Bits Bucket For October 17, 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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OK, this is just too funny: Bush to give pep talk to anxious country Friday.
Wild gyrations on Wall Street, a loss of confidence in the U.S. banking system and worries the economy will be weak for some time are raising Americans’ anxiety level.
Against this backdrop, President Bush on Friday was to give the nation a more detailed explanation of what the government is doing to battle the worst financial crisis in more than a half-century.
White House officials said Bush didn’t intend to put forward any new policy actions.
BWAHAHAHAHAHAHHAHAHAHHAHAHAHHHHHHHHHHHHHHHHHHH!!!
From the article: “Americans are feeling strained as their paychecks shrink and their savings shrivel. That’s causing shoppers to cut back, one of the reasons the economy is losing traction. Economic slowdown overseas, meanwhile, are expected to crimp demand for U.S. exports, which has been the main force keeping the economy affloat.”
A good summation of what is happening, IMO. Deflation reigns, debt sucks, cash rules.
From a Republican point of view, isn’t this a good thing? The free market is reducing the inferior people to the standard of living they deserve, while allowing the deserving to capture more of the good things in life.
With a little help from the government.
The last sentence you threw in an excellent summary of the difference between “neo-cons” and the old republican party.
“The free market is reducing the inferior people to the standard of living they deserve…”
These people reduced their own standard of living, the free market merely provided the method.
Republicans don’t believe in the free market. They just want lower taxes.
And bail outs when they make mistakes.
“And bail outs when they make mistakes.”
Mistakes, no freakin way, not even close…try…
“And bailouts when their greed-driven schemes implode.”
DOC
Right On Colorado!!!!
Many of the people in our circle have been telling us how much money they’ve lost in the stock market in the past few months.Some of them are truely beginning to panic. Many of them, I hate to admit, our Republicans, and they spouted they’re nonsense to us for years. Most of them are now losing their shirts, jobs and their house values are dropping like a stone.They were drinking the Kool Aid on a daily basis. We tried to warn them YEARS ago that this party was coming to end and that should be living below their means and not above them. They thought we were NUTS and that we we’re missing out. Well we all know how that turned out. Hate to say “I told you so”.
We SOLD the house, boat and all the rest in the last 2 years. We’ve been squirelling away money like crazy for the past 10 years or so and had no debt. We’ve been and and are totally Debt Free, Cash Rich and Foot Loose. Looking forward to Bottom Fishing in the very near future! Cash King and we’ve been sleeping real well.
WT,
That… or I happen to think this is something of a “buyer’s strike”? People are glued to the election right now and the shopping season hasn’t started in earnest yet. ( Used to be T-Day, now I’m told it’s Halloween )
By now most people have figured out ( with their HELOC shut down and plastic curtailed ) that they’ll be paying CASH for those impulse purchases, and they don’t see anything out there worthy of parting with cash for?
RIP, American Hyperconsumer
Please define inferior people.
You’ll have to ask a Republican to define it, or at least someone who has read Atlas Shrugged.
Just a “typical white person” no doubt.
“Please define inferior people.”
Those untainted with various levels of Sociopathic and Narcissistic tendencies.
DOC
Agreed, for the time being, it is deflation. Even with a surprise interest rate cut, gold is still falling. Oh, I mean gold never goes down–it is up -25 today after being up -35 yesterday. I suspect we’ll be in the 500s soon, since all the other PMs are in that area already. Look at Palladium, off nearly 75% from its highs in March.
Day ‘tarders forgo the future, one day at a time.
Perhaps not so glibly as alad -
What I see is postponement of the inevitable (perhaps). I mentioned this the other day - I think we’re in the midst of a bubble of the dollar itself, in the form of extreme borrowing (see links above). The bubble will pop when we can simply borrow no more. However in the meantime it will continue to grow, pushing PM’s down.
An analogy would be the stock market reaching new highs, above 14k on the Dow, in late 2007. It was obvious to many that the underlying fundamentals of the economy were getting weaker by the day, but the bubble kept inflating until it could no longer support itself, and now here we are at 40% off, and we don’t know where the bottom will be.
I say “perhaps” because I’m no macroeconomist, and may be wrong about the whole thing. It’s very unpredictable.
What I would *not* do is use falling PM spot prices as any indication of anything. As discussed ad nauseum the last few weeks - there is quite a disconnect right now between PM demand and spot prices.
there is quite a disconnect right now between PM demand and spot prices.
$7 over for eagles now, and climbing. The proverbial beachball at the bottom of the pool?
What I see is postponement of the inevitable (perhaps). I mentioned this the other day - I think we’re in the midst of a bubble of the dollar itself
I agree with this exactly. I guess you could say I expect deflation in the near-term and inflation or hyper-inflation in the long term.
The disconnect between spot and physical I still don’t understand (try as I might).
Inflation of paper/electronic gold (in the form of unbacked contract sales) is one possible explanation. This is the “it’s being manipulated” explanation. It’s certainly plausible, but I try not to let my tin-foil hat get too tight that it prevents other rational explanations from floating to the top.
Another possibility is a disproprotionate increase in the volume of physical metal traded has temporarily distorted the relationship. The resolution to this long-term would be increased coining, something that producers may be reluctant to invest in, in case that extra demand falls back off.
Those are the only two thoughts I have to explain it.
It’s pretty simple, actually. Multi-billion dollar hedge funds have been investing in huge quantities of “paper” gold and silver, along with other commodities like crude oil. With the huge losses in their stock market holdings, many of their clients want to liquidate their holdings. The hedge funds must sell good assets and bad, including GLD, SLV, and other forms of paper metals in order to have the cash to pay the clients. This drives down the paper price of gold and silver but not the real physical price. There is easily 100X the amount pf paper gold and silver than real physical metal.
“There is easily 100X the amount pf paper gold and silver than real physical metal.”
Do you have any REAL evidence that SLV and GLD are leveraged 100 to 1 on their “paper” PM’s? GLD is sugject to an independent physical audit. It could certainly be a major fraud, but the size would have to dwarf Enron and all known previous frauds, possible yes, likely no. I serious doubt there is actually more than a 5-10% deviation between “paper” and actual holdings at any one time. I agree liquidations have pushed down the price, but find the claim of 100 to 1 to be ridiculous without proof. I am willing to be convinced by facts.
I think we have an example of one way thinking here. On the way to $1000 gold I said it was leveraged speculators driving the highs. The insaners booed as hard as they could. Now the spot is going down and the herd says it is the leveraged speculators fault. LOL.
I called the 700s a few weeks ago for the golden goddess. Lucky call I guess. I believe in six months the coin collectors will be back on the street looking for buyers. Can’t imagine at what price. Then I will put some more away for the kids.
I’m not saying SLV and GLD are leveraged 100 to 1. I am saying if you take the total amount of silver contracts on the COMEX it is 100X or more of actual physical silver. If those futures contracts had to be filled and physical silver delivered the entire world’s supply would only fill 1% or less of the contracts. The Hunt brothers figured this out in the ’70’s, and would have owned the banks. The federal government changed the rules midstream and allowed the contracts to be settled in cash.
Blue Skye, if you’re going to be snarky, you should at least understand the conversation. It’s not about the change in spot, it’s about the apparent change in the relationship between spot and retail.
I do wonder if many who bought gold are finding that they need the CASH. I suspect that some of the goldbugs here are quietly selling, but they’d NEVER own up to that.
“Git ’bout the bizness of ‘Merika” (shop)
My all-time favorite decider line. Will anyone even be listening at this point? Maybe Joe (the unlicensed) Plumber?
Joe the Unresearched By My Campaign Before I Shot My Mouth Off Plumber.
how much you wanna bet Littleboots mentions Joe the 250k per year Plumber in his speech? Aint a lie if you repeat it enough.
Obama blew it and you know it! Whistling past the graveyard wont work. This zombie is grabbing the Dems around the ankle and will soon be totally out of the grave. I cant wait to see the Halloween ads. Libs have stiffed the non minority working class for decades while ducking behind political correctness; JTP forced their game plan into daylight.
“Obama blew it and you know it! Whistling past the graveyard wont work.”
Huh? This statement isn’t just wishful thinking, it’s delusional.
I haven’t heard such outlandish talk since David Lereah had credibility.
Funny I thought it was McCain who brought up Sam first in the debate. Also rumors have it Sam was a setup for McCain to use in the debate.
The Messiah walked down Joe the Plumber’s street, walked up Joe’s driveway, where Joe asked his now-famous question.
The attempts to discredit an ordinary citizen posing a question to a person running for national office are telling indeed…
The sanctimonious victimhood rhetoric won’t work either.
Stock market to drop 500 points while he speaks.
Is he speaking already?? Off a couple hundred at the open.
The vocal majority of Americans who elected Bush are strangely silent about their champion. Since his party has had a majority for 6 of the last 8 years in all branches of government, it’s hard to blame the decline of Western civilization on liberal bogeymen.
The politics of fear and homespun homilies seem to be less effective these days, when the nation needs intellect and consensus building.
“The vocal majority of Americans who elected Bush are strangely silent about their champion.”
Cheney-Shrub… “The Deciders” …are directly responsible for Obama’s opportunity to be President…talk about unforeseen blessings!
“talk about unforeseen blessings!”
Maybe God did personally ask him to run for president after all.
“intellect and consensus building” sounds squishy. I don’t think you are quite striking at the root of the problem.
Switching jersey colors on the presidential mascot is not what we need. Not even close.
The root of the problem is, that one mystical group of lemmings (doom & gloomers extraordinaire…) was perhaps the only cohesive political group in the country, and their votes elected their ideological dogma into office, and ’ssshrubery, with the help of Pat Robertson and others of his ilk, loaded like-minded Manchurian Candidates into important positions, not based upon intelligence, but whether you were a reliable cog for god.
I still think you are looking at this too superficially. We are governed by a Congress largely bought and paid for by the bankers. The party politics are a diversion, and only keep us fighting amongst ourselves.
Just as nobody dared stand up to McCarthyism, because people were bound by fear, nobody dared stand up to the evangs, because people were bound by fear.
“The party politics are a diversion, and only keep us fighting amongst ourselves.”
That’s exactly right. And it’s amazing how many otherwise intelligent people, on this board and elsewhere, on both sides of the political debate, have fallen for the ruse.
95% of the fiscal policy of executive and legislative branches is commenced with very little disagreement. All the heated fights are over the remaining 5%.
How much, if any, of the Bush-Cheney excesses will be rolled back by an Obama administration? Answer: about as much as Reid-Pelosi did in Congress when they took over, or in other words, none.
“How much, if any, of the Bush-Cheney excesses will be rolled back by an Obama administration? Answer: about as much as Reid-Pelosi did in Congress when they took over, or in other words, none.”
My thoughts exactly. I can’t stand the neo-cons, but I always like to say, they couldn’t have done it without their lickspittle friends in CONgress, the neo-liberals. Yah, Nancy “Impeachment is off the table”. Thanks for nuttin’ , beyatch.
“How much, if any, of the Bush-Cheney excesses will be rolled back by an Obama administration?”
I bet Haliburton/KK&R/Blackwater won’t have those no bid 1 billion a month contracts for long.
Remember Congress has a wose approval rating than the current admin.
“I bet Haliburton/KK&R/Blackwater won’t have those no bid 1 billion a month contracts for long.”
Skip, Keep telling yourself that. Obama won’t touch blackwater because his troop reduction plan relies heavily on “private contractors”.
There is no significant difference between the D’s or the R’s.
Stunning ignorance. Those “no bid” Halliburton contracts were signed by President Clinton. Google yourself up some LOGCAP:
http://www.google.com/search?num=20&hl=en&q=LOGCAP+Clinton&btnG=Search
Listening to the so-called “undecideds” is far more squishy than I am. Instead of participating in the process and demanding a higher standard, people act apathetic along the way, then complain about their choices. Always waiting for something better to come along.
It reminds me of overhearing a bunch of teenaged boys at the burger joint complaining that none of the girls at their high school are “hot” enough. They want an Angelina Jolie clone or nothing at all.
Either develop realistic expectations and make do with what’s available, or wind up being a wanker your entire life.
Amen!, NSO
Every time a D.C. clown pops up and says it’s all under control, it just spooks folks more. Of course I think that’s part of Paulsons plan, he and his crowd get to grab more dough to ‘fix’ it each time there is a convulsion.
“Bank buyout needed to preserve free market”
-President Bush
I think he has actually been reading, or having some one read to him. Amazon says sales of Das Capital are way up. Perhaps one went to 1600 Pennsylvania Ave.
“Bush to give pep talk to anxious country Friday.”
’ssshrubery was a cheerleader, so my guess is he nails it…
Suggested chants & cheers:
======================================
2, 4, 6, in just 8, i’ve made America 2nd rate
======================================
Watch out, we’re here!
Everybody stand clear!
Let’s shout, let’s cheer!
Our victory is near!
Liar! L-I-A-R-S!
That’s our name; we are the best!
=======================================
Clap your hands (clap hands three times)
Stomp your feet(stomp feet three times)
Clap your hands (clap your hands three times)
Stomp your feet(stomp your feet three times)
We’re the Chickenhawks that can’t be beat!
Lad, you’re hilarious — you should hook up with an illustrator and start a career as a cartoonist.
I owe it all to google…
SHORT! SELL! SHORT SELL!!!
Bush Calls For Panic
WASHINGTON—In a nationally televised address to the American people Wednesday night, President Bush called upon every man, woman, and child to spiral uncontrollably downward into complete and utter panic.
President Bush addresses the nation shortly before shaving his head and soaking the Oval Office in his own urine.
Speaking from the Oval Office, Bush assured citizens that in these times of great uncertainty, the best and only course of action is to come under the throes of a sudden, overwhelming fear marked by hysterical or irrational behavior.
Bub Diddley,
Even before you click on the link ( you just KNOW it had to be the work of… The Onion! )
I realize full well this won’t be a popular opinion here, and we can tear our hair out in clumps over WMD’s etc. but has anyone stopped to consider how different the situation might be financially had our allies lent more than token support in Iraq?
I know, I know, we should have had to “pass some sort of International “test” ” before entering into conflict but the rest of the world was perfectly willing to watch us roll up our sleeves and foot the bill. Just curious.
This is about the only speach he could give that wouldn’t be considered lies.
For all of those who support Obama, Please “Spread The Wealth”.
I will be accepting checks for $1000.00 from each supporter. Thank you.
Typical gop apologist. Always looking for a handout.
Here’s a vicious rumor for the righty-tighty-types to circulate amongst themselves…
Obama backwards sounds an awful lot like Amoeba, can America really afford to have a protozoa for a President?
Did you also happen to use the words “flip” and “flop” in the same sentence (not involving real estate) in 2004?
$1000 says you did.
A Trillion Dollar Bait and Switch
The Bailout and the Smell Test…
There is not an unmanageable number of defaulting mortgages. According to the US Treasury estimate, 90-93% of the mortgages are good. How does a 7% or 10% default rate on US mortgages translate into a systemic worldwide financial crisis?
