The Housing Bubble

Weimar*t

Always low currency prices!

So, stock market today: Dead cat bounce? Im still expecting one day where it hits its trading stops.

NARscum just won’t let go will they?

Jed Smith, a researcher from industry group the National Association of Realtors, also saw a glimmer of hope in 2009, forecasting a modest 2.0-percent increase in prices nationally over next year.

http://business.inquirer.net/money/breakingnews/view/20081019-167252/US-house-prices-face-long-fall-to-bottom

“Events are moving with lightning speed as the global credit freeze evolves into something awfully like a classic trade-depression. ”

“The world stole prosperity from the future for year after year, with the full collusion of governments, regulators, and central banks. Now the future has arrived.”

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3227361/Do-our-rulers-know-enough-to-avoid-a-1930s-replay.html

Hedge funds in grip of vicious selling cycle
By Henny Sender in New York
Published: October 17 2008 03:00 | Last updated: October 17 2008 03:00

Hedge fund king bows out with blistering rant on ‘idiot’ bankers
By James Mackintosh
Published: October 18 2008 03:00 | Last updated: October 18 2008 03:00

A hedge fund manager who made what is thought to be one of the biggest percentage profits of all time bowed out of the business yesterday with a fierce attack on the “idiots” running big banks who were willing to take the other side of his bets.

Monday, October 20, 2008
The bailout is not the end of capitalism

Renita Jablonski: So this morning, a bailout in Asia — of course, a fraction of what we’re spending in the U.S. As part of the plan here, the Treasury is pouring $125 billion into the nine biggest banks in the country.

It’s still hard to know what to make of these moves, let alone how to characterize them. Time for Fortune Magazine’s Allan Sloan to weigh in. What do you think, Allan?

Allan Sloan: Well, I think no one has seen anything like this ever, so people are making up it as they go. And I hear that sometime next month, there’s a presidential vote in the United States, is this true?

Jablonski: Ah you know what, I think that’s coming up here, yeah.

Sloan: Right. So with all of this, things have to be reduced to a soundbyte. So it’s nationalization — the end of capitalism as we know it. And just realizing that people are doing the best they can and have no idea what to do, that all disappears and everyone races to put a brand on it and then shriek.

Jablonski: And so what are you doing in this case? Is this the end of capitalism the way you look at it?

Sloan: No, it’s not even remotely the end of capitalism. If you look at the terms of the investment the government is making in these nine banks, boy, I would kill for somebody to give me that much money and exert so little control over my life. I mean, if Paulson has got $100 billion looking for a home, I mean I’m there.

Thought for the Day:
“I think Congressmen should wear uniforms like NASCAR drivers so we could identify their corporate sponsors.”

Greater urgency needs to be shown in sorting out guarantees for the banking system or cash will start to dry up by Christmas, National leader John Key said today.

He said yesterday a bipartisan approach was needed to extend the Government’s retail bank deposit guarantee scheme to cover wholesale bank deposits.

The Government has guaranteed retail loans in the face of the international financial crisis, creating a $150 billion contingent liability.

Under a wholesale scheme, the government would guarantee money loaned to New Zealand banks by foreign banks, a scheme being established in Australia and in place in other countries.

That would extend the contingent liability to $450 billion.

http://www.nzherald.co.nz/nz-election-2008/news/article.cfm?c_id=1501799&objectid=10538511
===================================================

To put things in perspective about how badly New Zealand’s tit is stuck in the ringer, thanks to the carry-trade…

There are 4 million people in the land of long white cloud, and their banking system requires $450 Billion NZ, which would be like our banking system needing a U.S. $20 Trillion guarantee.

tick, tick, tick, tick, tick, tick, tick, tick, tick, tick, tick

Next month, don’t forget to punish your elected officials who supported the bailout. Unfortunately both presidential candidates supported it, so there is no choice in that case.

P.S. Don’t get mislead by the prototypically mendacious title of the bailout bill:

“To amend the Internal Revenue Code of 1986 to provide earnings assistance and tax relief to members of the uniformed services, volunteer firefighters, and Peace Corps volunteers, and for other purposes”

My wife enjoys mindlessly flipping through women’s magazines after a long brain-draining day at work. She has 3 or 4 subscriptions which are practically free if you ignore the renewal notices until they get desperate to keep their subscription numbers up.

