Bits Bucket For October 22, 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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Come on Hank, I know you were up all night plotting some newfangled bailout? What’s the plan today?
“Plan triple c - flex ninety-two buzzard blue. On two. Break.”
“Down, set, hut 1, hut 2, hike!!!!!”
I still think if we gave everyone $2000 to pay down a credit card and also lower the limit the same amount…that could easily be $40-50-$60+ people will not have to pay each month forever.
and all the money stays in America….
That is what i want to know, do you have any plan that keeps the money here……not send it to china?
PS if you have no debt then you get to spend the $2000 for being frugal….sending the right message
Yeah, but that would only pay for yesterday’s goods - and to keep the Ponzi scheme going they have to instead buy tomorrow’s goods. As these people far out spent their incomes during the boom - paying down their debt would not necessarily get them back into the stores.
But it would make them “feel” better now if we can cap interest rates at 8% and maybe a 15% default rate…that could mean a total savings of $100-200+ mo and that means a lot to most people
I still think if we gave everyone $2000 to pay down a credit card and also lower the limit the same amount…that could easily be $40-50-$60+ people will not have to pay each month forever.
Who do you think has to pay the interest on the money that the government had to borrow to give everyone $2000?
Martians?
well That’s what I’m asking…do you have any ideas better then uncle Ben and Hank?
Ya, here’s an idea.
Tell the people with GSE bonds, tough luck, there never was an explicit guarantee. This would result in having the credit card revoked from the politicians wallet. Then we start living within our means and start saving money. We’d have a decade of slow economy, they could call it the “lost decade”.
Bing dow? Mika doe sushi! (Sounds like Japanese- but not)
Volcker’s old plan is the only way out IMO. Jack up interest, return to traditional financial lending standards, take away Uncle Sam’s no limit fraud, oops I mean credit card… Let’s find the bottom ASAP and then fix this debacle.
We have all typed it before, the answer is not going to change. Pain is going to happen. Let’s just hope the pain is applied to the group that needs it most… not to the responsible.
“Volcker’s old plan is the only way out IMO.”
I think BB has a new one in play:
1) First go to great lengths to publicly trash Uncle Buck.
2) Use the threat of printing massive numbers of dollars to
convince every smart fellow to dump Uncle Buck in favor of “safe haven” dollar alternatives.
3) Cook some popcorn, sit back and watch the subprime lending and investment banking sectors self detonate.
4) Announce that the economy is in for a protracted slowdown.
5) Watch in amazement as the boomerang effect of flight-to-quality back into dollars lifts its value high without the need for any Volckeresque rate hikes.
Actually, this may be a replay of the Japanese saga of the early 1990s; the Yen was eventually the best investment Japanese citizens could hold, thanks to deflation.
No matter how outrageous the plan, if you can think it, they can do it.
I remember the first 300 billion dollar “rescue” plan. I thought, no way, not a chance they could pull something this ridiculous off.
Silly me
“That is what i want to know, do you have any plan that keeps the money here……not send it to china?”
I have one:
Everyone should just stay home all day and make their own shoes, clothing, automobiles and electronic devices. Keep the Chinese out of the equation. Americans could become productive again, and would never have to send another dime overseas.
Indeed!
A Bailout a day keeps reality away, and reality has been suspended until after the Circus Show in November, where we get to chose either Grandpa Simpson or The Chosen One to lead us into a bold, new world of higher taxes, lower living standards (especially for savers and producers!), and more bailouts.
Excellent!?
Right. And I want to know where all of the reverse-bailouts were when the stock market was making new highs a year ago. Why does the Fed try every day to “do something” to prop up the market - why didn’t they do something when it go too high? Hmmmmm…
I was chatting w/ a buddy today… An image popped into my noggin… Someone needs to photoshop BB, Paulson and pals onto the Iwo Jima statue and change the flag to a Wall Street sign.
Well, you had to ask…What’s another $40 bn thrown down the REIC rathole after $700 bn here and many more $100 bns there already thrown away?
Wall Street Journal
* OCTOBER 23, 2008
Plans to Aid Borrowers Gain Steam
By DAMIAN PALETTA and MICHAEL M. PHILLIPS
WASHINGTON — The Bush administration is weighing a roughly $40 billion proposal to help forestall foreclosures, one of a series of ideas under consideration designed to address the root causes of the financial crisis.