The popping of the US real estate bubble could not produce worldwide systemic financial crisis without the mark-to-market rule, short-sellers, and a great deal of hype and orchestration. Why did Secretary Paulson let Lehman Bros. fail when every other firm is bailed out? Did Lehman’s failure, by unwinding its own large portfolio, push hedge funds and banks into panic selloffs that spread the crisis at home and abroad?
http://www.321gold.com/editorials/roberts/roberts101708.html
wmbz, I read that editorial. Paul Craig Roberts is one of my faves, not just in economics, but for social commentary as well. This piece he’s written about the “bailout” is extraordinary and one of the, if not THE, most important analyses of what is happening right now and why. If I were king, I’d lock every CONgressperson in a room, make them read it and then administer an exam. Anyone who gets less than 100% on the exam, losed their seat and is barred from holding public office at any level, forever.
My thoughts were that some of the money will end back up as “campaign contributions” to Congress. If they had merely bought properties from banks, very little to none of the money spent would have ended up back in Washington.
“The popping of the US real estate bubble could not produce worldwide systemic financial crisis without the mark-to-market rule, short-sellers, and a great deal of hype and orchestration”
That one line is complete BS. The only thing necessary to produce a worldwide systemic financial crisis is a monetary system based on “fictional reserve lending” and dependent upon exponential growth in debt.
Allowing organizations to claim assets as “reserves” at prices they could not realize (opposite of mark to market) is called “fictional reserve lending”.
We have discussed how “short-sellers” bring stability to the market so we all know they didn’t “cause” this systemic financial crisis and finally we all know that there was an unprecedented level of DENIAL in the media attempting to keep the economy afloat on “wishful thinking” and hyping the positive news.
The crisis was the run up in prices and irresponsible levels of debt based on fiat money and that was manufactured by government legislation.
Agree 100% with your post, Dan.
So what are Da Boyz doing with all this dough?
Banks borrow record $437.5 billion per day from Fed…
NEW YORK (Reuters) - Financial institutions ran to their lender of last resort for record amounts of cash in the latest week, under extreme pressure from the worst global financial crisis in a generation, Federal Reserve data showed on Thursday.
Banks and dealers’ overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day.
Some analysts are concerned that banks’ dependence on Fed lending might become long term and difficult to change.
“The banking system is going to become addicted to this very cheap money. Unwinding it will be very difficult,” said Howard Simons, strategist with Bianco Research in Chicago.
http://www.reuters.com/article/ousiv/idUSTRE49F97920081016
I get the sense that some of it is finding its way back into the stock market. I personally am tired of articles about big runups in stock prices that are solely attributed to individual investor sentiment. Ignore that guy behind the curtain who has dumped in three-quarters of a $1t in liquidity behind the scenes!
Stocks’ last hour unusually good
After wild day, Dow closes 400 points up
By Michael M. Grynbaum
NEW YORK TIMES NEWS SERVICE
October 17, 2008
NEW YORK – For once, fear fled the markets at 3 p.m.
—————————————————————————-
Fed’s liquidity provisions $784.5 billion as of Wednesday
By Rex Nutting
Last update: 4:31 p.m. EDT Oct. 16, 2008
WASHINGTON (MarketWatch) — The Federal Reserve had extended $784.5 billion in special liquidity programs to the financial system as of Wednesday, up $104.6 billion from the previous Wednesday. Much of the increase was in the new term auction credit, which nearly doubled to $263.1 billion.
OK - I see several things that are starting to scare the crap out of me with regards to the future - short-term even - of the dollar.
1. This extreme borrowing from the Fed (e.g. also see the following two links)
http://research.stlouisfed.org/fred2/series/DISCBORR
http://research.stlouisfed.org/fred2/series/NFORBRES
2. (Long-term) the amount of borrowing that will need to be done to fund the bailouts - the bill is already about $1.5T and climing - combined with the reduced borrowing power of the treasury as purchasers of treasury notes increasingly just don’t have the money to loan due to the economic downturn.
3. The disconnect between PM spot prices and demand (discussed at length on this blog already, and something I’m seeing firsthand as well).
OT
is there anywhere in the world where “Universal” healthcare isn’t a total failure ?
http://news.yahoo.com/s/ap/20081017/ap_on_re_us/child_health_hawaii
the next gov FREE thing coming your way
This comes a complete shock(not)… They haven’t seen anything yet, wait until after the holidays…
Banks Hoard Cash as Credit Card Defaults Rise…
These financial disclosures showed a spike in credit card loans going bad, putting further pressure on already-stressed balance sheets. J.P. Morgan Chase said the number of credit card loans in default rose 45 percent in the third quarter from the comparable period a year ago and predicted that default rates would sharply accelerate through 2009, with 7 percent of credit card loans going bad.
“We have to be prepared that it gets a lot worse,” J.P. Morgan chief executive Jamie Dimon said about the overall economic outlook.
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/15/AR2008101503233.html
Nobody could have possibly predicted this.
Have you seen the gold4cash.com commercials yet, Combo? They’re on the Weather Channel a lot lately.
It’s sad, one picture shows a pile of wedding/engagement rings - really sad - all that lost love sent blindly away in a plastic zip lock bag for some moldy old cash.
Those crack me up. Send your precious metals to someone you’ve never met and we PROMISE we’ll send you some cash.
Those tv commercials are very pricey, so somebody has to pay for them…
You can expect to get around 50-60% of true value for your ’scrap gold’, by doing your part.
My wife told me yesterday she heard about a thing going around, like those pampered chef parties or tupperware parties or makeup parties or whatever. It’s a gold selling party. The host invites his/her friends over, and someone will be there to buy all the old PM’s, on the spot.
I think it’s brilliant. What better way to get credibility than if you are invited into the group by a friend?
bluprint,
It’s true. On Good Morning America they showed one of these gold selling parties.
The idea is brilliant only as much as these women are morons. Does a woman go to a party expecting to buy Tupperware, only to be convinced, on the spot, to rip a gold chain off her neck to sell it to a stranger?
If I saw that kind of bait and switch I’d walk out immedaitely and never speak to the hostess again.
Well, I mean it’s brilliant from the standpoint of the gold buyer.
“It’s immoral to let a sucker keep his money.”
Oh, I understand what you mean now. No, I was using the tupperware thing as an example of the type of party.
AFAIK, it’s billed as a place to “sell your old gold”, like the similar commercials. I am not aware that it’s really any sort of bait and switch.
oops sorry, I thought meant that it was disguised a tupperware selling party, when it “really” was a gold party. Big difference.
Uncle Buck is really beating up Golden Boy today. Better sell that gold whilst its still worth something.
The situation with mellow yellow declining in price-as there is none for sale, is like a tale out of the Soviet Union & Bloc Party, where everything was dirt-cheap in price, but there was nothing on the shelves…
‘declining in price-as there is none for sale’
Huh?
Try to avoid sliding down a golden slope of hope…
MARK HULBERT
Those bullish gold timers
Commentary: Some gold timers remain stubbornly bullish
By Mark Hulbert, MarketWatch
Last update: 10:01 p.m. EDT Oct. 16, 2008
ANNANDALE, Va. (MarketWatch) — Can you say, “inflationary”?
The dominant feature of the economic landscape over the last month has been the eagerness of monetary authorities around the globe to throw huge amounts of money at the banking system.
If you want a textbook illustration of what economics textbooks refer to as “helicopter money”– the huge inflationary phenomenon for which Fed Chairman Ben Bernanke earned his nickname as “Helicopter Ben — the last month would seem to be it.
And, yet, gold bullion, the ultimate inflation hedge, hit a one-month low on Thursday, falling $34.50 on Thursday alone. See story
What’s going on?
Readers probably can guess my answer: I think it is in large part due to market sentiment. According to contrarian analysis, there’s been an excess of bullish sentiment in recent weeks and months, in effect forming the veritable golden slope of hope that makes it easier for the market to decline than advance.
‘declining in price-as there is none for sale’ Huh?
Paper price is declining, metal price is increasing. Tulving now sells one ounce eagles at spot plus $89, minimum order of 20. I traded gold for silver and received $79 over spot for my gold. All these prices are posted on his website.
Paper price is completely meaningless as there are no PMs available for anything near spot.
Call up a coin dealer or 10 in your area, they have none for sale.
If 400 oz vault bars were easily available, why would the U.S. Mint pretty much shut down production of all Gold coins?
The Mint claims there is a problem getting blanks*, which is queer, because the Mint has been making blanks and continues to do so, as it has done for over 200 years, minting base-metal coinage as I type, in fact.
* You first produce a long wide thin strips of metal, and run it through a stamping machine, that punches out round coins, without design: blanks, or planchet.
From Jim Willie…
We are witnessing the disintegration cited in my recent forecasts. It is a systemic failure, marred by lost confidence and trust in the entire financial system. Expect foreigners soon to pull the rug from under the American syndicates in control. Several key meetings have already concluded, totally unreported in the US press, which occurred in Berlin Germany. Consider it the Anti-G7 Meeting. Implications are profound, and involved the Shanghai Coop Org tangentially, since its member nations possess so much new commodity supply. Consider it the Anti-NATO group. An important and powerful alternative financial system is soon to spring into action, including high-level bilateral barter. Those who expect the current US Regime to continue their financial terror are in for a big surprise.
Expect defaults in the COMEX with gold & silver, whose prices for paper vastly diverge from physical, to the anger of foreigners watching. They hold massive precious metals assets. Disparities now contribute to powerful forces, sure to break the current system. Grand systemic changes come. THE RESULT WILL BE A BREATH-TAKING DISCONTINUITY EVENT.
Ironically, the more inner anguish felt on the falling gold & silver prices, the closer we are to a new financial framework, with the USDollar relegated to a Third World role. A REPLACEMENT GLOBAL RESERVE CURRENCY HAS ALREADY BEEN DECIDED UPON. Its launch awaits the proper moment. The Americans are last to know, as usual. The US leaders are under the illusion of being in control!
p.s.
You could say there’s a “Blank Run” going on at the Mint.
Gold-What the *&^%&
October 16th, 2008
“Earlier this morning, I commented to Marketwatch that gold was being sold off in the worldwide drive for any liquidity. And of course, when Crimnex opened for trading, it fell $50 in about 3 minutes. In 25 years watching gold trade, I don’t recall ever seeing such a drop in such a short time. It’s as if all traders move aside and a seller sold into thin air.
After failing to bust through above $925 more than once, the technical pattern suggests we could re-test $750 or so. Gold has more than once never tested key support and instead has reverse itself but in this worldwide sell off of everything including the kitchen sink, I don’t think any of us can accurately predict anything at this moment.”
Agoracom
“…There are whispers (unsubstantiated) of central bank interference or possibly a liquidation trade by a rather large player….What confuses us though is why the trade was done in a massive clump as opposed to a series of smaller trades — which may well have fetched better prices….”
FT
I hated to trade gold and I still hate to trade gold. It is the easiest market to manipulate.
Every other financial market that was/is being manipulated, will suffer as discovery devours markets, but when the shackles are removed from old money, just the opposite will occur.
What confuses us though is why the trade was done in a massive clump as opposed to a series of smaller trades — which may well have fetched better prices….”
I think it was involuntary. The family that owns Boston Scientific had to sell due to the Lehman bankruptcy:
http://www.boston.com/business/healthcare/articles/2008/10/09/boston_scientific_sell_off_was_involuntary/
I could see others being caught short as well.
Actually it appears more gold is coming onto the market as people are starting to realize gold’s trajectory, at least short-medium term is DOWN. Apmex, which two days ago was selling maple leafs for $89 over spot, is now down to $59 over spot. Bullion Direct also has maple leafs in stock, at about $50 over spot. Any gold rally from now on will be cause for people to sell and bump up supply.
As I said, a surprise interest rate cut of 0.5 didn’t do anything which seems like an ominous sign for gold bugs.
Please excuse my naïveté, but can someone explain how the paper price of gold can diverge from the physical price?
I thought the whole point of a commodities exchange was to let people buy and sell contracts for physical delivery. If you enter into a contract to purchase gold, when the purchase date comes up, you can either take physical delivery, or close out the contract at the current market price. If the paper/physical price diverged significantly, you would have one hell of an arbitrage opportunity.
righty-owe Bankquo…
As above…Silver eagles are $7 over spot now. There has been several articles on Kitco etc. of people buying Comex futures and taking delivery of the metal. Certainly don’t have a clue myself,but should be interesting as the spot goes down,and actual physical prices goes up…
“Paper price is declining, metal price is increasing.”
Is this whatsoever surprising, as recent events in the global market provide convincing evidence that not all paper promises represent credible commitments?
Perhaps this goes without saying, but I am a passive observer with respect to the gold market. But I am trying to understand the suggestions made here by Watcher and other market participants that the posted spot price is a fiction. Are you claiming there are actually no sales taking place at the published price, or merely that the places where you personally go to trade gold have none available at this price? And are you claiming there is some kind of global conspiracy to hide the true price of gold? I personally find this idea implausible.
UPDATE 4-Gold falls 3 pct as dollar firms
Fri Oct 17, 2008 9:24am EDT
* Dollar firms vs the euro on flight to safety
* Oil pares gains, undermining gold’s inflation hedge appeal * Platinum, palladium slide on demand fears (Adds comment, updates prices)
By Jan Harvey
LONDON, Oct 17 (Reuters) - Gold fell 3 percent on Friday, extending the previous session’s losses, as the dollar firmed against the euro, and investors sold bullion to cover losses on other markets.
Spot gold was quoted at $786.15/788.65 an ounce at 1304 GMT, down from $804.50 late in New York on Thursday, when it slipped 5 percent. Earlier it touched a low of $777.80.
Strength in the dollar against the euro is being supported by interest in the currency as a haven from risk, analysts say. This is weighing on gold, as it cuts the metal’s appeal as an alternative investment to the U.S. currency.
“This is a combination of the dollar being stronger, and disillusionment that gold hasn’t performed as well as might have been expected (given that) a lot of measures of market turmoil are still showing things to be as bad as ever,” said Matthew Turner, at commodity analysts VM Group.
LehighValleyGuy: Try to take delivery of your paper metals.
Here in da BEEG AppaH
Even the spammers are silent…….I used to get 30-40 responses to my resume weekly from Pre Paid legal, Quixtar, Ameriplan, Primerica…Be your own boss and come work for free with us and make $100K the first year…et all…but the last 2 weeks very few of them are spamming CL resumes…..
Is that a sign that they finally realize are not wanted or something more scary?
I am getting increased Spam of the fraudalent kind. The kind where they wan to use your bank account to “transfer” funds, under the guise of some BS finance job.
I personally caution gold market participants from getting carried away with drawing general conclusions about prices from their own subjective market experiences. Your samples are subject to selectivity bias, and hence may result in misleading inferences.
I switched all my holdings to rice, yesterday.
At least you can eat your rice
My plan is to corner the market in California, making a killing in the process.
Talk about storage issues…. Have a great weekend, off to soccer games and middle class diversions.
I don’t understand why people would overpay the spot price. Paying “premium” for physical gold sounds suspiciously like speculation. Sort of like people offering over list price for homes during the boom times. How is this any different?
“Individuals shopping for homes need to be confident that appropriate financing is available. Individuals need to be more confident in housing transactions proceeding normally. And individuals need to feel that there is potential for housing prices to rise,” Rosengren said.
To that end, the Boston Fed head cited his bank’s recent conference on foreclosure prevention, which he said was aimed at grappling with a widespread problem by helping thousands of people in one sitting.