Anyway, she received two of them in the mail on Saturday. They always have a list of featured articles on the cover… One of them, in the article that takes up the most cover real estate, says “Live Rich Without Getting a Raise: 14 ways to save money and still have fun.” The other one, in a smaller font, says “Recession-Proof Beauty: 24 Products for under $10 (They only look rich)”

Frugal is getting fashionable…

Now it is the voter’s turn to deliver some payback. Be sure you let your elected representative know next month how you feel about them selling you out to big FIRE business interests.

Business hits back after Congress bailout vote
Mon Sep 29, 2008 7:33pm EDT
By Kevin Drawbaugh

WASHINGTON (Reuters) - Business lobbyists scolded the U.S. Congress and threatened political payback after lawmakers handed the financial services industry a stunning defeat by killing a $700-billion Wall Street bailout.

The vote Monday in the House of Representatives to reject the rescue plan, proposed by the Bush administration September 20 and modified by congressional leaders over the past week, came as a rude shock to powerful and deeply entrenched interests.

Major banks and executives from the financial sector overall donate heavily to political campaigns and spend a lot of money on government lobbying to push their agenda.

The titans of high finance don’t always get their way on Capitol Hill, but the 228-205 House vote was unexpected and drew a flurry of private sector counter-punches.

–
As Commidities Bust continues…

–
Copper Prices Have Collapsed in North America by a Factor of 5,000+ in 400 years

I have a close friend (we meet and talk frequently) who is unabashed bull on copper despite huge swings in copper prices and demand, historically. His thesis rests on the New Era argument of globalization and secular demand so common among bulls. My friend cannot even imagine a recession, let alone depression, in China and India, any time soon, which to me is a given. When that happens the demand will fall in America, China, Europe, India, etc, more or less simultaneously. Adjusted for inflation copper prices are below where they were in 1900 and at the recent high they were where they were in 1907! Production since 1800 has grown exponentially except for few drops during demand slumps. I expect copper to go down to $0.50-1.00/lb range, if not lower. Anyway, I found this gem:

“Thirty years later [around 1615], Jamestown’s John Smith noted that, “for a copper kettle. . . [the Powhatans] will sell you a whole Countrey””

“for as much red copper [in 1605] as I can bring [to North America] I’ll have thrice the weight in gold”

Commodities bulls have a blinder – no global recession, let alone global depression. We shall find that out soon enough in about a year.

Jas

ING is getting a $13.5 billion bailout from the Dutch government. With all these banks getting bailed out, where are we supposed to keep our money? We used ING Direct for almost five years and they paid a great interest rate.

One positive…one of the higher-ups in ING is foregoing his bonus this year.

Say, @ what point do homeowners emulate countries, and start to ‘guarantee’ their mortgages?

Wall Street Journal
* THE WEEKEND INTERVIEW
* OCTOBER 18, 2008
Anna Schwartz
Bernanke Is Fighting the Last War
‘Everything works much better when wrong decisions are punished and good decisions make you rich.’
By BRIAN M. CARNEY
…
Federal Reserve Chairman Ben Bernanke has called the 888-page “Monetary History” “the leading and most persuasive explanation of the worst economic disaster in American history.” Ms. Schwartz thinks that our central bankers and our Treasury Department are getting it wrong again.

To understand why, one first has to understand the nature of the current “credit market disturbance,” as Ms. Schwartz delicately calls it. We now hear almost every day that banks will not lend to each other, or will do so only at punitive interest rates. Credit spreads — the difference between what it costs the government to borrow and what private-sector borrowers must pay — are at historic highs.

This is not due to a lack of money available to lend, Ms. Schwartz says, but to a lack of faith in the ability of borrowers to repay their debts. “The Fed,” she argues, “has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible.”

So even though the Fed has flooded the credit markets with cash, spreads haven’t budged because banks don’t know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is “the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue.”
…
“Why are they ‘toxic’?” Ms. Schwartz asks. “They’re toxic because you cannot sell them, you don’t know what they’re worth, your balance sheet is not credible and the whole market freezes up. We don’t know whom to lend to because we don’t know who is sound. So if you could get rid of them, that would be an improvement.” The only way to “get rid of them” is to sell them, which is why Ms. Schwartz thought that Treasury Secretary Hank Paulson’s original proposal to buy these assets from the banks was “a step in the right direction.”