At a Senate Banking Committee hearing Thursday, Federal Deposit Insurance Corp. Chairman Sheila Bair is expected to suggest the government give banks a financial incentive to turn troubled loans into more-affordable mortgages, according to a person familiar with her testimony. Under the proposal, the government would share in any future losses on the new loans with lenders.
The Treasury Department, under pressure to act more aggressively to help homeowners, is discussing this option, people familiar with the matter say. It is also moving ahead with separate plans to use part of its $700 billion financial rescue fund to directly buy and renegotiate mortgages.
Knock knock.
Whos there?
Euro.
Euro who.
Eurowing me money!
Currencies snapping like my fried synapses; pound slides, Buck parabolics but can’t keep up with the Yen (strong like bull) which crashes up, now below 100 to the USD.
yes, but the parabolic trajectory will be ending soon; the dollar is ridiculously overbought relative to the euro and most other currencies. In some years they will all be toast, but the current dollar party doesn’t make any sense when Hank & Ben are trying like mad to inflate away the dollar (and dollar debt).
Knock, knock.
Who’s there?
Króna.
Króna, who?
Krón-anyone help me out?
It’s easy to get cod up in their financial foibles…
“Don’t cry for me, Argentina.” Cry for yourself. It looks like another disaster is in the cards for Evita’s former playground. Let’s add them to the ever-growing list where a pocketful of metal would have come in handy. We now have Iceland, Brazil, Russia, Argentina and it sounds like Korea and several others are looking shaky. The Euro and pound are getting hammered today. Bits and bytes gold is weakening against the dollar but getting strong every other place.
I haven’t seen much discussion on the dollar’s strength and what it will do to exports. That was the one area of the economy that was bragged about while the $ was tanking. Plus, how will those foreigners keep retail, and real estate, here in Fantasyland, humming along when their currencies are going “down, down, down”?
We live in interesting times.
Interesting… couple of questions then.. How much of the recent world “growth” was financed with cheap debt? We are aware of our own excess, but what makes us think that the rest of the world did not go on a debt binge that makes ours look small?
And who is owed all this money, and will take the fall at the end, as after all losing money that is lent, is the same as not having any…
Finally what would a sovereign US dollar default look like for the rest of the world? Remember that a US dollar in cash is accepted anywhere, while the electronic blips may not.
I think all countries borrowed as much as they could for as long as they could. We had the best credit so we could borrow the most, but our credit was likely undeserved while other countries had less credit than they “deserved”. The result is that we have a much larger gap between fantasy and reality than many other countries. A larger gap means a harder fall.
Agreed, but there are no other countries that can enforce collections on us…
This will get interesting because it will boil down to how to make others pay, when there are no ways to make them pay. Think about it in the same way as loaning money to the neighborhood junky with the 9mm in the waistband, and an ugly looking pitbull in the yard…
Hmm….wouldn’t be too sure of that. I wouldn’t be surprised if China doesn’t produce some crucial widget.
Remember when the Swiss company made a crucial part for the JDAMs and refused to supply it any more after we invaded Iraq?
Washington Times - Outsourcing defense contracts
Mar 28, 2008 … Because the Swiss government objected to American action in Iraq, it ordered the company to stop the shipment of JDAM components. …
http://www.washingtontimes.com/news/2008/mar/28/outsourcing-defense-contracts/
What you are forgetting is that US government debt is fungible. You can’t stiff the Chinese without stiffing everyone’s pension, well actually the whole global financial system.
There is simply no way the USG can stop paying interest on its debt. Best it can do is reduce the real value of the payments (i.e. devalue).
our credit was likely undeserved while other countries had less credit than they “deserved”
I’m not sure I buy that premise.
Germany and Sweden, for example, are doing OK by the measure of deficit as a percentage of GDP, but the UK, France, Spain, and Japan — to pick a few big countries — are running deficit numbers that are similar to ours (source: The Economist country briefings). It’s difficult to foresee what countries will be most resilient, but I’d think Japan would be high on the list, as would Germany.
In some ways it’s a moot point, I guess, as credit is generally going to be tighter, “deserved” or “undeserved.”
At the end of the day the industrious people win out. Japanese and Germans have been consistently so, for hundreds of years. When the dust has settled, they will both overtake the US and become #1 and #2 in terms of economic “soundness”. Unless the US pulls up its collective sleeves and gets down and dirty, they will continue to drift down the rankings.