See what the FEDS think…they have to make us feel that housing will rise instead of letting it get back to its historical levels….Rinse, Lather, Repeat!
well just imagine, they’re thinking of their homes value, their kids’ homes, their other relatives’ homes, their friends’ homes, their colleagues’ homes…it’s a massacree out there!
They need to be confident about credit, loans, and transactions?!?!?!
Whatever happened to being confident about how the house is constructed, how the neighbors conduct themselves, how the local gov’t manages their funds?
“Individuals shopping for homes need to be confident that appropriate financing is available. Individuals need to be more confident in housing transactions proceeding normally. And individuals need to feel that there is potential for housing prices to rise,” Rosengren said.
To that end, the Boston Fed head cited his bank’s recent conference on foreclosure prevention, which he said was aimed at grappling with a widespread problem by helping thousands of people in one sitting.
See what the Feds think…..have to trick us to beleive housing will rise instead of letting it fall to affordable levels…rinse lather repeat
“And individuals need to feel that there is potential for housing prices to rise,” Rosengren said.
I will feel that there is potential for house prices to rise, after they’ve fallen another 30-40% or so.
Heh. Ron Paul’s on CNN saying govt has no business propping up house prices. Too bad the candidates who do have a snowball’s chance of winning can’t seem to tell the truth.
That’s alright Frick and Frack will distract us and then we will vote and get the “change” we so richly deserve!
You’d like to think “we” have learned something in the huge debacle of lies, greed, corruption and the undermining of our country but apparently all we are going to do is change bus drivers.
Firesign Theatre had it right.
Nick Danger, In the case of the missing other shoe dropping.
When the recession hits, perhaps the cost of building your own home will go down due to decreased labor costs. If people are willing to salvage building materials from all of these empty houses, it will drive the cost down even more. Lowes and Home Depot are overbuilt and likely to have more firesales as their profits nosedive.
The only thing keeping building costs high is the price of land. That is where the real speculation occurred. I have been following land costs locally, and those haven’t dropped percentagewise as much as the cost of finished houses. It’s a shame the holding costs of land are so cheap that there seems to be little incentive to drop them.
Yes!
Marketwise, if it becomes more economical to build your own home, then I would expect land to be in greater demand and therefore, more resilient.
“The only thing keeping building costs high is the price of land. That is where the real speculation occurred. I have been following land costs locally, and those haven’t dropped percentagewise as much as the cost of finished houses.”
There was a story in the past couple of weeks on D.R. Horton dumping land at less than 10 cents on the dollar in Desert Hot Springs (Palm Springs area) and less than 25 cents on the dollar in Escondido. That’s a far greater drop than the price of finished housing in those areas so far.
And that was for finished lots (leveled, roads, sewer, water lines).
Do you really think that was “an arm’s length transaction”?
I have no way of proving it, but my hunch is that sale for 10 cents on the dollar for finished lots was to someone connected. Of course, on paper, it will look like a legitimate transaction, but…
test
This will not go over well in Detroit if it happens. The head of the UAW has already indicated he’ll oppose it (not that it matters):
http://www.cnbc.com/id/27228423
Whoever said yesterday that Ceberus was using GMAC to twist GM’s arm sure sounds like they were on to something.
Twas Moi, I believe……..
But what kind of deal they are working on makes your guess as good as mine:
-Swap the rest of GMAC to Cerebus, in exchange for Chrysler?
-Outright buyback of Chrysler, including GMAC, to GM?
Either way, once GM owns Chrysler, expect GM to keep the minivans and Jeep, and the stuff that is not in direct competition with current GM products, sell off the Dodge Viper (it’s basically a stand alone company inside Chrysler), and sell off or close everything else.
Damn…….I’ve been waiting 35 years to buy a Dodge Challenger, and now it looks like I’m going to miss out again.
“expect GM to keep the minivans and Jeep,”
Whats left of Jeep after DCX completely destroyed an American legend.
It’s been my opinion that Cerberus just wanted Chrysler’s finance arm to combine with GMAC, then ditch the auto making operations.
Lot’s of “oh s**t” talk around here if it happens. Lots of well paid salary types will be hitting the road.
The local Dodge dealer has new 2008 Durangos (V8) advertised for $20,000. Merging GM and Chrysler sure sounds like a winning formula, for losing even more money.
The lost opportunity costs of spending $20,000 on a vehicle look to be enormous for the next couple years.
The merits of stocks, RE, metals, etc. are always open to debate - but one thing that is always certain to be a money loser is buying a mass produced auto. So even a Durango at $20,000 really isn’t a “deal”…at this time especially.
How weirded out by the economic situation are your family & friends?
My mom doesn’t want to talk about it, my sister (family homeowner champion, snatched up 3) might still be in denial (I called her 3 weeks ago to ask if she was keeping up with the news, and to apprise her of the situation, and she told me “it was no big deal” and blew me off), but most of my other friends who don’t own homes or stocks, seem to grasp what’s happening.
They still think that I am crazy… That I am far too pessimist. When I tell them that this is far beyond what I told them 2 years ago, they look at me in disbelief.
Stepfather is feeling really ill, as most of his (considerable) fortune was made on other peoples backs (appreciation) and that fable is coming to an end.
people need to understand the difference between pessimism and being a realist. They always assume you are a pessimist if you are not positive about something. So in the end are you a denialist or a realist?
Sing it.
We are not “pessimists”; we are not “down on ourselves”; we just see the facts and think through what is likely to happen so we can sail through this, and possibly even prosper.
Clearly this is not the default response.
During our family get-together last xmas, my brother-in-law prompted me in front of everybody, to soothsay for them like a barking dog by asking “so you really think there will be economic collapse?”, and I said as much as I could in the fewest words to say yes and why, as everybody got uncomfortable with me saying so.
‘…say why, as everybody got uncomfortable with me saying so.’
Sounds a bit like MY clan’s Christmas events. Only we do the ‘uncomfortable’ on purpose to each other. After the talent show on Christmas eve we have a little prize drawing with gew-gaws, and I emcee the drawing with help from sister Rachel, see, one of us pulls out the prize and then acts like a game show bimbo with it whilst demonstrating the prize, while the other draws someone’s name from the hat. The winners name is not called out, rather, participants must guess who the winner is by clues provided by the emcee. For example: I will call out ‘And this fine plastic Groucho Marx mask goes tooooo…..the person wearing the ugliest shirt in the room!’ And then we merrily guess. Fun!
Or: ‘This chewed on pencil goes to the person whoooo…….recently peed their pants!’
See, that could be Silas, who is 9 months old, or it could be Jooley, 27, who probably got really super drunk on egg-nog the night before and, well…you know.
We all love the Prize-Drawing event, but yes. It becomes a bit uncomfortable at times. That’s WHY we love it, and so does Sweet Baby Jeebus, because after all, He likes a fun and cheery birthday party as much as anyone, right? Right!
As Edward Abbey said, “A pessimist is an optimist that knows the truth.”
Good point.
For those things I can control - there is optimism. But, for those things that are in the hands of others - there is pessimism.
I would say a realist… I see oportunity in this debacle, and think that it will do us good to get back to basics, to producing and saving, instead of spending and importing… The wealth of the nation has always been in being innovative, and building a better mouse trap, but lately it seems that the wealth has been concentrated in the scam artists, and conmen in WS.
I second that opinion and would like to add that unless we have MAJOR reforms to our patent, copyright, and trademark laws, guys like me will be unable to build a better mousetraps due to constant threat of lawsuit over the most trivial technical differences.
If our future depends even slightly on innovations from new startup enterprises, we need to garbage the current system which is wielded like a club by the big industry AGAINST anyone who might dare to innovate and compete.
To put it another way, if the Wright brothers did their thing in the day and age, they would be sued into oblivion by the bicycle company that made the parts they used, along with anyone else that had the slightest involvement in making any of the component parts of their flier.
QED
“…in THIS day and age.”
Weird: Relatives who thought I was a crackpot three years ago are now calling me for financial advice.
You are lucky. Many of us are just being called for cash.
Just Say No™
Or, what part of “No” don’t you understand, the “N” or the “O”?
PB I have had the same thing happen.
I recently switched jobs for a promotion. I was somewhat vocal at my previous workplace telling coworkers the things that were about to happen…
I got 6 e-mails from people in the past 10 days saying wow you were right… Now what? Of those 6 at least half thought I was a crackpot as little as 6 months ago.
My bank teller asked me yesterday “how did you know 6 months ago what would be happening these days?”
I have had numerous people come to me for advice that use to dismiss me. There are still many people that prefer the head-in-sand approach.
I think those who are capable of dealing with the truth can see what is coming, and those who cannot deal with the truth refuse to even consider it. To put it in perspective, an economic collapse might as well be the same thing as our sun going supernova to many people and so they choose to party on instead of taking defensive measures.
Many people, like my mother, have been saving their entire life for a retirement of cruises and world travel. Accepting the idea that she may be grateful for a retirement with food on the table and a warm house is very hard for her. She needs to *hope* that the market keeps going up and that society will be more or less the same for the next 20 years as it has been for the past 20 years.
Though even she is starting to think it prudent to stock up on food. When she comes around I know the end is near because the masses will not be far behind her.
Your comments, and the “my 401K is now a 201K” and “I’m afraid to check my 401K statement” comments in that article from yesterday got me to thinking about how much of a Ponzi scheme the whole retirement complex is.
All of these people, diligently putting sums of money into a 401K and then neither checking nor managing those accounts all on the hopes of an auto-pilot strategy that the market will always go up.
Really made me think about how important (and potentially profitable) it is to take ownership and learn, learn, learn about multiple investment vehicles and individual stock picking.
If nothing else, because “no one” else is doing it.
I’ll expand on that:
My boss I consider a reasonably intelligent person. Not way above avg, but reasonable, and he’s a very competent person.
At the end of the week we had the 22% decline, “the market” came up in discussion, and he commented on how much he had lost from his whatever (I assume 401k, plus previous 401k, plus any private investmentst, etc), said he’s down like 30%.
Anyway, he went on to say that he didn’t know it was possible to lose the initial amount he had put in. So, if he had contributed, say, 20k, and everything else was appreciation, he thought he would always have at least 20k in that account.
My mouth was literally hanging open…
I can top that. A good friend of mine is an MD. He was in the doctor’s lounge talking about the markets with fellow docs, lamenting their losses. One doc said, “but the losses are insured, right?”
Last project I worked on, I had a fairly intelligent boss (project leader) who was a former Air Force pilot, graduate of the AF academy, so he’s no dummy. Anyways, turns out in addition to doing project work, he’s also involved in Primerica, which of course is the network marketing arm of Citigroup. So, he has his insurance license and is working on getting his series 7 or 63 or whatever he needs to sell mutual funds in addition to insurance.
One of the bad things about network marketing is that those people find a way to bring that stuff up all the time as part of daily conversationg (as one former Amway guy I knew put it “everyone’s a recruit”). So, he says to me “you know, there hasn’t been a 10-year period in history in which the S&P has failed to go up by 8% compounded”.
I was flabbergasted! This must be part of the Primerica sales / recruiting pitch, is all I was thinking. Since I was sitting at my computer when he said this, I popped over to Yahoo and quickly downloaded about 60 years worth of S&P historical prices into Excel. This took about 45 seconds. Then, I compared each month’s closing price against the month’s closing price 120 months earlier (10 years). This was a really simple calculation. Once I had the formula, I just copied it down and I could compare 10 year S&P monthly closing prices (adjusted for stock splits and dividends) going back to around 1950 or so.
What was the result? There were NUMEROUS ten-year time periods where the result was negative. Meaning, not only did we not achieve an 8% compound return over that ten years, but we actually had a negative return over that ten years.
I showed it to him, and he got a really flustered look on his face. You could tell he was really bothered by what I had just showed him, and he said “I’ll have to look at those Yahoo numbers a little closer”…
It seems the Information Age is a new concept to some people. Stocks ONLY GO UP!
I hear about cooties on the playground!
…“but the losses are insured, right?”
Yeah, kind of like my last medical insurance:
Fully insured with a 90% deductible and a 10% copay
PB -
You’re still a crackpot. You just so happen to have been right.
We’ve been in a recession around here for 4-5 years now. It’s old news to a lot of folks here and doesn’t even come up much it seems.
Detroit leads the way into the New Frontier, version 2.008
I hope the rest of the country doesn’t follow, at least for long. I’m planning on blowing off this pop stand for greener pastures in a few years.
The greener pastures of Motor City not good enough for you?
Greener?? Maybe browner, lol. Nah, I’d rather be somewhere else. Been here 20 years….long enough.
Sorry if this is a repost, lad…..
But no, it’s not good enough. More like a big brownfield, lol. Been here 20 years, that’s enough.
How about Oil City, PA? I hear it’s great.
LOL!!
I’ve been to Oil City, Pa, “brownfields” is an embellished description of that locale.
I always thought Michigan as the Canary of economic problems. From my perspective (automotive engineer) things really started going downhill around 2000, but have been bad since the early 90’s. Although back then there were still plenty of jobs and some engineers were writing their own tickets.
But, I still have a job (not sure for how long), my favorite restaurant is still open, and the world still turns. I am hoping for some investment opportunities in the not so distant future though. With all these mergers, bankruptcies and companies folding there has got to be a way to come out ahead for the litle guy.
Meanwhile looking to get into engineering in the medical field or maybe energy.
Mom filed RE bankruptcy recently. She is happier today.
Rather than manage the situation (feeding two alligators with a dwindling and soon to be cutoff equity line from primary), big sis is contemplating upping her RE cult membership from 3.5K to 10K per year, the platinum level.
Oh, cultists run in ever family… don’t they?
Lad;
My mom says she is glad she won’t be around for the new socialism stuff.
My brother says he won’t talk to any dems.
My one sister says don’t ask her husband about their 3rd spec property in chesapeak bay.
other sister says her two overpaid condos at least give her an income.
we know all about me: too scared to do anything except a manicure and pedicure.
Growing I was mistaking enrolled in one of those private Fundie schools, by my well meaning grandmother. It was the kinda school started by people soo concerned about the “indoctrination” at public schools, they set up their own. I have noticed with such organizations they hold the view that all “indoctrination” is bad unless its their own ideology, then its totally different.
In in the interest of being polite, i wont say the name of this group, but their founder about 150 years ago received messages from god, and as a result they have their addition set of doctrine.
Although, my grandmother was told there was no issue with the fact that me and her didnt not attend their church. It did happen to make us outsiders to the teachers, parents, and other children. By their own doctrine I was taught me and my grandma were going to hell.
I always think about that experience, cause it tough me alot about social pressure. These people were honestly threatened by a 10 year old child and 60 year old woman. Alot of passive aggressiveness from them.
If you look at this bubble and its effects, then the psychology of the people involved, you will see how money is not just a game but a religion. Once you sign that mortgage you are a convert, given body and soul to it. the people who just walk away are those that have fallen away from the truth “it only goes up” It is merely a test of faith, just hold on and you will be rewarded, They are to be condemned for leaving the fold the only worse then their ilk are those angry renters who could join the fold if they just “buy now” if conversion fails they should be stoned.
Honestly, socially pressure is a very powerful weapon resist it too much and become a marginalized wacko (like those that called this thing coming down)
Does it surprise anyone that people just want to pretend trouble aint happening? Remember if you were right then they must have been wrong.