The problem with that idea was, and is, how to price “toxic” assets that nobody wants. And lurking beneath that problem is another, stickier problem: If they are priced at current market levels, selling them would be a recipe for instant insolvency at many institutions. The fears that are locking up the credit markets would be realized, and a number of banks would probably fail.

Ms. Schwartz won’t say so, but this is the dirty little secret that led Secretary Paulson to shift from buying bank assets to recapitalizing them directly, as the Treasury did this week. But in doing so, he’s shifted from trying to save the banking system to trying to save banks. These are not, Ms. Schwartz argues, the same thing. In fact, by keeping otherwise insolvent banks afloat, the Federal Reserve and the Treasury have actually prolonged the crisis. “They should not be recapitalizing firms that should be shut down.”

Rather, “firms that made wrong decisions should fail,” she says bluntly. “You shouldn’t rescue them. And once that’s established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich.” The trouble is, “that’s not the way the world has been going in recent years.”

Just got back from rural NC. Just about every commercial business/building/property on the main highway (74) has a for sale sign. That area always looks depressed but now is going on desperate. Beautiful fall up there though.

“We cannot continue along the same lines because the same problems will trigger the same disasters. This sort of capitalism is a betrayal of the sort of capitalism we believe in.”

French President Nicolas Sarkozy

http://www.nytimes.com/2008/10/20/business/media/20carr.html?ref=business

So now even Cramer is a Bear. Maybe it’s time to buy.

“Why power prices aren’t falling

Robert Peston
20 Oct 08

There was a hope that a global economic slowdown, which has led to a fall in oil prices, would also lead to a fall in the gas and electricity prices we all pay.

I’ve been talking to those who run our big power companies. And this is what they say:

1) gas prices are still 70% higher than where they were last winter, in spite of a fall in the past few weeks;
2) electricity prices are double where they were last winter;
3) there is very little spare capacity in the electricity generation market, because of the age and fragility of our generators, so there’s a risk that - if another generator were to fall over - electricity prices could rise further;
4) over the summer, energy companies bought power on the forward market at prices that are higher than where they are today;
5) it’s currently very difficult to hedge power prices at the slightly lower prices now prevailing, because the credit crunch has reduced the capacity of financial firms to take the other side of bets on the future path of energy prices (which is why certain power companies are no longer providing big fixed-price contracts to huge industrial consumers);
6) all the power companies are generating much reduced profits from their retail energy businesses, such that if they suffer a further margin squeeze they may well find it harder and more expensive to raise credit (another painful impact of the credit crunch);
7) power companies have no idea whether this winter will be cold, and therefore whether there will be a surge in demand for gas and electricity, which will lead to a spike in wholesale prices.

Put it altogether and what you’ve got is the near-certainty that those increased prices we saw in the summer - with British Gas increase the gas tariff by 35% and electricity by 9% - will prevail for many more weeks to come, and possibly all through the winter.

All the power companies will do what they can for those on lowest incomes. And they are conscious that for small businesses, the high cost of energy can prove fatal.

But the vast majority of us would probably be foolish to factor into our budgets any significant fall in what we pay for energy.”

BBC

The same is true for the US.

Is this who McSame / McVague thinks is “tearing apart the very fabric of American Democracy”?

Mark Anthony Jacoby, the owner of a signature-gathering firm called Young Political Majors, was taken into custody by Ontario police just after midnight Saturday and booked with a felony punishable by up to three years in prison.

According to The Los Angeles Times, Jacoby’s firm was paid $7 to $12 by the CRP for each GOP voter registration signature, but dozens of voters who signed on said they were duped into registering as Republicans and thought they were signing a petition to toughen penalties against child
molesters.

Republican Voter Registration Chief Arrested for Fraud in California

http://elections.foxnews.com/2008/10/20/republican-voter-registration-chief-arrested-fraud-california/

Wall Street Journal
* INFORMATION AGE
* OCTOBER 20, 2008
Don’t Sell Hedge Funds Short
They were the first to signal troubles at Tyco, Enron and now Fannie Mae, Freddie Mac and banks.

After a dinner in April with Treasury Secretary Henry Paulson, Lehman Brothers CEO Richard Fuld emailed the good news of what he learned to his general counsel. Mr. Fuld reported that Mr. Paulson wanted to “kill the bad” hedge funds and “heavily regulate the rest.”