Canada’s had a surplus for 8 years running… Yet our dollar used to be worth 1.10 US a year ago… Now it’s worth les than 80 cents… Go figure…
Really? I guess I should have spent the last C$15 I had in my wallet before I flew back from vacation last month. My understanding is that Canada has been crashing even harder than the US because while we get at least a little moderation of the bad news from oil going down, oil going down bad news all on its own in Canada.
Canada = commodities + financials.
Deflation crashes both. (Commodities because of lack of demand; financials because of debt default.)
End of story.
Owe, Canada.
what doesn’t deflation touch?
Hey NYCB I lived at 88th and York from 1976-80. Right between the Tennis court and Gracie Mansion.. .
The fact is, all these countries have to feed and house and maintain infrastructure for their citizens. Of course, like us or US (USA) they are bankrupt.
The time honored tradition of repudiation of debt via printing press begins.
Central banks maintain orderliness of markets but let them drift where they may; unless sufficient control could be jeopardized.
There is a growing consensus among central bankers that you need to prop up your markets first and foremost by getting your central bank long gold, gold mining shares and acreage, silver, silver mining shares and acreage, and execute a two to three year shift in the decimal point in the value of the dollar.
An orderly inflation. This is why metal prices seemed to have bottomed in terms of dollars.
The equity markets are hopeless. According to P/E investing, when the company only has losses, doesn’t that mean the stock should trade IN NEGATIVE NUMBERS?
So far as I know the Dow can go to zero, and the catfish are still swimming in the creek.
Watch the metal futures lead a reflation.
Todays unemployment numbers will soon look like the Good Old Days, “when most people had jobs”.
Excuse me Mr. T. Which central bankers are telling you their innermost thoughts? You see any evidence that our own central bank is in a flight to quality? Looks like they are in a flight to crap.
Probably not the best day to call the bottom of the PM’s with gold down 4%, Silver down 6.5% and Copper down another 8.5%. Calling a bottom is always very difficult, even most pros won’t try to do it. I also don’t get the Central Banker call, if they were rushing into Gold, would the price be holding up and maybe even surging? Do you have an inside source for any of that?
what countries will be winners ?
A lot of foreign companies were hedging against cheaper and cheaper dollars. When the dollar turned they had to cover, dollar demand. Some of them will and have gone BK as a result. In addition, emerging market money is coming home, more dollar demand. Plus, ECB and BoE are expected to lower rates further in coming months, euro/dollar parity. Add to the mix failing currencies and short term financing schemes. All of these things buoy the dollar. We live in ironic times.
I didn’t hear much either from big companies in Euroland that were demanding that the kleptocrats in Brussels destroy the euro, in order to keep them competitive. The euro is crashing, but the only news from these big companies is more layoffs (and higher bonuses for the management, of course).
nhz,
Sort of like having your cake and eating it too?
(with apologies to Marie Antoinette)
I fear that current EU management, especially new Roy Soleil Sarkozy, are not very quick at understanding the new reality.
you can cry for them now:
Oct. 21 (Bloomberg) — Argentine bond yields soared above 24 percent and stocks sank the most in a decade as the government proposed a takeover of pension funds, a move analysts said is a bid to seize assets and stave off the second default this decade.
“It’s horrible,” said Jaime Valdivia, who manages $1 billion of assets for Emerging Sovereign Group in New York. “We’re going back to the dark ages. Not even in times of the worst financial stress did the government ever think about taking over the private pension system.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=amrA2sSMH3_c&refer=worldwide
Oct. 22 (Bloomberg) — Argentina’s planned seizure of $29 billion of private pension funds stoked concern the nation is headed for its second default in a decade.
“It’s the final of many nails in the coffin from an institutional investor perspective,” Bill Rudman, who helps manage $3 billion of emerging-market equity at WestLB Mellon Asset Management in London. Argentina is “disappearing into irrelevance,” he said.
http://www.bloomberg.com/apps/news?pid=20601068&sid=apDlwrW9f4c8&refer=economy
Yep, more of the world’s money destined to disappear.
“Argentina is ‘disappearing into irrevelance,’ he said.”
And is taking a lot of money with it.
And anybody in Argentina that was holding crash is crying like a baby. Crash went from king to village idiot at the blink of an eye. But don’t worry, it’s different here. The U.S. is special. It’s never been a better time to hold dollars.
“It’s never been a better time to hold dollars.”