Thats why its soo often said on this blog to just keep ur mouth shut, tell someone what to do with their money, if your wrong its your fault and they hate you. If your right, then they will still hate you. If you a finical adviser then maybe you get a tv show…
The CFO of my husband’s company told him he was a “freakin’ genuis” for not buying. Quite frankly I’m a little scared that he’d be so out of touch. Others have also congratulated us for not buying.
I’m avoiding my hedge fund brother. I really don’t want to know, we’ve had heated debates on how this whole thing was going to play out.
McLame / McVague: “our next desperate, quick look over there, will be…”
I wish Bill O’Reilly would ask “Joe the Plumber”… “Hey Joe, really so how much cash do you have to buy the business you are so worried Obama will tax to death? Like what… $500.00 down and a $249,500 SBA loan, was that your plan?”
To quote fpss:
BWAHAHAHAHAHAHHAHAHAHHAHAHAHHHHHHHHHHHHHHHHHHH!!!
“…But the scrutiny around him also intensified — much to the plumber’s dismay, no doubt. Various news outlets are reporting that records indicate Wurzelbacher is not licensed as a plumber, and that he has a tax lien pending against him for $1,182.92″
Joe’s cup is running over — with scrutiny:
http://blogs.marketwatch.com/election/2008/10/16/joes-cup-is-running-over-with-scrutiny/
Are you suggesting McCain’s everyman is a tax deadbeat?
He claims directly to Obama.. in person…that Obama’s tax plans are going to effect his “opportunity to make a profit, ….when and if…he “buys” the “plumbing business” he’s worked for for 10 years…are his “fears”…. based on reality & truth?
In a local article yesterday it was apparent that Joe the Plumber is at the moment more like Joe the Dreamer.
And if he has an outstanding tax lien and is making no effort to pay, does that qualify as tax deadbeat?? Seems like it.
I personally see nothing wrong with not paying taxes. Stupid maybe. But still an American patriot.
If you never plan on paying your taxes, does it matter what the rate is?
Apparently “Joe the Plumber” received as much screening as a certain VP candidate. What does it feel like to be a disposable prop, Joe?
Joe the Plumber on Fox news: “On the other hand…maybe I should have just kept my p-trap shut”
All who blaspheme against the Obamessiah will be punished! All hail Barack the Redeemer!
Can you imagine how wildly popular he would have been with media (and the Obama brown shirts) had he simply said he liked the chosen one? Fascism is not only a vestige of the right it appears. With Obama’s attack on free speech (see Missouri truth squads) and no check and balance in Congress we may see a very very dark time ahead of us.
Uh, let’s see…Obama went looking for Joe the Plumber? …or …Joe the Plumber ( a young-repubican straw plant) went looking for Obama? Really, I’d like to know his financial plan for buying his owners business and exactly how Obama’s tax plans are going to take money away from his… net $250,000? From the looks of his stylish coffee table, I’d say he doesn’t own a Salvation Army credit card. He’ll be a hit at his 20 year high school reunion, provided he graduated.
It is ineteresting to see how many people have been sucked into the mantra about “Joe The Plumber”.
WHEN THER REAL STORY HAS ALWAYS BEEN. BARACK OBAMA STATING “WE NEED TO SPREAD THE WEALTH AROUND”
I think it is laughable that the media is working to discredit Joe. That is funny. It is also funny how ignorant people who blame Joe for Baracks message of TRANSFER OF MONEY FROM THE HAVES TO THE DO NOTHINGS.
The wealth has already been redistributed via trickle down economics, poor regulation, and tax system. When CEO’s, and Hedge Fund managers, bankers ect have effective tax rates of 15-20% while people who work for a living pay taxes of 20-35% there has been a redistribution of wealth. When the gov allows bankers and financial companies to game the system with securitization and rigged rating systems destroying 401k’s and J6pks savings there has already been a redistribution of wealth. When inflation kills the wages of working class Americans who unlike the elite can’t hedge their paychecks against inflation there has already been a redistribution of wealth.
Apparently you believe that those who make less than 250k a year are the do nothings while FULD, Mozillo, Ken Lay ect have been working hard???????????
Take a look at what the wealth distribution in this country has done over the last decade. The middle class is shrinking. I hope you’ve lined up some work that doesn’t rely on the middle class consumer.
The reason Joe the Plumber story has gotten so much traction is the absurdity of his support for John McCain. The guy makes 40k a year and will do much better under Obama financially. Even if the plumbing company he wants to buy makes 280k a year (which I doubt), he would pay at most 900 dollars extra in tax. More than likely once he deducts the large interest payments made in order to purchase the company he would have very little taxable income thus he would save money under Obamas plan.
The emperor (trickle down economics) has no clothes but Joe the Plumber still clings to the belief that he does.
So what happened to Obama’s message of HOPE? Joe dreams of making more after he purchases the small company he works for. I guess HOPE is just for the folks who like to live at the bottom of the strata and really don’t want to work harder and smarter to get ahead. It doesn’t make sense take incentive out of the system. “Spread the wealth around” sounds great until it my dime. How did the class war work during the great depression? Do we need reform of the system? YES! Was there greed beyond belief on Wall Street (and everywhere else)? YES! Do we throw out the baby with the bath water? NO! Do we want to become France? No, I believe during good times their unemployment rate is something like 7.1%!
Obama’s message of hope is for people who earn their money honestly, not the bubble-blowing equity hawks who live off of their
Ponzi schemes“investments”. Joe supposedly is benefitting from the loose credit created by this Big Bailout in order to finance his business purchase, but doesn’t believe he should help pay for it? WTF???Where is all of this rescue money going to come from? Taxes MUST go up to pay for Bush’s wrecking and then bailing out the economy, no matter who gets elected…
Like I said there has been covert class warfare going on for the last decade and the top 1% have clearly kicked the snot out of the bottom 95%. The tax code is so skewed toward the elite that I’d be happy with a flat tax at all income levels and for investment income.
It boggles my mind that there are people like Joe the plumber that defend the ability of CEO’s and Hedge fund managers to pay effective tax rates 50% less than many middle and uppermiddle class Americans. That 250k # covers 98% of small businesses and probably more given the huge number of deductions allowed to small business.
Another mantra: working harder and smarter.
For a sadly large portion of the populace, working the “smarter” part is not a possibility. Working harder? I guarantee many of we more fortunates rarely work as “hard” as many of these folk, nor hours near as long.
Are their earnings forever low? Of course. Are they collectively lesser beings? In my opinion, not, particularly in view of the morass a smallish group of our brightest landed us in.
Every time I hear Limbaugh Lies or Hannity Harping or hate from that San Fran nutball, I despair of the minds which are so small, so terrified, so incapable of critical thinking. And boy, do they vote.
The Reagan Revolution is in the sh*tter, permanently. Get over it.
“It is also funny how ignorant people who blame Joe for Baracks message of TRANSFER OF MONEY FROM THE HAVES TO THE DO NOTHINGS.”
It’s always funny to me when people bring this up because we are ALREADY giving the do-nothings unemployment/welfare/medi-cal.
I think we might as well get something out of it for ourselves.
Food stamps and unemployment aren’t for the poor they are for the rich who want to avoid riots while they are stealing from the middle and upper middle class.
PS personally I’m against both, but I would support gov works programs that would pay enough to cover basic expenses for those who don’t have a job. Because I too would like to avoid the riots and crime that come with poverty.
Once again, it’s the media’s fault. Yeah, we wouldn’t want reality to get in the way of a heart-felt stretching of the truth, would we?
Fact check: Plumber Joe’s taxes
Help me understand how 8 years of “Conservative Rule” have helped improve the lives of average Americans? Lets look at it a bit:
Cost of Living - up, way up
Average wages - stagnant to down
Job Security - down, way down
International Image - down, way down
Corporate Profits - up, way up
National Security - down, way, way down
Then you look at the “wag the dog” issues like abortion - with 8 years of conservative rule - has anything changed? No! To be honest - this will never change - it’s the only thing keeping the bible thumpers on the right.
National debt has gone through the roof - we have a devastated economy - we have an unpopular war that’s being executed poorly. Spending deficits have also reached record levels.
If you ask me - the do nothings are our trickle down economic leaders that are pretending this economic crisis is a “surprise.” Can anyone on this board state that any corporate exec that was surprised was doing his/her job?
This bailout is nothing more than the greatest example of corporate welfare in this nations history. Our “conservative” leadership has singlehandedly done away with the vast majority of our rights to privacy or economic opportunity by doing away with any notion of a free-market. We now have a system that keeps profit private and makes the loss social - nothing more than a scheme to “concentrate” wealth at the top.
You know - no “liberal” administration has ever been able to bring America this close to socialism.
“Vacuum Up” had been tremendously successful for those at the top of this financial enterprise. For everyone else, not so much.
Can hardly wait fo Obama’s “Trickle Up Poverty”
I’ve said it before, but it’s worth repeating.. need to put housing back in it’s bottle for the all devastation it has created here in the US and around the globe.. best way to do that is to remove humans from setting the Fed discount rate and have the rates set based strickly on housing prices and some factor for rents, and that’s it.. that’s enough.. that’s all that matters.. choke off housing appreciation at NMT 1 - 2 % / year with higher and higher rates… set higher rates on the coasts if necessary… force the economy and working Americans to look elsewhere for real employment and investment.. CPI is a joke… so if the Fed for standing guard over this disaster…
The problem is the insolvency of American business.
also, add in the insolvency of American Households
disagree… problem is and remains housing… it’s the preferred craps table all across America… that includes American businesses…
And when you have major disruptions to the supply/demand of housing? You cannot PRICE FIX. The problem is the price fixing of the interest rate, not whether a computer or a human does the fixing.
Only allow banks to lend real savings (100% reserve) and you have an AUTOMATIC limit on debt that equals savings. If some people start saving more others can borrow more and home prices may go up, but as prices go up savings goes down and so does lending.
When you understand that all bank lending to individuals is nothing more than monetizing an IOU from Joe Schmoe then you will see that the problem is not the interest rate, it is the fictional reserve system.
VTD,
Quick question. How can you lend with 100% reserves? 100% reserves means that all deposits stay in the bank so there is nothing to lend except the banks own equity. That is not alot of money.
Think of borrowing money like renting a house.
Fractional reserve banking is like a landlord renting the same house to multiple tenants at the same time.
A bank can borrow from one individual to give to another, but the bank cannot also pretend that the first individual can withdraw their money on demand.
Al,
Full-reserve (100% reserve) banking would mean that deposits and loans would be matched.
IOW, let’s say you wanted to borrow $100K and I had $100K to lend. The bank would effectively act as a broker and match us up. We would agree on the price and terms of the loan, say I’d accept 8% over 10 years, and you accepted those terms…the bank would probably take a cut in the middle (I’d really get 7% and you’d really pay 9% or some combination), and we’d have a deal.
No fractional reserves or leveraging. If you default, I’d lose my money.
VTDan would probably advocate no FDIC coverage, too. The lenders would well know the risks they are taking, and the borrowers would have NO luck getting another loan if they defaulted on a previous one. There would be some serious risk-based pricing, which I happen to think is a good thing.
I’ve got a pretty good working knowledge of bank / mortgage lending, but disagree completely with your comment that the failure to consider housing prices in calculating real inflation for setting the fed discount rate was not a significant cause of this problem.. there were many causes, including the lack of regulation on reserves as you noted, but one of them was certainly low fed discount rates during a period of rapid housing inflation… I see too much gaming of the system and too much focus on the fed chairman’s comments by the pundits and wall street crooks, so I say get the humans out of this line of work (which we obviously stink at) and do it mathematically based on housing / rents and that’s it… that’s it..
The years mentioned below (1991 and 1982) were both during previous recessions. As always, declines were worse than economists expected.
THERE WILL BE NO BOTTOM UNTIL AFTER THE END OF WORSE-THAN-EXPECTED RESIDENTIAL CONSTRUCTION NUMBERS.
latest news
Bush: going to take ‘awhile’ for credit to thaw
ECONOMIC REPORT
Housing starts fall 6% to 17-year low in September
Building permits drop 8% to a 27-year low, government data show
By Rex Nutting, MarketWatch
Last update: 9:02 a.m. EDT Oct. 17, 2008
WASHINGTON (MarketWatch) — Construction of new homes dwindled to a 17-year low in September as home builders sought to reduce the number of unsold homes in an elusive quest to find the bottom of the historic housing collapse.
Housing starts fell 6.3% in September to a seasonally adjusted annual rate of 817,000, the lowest since January 1991, the Commerce Department estimated Friday. Starts of single-family homes tumbled 12% to an annual rate of 544,000, the lowest since February 1982. Read the full government report.
Housing starts were also revised lower in July and August. Starts in August were revised down to 872,000 from 895,000.
The September estimates were much worse than the 3% decline to an annual rate of 870,000 that was expected by economists surveyed by MarketWatch. See Economic Calendar.
Building permits, which are less volatile than the starts data, fell 8.3% to 786,000, a 27-year low. Permits for single-family houses fell 3.8% to 532,000, the lowest in 26 years.
Few economists expect to see a quick end to the housing recession. “We continue to believe that new homebuilding will decline another 15% over the course of the next year,” said Morgan Stanley economist David Greenlaw ahead of the report.
This is actually good news: less new home building -> less inventory -> faster eventual bottom. Now if we can just see a few of these mega-builders go bust and my SRS holdings go to $200 a share I will be a happy camper.
Shrub, “…addressing the U.S. Chamber of Commerce. “I don’t think so. In fact, I know that if we had not acted, it would have affected the American people directly.”
Shrub gets economics cornfused with ozone:
“If the government had not acted, the hole in our financial system would have gotten larger,” he added.
Joe the Plumber: “I’m worried about Obama..he’s going to tax the $475.00 I’ve save up over the last 10 years…”…”Honey, do we have a 401-K or a 201-K?” …asks Joe.
The first thing that Mr. Nassim Taleb has said that I agree with:
Revoke the Nobel prize to Myron Scholes and Robert Merton; the Black-Scholes model is flawed.
I’d say its more incomplete than flawed.
Several people have made additions/enhancements to it for purposes of adjusting for additional variables. One such version I have seen proposed being the Black Scholes Merton Bagley model, if I can even remember correctly that far back, was to account for what was referred to as a Krakatoa effect, when volatility basically hits degrees with cause market disruptions and therefore mispricing, etc. I actually proposed an idea I had regarding this to Harry Markowitz in regards to ideas I garnered here that possibly there would be a rubberband like effect causing investor preferences to shift as the difference between fundamental and market values shift. Does that mean Markowitz’s current research is wrong? No, but there are unaccounted for expectations that would suggest additional variables. Then again, maybe, though I personally don’t always agree with it, maybe, maybe its not describle via a model
And yes, models get us in trouble when theyre missing variables.
I appreciate models for the insight they give us and would never use one solely to determine trading. I find common sense and logic to be much more useful.
The assumptions are certainly flawed, especially the assumption of an exogenous stochastic process driving price movements.
How so? I would presume the inputs come from outside the market itself (economy, news, etc) and that there is a purely random element/interdeterminacy present.
