergency State of the City address, San Diego Mayor Jerry Sanders on Tuesday warned city residents of significant, perhaps even drastic, service and program cuts — and he said they are coming soon.
Current projections show the city $43 million in the hole just three months into the fiscal year as the plummeting economy continues to hit the city’s three main revenue generators — tourism, sales taxes and property taxes — as hard as they’ve been hit in decades.
“These are uncharted waters, and I don’t pretend to know where the economy is heading,” Sanders said to a packed ballroom at the Kona Kai Resort and Spa on Shelter Island. “But I can say this — we almost certainly will need to curtail programs and close facilities that enjoy broad public support.”
Sanders offered little in the way of specifics as to what programs and services are on the chopping block, instead laying out broad promises. He would only say that the cuts will be made “without damage to our city’s core services,” adding that police and fire budgets will be spared.
The administration will present a package of cuts for the fiscal year — which began July 1 and runs to June 30, 2009 — to City Council in early November, with the expectation that they will be voted on by mid November. He added that until the economy shows signs of improvement he will veto any council action that increases spending in non-essential programs.
“At this moment I can’t speak to its content,” he said of the budget proposal, “but I will attest to its character: It will meet the problem head-on. It will tell the public the truth. It won’t flinch from the tough decisions before us.”
Get shorty — some more!!!
OCTOBER 15, 2008, 7:41 P.M. ET
SEC Extends Period for Disclosing Short Positions
By KARA SCANNELLArticle
The Securities and Exchange Commission said hedge funds and other investment managers will need to report their short positions to the agency until August 2009.
In an order issued late Wednesday, the SEC said it was extending disclosure requirements issued under emergency authority until August 2009 and would accept comments from the public before making the rule permanent.
Financial Times
Hedge funds call for intervention on Lehman
By James Mackintosh in London
Published: October 16 2008 03:00 | Last updated: October 16 2008 03:00
A group of the largest US hedge funds has called on the Bank of England to intervene to free an estimated $65bn in assets frozen in London in the collapse of Lehman Brothers, warning that delays “could be disastrous for UK plc”.
The funds, through the Managed Funds Association, said the scale of the problem was so great that it could undermine bank rescue plans as tens of billions of dollars would be kept out of the market. It was also likely to lead to the failure of some fund managers, said Richard Baker, chief executive of the MFA.
The warnings come as hedge funds have been quietly shifting billions of dollars of assets out of London to the US, claiming that the US legal system provides greater protection.
Mr Baker, a former congressman, said that by damaging confidence in prime brokers after the fall of Lehman, delays in returning assets were prompting hedge funds to hold more cash and to move assets out of London.
“Prime brokerage clients are already withdrawing their assets from the UK prime brokers/UK branches of overseas prime brokers,” he wrote in a letter to Mervyn King, governor of the Bank. “This development is calling into question the future of the UK prime brokerage market.”
This would be particularly serious for London because prime brokers, which provide services to hedge funds including financing, have been one of the most profitable divisions of banks in the past few years.
MarketWatch.com
October 15, 2008 10:02 P.M.ET
BULLETIN
Japan drops 9.7%
Sell-off slams Tokyo exporter stocks, sends Nikkei 225 plummeting as sharp overnight U.S. losses raise new recession fears. Australian, South Korean indexes also drop sharply in early trading.
Just broke 10%.
It’s a good thing that all these violent swings are typical of a normal market, otherwise one might have cause to be…er…worried.
recession?
surely, in a global event such as this…..recession is not a factor.
the factor is claims on money is money…..
wait, WTF is money, again?
Uh, the stuff people need to pay their bills with?
wait, WTF is money, again?
supposed to equal work if you want it to have value.
Print more money than anyone or nation can work off then you have a problem. like now.
“surely, in a global event such as this…..recession is not a factor.”
(Sarcasm tag on)
Right — the markets are decoupled, so Asian nations like Japan, China and India will be little impacted by a U.S. slowdown.
(\Sarcasm tag off)
Wall Street Journal
* OCTOBER 16, 2008
Fannie, Freddie Share Spotlight in Mortgage Mess
Government-Backed Mortgage Giants Are Targets in Political Debate Over What Sparked the Housing Bust
By JAMES R. HAGERTY
Fannie Mae and Freddie Mac have become prime suspects in the political debate over who caused the mortgage meltdown.
Last week, Sen. John McCain, the Republican presidential nominee, said the government-backed mortgage investors are “the match that started this forest fire” in the U.S. economy. Others contend that a push by Congress that forced Fannie and Freddie to sharply ramp up lending to lower-income borrowers is what did in the mortgage giants. A television ad campaign by the American Issues Project, a conservative political organization, accuses Democrats in Congress of coddling Fannie and Freddie, allowing them to escape tougher regulation.
Fannie Mae President and CEO Herbert Allison Jr., left, and Freddie Mac CEO David Moffett talk during a break in congressional testimony last month.
“That’s nonsense,” said Rep. Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee. He said in an interview that when Republicans had a majority in Congress they failed to pass legislation improving regulation of the companies.