Mr. Fuld was delighted to hear that Treasury sided with Lehman against hedge funds that were short selling its shares, along with those of several other investment banks. Instead of blaming hedge funds for their prediction that the Lehman share price would fall, Mr. Fuld should have acted on the short sellers’ clear warning, months ago, that he was atop a powder keg of mortgage-related securities that would soon explode. Instead, Lehman is bankrupt and Mr. Fuld is a former CEO.

For their part, regulators spooked markets by trying to make short sellers the scapegoats for problems they didn’t cause. The biggest impact of the temporary ban on short selling, which expired earlier this month, was its role in undermining the trust on which markets rely. Why would regulators ban short selling in nearly 1,000 companies, effectively banning accurate information from the markets?

It’s UnAmerican to vote early! You’re not a true Patriot!

“Young repubicans”: Fear the blackman…fear Jackie Robinson…he’ll ruin baseball & our Nation.

…Photographer Joe Eddins and I headed over to the closest one and found a steady line of voters hoping to cast ballots early. Most seemed to be Obama supporters and several had come from the rally. Nearly all the voters were black.

Also at the polling site was a group of loud and angry protesters who shouted and mocked the voters as they walked in. Nearly all were white.

As you can see from these videos, no one held anything back. People were shouting about Obama’s acknowledged cocaine use as a young man, abortion and one man used the word “terrorist.” They also were complaining that Sundays are for church, not voting.”

McCain supporters heckle early:votershttp://washingtontimes.com/weblogs/bellantoni/2008/Oct/20/mccain-supporters-call-early-voters-ch/

Well, OK, I did buy more SLV today.
500 @ 9.45. Total now 42000.

Just sayin’

I rent.

My question is, is it going to be stagflation, deflation, hyperinflation, inflation or something along the likeness to depression. All these scenarios have been predicted here on the blog. Do we have a clear picture of what is going to unfold yet?

RE: GM

What a joke!

German auto maker Mercedes Benz, one of the top auto makers in the world, dumps sorry-azz Chrysler to the tune of lost billions; allowing a collapsing GM to merge with what has always been the odd out US car mfg’er.

This is nothin’ more than a copy-cat “too big to fail” set-up, to extort further billions from the US taxpayer so as to line the pockets of the insiders as the ship is sinking, with a grande finale bankruptcy declaration to dump all the pension and health care costs on the Pension Gurantee Authority.

It’s a no-brainer to see right thru this scam.

http://www.usatoday.com/money/autos/2008-10-19-gm-chrysler_N.htm?loc=interstitialskip

Ode to Shirley Temple…

On the goo-oo-ood ship Lollyprop
It’s a swee-ee-eet trip to a PPT drop
Where the bulls do prey
On the sunny reach of Wall Street Pay

Lemons stand everywhere
‘Cross the de-e-eck spans belly air
And there you are
Happy landing on an iceberg bar

See the money bowl do the give-out role
With the big bad Fed’s Fruit Cake
If you take too much, ooh-ooh
You’ll awake with a tummy ache

On the goo-oo-ood ship Lollyprop
It’s a ni-i-ice trip into hades you’ll hop
And dream away
On the good ship lollyprop

On the goo-oo-ood ship lollyprop
It’s a swee-ee-eet trip to a China shop
Where bulls do play
On the sunny beach of Wall Street Pay

http://www.youtube.com/watch?v=lFGTl_nwOOQ

This article says we will see stagflation:
The Panic of 2008 and Financial Socialization, by Michael S. Rozeff

OT- proposal to the pro-tax people:
Gov inspections of meat have failed me plenty. Now I read the gov stops meat packers from testing their products themselves more thoroughly. Just as in real estate, a person is better off using a private inspector, preferably someone you know.

A McD’s drive-thru runs better than a State DMV or Fed TSA airport screen. It seems as though a private company could run Air traffic quite well. Think UPS here.

Nuclear is a lab.

Police officers & firefighters are great private company potential - remove the gov. monopoly & create opportunity. Security is a personal responsibility.

Medical clinics are labs.

We have far too many road signs, some countries even have none, I think. Local businesses could maintain road signs.

HazMat, for the labs?

Lifeguards are hand-holders - enter at your own risk - or hire a private lifeguard.

!8-wheeler safety inspections are just like food inspections, they fail now - as things are currently. A private company could easily do this & probably with less corruption.

Pay a private company a toll to cross the bridge, no problem.