It seems you are correct.
You are correct. From Argentina to Iceland a sudden implosion shows that cash is too risky to hold in this environment.
What’s in your wallet? Seriously, if you’re worried about the US becoming Argentina are you heavily invested in gold or something? From where I’m sitting, nothing is “safe”.
How to invest in gold?
ETF? No, because it does not reflect gold any more. Coins are sold out almost anywhere, maybe only on ebay you can find one or two sell for 1000 a piece. Only 400 oz gold maybe available, and it is not a convenient way to invest in gold.
One Canadian Portfolio manager posited buyers of long futures contract on gold will start demanding physical delivery at expiry… At that point in time the demand from the physical will influence futures prices more directly…
liwie, That’s simply not true. Go to APMEX dot com or Tulving (if you want to place a larger order - how’s that Watcher) and buy as many Can. ML’s for spot plus $59 or Eagles at spot + $89. With spot acting more like lead than gold, if you thought physical gold was the real deal last week or last month, its ON SALE now, even way above spot, buy as much as you can/want. Again, I have some Gold am not necessarily against it, its just that the idea that you can’t get it, is not true. It may be harder to get, and higher relative to spot, but its out there for the taking at ever decreasing costs (for now)
Look.
Either the price of stuff goes down, in which case you get ahead owning cash, or the price of stuff goes up, in which case you get ahead owning stuff.
One or the other. It is not possible for both owning cash and owning stuff to be losing strategies over the same period.
“buy as much as you can/want”
Please send them an e-mail or call them on the phone and confirm you can buy as much as you’d like for immediate delivery, and get back to us.
Physical metal promised weeks or months out doesn’t count, by the way.
A lovely-looking country with far too many public services.
I’m imagining the crooks in DC drooling in their morning coffee over the prospects of fleecing the 401Ks.
60c today or 70c in three years….itching to pull the trigger.
Aren’t we a bigger, less severe version of Argentina?
After all, they are seizing the extra pension payments to spend now, thus ensuring younger generations will not get pensions.
Isn’t that what Social Security has been ever since the cut the progressive income tax, raised the regressive payroll tax (to “save Social Security), spent the additional payroll tax revenues while depositing IOUs in the “lock box,” and borrowed trillions on top of that?
We seem to be moving from weekly bank failures to weekly country failures. Who’s next? Who’s last???
There are around 225 countries and only about 25 of them really matter in the scheme of things, so it shouldn’t be long before we run of decent 1st world possibilities…
RE: Argentina is “disappearing into irrelevance
Argentina has been really hyped by “International Living” as a fabulous foreign retirement haven.
A restaurant owner in our town recently sold of his businesses and moved to Argentina (his wife is Argentinian).
He probably:
A) Sold the restaurant at price the new owner likely has no chance of getting in the next 10 years.
B) Probably kept the majority of his money in US Dollars.
If there’s no social unrest and crazy violence, he and his wife might end up living a better life than they had originally planned.
Countries that have a history of economic crises have less risk of disorder from future crises, because people are used to them.
In Latin america they have a tradition of civil uprisings.
maybe it is, farmland and homes are still very cheap in most of Argentina for foreigners. And the country can produce most of its own food, water etc. But I think people who are going there for a ’safe haven’ have their capital on a foreign bank (like the Argentina elite, before the previous crash) and not in cash or on an Argentina bank account.
A few years ago, an Argentinian friend showed me photos of what sort of house $40k U.S. buys you in the Lakes District there, and it seemed giveaway cheap…
It’s a house that would sell for $900k in Lake Tahoe.
I heard from my nephew in Ecuador that prices for real nice properties (e.g. historic buildings in Buenos Aires) went down something like 90% in the last crash; of course they were strongly overvalued to start with.
I am told that nice homes in the Lakes District went up 2-3 times again over the last years, mostly thanks to foreign buyers. Let’s see how safe that investment is if the crash is repeated …
Chenny-Shrub had better get the IMF & World Bank over there and give’em a damn good lesson in “Free Market Capitalism”
The global crisis is bound to be felt first and be harder in countries that are badly governed, such as Argentina.
In March the government tried to raise export taxes on farm exports from 35% to a sliding scale tax that took from farmers up to 90% of the price if prices kept going up. They were betting big on the commodities boom. That didn’t work out due to a huge farmer’s strike that found unpredicted support in the cities and turned Congress against the government (the vice-president ended up voting against the measure after the Senate tied, which was unthinkable only a couple of months before that since the government had ample majority in Congress).