I had posted a few weeks ago that I don’t think the US economy will bottom until Americans learn to not to spend every $ they make and learn how to save again, probably between the 5%-10% range. This is a start:
By Colin Barr, senior writer
Last Updated: October 16, 2008: 2:42 PM ET
NEW YORK (Fortune) — The economic storm pelting the U.S. economy is going to do plenty more damage to already flattened job and housing markets.
But as dark as the next three or four quarters could be, the U.S. economy appears to be undergoing a more lasting, and ultimately uplifting, shift.
Americans who for decades have spent an increasing share of their incomes and taken on more and more debt are now, for the first time in years, saving instead.
The personal savings rate, which measures the amount of disposable personal income that isn’t spent, ticked up to almost 3% in the second quarter of 2008, after almost four years below 1%.
It’s about freak’n time. Pay yourself first.
US economy will not recover under the current broken financial system.
The US will default on its obligations (bonds) next year, banks/markets will close for a few days and a currency revaluation will take place (lower). Iceland is the example of an overleveraged financial system that is larger than the economy. We will follow their example. Euro will be seen as an alternative to USD as euronations are now taking steps to sever ties from sinking USA. US will not be a significant player under BrettonWoods III.
As all US bonds are denominated in dollars and the interest payments are in dollars, this just doesn’t seem very likely to me. At least the default stuff. I think the Euro has enough of its own problems as well as the yen and expect to see much of the status quo.
The US can just print more dollars. Unless the printing press breaks down, it is not possible for the US to default.
As Mr. Warren Buffett wrote this morning
“…Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value….”
I agree with that statement 100%. Cash and cash equivalents are the refuge of the incompetent. The dollar is certain to depreciate, The good news is that the Euro has more problems.
The authorized by Congress Tarp plan is $700B. The current spending plans for this moneys is $2.25T. By the time this is through the government will have authorized over $6T in new moneys.
We are still in the 4th inning.
I respectfully disagree with Buffet’s statement. While cash is a terrible long-term investment, I’m happy having lower-single-digit losses on much of my portfolio for this year. And using a small percentage of my portfolio to invest on targetting downside bets has been more than making up for those small losses.
I can’t find a segment where I’m happy speculating with more than a small percentage of assets, so the rest remains in cash/treasuries.
I feel much better knowing I have 100% of my original money at near zero percent interest than having 60% of any original GREAT long-term asset. Inflation erodes any and all of it.
“…Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value….”
Mr. Buffett is a hedged investor with a significant amount of his wealth in the currency markets. He is quite often ‘long’ currencies other than the dollar. He played the dollar depreciation from 2001 to June 2008. He is playing the dollar depreciation again. He is not stupid.
I have no problem with sovereign investments e.g. bonds; I question keeping them in dollar denominations.
If for example this year, you had started out long Japanese Government Bonds yielding 1.75% on Jan 1, as of the close of business today you would be up 18% this year. Forget the interest rate and look at the total risk value. That does not make US Treasuries look very good.
Disagree with Buffett too…liquidity has its advantages. Ask anyone who is now the proud owner of a HELOC.
>The US will default on its obligations (bonds) next year
If you really believe in that you should be short one-year US Treasury notes. Are you? Don’t say you are long gold, because if you really believe so strongly in one asset class will go in default in a year there is no substitute in shorting that very asset class. Gold may do well or badly depending on a variety of other reasons.
It won’t recover until the middle class starts growing again and gains spending power. Banks won’t loan to people with no earning power, and people won’t borrow to start or expand a business if there is no one to buy their product, they won’t borrow to buy a car or house if they think their job is on the line. The emphisis on banks and the elite is foolish for everyone. One time tax credits are foolish. People have to believe in the future to invest. They need to think hey I have a good job and I can afford to spend and invest. The gov should spend the borrowed money it has building infrastructure and alternative energy. It should stimulate job growth. It should insure bank accounts and to some extent retirement accounts. It should change tax policy away from favoring the elite and CEO’s (15-20% on dividend and cap gains often given as part of pay package for work) and toward the middle class (20-35% tax rate). GOP says there shouldn’t be wealth redistribution via the tax code. What a crock, the wealth redistribution has already occurred via the trickle down economics and tax policy of the last decade or two.
MEaston,
Your posts are always on-target. (Maybe because they sound like mine.)
Not that I’m biased, or anything.
isn’t just money they took from one place or another and placed in savings for safety
And dont forget about those stimulus checks. I wonder if they are included in that?
Start spending again? I think we bought every doodad, and widget in the store,and hocked our houses to do it. Most, not all my family,and friends are bemoaning all the crap they have, and want less…Not doubt food,and necessities will be up, but less money, less jobs, higher gas, food prices will kill that old model.
As to Treasuries don’t even pretend to understand the implications, but every ‘expert’, Rogers, Buffett, etc all have said we are in a bond bubble many times the housing,and equity markets…pump the dollar so we can get out of these suckas’?
Who was that masked banker?
October 17, 2008
Armed Robbery At The Fed: Bank Problems Are Getting Worse
(C)(MER)(JPM)(UBS)
…
Perhaps the most pure and pointed analysis of how banks and brokerages are doing is how they behave in their relationships with the Fed day-in and day-out. The relatively new “emergency lending window” is a place so financial firms can turn in their toilet paper of mortgage securities and LBO debts and get real capital. It is a short-term facility and money taken carries only the most modest rate of interest.
Over the most recent week, the companies that can take money from the window hit it with great ferociousness. That is evidence that the financial world is still starving for credit and short on capital.
Based on information given to Reuters, “Banks and dealers’ overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week’s $420.16 billion per day.” The figure is staggering, but, based on the source, almost certainly true.
The danger of keeping the window open is that banks will never face up to their problems, take significant write-offs, and come clean with Wall St. about their capital needs. Management at the largest banks and brokerages are afraid that the markets will turn on them and take them down the way they did WaMu and Lehman. Their fears are almost certainly justified. No matter how many people are hurt, investors will crawl over one another’s bodies to hit the exits.
Isn’t this just another way for banks to hide their problems. They can show cash on their balance sheet by handing over a large chunk of their toilet paper to the FED. Its the supper SIV of last resort.
Nassim Nicholas Taleb insights have often proven to be prophetic:
http:business.timesonline.co.uk/tol/business/economics/article4022091.ece
“Our nation stands at a fork in the political road. In one direction lies a land of slander and scare; the land of sly innuendo, the poison pen, the anonymous phone call and hustling, pushing, shoving; the land of smash and grab and anything to win.”
Adlai E. Stevenson, Jr.
“In one direction lies a blah, blah, blah. In the other direction lies total disaster and ruin. Let us pray we make the correct decision.”
“When you see a fork in the road, take it.”
— Swami Beyondananda
Nobody ever expects the Bullsh!tvek Inquisition…
What if there is no bottom?
Headless body found in topless bar?
Apparently, some thought there would never be a top.
Why does anyone quote “economist” Diane Swonk any longer?
*****
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat.”
Diane C. Swonk, chief economist at Mesirow Financial in Chicago
The New York Times, “Trading Places: Real Estate Instead of Dot-Coms” - 3/25/05
To all the folks who emailed me yesterday, I am sorry if I did not reply to you at least to say hello. Yesterday was a busy day, and I ended up exhausted by midnight so I didn’t have time to reply. YOU WILL GET A REPLY.
I’m excited that so many people read my novel-length post and decided to look for a way to make a change in their lives. I’m also excited that some of you got excited by some of my ideas.
As those who know me well over the years know, I have few secrets to hide. My life, my businesses, my tax statements and medical records are all open books. This creates reputation and stability. I’ll be happy to share the business secrets with those of you who asked, and hopefully keep some of those threads off of Ben’s blog because it is obviously off-topic.
On-topic note: I recently found 3 4-flats in Chicago that are selling for under 110X rent. Another 10% drop and I have a target buy price.
FYI, there is also forum dot thehousingbubbleblog dot com
There are so many “For Rent” signs around me in the southwest burbs. If I stay in the 4 flat I am in now, I will be recieving a discount on rent or I will be moving next year. For those that don’t know they have rental moving season. If you don’t have it rented before winter, it ain’t gonna rent until the next spring/summer.
My point being that 110X rent is not low enough. Too many rentals around here that went unfilled this year. Another 10% may work, Maybe..
In some areas, there is definitely an excess of rentals. In Chicago itself, my friends who are landlords are booked completely.
They key is to know your tenant market. I know what kind of tenants I like and are drawn to properties I own or have owned.
BTW, some of your posts have insinuated that you are a professional economist by training. Did I misunderstand them?
I am certainly not an educated, professional economist. That being said, I’ve studied many markets from a purely Austrian supply-demand perspective, and it has been a profitable experience.
I have no desire to be a professional economist. I also do not respect most of them. In my close family, I am related to quite a few professional “economists” and “financial advisors.” My cousin is a very well known TV talking head, and my other cousin is a bigwig at PIMCO. I gladly prefer to be the contrarian of the family.
Fair enough. But I thought one of your earlier posts insinuated otherwise.
If governments around the world borrow from the total available pool of capital and use the moneys to prop up non-productive assets, leaving less capital to invest in income producing assets and consumption, how is that not deflationary?
If governments around the world borrow from the total available pool of capital and use the moneys to prop up non-productive assets, leaving less capital to invest in income producing assets and consumption, how is that not deflationary?
Quite simple: the money that flows into any market via government force does not stick in just that market. Because of the money flowing to that market, supply goes down, prices go up, in that market.
If that market is specifically tied to a typical person’s general living costs, we’ll see inflationary pressures all over. If it’s houses, housing prices go up, employers need to pay people more to live close to their offices, hence service and product costs may go up.
Government has destroyed markets in:
1. Health care
2. Security
3. Banking
4. Housing
5. Technology innovation
6. Medicinal needs/drugs
7. Food
8. Cars
9. Energy
10. Insurance
11. and on and on and on
all because of their indecent and immoral manipulation of the supply and demand curves. Eventually, though, those curves find a way to fix themselves.
In the case of TARP, however, they are not adding more money to the system. They are taking money out of the system and locking it into overpriced mortgage securities. Isn’t that similar to an upside down RE investor deploying all his available capital to a property with negative cash flow? As a consequence, he has no excess capital to consume or invest in income producing alternatives.
They are pouring moneys into the system. There are already well over $3T in government guarantees that were not previously available. This is not including the $850B bailout, the $160B stimulus and the $5.4T assumption of F&F debt for the next year.
They are giving banks money at 6% below market rates with no strings attached.
The government is guaranteeing. Money Market accounts, Commercial paper, Lars’ notes and any other piece of garbage that is presented to the Federal Reserve.
Ambac, MGIC, and other bond insurers are presenting their bail out plan to the government next week. The Fed will support it.
This is free moneys. It is the largest percentage increase in currency expenditure since the Weimar Republic. “Expected to settle the final payment seven decades later, the German government opts instead to pay early by printing money. The volume of Reichsnotes in issue rises 35 billion times over between 1918 and 1924 – and “the young and quick-witted did well,” as the German journalist Sebastian Haffner will record, fifteen years later.” (market oracle May 18, 2008)
It is planned devaluation of the dollar.
I have a little pile of German paper money dating from 1920 to 1923, and early on the denominations were small (10 Marks) and by 1922 all hell had broke loose, and 100,000 Mark banknotes had replaced the earlier banknotes in terms of buying value, only to be surpassed by banknotes denominated in billions a year later.
Germany after World War 1 was an interesting place. The war barely touched the infrastructure of the country, and yet they lost.
The victors leveled heavy reparations against the loser, and Germany could never pay it’s debt as demanded, so they willingly debauched their own currency, to evade having to pay the freight.
Who could have ever imagined that a Billion Marks would have almost no value, ten years after it had the buying power of U.S. $200 Million in Gold coin in 1913?
I agree. They are pouring money into the banking system. However, they are borrowing the money from public sources. In addition, they are also encouraging even more private capital into the banking system. All this capital is moving away from otherwise productive assets and into a rat-hole, leaving less moneys available for other things.
This begs the question do we move into asian currencies or US stocks to hedge this inflation/devaluation?
“This begs the question do we move into asian currencies or US stocks to hedge this inflation/devaluation?”
Obviously the only wise choice is to purchase physical gold.
“They are giving banks money at 6% below market rates with no strings attached.”
I guess banks could choose to become tomorrow’s residential real estate investors, using this Fed-funded carry trade money to speculate on a return of the buyers. I predict it will backfire, as there are not really very many end-user buyers at current price levels. At worst, we could quickly return to the early 2000s flipper market, with banks replacing individual investor flippers. A continuation of high vacancy rates, unaffordable housing prices and rapid real depreciation due to physical deterioration of the existing vacant housing stock would result, but at least banks would not have to immediately face the consequences of their real estate lender bender earlier this decade.
This Land
Bootleggers Playing Hide-and-Seek on the Tundra
“…By the way, a fifth of R&R — which stands for Rich & Rare, a highbrow name for a bottom-shelf blend — sells for $10 or so in Anchorage. But that same bottle can sell for as much as $300 in a dry village in the tundra, making R&R the bootlegger’s current alcohol of choice and the trooper’s alcohol of interest.
“Ninety-five percent of all bootlegged alcohol in the Bethel area is R&R, and because of that we tend to focus on it,” Mr. Carson says. But the brand is not for discriminating tastes, he adds. “Even the bootleggers don’t like it.” …
http://www.nytimes.com/2008/10/13/us/13land.html?_r=2&scp=1&sq=%2240%20miles%20an%20hour%22&st=cse&oref=slogin&oref=slogin
Good heroin dealers don’t do their crap either.
First Tesla crash ever:
http://blog.wired.com/cars/2008/07/worlds-first-fo.html
Telsa is about to go belly up:
http://www.mercurynews.com/cars/ci_10727401
NOT cash-flow positive.
$25B “loan guarantee” to Big Three screwed them over big-time.
Oil is deflating.
And they’re making a $109K car headed into an epic recession.
Hasta luego, baby!
BWAHAHAHHAHAHAHHAHAHAHHAHAHHHHHHHHHHHHH!!!
“…These days policymakers in Tokyo suspect there were at least two reasons for this delay, both relevant today. First, when a crisis of this magnitude hits a financial system, it takes time for consumers, companies and banks alike to recover their nerve. After all, once trust is shattered it always takes time to restore - and today, a decade later, Japanese consumers and banks have still not shed some of their psychological scars….
However, the second problem is the “feedback” effect. In the years after the Y25,000bn bail-out package was announced in Japan, the real economy continued to produce new corporate and consumer defaults - hence more bad loans. That made it hard for banks to convince investors (or themselves) a true bottom had been reached, or even that the capital injections had been big enough to tackle the rot. Unsurprisngly, confidence in banks, regulators and borrowers remained low, further sapping the economy.”
Gillian Tett
http://www.ft.com/cms/s/0/f8b755c8-9be3-11dd-ae76-000077b07658.html
Japan got lucky, they ended up as the recipient of China and the rest of Asia’s growth.
Comment by watcher
2008-10-17 06:23:26
‘declining in price-as there is none for sale’ Huh?
Paper price is declining, metal price is increasing. Tulving now sells one ounce eagles at spot plus $89, minimum order of 20. I traded gold for silver and received $79 over spot for my gold. All these prices are posted on his website.
Paper price is completely meaningless as there are no PMs available for anything near spot.