If this were done, safety would improve, jobs would become more secure, efficient, and less flawed overall.

And then… opportunity would be huge - Inspectors, security personnel, medics, lifeguards, and firemen could start their own businesses. People could have some connection to their world, so unlike today’s, hollow, no money down - nothing else in it -world.

Heh- We don’t want your so-called free government services, and stop taking our money. If government had to ask each of us for the money, & we could say no, things might be alright for everyone.

/dream off.

http://www.chicagotribune.com/news/nationworld/chi-foreclosure-courtoct20,0,3770516.story

Just off the elevators on the 28th floor of the Daley Center, a scene of arresting beauty unfolds. Sunlight glints off Lake Michigan, high-definition views extend for miles and the city seems almost suspended through the lobby’s wall of windows.

Foreclosures in Cook County were up 47.8 percent in the first half of this year and are expected to pass 42,000 by year’s end. But the increase in judges is not just a sign that things are bad; it’s a sign that things are likely to get worse.

Isn’t there someone on this blog that has posted a few times about Cook County Foreclosure Court a few times?

There is a great deal of money-pumping. This will cause stagflation. The Fed is the cause of stagflation by slowing, then pumping, then slowing, then pumping in succession. The slowings produce the stagnation. The pumpings produce the inflation. The alternation produces uncertainty and confusion. Prices of consumer goods move with lags, and the money effects have lags. This makes direct connections to Fed actions hard to see. The uncertainty means that not everyone views the processes in the same way. Some people think inflation and some think deflation.

http://www.lewrockwell.com/rozeff/rozeff231.html

hoz/FPSS,

I’ve seen you two discuss that the current credit cycle began back in (a time you disagree on) early 80’s or early 90’s. I think FPSS says appriximately 83 and hoz you have been leaning toward I believe it was maybe 94 (although I’ve seen you post a time or two that you might need to redo your numbers back to the 83 timeframe).

Can you elaborate on what led you to your respective conclusions about when the current cycle began? Theory is one thing, but attempting to actually measure this thing I find to be a lot more difficult.

HBB’ers, it is my considered opinion that in order for the Fed to conduct a general reflation of the economy via housing prices, precious metals must assume the lead sled dog team status as point of the new bubble.

Nothing else works.

FDR’s policies prolonged Depression by 7 years, UCLA economists calculate
By Meg Sullivan| 8/10/2004 12:23:12 PM

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409

Time is an out-of-round barrel we must experience over & over. The housing bubble is proof that time & space are curved & loop?

–
THE WEEKEND INTERVIEW OCTOBER 18, 2008 Anna Schwartz
Bernanke Is Fighting the Last War
‘Everything works much better when wrong decisions are punished and good decisions make you rich.’
By BRIAN M. CARNEY

http://online.wsj.com/article/SB122428279231046053.html
-x-x-x-
Anna Schwartz: “Bernanke Is Fighting the Last War”

Honest to goodness, I said exactly that few years ago. Nice to get corroboration.

‘Everything works much better when wrong decisions are punished and good decisions make you rich.’

Very close to comments I made on this blog. Amazing how our policymakers forget such simple truths.

Comments: “Anna Schwartz, the co-author, with the late Milton Friedman, of the 888-page A Monetary History of the United States implies in an interview today in The Wall Street Journal that Ben Bernanke doesn’t have a clue.”

I could have, and did, tell that years ago. He is close to being a moron on economics of supply and demand for goods and services. He thinks that the “Aggregate Demand” can be artificially manipulated at will. By showering money on bankers and financiers who were pushing bad debt? He also said in march 2007 that home prices will not fall only the price increase will fall to 3-5%. What a moron. He is fit for the bad American system and born-and-bred American dopes that we do have. Everyone – people, leaders and the system – are in harmony!

Under our system we do get the leaders that we deserve, or, more accurately, our leaders breed people they can mislead without any resistance! Viva la resistance?!! America — an idea whose time is past.

Jas

Open your wallet. Gov’t is going to pour more cash into it! Speaking today on Capitol Hill Federal Reserve Chief Ben Bernanke assured a Congressional panel that it might be a good idea to send out another stimulus package. “With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.”

Poor old B.B. the fellow who supposedly knows more about the GD than anyone else. Gonna send us some more ’stimulator’ checks, why not send us all $100,000.00 each this go round.