Raising export taxes was the one and only “plan” the government had to keep things going until the next election in 2009.
Well, now soy, wheat and corn are down 40%, so forget about squeezing more money out of farmers. The export tax still stands at 35%, so most will be broke. Needless to say, the tug of war with farmers is still on. The government is doing all it can (which is a lot) to make exports difficult or impossible and taxes very high. Add to that a bad drought and you get the picture. Not good at all.
So, now the government is in a very tight spot, because all the growth since the last default was predicated from farm exports and lots of public spending and subsidies for everything else. The private pension funds in Argentina were not very well set up. They charged huge commissions and not everybody agreed with them in the first place. It would not be so bad if they really planned to use the money to help retirees. I would not agree, but I would understand. The scary thing is they are probably going to use the money to pay foreign debt. The government is desperate to grab money wherever it can. The only hope now is Congress will either stop them or at least try to make sure they can only use the money for retirement benefits. I wouldn’t bet on that, though. It really makes you want to cry, if you really think about it.
cassiopeia,
Thanks for your account of unaccountibility…
Speaking of Argentina, this documentary on the 2001 curency crisis is a good watch tonight, when ya’ll get home.
http://video.google.com/videoplay?docid=4353655982817317115&ei=BJD8SK2gFKeKqQPPgIH4Dw&q=argentina+financial
–
Mortgage Applications at 8-Year Low (that is BB, before the bubble)
Wait until it hits 1990-91 levels. –Jas
-x-x-x-x-x-x-x-x-x-
http://www.mbaa.org/NewsandMedia/PressCenter/65914.htm
WASHINGTON, D.C. (October 22, 2008) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 17, 2008. This week’s results include an adjustment to account for the Columbus Day holiday. The Market Composite Index, a measure of mortgage loan application volume, was 408.1, a decrease of 16.6 percent on a seasonally adjusted basis from 489.3 one week earlier. On an unadjusted basis, the Index decreased 25 percent compared with the previous week and was down 44 percent compared with the same week one year earlier.
The Refinance Index decreased 23.5 percent to 1158.8 from the previous week and the seasonally adjusted Purchase Index decreased 10.9 percent to 279.3 from one week earlier. The Conventional Purchase Index decreased 10.5 percent while the Government Purchase Index (largely FHA) decreased 11.9 percent.
The four week moving average for the seasonally adjusted Market Index is down 9.2 percent. The four week moving average for the seasonally adjusted Purchase Index is down 4.9 percent, while this average is down 14.2 percent for the Refinance Index.
…
jas,
Should say hi to 91-92 levels on way to 80 levels.
Unemployment skyrocketing. Business going under in droves.
Wonder when stock market takes next leg down. Should start soon.
Early in crisis government is throwing out life preservers. Later in crisis shoots people in water to keep boat from sinking.
We are entering new phase. Government finishes off the thrifty.
Could be the goldbugs and other nuts will be only survivors.
“Could be the goldbugs and other nuts will be only survivors.”
And the politicians, of course.
Buy gold now or be priced out forever.
Opinions please. Which price will gold get to first, $700/ounce or $850/ounce?
We had our 401K advisor in to talk to our company today and he gave the wonderful advice of “think long-term” “markets always go up compared to cash”
So thinking long-term (20 years) it seems like gold will still be around while the dollar and other fiat currencies are destroyed one at a time (possibly all at once). Long term (next 5 years) the US will default on its debt.
While I will not try to predict the day to day movements (based upon government decrees and deliberate manipulation) I can predict that if you had to pick something to invest in, go into a coma for 5 years, and hope to get something of value out, then I would buy physical gold/silver and bury it in a secure location.
A country can go from relatively stable 5-10% inflation to 100% inflation over the course of a month… I for one would rather be a year early than a day late.
$650
+2
Gold and oil prices (almost) always go down.
100% per year inflation will “fix” everything… just don’t expect a raise to match the prices!
Go long dogfood since that’s what’s for dinner!
Gold and oil prices (over the past 30 years) have been an anomaly in every way (housing, stocks, etc). Over the past 3000 years gold has been relatively stable or increasing in value. You can get more for 1 oz of gold today than you could 100, 200, or 2000 years ago.