Checked the site. I know they are reputable, the “gold standard” if you will. I can get up to 2,500 Can. Maple Leafs for today’s spot plus $59 (for shipping week of Nov 3rd), which means I can now buy more physical Gold than I can afford today at (the totally fake, unrealistic) spot price of just 2 days ago! Unless and until the long awaiting COMEX collapse, the paper market has everything to do with the physical market. As long as they control spot, and spot is the basis for your physical trades with reputable companies and dealers, it is extremely reckless and foolish (IMHO) to disregard spot.
‘disregard spot’
Sort of like saying, there are no Toyotas at the dealership price, except at the Toyota dealership…
You might say for the hoi polloi has only just stood up for the playing of the National Anthem, in a full 9-inning game of fear & loathing…
Gold has always been a reliable clean-up hitter, when push meets shove.
It’s batting .9999
Yes - just a few days ago the spot price was a completely fictitious, horribly undervalued price affixed to the true price of physical Gold by the evil manipulators, yet this morning it seems like it was actually overpriced construct for real, physical gold…. I take no particular joy in this, as I posted a while back, I do own some (fake) GLD and have lost some $$$ on it…. Just a small position/hedge but I do have it.
GLD is based on spot, so you are correct, you lose on that. You might have a long ride down as paper price could go to 0 AFAIK. Not that the price of gold will go there.
You made another mistake in calculating price of maples at $59 over spot. Minimum order is 20 ounces so minumum buy is over $16k. For J6P who wants to buy one ounce (if he can find it) premium would be $100 or ? This is a guess as I can’t find single ounces to buy. So one physical maple would be at least 840, maybe more.
Market price is the price at which trades take place. Trades do not take place at spot price, therefore spot price is not market price. If you want to sell to me at spot I will buy everything you have. Deal?
I guarantee you millions more “trades” took place today in the US in COMEX Gold, GLD than in the “market” you say reigns supreme. Your offer to buy at spot is like trying to buy in the retail market at cost, without any mark up. In any healthy market, there will be a mark-up. Hate to say it, but Gold is acting like the car market, hot car, mark-ups over cost(spot) slow markets trade closer to cost/spot.
I still don’t get your argument. I will accept that you can’t buy physical Gold at spot (see above) and I wouldn’t expect to under normal market conditions. BUT, it seems that the purchase and sale of physical Gold is based on the spot, plus something. I lose on my GLD because spot went down, but your physical GOLD lost value also because spot went down. Either they have to decouple or your spreads have to get wildly out of control. In the past 3 days, you’ve lost more as it seems the spot PLUS margin actual came in. The margin change (spot v. physical oz.) relative to the cost of the asset (5-10%), isn’t enough to justify your argument in my mind. To get there we need the better to have guns than gold argument. Thanks to you and your kin here, I now have both….
“Hate to say it, but Gold is acting like the car market, hot car, mark-ups over cost(spot) slow markets trade closer to cost/spot.”
It also brings to mind the difference between the retail market for housing, where listing prices seem to go ever higher, versus the foreclosure auction market, where prices seem to go ever lower. Where the market price of housing currently lies is difficult to say based on narrowly subjective information.
Your definition of market price is garbled. The spot price is the price in the market for immediate delivery. Absent qualification about timing, spot price and market price are synonymous.
What is the Spot Price?
The spot gold price refers to the price of gold for immediate delivery. The spot gold market is trading very close to 24 hours a day due to the variety of markets around the world that are actively processing gold transactions. New York, London, Sydney, Hong Kong, Tokyo, and Zurich are the most popular gold trading locations. When trading is active the spot price shows the lowest bid and the highest ask of the day.
From the MIT Dictionary of Modern Economics:
spot market. A market in which a commodity or currency is traded for immediate delivery. It is distinguished from a FUTURES or a FORWARD MARKET, in which contracts for delivery at some future date are traded. Prices in spot markets are known as ’spot prices’. In foreign exchange spot markets the price of one currency in terms of another is known as the ’spot rate’.
My last gold question of the day, I swear. As I have posted, I am new to trying to understand the PM Market. Was it ever possible to buy physical gold locally at spot? I live in a semi-rural area and always pay more for most everything then those in the City. Why would I expect to pay the most efficient market price (COMEX spot) when I am trying to buy it locally and my gold has passed through countless hands. If I were to buy some pot from the source/grower, wouldn’t I expected to pay considerably less than a dealer 3-8x’s removed?
In a normal 2-way market, the buy-sell spread on a 1 oz coin was probably around $25 in the big city, an example:
Let’s say the spot price of Gold was $500 and you had a Krugerrand.
A dealer would buy it from you for $480, or sell you one for $505.
Things are hardly normal now though, as nobody has any inventory for immediate delivery.
Thx for the info.
Wow–receiving _over_ spot on sale of PM is _crazy_.
Is it legal to post gold prices as ’spot’ for which none is available in the market?
Apples and oranges. Bullion and coins.
Not after you melt the coins
Something I’ve been wondering: is it time for me to move from
Treasuries to MM, now that the two big firms my money is at (Fidelity and Vanguard) have both announced that they are signing up for Treasury’s insurance program?
Seems I’m leaving a couple of percent on the table, and the two would have relatively equivalent risk…
Course part of me wants to stay in Treasuries just so I continue to be part of the “frozen money markets” I keep hearing about…
Money Market accounts have traditionally been very safe shepherds of sheep thrills, and the choice of ‘trarians the world over…
What could go wrong?
IF you believe some HBB posters (not myself), US Treasury notes/bonds will fail soon enough so that is no safe heaven at all. In fact other than physical gold in some unspecified country buried deep, you WILL be buried deep yourself soon enough. So in such a case may as well take some “risk” and buy some money market funds. and get some higher interest payments until all hell breaks lose later on.
* Sarcasm off *
Bad money had it’s day.
It’s too late to move–only MM balances as of Sept 19 are insured under the Treasury program.
I thought that was just the rule for the “temporary” program; both of the fund-families I referred to have expressed their intent to sign up for the “permanent” program. Though I have not yet been unable to find any details online for what is covered under that program.
I posted this in the HBB forum also….
Moving to Seattle/Bellevue, Advice where to Rent?
After 21 years in Texas, I am moving to Bellevue ( East of Seattle) to take a new job.
Looking at maps and from my limited visits, when compared to the flat expanses of Texas, the area appears extremely constrained and convoluted, especially with all the water and mountains.
I am going to be working in downtown Bellevue, (which has changed considerably since I was there 3 years ago), and what I desire is to rent a small place (800-1100 sq.ft w/ a garage) that isn’t too far away to keep my commute short. (the traffic there reminds me of LA / CA). And of course I’d like to not be paying (too much) of a premium.
I am flying back up there next week to scout out a place. Can anyone familiar with the area recommend either areas to check out, or areas to avoid?
Prime;
thank you for asking this question.
I am in knots today about getting into something else.
Nobody wants to give me advice but what do you think about GO’s?
I would tend to think that in theory, one government obligation is about as good as another. Will practice follow theory?? Wish I knew!!
I’m aware that lots of Craigslist posts are cranks or spammers, still, ones like this seem to have popped up a lot more lately, at least here:
http://detroit.craigslist.org/cas/882609769.html
That looks to be right up your alley blano.
Lol, not quite. More liberal way of living than I care for.
Just back from the local Bank of A branch, on the lobby markup board…..30yr fixed…1 point…..7.125%
Maybe futures assuming Obama win, Volker as Treasury Sec.
I think someone posted here on this idea recently.
October 17, 2008, 11:50 am
Paul Volcker for Treasury Secretary
By Joe Nocera
I do not know about you, but I was both surprised and pleased to hear during the presidential debate this week that the Democratic candidate Barack Obama was relying on the former Federal Reserve chairman Paul A. Volcker for advice during the financial crisis. I was surprised because I did not realize that Mr. Volcker, who had been an extremely nonpartisan Fed chairman before Alan Greenspan, did that sort of thing — roll up his sleeves in the middle of a heated campaign. I always had the sense that he preferred to be above the political fray.
All the Volcker adherents are mighty quiet these days.
I did not know Volker was 81 - that changes things.
Stocks will be up big today. Anybody disagree?
The PPT agrees, but Mr Market does not, at least so far. However, I expect after-lunch window dressing may help him to support your conjecture.
October 17, 2008 12:29 P.M.ET
BULLETIN
Stocks go bungee jumping
Stocks swing wildly, shifting lower as new-home building falls to a
17-year low with Caterpillar fronting blue-chip losses, down 3%.
With the double whammy of terrible numbers on consumer sentiment and residential construction, what can investors be thinking when they drive the stock market right back up to opening bell levels in the immediate aftermath of a bungee jump?
The volume seems to be lite, so i wonder if it’s the Warren Buffett followers jumping in head first?
Old Warren Commission: Who killed JFK?
New Warren Commission: 50%?
“You might say for the hoi polloi has only just stood up for the playing of the National Anthem, in a full 9-inning game of fear & loathing.”
I’d put it differently. October 2008 is the fourth inning, and the players have been watching in horror as they fell behind 100 to nothing. Meanwhile, most of the fans have just reached their seats and looked up at the scoreboard.
Bases loaded 2 out, Hank @ the bat can cut the margin to 100 to 4, with a mighty swing.
It isn’t over until the fat lady can’t get a loan…
Or until Mighty Casey strikes out.
Might be “Mighty Buffet” this time.
http://www.nytimes.com/2008/10/17/opinion/17buffett.html?ref=opinion
Buffet’s a buyer:
“THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary. So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.”
Why?
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”
“Be fearful when others are greedy, and be greedy when others are fearful.”
Alternative formulas:
1) Go long when deleveraging is forcing others to sell.
2) Buy when everyone else is selling, and sell when everyone else is buying.
Case in point (for version 1) ):
BULLETIN
DOW INDUSTRIALS UP 200 POINTS
METALS STOCKS
Gold falls for seventh day on funds liquidation
Futures set for biggest weekly percentage drop in more than 20 years
By Moming Zhou, MarketWatch
Last update: 1:19 p.m. EDT Oct. 17, 2008
NEW YORK (MarketWatch) — Gold futures fell Friday for a seventh straight session, with the benchmark contract heading for the biggest weekly loss in more than 20 years.
Gold for December delivery slumped $26.40, or 3.3%, to $778.10 an ounce on the Comex division of the New York Mercantile Exchange. The contract has lost nearly $80 this week, or more than 9%, its biggest weekly percentage loss since at least 1984, according to FactSet Research.
“Funds who would like to keep their asset of last resort are being forced to sell, and this is causing weakness in the paper gold market price,” said Peter Spina, president of GoldSeek.com.
Buffett’s value investing strategy obviously works for him, but it is not something that is going to work for the average person. Most people simply dollar cost average into their 401ks. Buffett tends to get described by media outlets as simply a buy and hold investor, which really isn’t true. He only buys under specific circumstances and has the clout to get bargains that will never be available to the average person. With the kinds of returns the average investor has gotten over the past 10 years I wish someone like him be a little more careful about telling people just to jump in with both feet.
Man Friday
What Would Milton Friedman Say?
Peter Robinson 10.17.08, 12:00 AM ET
The day after Milton Friedman died in November 2006, The Wall Street Journal published an article about monetary policy that Friedman had written. Unable to recall when the article had first appeared, I asked the editor. “Today,” he said. “Milton adapted it just a couple of weeks ago from a research paper he was working on.”
This took a moment to sink in. Friedman, by universal consent one of the two or three most consequential economists of the 20th century, had still been performing original economic research then describing his findings for ordinary readers–at the age of 94.
And that’s when most people my generation and after will get to retire.
If I can continue productively working up until the day I die at age 94, I will feel lucky and die happy
“Free to Choose”. That should be the goal. “Free to invest”… “Free to fail”. Milton Friedman had it right.
Fannie and Freddie with Social Engineering by government created the market for subprime. Banks then found a way to leverage that opportunity and to create more financial engineering to compete with the GSEs. Greed took over and these products were unchecked by what should have been adequate government oversight. The government not only turned a blind eye… but provided the rope for the financial industry to hang itself with.
Government oversight was turned down by the libs as it contradicted their political social engineering goals and financial contributions. Republicans, rather than fight the democrats went ahead and bragged about economic results and homownerships created by this bubble. Most every politician was culpable by taking credit for a bubble… and free markets did their thing based on greed.
Greed left uncheck will have short-term ramifications… understood by Milton Friedman. However, consequences are amplified and prolonged when the government sponsors and endorses such greed.
Whom would Milton (Friedman) have blamed?
For the bubble itself? Probably nobody. From the tulip mania in Holland more than three-and-a-half centuries ago to the dot-com bubble here in the U.S. less than a decade ago, wildly irrational behavior sometimes develops in markets. “Friedman never argued that markets are perfect,” says Jay, “only that over the long run they’re a lot more efficient than any other method of allocating resources.” Sometimes, Milton recognized, bubbles just happen.
Whatever the origin of the bubble, however, Milton would have blamed Congress for making it much, much worse. Congress, after all, created Fannie Mae and Freddie Mac, institutions that spent tens of billions of dollars on subprime instruments. “Congress told Fannie and Freddie to subsidize bad loans for the purposes of social engineering,” says Jay. “It was terrible, just terrible.”
I thought I heard Cheney-Shrub spouting off about how much they’ve help Americans become stakeholders in America’s great OWNERSHIP SOCIETY!
That “they” should be given credit for such “good policy ideas” that have benefited so many Americans.
Maybe I was mistaken, maybe “The Decider’s” didn’t take credit for such a grand national ideal, perhaps I overheard an echo over at the Shadow Gov’t C-span channel: Fox News Maybe.
Look at the outcome:
1) The GSEs essentially collapsed, and are wards of the state.
2) Many low income households are in dire financial straights, thanks to Congressional encouragement to purchase homes they could not afford.
Does anyone want to offer a defense of why the move to force the GSEs to engorge themselves on subprime loans was a good idea, or would everyone who thought it was a good idea rather not talk about it now?
PB, nobody is talking about it now.
That’s where the frustration is for us here, can you say Barney?
That gorging is just throw up now.
Now we enter the anorexic stage.
One of the nice things about financial emergencies is that they limit the time available for reflecting on who should be blamed for creating the problems at hand.
If the GSE’s rather than securitization and poor regulation is the problem then why are all the banks and financial institutions going bankrupt. Why are so many bond holders getting killed. The answer is that the GSE’s were not the cause of the problem they were a symptom. Once securitization and fraudulant rating agencies are in place the banks and financial houses needed a place to sell the gold plated crap. Certainly the gov was a major target as were pension funds insurance companies and individuals and of course other banks.
1) The GSEs were the leaders in the “innovation” of securitization, and the private lenders were followers.
2) To compete with the implicit subsidy in GSE (below-market) interest rates, private lenders had to securitize what the 800 lb GSE gorillas would not purchase. The private securitizers thus had the choice of either purchasing even worse quality loans than the subprime stuff the GSEs were purchasing, or else staying out of the game.
3) The GSEs would best have just said no to “gold plated crap” in order to protect their investors, but Congress insisted on another plan entirely to meet social engineering objectives.
ECONOMIC REPORT
Consumer sentiment plunges at fastest rate ever
By Ruth Mantell, MarketWatch
Last update: 11:52 a.m. EDT Oct. 17, 2008
WASHINGTON (MarketWatch) — In the midst of global efforts to shore up markets and economies, U.S. consumer sentiment plunged in October, according to the University of Michigan/Reuters index released Friday.