–
Part between ***** was emphasized in the original.

David Rosenberg:

“Deflation, not inflation, is the number one medium-term risk —
And the Fed knows it – see page A2 of the weekend WSJ (“Amid Pressing Problems, Threat of Deflation Looms”). Indeed, one of the reasons we like Treasuries is because we believe the Fed at some point is going to be buying a whole lot of them to bring down long-term rates (and hence mortgage costs) as they did in the 1940s. This is definitely in Bernanke’s tool-kit. And as for deflation risks, go back and reread Janet Yellen’s speech of last week – ***** “In recent months, however, the outlook for inflation has noticeably changed. Commodity prices, including the price of oil, have plunged. And I expect this development, along with a further increase in slack in labor and product markets, to push inflation down to, and possibly even below, rates that I consider consistent with price stability”.*****

Jas

No really, folks, when you see silver prices particulary, going higher, as in a bubble, you will know that confidence is returning to the jungle.

Any collectible gold or silver artifacts, jewelry, bullion bars, etc. will grow in value in dollars. Every year, year after year.

“Deflation, not inflation, is the number one medium-term risk —”

You’re stating the obvious jas. The demand side stimulus checks of 3 months ago and new demand side stimulus suggested by BB today screams deflation, loudly.

It may be true, the Egyptions could at one time forge steel in one step, an astounding feat we cannot duplicate today. At times, the history of the river Nile is the history of the economy of Eqypt, boom and bust with rain or drought. I wonder if the bust wiped out the knowledge set which created steel in one step.

Unintended consequences? At this moment in time, is the world on the verge of loosing a large specialized knowledge set simply because the powers-that-be manipulate, restrict & monopolize etc… barriers to entry, so that by the time the younger generation gets into a position to learn & build, the older generation are unable to communicate what they know?

This is 4-week old news, but seems perfect for today’s thread.

http://www.bloomberg.com/apps/news?pid=20601088&sid=aPRFFY2px4zc&refer=home

Damien Hirst Bucks Financial Slump in Record Art Sale

Sept. 16 (Bloomberg) — Damien Hirst’s “The Golden Calf” kept alive a 10-year bull run in the art market last night as collectors vied for the British artist’s works at Sotheby’s, even as global stock markets collapsed.

Hirst’s “Beautiful Inside My Head For Ever” auction in London took 70.5 million pounds ($126.6 million) with fees, led by the 10.3 million-pound preserved Charolais calf with 18-carat gold horns. The total was a record for a sale of works by one artist, said Sotheby’s, which had estimated the evening would fetch as much as 62.4 million pounds. All but two of the 56 lots sold.

“The sale was magnificent, a triumph,” London dealer Ivor Braka said in an interview. “At a time when other markets are reeling, the people with the free cash and the will have ignored the storm warnings and the voyage goes on.”

Banks large and small are interested in a piece of bailout pie.

SPECIAL REPORT AMERICA’S MONEY CRISIS
Bailout interest ‘broad’ - Paulson
Treasury Department lays out process for banks to apply for funding.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: October 20, 2008: 12:32 PM ET

NEW YORK (CNNMoney.com) — Banks of all sizes are interested in a piece of the federal government’s $250 billion fund to recapitalize financial institutions, Treasury Secretary Henry Paulson said Monday.

“We have received indications of interest from a broad group of banks of all sizes,” he said.

I posted this yesterday, but it slipped away somehow. Maybe it was too boring to stick I’ll leave out the links.

International moral hazard? (from worthwhile dot typepad dot com)

The problem is this: If an Irish or German bank, for example, can issue debt that is guaranteed by its government, it may have an easier time raising money than a bank in a country such as Canada, one that doesn’t offer such security.

Similarly, in the current climate of panic, there is a risk that deposits will begin flowing to regions where they are fully insured by government coffers.

In other news, the Canadian Finance minister promised to ‘inject’ $25 billion into the financial system (from globe & mail)

A plan originally earmarked for Friday morning would see the government assume some mortgages currently held by the banks by giving them to the Canadian Mortgage and Housing Corp., a Crown corporation. In turn, the banks might receive CMHC paper – possibly bonds – against which they could use as collateral for their own loans from other banks.

$25 billion is a lot for a country with our population. I’m not sure if turning up the airconditioning will save our igloos at this point, but what do I know.