In 1913 gold was $20, today it is $720…
Pick an investment to hold for the next 5 years… gold/silver/guns are as safe as it gets for keeping value (not necessarily making the most money).
“And the politicians, of course.”
One has to admire the much belittled cockroach sometimes.
Closing bell…hours later from original Jim post…
“Wonder when stock market takes next leg down. Should start soon.”
I think it did.
Do “Mortgage Applications” = Mortgages?
In other words, I think that there is probably more than one mortgage application for every home loan actually made. I don’t think the liquidity drying up was as severe in 1990/91, meaning more borrowers need to try more than once this time around than then. This means that lending on homes may already be below 1990/91 levels. Take a look at housing starts…based on 2008 to date, we are at the lowest number of starts going back several decades (with data looking back to the 1950’s).
Hello folks!, I have a question for some of you.
Since I cannot trust the general media sources (is it just me, or does it seem like all the analysts and reporters just “talk their book” so that the dummies can jump in for liquidity).
So, what foreign or domestic source of news is worth reading? What do you rely on?
This one offers a slightly different perspective than, say, Fox News.
The Onion.
That’s why I love this crowd. Someone poses a serious question and gets a flippant answer. Combo, you have a great sense of humor.
Satire or not, The Onion is often on the mark.
I’ve posted a link to a prescient 2001 Onion article on G-Dub a few times here — it was titled “Our Long National Nightmare Of Peace And Prosperity Is Finally Over.”
A few years later, some interwebby wit went back and hyperlinked many of the satirical claims in the article. It was depressing how many had come to pass.
Housing bubble blog is best news around combined with commentary that exposes the heart of most issues. Lewrockwell, mises.org, and digg are all good sources of news/perspective.
I contend that the major networks are good at “breaking” news but poor on commentary and explaining the *real* implications of the news.
Don’t expect “foreign” news sources to be any more reliable than “U.S.” news sources as they are all owned by the same corporations and generally promote lies/falsehoods for their government/causes.
Always seek out debate from message boards if you want to expose fallacies in news articles.
I like The Economist magazine, but Rachel Neuwirth says it’s an anti-Semite publication that should be avoided.
I would not call it anti-Semite….just perhaps not pro-Israel.
How is the Economist anti-semitic? Anyone who calls out Israel for its treatment of the Palestinians I guess is labelled an anti-semite. sad. The Economist is one of a few major magazines that has an objective view on the middle east. Most of our media are one sided on the matter.
In the debates, when both presumptive presidential candidates started doing a love-fest over whom loved Israel best, one-upping one-another in adoration, as I got to thinking about how some place far, far away meant anything to the vast majority in my situation?
anti-Semite, because it sometimes warns against certain really bad central bankster policies?
It’s a great newspaper, but they’re pretty far from objective (very pro LD). If you don’t mind that they’re probably isn’t a better news source. As darth mentions below, the rest are probably just as far from objective, but don’t flaunt their subjectivity so much.
HBB of course.
The MSM is still very valuable. The trick is to approach it cynically and analytically and read between the lines. They all have an agenda. Once you understand what it is the MSM becomes more valuable.
To be honest lately I’ve been reading a lot of the Journal. Some times recently they’ve dropped their pants and basically admitted they have no clue what the hell is going on these days. I like the Beebs website also. Oh and yes and painful as it is to admit, drudgereport to see what the enemy is thinking.
Oops….forgot the Economist….thanks rms! I think they might be a tad critical of Israel which by definition these days is Anti-Semitic. Boo-hoo.
Have to add to the choir. The economist is ridiculously chuck full of info, and generally well thought out. The Anti-Israel “bias” is a load of hooey. My daily rag is the WSJ, nothing better for the daily things that matter. The only bad thing about WSJ is that the editorials have really become progressively “Pro-Republican” since Murdoch took over. Don’t get me wrong, it always was “conservative”, especially financially, but now it is usually party line.
There are two sources I prefer.
Truthful but with anti-government intervention bias: The Economist.
Truthful but with a pro-government intervention bias: PBS and NPR.
As for the rest, they are out to make money by telling people what they want to hear, or advertizers want them to know.
The best thing the Journal has going for it is Eric Feltons (SIC?) column in the weekend edition. Hik!
For those who think The Economist promulgates a non-government / conservative agenda, just remember its endorsement of John Kerry in 2004.
As well, The Economist criticizes many when they rightly deserve it, and not just Israel alone.