In a record single-month drop, the index fell to 57.5 in October, compared with a reading of 70.3 in late September. Economists surveyed by MarketWatch had been expecting an October result of 64.5.
“Clearly, this is the response to the market chaos, and it does not look good,” wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics.
It’s unlikely that consumer confidence will reach levels consistent with rising spending until next year, Shepherdson added.
Sentiment settles to the bottom of bottled-up fear.
I believe that Sir Greenispent called this his: “Wallet’s being slammed shut Index”
Confidence plunges among US consumers
By Krishna Guha in Washington and Anuj Gangahar, Saskia Scholtes, Jonathan Birchall and Daniel Pimlott in New York
Published: October 17 2008 19:57 | Last updated: October 17 2008 19:57
US consumer confidence has fallen more sharply this month than in any month since records began in 1978, a widely followed survey showed on Friday, raising fresh fears about consumer spending.
The University of Michigan consumer sentiment index fell from 70.3 in September to 57.5 in October, well below economists’ expectations.
The sharp deterioration raises the danger that US households, scared by the extraordinary events of recent weeks and weighed down by the fall in stock and house prices, will retrench, sending the economy into what could be a deep recesssion.
“People are really terrified and this has the potential to have a big impact on spending,” Frederic Mishkin, a professor at Columbia University and former governor of the Federal Reserve, told the Financial Times prior to the release of the Michigan figures.
Underlining the grim mood, Linens N Things, once the second largest US home furnishings chain, launched liquidation sales at its 371 remaining stores on Friday.
Separate data showed that US housing starts fell again in September to their lowest level in nearly half a century, indicating that the housing sector is still far from bottoming out.
Builders started construction on new homes at a seasonally adjusted annual rate of 817,000 last month, the weakest level of new building since January 1991. Excluding that month, starts have never been lower since records began in 1959. Permits, which signal future housing activity, were down 8.3 per cent.
“If you thought it could not go much lower, think again,” said Alan Ruskin, strategest at RBS Global Banking and Markets.
Why in heck are this many new homes being built? Maybe the bailout should have included a few billion (what the heck, 10’s of billions, after all it’s not like it is real money) to PAY THE BUILDERS to shut the doors and GO HOME!
“Builders started construction on new homes at a seasonally adjusted annual rate of 817,000 last month, the weakest level of new building since January 1991.”
I posted this in the HBB forums also, but the traffic seem higher here.
I’m looking for advice from Seattle area locals.
After 21 years in Texas, I am moving to Bellevue ( East of Seattle) to take a new job.
Looking at maps and from my limited visits, when compared to the flat expanses of Texas, the area appears extremely constrained and convoluted, especially with all the water and mountains.
I am going to be working in downtown Bellevue, (which has changed considerably since I was there 3 years ago), and what I desire is to rent a small place (800-1100 sq.ft w/ a garage) that isn’t too far away to keep my commute short. (the traffic there reminds me of LA / CA). And of course I’d like to not be paying (too much) of a premium.
I am flying back up there next week to scout out a place. Can anyone familiar with the area recommend either areas to check out, or areas to avoid?
———–
And again, I thank Ben and everyone here. Had I not been aware, I would most probably still be clinging to my oversized house in Rockwall, Tx, slowly sinking and stuck instead of being in the highly mobile position I am in.
The mention of “affordable mortgage products” somehow seems incongruous in an article about (unaffordable) Manhattan property prices…
Financial Times
Manhattan property joins race to the bottom
By Daniel Pimlott in New York
Published: October 3 2008 14:59 | Last updated: October 3 2008 14:59
Manhattan real estate prices have joined the rest of the US in a downward tumble.
The average sales price of property on the island fell by 11.3 per cent to $1,480,363 in the three months to the end of September according to data from Miller Samuel, a real estate appraiser, compared with the previous quarter.
The data points to still deeper plunges ahead because it registers closings of sales, which are normally at least three months - and in the case of newly built apartments can be more than a year - after parties agree to a sale.
Real estate brokers say that sales have come to a near standstill since the government takeover of Fannie Mae and Freddie Mac in early September.
“At the moment…there’s a lot of wait and see,” said Hall Wilkie, president of Brown Harris Stevens, a broker.
“The events of the second half of September in the financial markets and Washington have not shown up in the market data for the quarter aside from the continuation of a lower level of sales activity compared to last year’s record levels,” said Jonathan Miller, who runs Miller Samuel.
“The reduction in affordable mortgage products continues to hamper buyers, not only in New York, but in most housing markets across the country.”
Bad news all around, with the worst consumer sentiment ever, retail sails plunging, plummeting commodities, no builder confidence and housing starts in the tanker, job and wage destruction and a general unease in the air. What’s it all mean for the stock market? Well, the Marketwatch headline says it all!
“Street shifts into higher gear”
It’s all good on Wall St. Bad is good, down is up, and all that don’t you know?!
Can someone here give me some ideas on how to beat a car dealership down on their prices?
I might have to take the plunge on getting a new/used car, so any good ideas would be greatly appriciated!
..
Arrange your own financing beforehand.
Tell the salesguy that you will not need to talk about the F&I; just the price of the purchase.
If its a mid-sized truck or car (non-hybrid), demand 20% off dealer invoice.
If its a full sized gas-gulper, demand at least 30% off dealer invoice along with any factory incentives.
I bought a nice 2007 4X4 Chevy Silverado a few months ago here in FL with all the goodies for $13,000. Kelly Blue Book on my truck was ~$27,000….I ain’t kidda ya….( I needed the truck to pull the boat that I bought off an unemployed Realtor(tm) )
My girlfriend, on the other hand, bought a Prius Hybrid and paid twice what I paid for my full-sized 4X4. My truck payment = ~$250.00. Her car payment = ~$475.00.
She may “get better gas mileage”; but I only drive six miles each way to work and all together I spend about ~$150.00 less per month, gas included, for the price of “ownership” of my big truck.
..
go at the end of the month, often times the maker offers rebates if the dealer moves enough units, so while they may take a hit on the car. they can recoup it on a kick back from the maker
also dont use their financing
Sometime you can’t beat their financing. Toyota is offering 0% financing in Texas. You of course, still have to negotiate a deal on top of that.
Go on the last day of the month, walk into the dealership and yell
“who wants to make their quota?” If you do your homework, you will know invoice before you go. Holdback is 3% of invoice, good negotiating will get you half of the holdback price plus all manufacturer incentives.
That is so tacky beyond words..
Tell them you don’t need a loan.
Ask for the #2 sales guy… He’ll do darn near anything to get the #1 spot. Don’t tell them any personal info. They always ask sly ?’s. Like, what do you have to trade in? Don’t drive your trade in to do the deal… Leave, and come back in it AFTER striking a price, THEN negotiate trade value.
Another ? they ask- What kind of payment are you looking for? Tell them it depends on the car. Never show interest in a particular vehicle, even if you have a preference. I usualy act interested in a different car, find fault with it and “settle” for the car I really want. Make sure you ask for extras for incentive, rubber car mats, roof rack if needed, etc.
Thanks guys for your great ideas. I’m going to give them a try over the weekend and let you know how it goes.
Thanks again, and have a great weekend!!!!
Somthing to think about
By Jim Jubak
We’re building the foundation for the next boom in commodity prices — and commodity stocks.
I can’t give you any guarantee that commodity prices won’t tumble further in the short term. In fact, I think that’s very likely to happen as the U.S. economy slips into recession (possibly along with the economies of Japan and the European Union).
But right now commodity stocks are factoring in huge declines in demand and tumbling commodity prices over the long term that just aren’t going to occur. A patient investor who can put up with the pain of the next six, nine or 12 months can now buy a very reasonably priced option on the shares of the strongest commodity producers for the next leg up in commodity prices. I peg the beginning of the next boom at late 2009 or early 2010.
We should NEVER forget the spike in crude prices, and continue the development of alternative energies. The evil which drove oil prices to $147 still exists.
“The evil that drove oil prices to $147 still exists.”
But when the price of oil declined unfortunately so did the incentive to develop alternative energies.
Which, of course, makes OPEC a friend of those who want the U.S to become energy self-sufficient and it makes Hugo Chavez the biggest friend of them all.
Make that a few years after housing starts taking off again.
The methods of the housing bubble were around in the 1980’s. I know several people who fixed & flipped houses in the 1980‘s, who continue to this day, doing things the same way the whole time, getting bailed out with yet another credit plan at the last moment.
HBB’er-types are the most patriotic people because they place liberty First. Without liberty, everything else is at the whim of another. Many people who jumped into housing and the credit-leverage game did not place liberty higher on their priority list than making money or getting that dream house. From that point, it was easy for people to rationalize the boom would keep going - they put liberty last - and they expected everyone else to make the same trade. Getting rich was presented as the way to purchase liberty & self-actualization
The desire of many people to, “go for” the easy riches of the housing bubble & the derivatives mess is reinforced by the schools teaching ideas like Maslow’s Hierarchy of Needs pyramid which lumped liberty in at the top with self actualization, above & after shelter. Liberty should be at the foundation of the hierarchy of needs pyramid, as achieving everything else successfully in life depends upon a person maintaining their liberty, especially in finance.
As Americans, our most important, “regulation” to uphold is the liberty of everyone - everywhere we go.
The unpatriotic person is one who does not put liberty of themselves, and everyone else, first, or causes another to give up their liberty - without due process - financial or otherwise.
For the love of liberty. This is what I thought *was supposed to be* the banner to uphold as an American and the basis of our entire culture and laws.
Hedge Fund Manager Takes his Stash and Calls it Quits:
http://www.cnbc.com/id/27239479
Note: the term “Stash” as I used it above is rather ambiguous as you will read in the article…
This is the best “take your system and shove it” letter ever!!!
Stick it, stick it to ‘em good, Andrew!
I think a lot of you HBBers will enjoy this (sorry if it has already been posted).
http://www.cnbc.com/id/27239479
http://www.cnbc.com/id/15840232?video=780461999
A brilliant commentary by Dennis Kneale, from June of 2008. I wonder if he ever gets tired of being wrong.
Dennis Kneel is Cocaine Larry Kudlows favorite rag doll/mouthpiece. He’s on Lying Larrys Propaganda Hour 3x a week.
I know that in many ways some of the people on CNBC are entertainers, that being said you would think they would concerned about their credibility. Anybody can say it is always a bull market, eventually you are going to be right. The only one who has less credibility left than Kudlow & Neale is Jim Cramer. I would love for some investigative reporter to find out what the returns were that Cramer got when he was a hedge fund manager. He claims to have been a great success, while I suppose that is possible, I just find it very hard to believe.
Not only is/was he dead wrong, he just looks wrong.
Man in the News: John Maynard Keynes
By Ed Crooks
Published: October 17 2008 19:43 | Last updated: October 17 2008 19:43
“We have reached a critical point,” John Maynard Keynes wrote in March 1933. “We can … see clearly the gulf to which our present path is leading.” If governments did not take action, “we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what ultimate outcome we cannot predict.”
As the world reels from a 1929-style stock market plunge and a 1931-style banking crisis, his words are a fair assessment of the dangers we face once again. Keynes, whose life’s mission was to save capitalism from itself, is more relevant than at any time since his death in 1946.
His renewed influence can be seen everywhere: in Barack Obama’s planned stimulus package, for example. When George W. Bush said his administration’s plan to take equity in banks was “not intended to take over the free market, but to preserve it”, he could have been quoting Keynes directly.
The key to Keynes was his commitment to preserving the market economy by making it work. He was dismissive of Marxism but believed the market economy could survive only if it earned the support of the public by raising living standards.
The role of the economist, he believed, was to be the guardian of “the possibility of civilisation”, and no economist has ever been more suited for that role.
Lionel Robbins, later head of the London School of Economics, described Keynes as “one of the most remarkable men that have ever lived,” surpassed in his time only by Winston Churchill. Even Friedrich Hayek, Keynes’ staunchest adversary, described him as “the one really great man I ever knew, and for whom I had unbounded admiration”.
His optimistic, positive thought reflected his comfortable and happy upbringing and career. An academic’s son, he won scholarships to Eton and Cambridge and fell in with the Bloomsbury Group, the circle of writers and artists such as Virginia Woolf and Lytton Strachey who embodied an ideal of cultured living.
He was an imposing figure, six feet, six inches tall and full of jokes, gossip and sharp observations. Alongside economics, he had an array of other interests as mathematician, administrator, academic, investor, journalist, art collector, politician, impresario and diplomat. He was even an exemplary husband, devoted to his wife, Lydia Lopokova, a ballerina. In his language he could be carelessly provocative. But, as he said: “Words ought to be a little wild, for they are the assaults of thoughts on the unthinking.”
“The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems — the problems of life and of human relations, of creation and behaviour and religion.”
–John Maynard Keynes–
First Annual Report of the Arts Council (1945-1946)
More Keynesian wisdom, pertinent at the present Minsky moment as much as ever:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
“What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual and firm to fulfill all obligations in full compliance with the terms of the contract.”
- Ludwig von Mises
Also:
“Credit expansion is not a nostrum to make people happy. The boom it engenders must inevitably lead to a debacle and unhappiness.”
Here’s a gem.
“The final outcome of the credit expansion is general impoverishment.”
-Mises
Bet Keynes never uttered such a thing.
What he did say was, “In the long run, we are all dead.” I suspect he realized that he would not live long enough to see the long-term damage due to many Depression-era government programs which were inspired by his ideas.
Newly licensed Akron panhandler has a bad first day on the job.
Sorry about the double post earlier. When I didn’t see it post after about 10 min, I assumed it was a problem on my end (which I have been having with my connection).
I’d love to see a discussion about whether people think we are headed for inflation or deflation.
Who (HBB’s, MSM, economists, politicians) is predicting inflation and why?
Who (HBB’s, MSM, economists, politicians) is predicting deflation and why?
Watching this all unwind has been fascinating, especially since I’ve been reading this block regularly for a few years and now have seen so many predictions from here come to pass.
I truly believe that we are headed for monumental change in the next decade. Some combination of peak oil, food shortages, financial collapse (end of capitalism? new world order?)….who knows? Seems like anything could happen now.
My next question is: will this happen slowly over the next few years or will there be some catastrophic type “event”?
I have more questions than answers, and I read a lot, and it is clear that there is no consensus anywhere on what the future holds.
Seems like most of the people around me are clueless about the magnitude of what is happening, especially here in San Francisco, which is a city of wealthy folks. There are no empty lots with weeds or abandoned house here, that’s for sure. Clearly people are spending less and the stores are less crowded, and housing has come down some, but it is still astronomical, as are rents in the city.
So in our daily lives we are living the way San Franciscans do: as if we were not really part of the rest of the country. We’ll see how long that lasts.
I think we are headed towards hyperinflation, and here’s something to chew on…
=======================================
Pearl Buck, the American writer who became famous for her novels of China, was in Germany in 1923. She wrote later: “The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self-assurance, their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency.”
http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html
By contrast, no American cities have been bombed to rubble, no foreign power has defeated us in war and demanded unrepayable reparations, and your analogy is about 100 percent wide of the mark.