Looks like King Kash has been spending some “quality time” with Countess Silver this morning.
“Give me all 36 cents”, she moaned; A true story…

Some time ago I said SLV was at a discount to the reported paper “spot” price, but would soon trade at a premium. Looks like there has been some trading at a premium most of the day today, for the first time.

Perhaps perestroika is a better word for it?

latest news
[AIG] AIG says jobs cuts will be part of restructuring: WSJ

Bernanke won’t say the ‘R’ word
By Rex Nutting
Last update: 11:21 a.m. EDT Oct. 20, 2008

October 20, 2008, 1:49 pm
First Birthday for the Recession?

The Federal Reserve chairman, Ben S. Bernanke, declined today to say whether we are in a recession. The only reason to avoid doing so is that it would not be reassuring to admit the obvious. The National Bureau of Economic Research has yet to certify there is a recession, but otherwise there is no doubt.

In fact, just as he began his testimony, the Conference Board released its index of coincident indicators. That index not only confirmed a recession is under way, but it provided powerful evidence that it began in 2007, or in January 2008 at the latest.

Gold is backed by hard work and food.

You wanna eat, raise it yourself or trade goods or gold.
You wanna cross the river, do it yourself or trade me gold.

Here is where it became really important. Once enough
people established trade routes, gold became the easiest
form of trade to carry. Sell all of your stuff. Get a ride
on a boat somewhere, and buy more stuff at the other end.

Gold and Silver are good stuff, Maynard.

The stock market, up nearly 300 right now, appears to be de-coupling from reality.

Ben Stein is still a big fat idiot. I don’t think he understands the concept of unintended consequences.

Yep, nothing like voiding legally-valid contracts to instill confidence in the business and financial system. If this occurs, what kind of market OR contract is really safe to enter into? Ummm….. None.

This would result in an even more massive seize-up of the credit-system. Next thing you know, overnight-loans could be made null-and-void by the govt.

http://finance.yahoo.com/expert/article/yourlife/115733;_ylt=Aod6pMn1K5×7JUZ.dJnEFE27YWsA

“I might well be too alarmist here, but I think the only rational possibility is for the federal government or the New York State government (because most of the CDS were entered into in New York) to simply annul the credit default swaps as void as being against public policy. After all, there was no insurable interest in most cases, which tends to void insurance contracts, which is what a CDS is.”

House Republicans are also calling for purchasers of homes that are not primary residences to be entitled to the same capital gains exclusion as owners who sell their primary residences. Currently, a single homeowner can exclude $250,000 of capital gains on a sale, while couples can exclude $500,000.

The proposal would only apply to people who bought second or third properties over the next 18 months and held their properties for at least five years.

“This could help take foreclosed properties off the market, raising home values,” said House minority leader John Boehner, R-Ohio.

In Cash-Rich Japan, World’s Financial Woes Inspire a Grand Plan
By Blaine Harden
Washington Post Foreign Service
Sunday, October 19, 2008; Page A21

TOKYO — Kotaro Tamura, an investment banker turned Japanese lawmaker, has an immodest proposal for healing the sick global economy, making all Japanese richer and compelling the United States to be more deferential toward Japan.

“We are in a special position because we have huge money,” Tamura said, referring to about $950 billion in government foreign reserves, $1.5 trillion in public pension funds and $15 trillion in personal financial assets, about $8 trillion of which is on deposit at shockingly low interest rates in Japanese banks.

“We should send the signal that we are ready to save the world with this money,” he said in an interview.

Tamura leads a group of 65 lawmakers from the ruling Liberal Democratic Party who have proposed to Prime Minister Taro Aso that Japan treat the global financial meltdown “as a huge opportunity for us.”

They are urging the government to inject some of its abundant cash into troubled U.S. and European banks, in return for equity, and to purchase distressed corporate assets at fire-sale prices.

“The economy of every major power has crashed, and Japan has the least tainted market in the world,” Tamura said. ..

“We are a bank-centered nation that avoids risk, even good risk,” said Akira Kojima, chairman of the Japan Center for Economic Research….

“Everything is very cheap right now [in world stock markets], and 10 years from now we would make very big money,” he said.

His plan calls for Japan to hire outside financial experts to manage its investments in Europe and the United States. “They should be easy to find because they are all losing their jobs,” he said…. ”

China is a nation of gamblers and could do this. Japan takes 6 months to decide to buy a US Treasury. Besides they are all yellow skinned slant eyes and our xenophobic government would ban them from buying anything desirable. (See China’s attempt to purchase UNOCAL)

Financial Times
Lousy housing
Published: October 20 2008 09:22 | Last updated: October 20 2008 21:15

So much for the secondary symptoms. How is the disease coming along? With government sights trained on the ailments afflicting Wall Street, the debilitating wastage of the US housing market continues unabated. Housing starts, on an annualised basis, slumped 6.3 per cent in September month-on-month to a 17-year low, the second worst reading since 1959. Homes intended for a single family fell more sharply, down 12 per cent.

Multi-decade lows could, in theory, be good news for a market drowning in existing homes for sale – about 11 months’ worth at the current rate of sales. The figures have now fallen to levels associated with previous troughs. But the patient could yet take a turn for the worse. Building permits continue to decline. Sentiment among homebuilders is at a historical nadir, at least since that measure began in 1985.

Hedge funds can look forward to evolution by jerks

Financial Times
Long View: Hedge funds poised for harsh phase of evolution
By John Authers, Investment Editor
Published: October 17 2008 19:16 | Last updated: October 17 2008 19:16

Hedge funds are the Galapagos islands of the financial services industry. So at least says Andrew Lo, the Massachusetts Institute of Technology economist who has pioneered the application of evolutionary biology to markets.

According to Mr Lo and many of his acolytes, markets are not efficient, as had been assumed by academics for the past generation, but rather they are adaptive, with participants following Darwinian rules. After periods of relative stability they will undergo periods of intense change as participants evolve to take account of new realities.

Hence hedge funds are markets’ Galapagos, the islands whose unique eco-system allowed Darwin to work out his theory of evolution, because evolution there happens so fast. Lightly regulated, hedge funds offer the closest we have an experimental laboratory for testing which ideas for making money will prove to be the fittest.

Wall Street Journal
* OCTOBER 21, 2008
Investment Club Weighs Future Amid Turmoil
By CLARE ANSBERRY

The Satin Bags, an investment club for women in their 50s and 60s, spent an evening earlier this month — even before the market’s historic mid-October plunge — holed up in the Butterfly Room of the local country club in Uniontown, Pa., reviewing their investments.

The club’s president, schoolteacher Ruth Frank, provided a quick update. Their portfolio, valued at $100,709 last October, was now worth $92,684. Of their 23 stocks, 14 had lost value since their September meeting. The big loser: once-promising National City Corp., which was trading at $3.14 a share, down 86% since they bought it.

One member, concerned over the club’s performance, had resigned. The club was debating whether to retain its current financial adviser or find a new one.

President Ruth Frank (far right) addresses the Satin Bags investment club at their recent monthly meeting.

The Satin Club
The Satin Club

There was some good news: The club was still in the black over the long term. “We’re still ahead,” said Ms. Frank. “That’s pretty good after what has happened.” Indeed, while their portfolio was down about 8% in total value from a year ago — excluding the $50 monthly contributions each of the members is required to make — it had done much better than many professional managers.

Be that as it may, the club’s 13 members are frightened, which is noteworthy among women who have been around for a while and have seen some bad times and truly nasty markets. The consensus is that this is one of the worst. The sense of urgency they feel is heightened by the fact that they’re older and often relying on a fixed income, making their investments a welcome supplement.

“To be truthful, this is our biggest crisis. Even when the tech market fell, we still held our own,” said Marcia Rabatin, 60, one of the original members. “We just have to be patient and hang in there.”

Wall Street Journal
* REVIEW & OUTLOOK
* OCTOBER 21, 2008

Bernanke Endorses Obama
There was a time when Fed chairmen feared to even seem political.

Ben Bernanke apparently wants four more years as Federal Reserve Chairman. At least that’s a reasonable conclusion after Mr. Bernanke all but submitted his job application to Barack Obama yesterday by endorsing the Democratic version of fiscal “stimulus.”

While the Fed chief said any stimulus should be “well targeted,” even a general endorsement amounts to a political green light. Mr. Bernanke certainly knows that Mr. Obama and Democrats on Capitol Hill are talking about some $300 billion in new “stimulus” spending, while President Bush and Republicans are resisting. And by saying any help should “limit longer-term effects” on the federal deficit, he had to know he was reinforcing Democratic opposition to permanent tax cuts.