There is lengthy discussion daily in the bits bucket regarding this issue.
My take is deflation, followed by inflation. The challenge is to make the move in the sweet spot.
I’ll take yen over euro, gold over yen, arable land over gold; at that point in time.
It’s difficult to predict the Fed’s response. However, asset prices all across the globe are in free fall. Stocks, bonds, commodities, houses, etc. etc. are cheaper than they were 6 months ago. Capital is scarce, unemployment rising, and a recession is underway. It’s going to take many, many months if not years before we untangle ourselves from the housing bubble.
Mr Market wants deflation, and the Working Group clearly does not. The likely result of this struggle of market forces against government intervention is unpredictable and highly volatile asset price movements (sound familiar)?
Footnote: I believe it is much easier to use intervention to materially influence paper asset prices (stocks, bonds, paper gold, currency) than real asset prices (physical gold, houses). The problem with the latter are that too many transactions occur between individual households outside the glaring spotlight of a central exchange. This makes the actual market value of real assets quite difficult to even measure, much less manipulate.
How do you influence “paper gold” prices but not gold? Makes no sense. If anything, this so-called physical and paper gold market is analagous to the bond market, where physical gold would be like the risk-free security (a la Treasury securities) and various forms of “paper gold” would trade at lower prices. The stock GLD certainly does not trade at a premium to physical gold.
Also, if anything, the prices of physical assets are easier to measure than paper representations of them. Bring gold to a dealer or corn to a silo, you get quoted a price.
Conceivably you could manipulate “paper” gold the same way gold-backed currency can be manipulatd, create more of it than is actually backed by gold.
Physical on the other hand is not subject to the same problem since it’s, well, physical.
I’m not saying that’s what is happening..but some people are saying it.
‘How do you influence “paper gold” prices but not gold? Makes no sense.’
It makes perfect sense if the market believes there is a high risk the promises inscribed on the paper are not credible.
The other factor, as pointed out by Watcher and others here, is that international monetary authorities (e.g. the IMF) may have an agenda of suppressing gold prices which drives a wedge between the price at which physical gold and paper gold trade. I have no way to test the plausibility of this assertion.
Re: Price of Gold
Continued long liquidation that included the funds sent gold futures to their lowest level in slightly more than a month Friday, analysts said. “There is considerable liquidation from the commodity funds,” said Bill O’Neill, one of the principals with LOGIC Advisors. “Over the last three or four days, we’re seeing some big funds being forced to liquidate. It’s the same old situation with the money flow.”
The funds both have to liquidate commodities positions to meet margin calls in other markets, and redemptions are occurring, O’Neill said. “It’s really not gold’s fundamentals or anything dramatically new. It’s just a money flow out of commodities,” O’Neill concluded.
“Funds who would like to keep their asset of last resort are being forced to sell, and this is causing weakness in the paper gold market price,” said Peter Spina, president of GoldSeek.com.
“Gold has continued to fall and not made expected gains as the process of massive deleveraging of the entire international financial system is resulting in unprecedented selling in nearly all markets including the huge commodity index funds,” said Mark O’Byrne, executive director of Gold and Silver Investments.
Re: Physical Gold price vs. Comex Price
“Nearly half of the people who bought homes in the Tampa Bay area in the last five years owe more than their home is worth. The story is even worse for those who bought at the market’s peak in 2006. More than 70 percent of those buyers in Tampa and St. Petersburg now have negative equity, according to Zillow.
Now factor in that unemployment in St. Pete and Tampa is nearly 7% and over 8% in Pasco County. However, those unemployment numbers only count those receiving unemployment checks. Therefore, the real unemployment numbers are probally double what is being reported by the state and local governments. People who ran out of benefits, self employed, part time workers do not get counted in the “official unemployment numbers”.
Disinflation followed by inflation.
Is Inflation Always and Everywhere a Monetary Phenomenon?*
Paul De Grauwe
University of Leuven, B-3000 Leuven, Belgium
paul.deGrauwe@econ.kuleuven.ac.be
Magdalena Polan
University of Leuven, B-3000 Leuven, Belgium
magdalena.polan@econ.kuleuven.ac.be
Abstract
Using a sample of about 160 countries over the last 30 years, we test for the quantity theory relationship between money and inflation. When analyzing the full sample of countries, we find a strong positive relation between long-run inflation and the money growth rate. The relation is not proportional, however. The strong link between inflation and money growth is almost wholly due to the presence
of high- (or hyper-) inflation countries in the sample. The relationship between inflation and money growth for low-inflation countries (on average less than 10% per annum over the last 30 years) is weak.
http://www.econ.kuleuven.be/fetew/pdf_publicaties/4155.pdf
basic definitions:
“The quantity theory of inflation rests on the equation of the money supply, its velocity, and exchanges.”
“The quality theory of inflation rests on the expectation of a seller accepting currency to be able to exchange that currency at a later time for goods that are desirable as a buyer.”
“Disinflation: The slowing of the rate of inflation per unit of time.”
“Deflation should not be confused with temporarily falling prices; instead, it is a sustained fall in general prices.”
Nobel Economics Laureate Krugman Sees `Nasty’ U.S. Recession
“Oct. 17 (Bloomberg) — The winner of the 2008 Nobel Prize for economics said the U.S. is plunging into a “nasty recession” with a “lot of suffering” to come, even if policy makers succeed in unfreezing the credit markets.
“That’s baked in,” Princeton University professor and New York Times columnist Paul Krugman said in an interview on “Night Talk” with Mike Schneider to be broadcast later today on Bloomberg Television. “There is a lot of downward momentum.”
He said a rise in the unemployment rate to 7 percent “seems almost certain” and he put the odds of an increase to 8 percent at “better than even.” The jobless rate in September stood at a five-year high of 6.1 percent.
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Krugman voiced some doubts that the steps that Treasury Secretary Henry Paulson is taking to combat the credit crisis will succeed and suggested that more might be needed.”
Home prices plunged by 32% in Santa Cruz. Numbers came in unusually late this month. Very short story in the Santa Cruz Sentinel and they disabled comments this time.
http://www.santacruzsentinel.com/localnews/ci_10746479
Financial Times
Wall Street ends in red in volatile session
By Alistair Gray and Anuj Gangahar in New York
Published: October 17 2008 13:54 | Last updated: October 17 2008 21:44
A wild week for Wall Street stocks that saw their biggest gain since the Depression and worst sell-off since 1987 drew to a close with another highly volatile session that ended in the red.
Relatively upbeat earnings and a further easing of strain in money markets failed in the end to outweigh a fresh batch of gloomy economic data and renewed concerns over the health of some financial institutions.
The market swung between gains of as much as 4 per cent and losses that hit 2.9 per cent as last month’s options and futures expired.
Big name financials including Metlife and State Street endured heavy losses towards Friday’s close and finished down 9.2 per cent at $31.14 and 9.6 per cent at $40.76 respectively.
Housebuilders, home furnishers and real estate services were among the key losers on Friday from grim construction and building permit data. DR Horton, CB Richard Ellis and Leggett & Platt were among the biggest drags on the market, down 8.3 per cent at $6.77, 4.8 per cent at $6.32 and 12.3 per cent at $16.29, respectively.
PHM was down only about 3%, much to my dismay.
I don’t understand how the market can still value builders the way that it is; this is the worst period in which to be building in history, but they’re still valued as if they’re going to survive.
Apparently the PPT favors homebuilder stocks. Why else would their share prices continuously fall upwards?
Pikeville College
Pikeville, KY
A private liberal arts college in eastern Kentucky is cutting almost 20 percent of its staff and limiting spending to essential expenses. Pikeville College board Chairman Terry Dotson said 25 of its 105 staff positions are being cut immediately and 15 of the 105 faculty posts will be eliminated over the next 18 months. The college issued a statement saying the cuts are part of a restructuring of the undergraduate program. Officials said no changes are expected at the School of Osteopathic Medicine. “We’re just exercising every measure of prudent management, as any business would do,” Dotson told The Appalachian News-Express. “The purpose of the college is the furtherment and development of people in the region, but the business of the college is it needs to be able to pay the bills.”
Associated Press
Oct 15
Who need an education when there are no jobs for them?
It has to be tough times for the small colleges. Big colleges will have more students than they know what to do with in tough economic times, but marginal ones may suffer due to the drying up of easy money student loans.
Gasparino on CNBC is giving a report about Lehman subpoenas, and his cell phone keeps going off. lol
Taleb was way out front on the Fannie blow-up. His shared philosophy on randomness and predictability is fascinating - to me at least.
Wiki has a piece about him if you want to expand your thinking beyond ‘Joe the plumber’:
http://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb
Kudos to the PPT for sending the stock market skyward this week against the backdrop of utterly relentless and terrible economic news!!! Got liquidity, get stock market gains…
Fallout from financial crisis hammers housing
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer – 19 mins ago
WASHINGTON – The nation is on track to build fewer homes this year than at any time since the end of World War II, adding to the woes of an economy that analysts said Friday has almost certainly entered a recession.
While the economic outlook darkened even further with bad reports on layoffs and consumer confidence, it was one of the quietest days since the financial meltdown began a month ago. Wall Street’s tumultuous week turned out to be its best in five years.
Is Switzerland the next Iceland?
After Britain and the US injected massive amounts of capital into their banks, Switzerland has taken emergency measures to try to shore up its banking system. Sean Farrell reports
Friday, 17 October 2008
In an extraordinary move for a nation proud of its financial prudence and stability, Switzerland was forced to take emergency measures yesterday to shore up its two biggest lenders to prevent a collapse in confidence in the country’s banking system.
The state will inject SFr6bn (£3.1bn) into UBS, its biggest bank, in return for a 9.3 per cent stake, and will allow UBS to unload $54bn (£31bn) of toxic assets, including sub-prime mortgages and Alt-A securities, into a fund controlled by the central bank.
Credit Suisse, the No 2 Swiss lender, obeyed instructions from the central bank by raising about SFr10bn from investors in the market, including the Qatar Investment Authority, which is already a big shareholder and is a major stakeholder in Barclays. The fundraising, which allows Credit Suisse to meet tough new Swiss capital rules, represented about 12 per cent of the bank’s existing equity.
Time to bail out hedge hogs now? What next: Uncle Sam bailing out himself by the strings of his own boot straps?
MARKETWATCH FIRST TAKE
The looming hedge-fund problem
Commentary: Without a history of regulation, the funds pose danger
By MarketWatch
Last update: 12:17 p.m. EDT Oct. 17, 2008
NEW YORK (MarketWatch) — As a growing number of hedge funds struggle with volatile markets, the industry is hoping Washington will open up the bailout spigot for cash-strapped funds to help them avoid collapse and panic selling.
The concern comes as two more hedge funds, Highland Capital Management and TPG-Axon, have plans to shut down funds or have warned their investors of big losses, according to reports Friday. Credit Suisse estimates 30% of the 8,000 hedge funds will close during the next few years. See story in WSJ (subscription required).
The problem is that even if hedge funds can survive stormy markets, the collateral backing their loans is declining in value. As banks tighten lending, hedge funds need more collateral to make loans.
Meanwhile, hedge-fund investors are withdawing their money, putting many funds in a cash-crunch crossfire. See full story.
Accelerating pressure on hedge funds led Treasury Secretary Henry Paulson to underscore that the bailout program is for “banks and thrifts.” But Paulson also hinted that could change, saying that that’s the plan “right now.”
It sounds to me like it may be time for the hedge fund industry to go the way of the subprime lending sector and the investment banking sector. I suspect many of these firms believed they were hedged through implicit LTCM-style implicit too-big-to-fail bailout insurance protection, but their unwritten, unstated, unfunded blanket insurance program probably has already reached its bailout capacity limits. Bye bye, highly leveraged, unhedged, overpaid gamblers!
Wall Street Journal
* BUSINESS
* OCTOBER 17, 2008
More Pressure on Hedge Funds
By GREGORY ZUCKERMAN and CASSELL BRYAN-LOW
Some hedge-fund managers are coming under increased pressure to liquidate their positions as banks ask for more collateral to back funds’ borrowing.
The changes are hitting a number of funds across the industry, which experienced its latest blow Thursday, when Dallas-based Highland Capital Management LP said it was closing of two of its five hedge funds, which managed about $1.5 billion of Highland’s $38 billion war chest.
[Underperforming]
It has been a brutal few weeks for the hedge-fund industry. As a group, the funds were down 5.4% in September and 10.1% for the year, beating the Standard & Poor’s 500, which fell 20% over the same period. Still, October trading only solidified 2008 as the worst on record. Credit Suisse now estimates 30% of the roughly 8,000 hedge funds over the next few years will close.
Many investors and regulators worry whether a broad hedge-fund deleveraging will create more risk for the overall financial system. While some funds have taken some precautions, others are finding themselves squeezed by a declining stock market and nervous lenders.
Levels of market exposure have decreased by over one-third in the past 12 months, according to Hedge Fund Research Inc., as managers hold more cash to meet investor withdrawals and to keep losses in check. Funds held a record $184 billion of cash as of August, according to Merrill Lynch, about 10% of the funds’ assets.
The San Diego County Jobs graph accompanying this article best tells the local economy’s recent story:
1) Onset of job losses in March 2008 with only April showing a subsequent gain;
2) Average job losses of 5000 or so a month since June, for a cumulative total of 20,000 or so lost San Diego jobs since the beginning of summer.
State data show more than 143,000 jobs lost in past year
Consumer-driven recession cited
By Dean Calbreath
STAFF WRITER
October 18, 2008
Over the past couple years, many economists have said the California economy would not experience a true recession until job losses spread from the real estate and construction industries into other segments of the economy.
That day has arrived.
Retailers – hard hit by economic jitters and a sharp decline in consumers’spending power – have cut thousands of jobs over the past year, according to data released yesterday by the California Employment Development Department.
“California is moving from a housing-driven slowdown to a consumer-driven recession,” said Steve Levy, who heads the Center for the Continuing Study of the California Economy in Palo Alto.
California lost a total of 35,700 jobs in retail stores between September 2007 and September 2008, as well as 76,700 in construction, 31,400 in financial services and 6,900 in the information industry.
During the same time, San Diego County lost 3,000 retail jobs, in addition to 6,800 jobs in construction and 4,100 in financial activities. During the past month alone, there were 1,000 retail job losses, although part of that decline may have been seasonal fluctuations from the end of the summer tourism season.
Can someone explain why condotels qualify as commercial real estate rather than residential? Sounds pretty residential to me, unless they expect to sell all units to absentee flippers who don’t intend to ever live in the places or rent them out before selling to a greater fool…
High-rise proposal near Petco goes bust
By Mike Freeman
STAFF WRITER
October 18, 2008
The developers of Cosmopolitan Square, a proposed 39-story hotel/condo project overlooking Petco Park, failed in a last-minute bid to find new financing and lost the full-block site to foreclosure.
At an auction Thursday, senior lender SDG-Left Field took control of the undeveloped downtown block at J Street and Seventh, Eighth and Island avenues to satisfy $20.6 million in debt and penalties.
Although home foreclosures have surged locally in the past two years, it remains unusual for a commercial project to fall into foreclosure. But some real estate experts are watching to see how much of a strain the credit crisis puts on commercial real estate owners – particularly those who bought buildings at sky-high prices during the boom.