Thanks for the heads up jack. Picking up a copy is first on my list after the taskmaster rings to bell.
Truthful but with anti-government intervention bias: The Economist.
I disagree about the anti-government intervention bias. The joke is that when the brits tell about their political system to the yankees, the say “We’ve got the Labor party, known in the US as ’socialists’, and then we’ve got the Conservative party, known in the US as ’socialists’”.
Most of the material in the Economist is for moderate government role, not anti-government by a _long_ shot.
I’ve heard old KGB and other intel people say that they get most of their valuable information from the MSM, not from some top-secret files. The real talent is to read and understand what’s going on, out there in the open.
“The real talent is to read and understand what’s going on, out there in the open.”
There it is.
Would the Last Honest Reporter Please Turn On the Lights?
http://www.linearpublishing.com/orsonscottcard.html
Our media are good at reporting the facts. They cross the line when they start telling you how to interpret the facts. Read foreign sources to get a different interpretation of the same facts then make your own judgment.
I like the Brits b/c they pull no punches. Last night they reported on Mervyn King’s speech (Bank of England Governor). He is preparing the Brits for a nasty recession. Says the banking system is in shambles and compares it to WW1 period.
HBB, and blog.mises.org.
Here’s a particularly interesting post on the latter site:
Did Joseph Wharton cause the US Financial Meltdown?
http://blog.mises.org/archives/008811.asp
Hey, I thought you were just “Lehigh”?! Are you pulling some voodoo with my moniker?
The Wall Street Journal is a joke, Financial Times for general economic news is the best.
What he said.
WSJ is definitely not as useful as it once was…even in the past year. Have cancelled my subscription and just pick it up at the newstands once in awhile.
I subscribe to Business Week (yes, I know it looks like Entertainment Weekly but I think it is pretty balanced). The recent issue had a lead story with the headline “Forget Adam Smith, Whatever Works.”
‘Financial Times for general economic news is the best.”
Absolutely….when you can find the bloody thing! I don’t think it can be found anywhere in the hinterlands of VT… so the Journal it is.
The Atlantic Monthly
All of the above (The Economist, FT, WSJ). Plus, Harper’s my “continuing education” magazine. It’s not “news”, but when they deal with something, they do it in depth.
The New Yorker has been my constant companion for a long time now…
They’ve had some really good articles about financial goings on, in or out of the Empire.
The New Yorker is my Big Picture source, too — whether it’s art, literature, biology or economics, they consistently deliver the best long-form articles for the layman.
Strictly in terms of finance/economic writing, James Surowiecki of the New Yorker is one of the best around.
The Onion.
The Economist.
The Daily Show (OK, you can’t read it, by like The Onion, it is often on the mark).
BTW: I kept an edition of The Economist from 2005 or 2006 that had the housing bubble on the cover.
From memory, if I’m correct:
June 14, 2005
“After the fall”
Whoops, forgot about PBS/NPR (although they were slow to see the bubble).
The Economist. They produced the definitive critique of the housing bubble in 2005. Obviously Bernanke didn’t read it, as he told Congress there was no housing bubble at his confirmation hearings a few months later.
Playboy
I get it for the articles.
Read all sources with your crap filter set on high bar.
Also NYT has their moments:
http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?_r=1&oref=slogin
A headline round-up:
Industrial production falls by most since late `74
Boeing’s 3Q profit dives 38 percent
Home construction falls sharply in September
Wachovia reports $23.9B loss for 3Q
And finally…
McDonald’s 3Q profit jumps 11 percent
Looks like you can always bet on people eating piles of cheap crap.
Boeing was supposed to be one of the bright spots, in terms of exports…
What else do we actually produce (aside from produce) that 95% of the other citizens on this orb want to buy from us?
Gold? Coal, software, hardware (military), movies, and right now $s.
Aviation products, components, and services.
AK- To your point. I eat lunch on the road alot and I try to have a sit down good nutricious lunch to slow the day down a bit.
Last week I stopped in a Crispers and had a bowl of soup and a chicken salad sandwich-$13.87…..wow
I decided I could not handle a nutricious lunch the next day so I stopped into Micky D’s. Oh yes I know I am sucking around for a rib spreader but I had 2 hamburgers and a diet coke for $2.39. The drink cost double the burgers.
The place was packed. There was a line all the way aound the building for the drive thru, while the Crispers had 3-4 occupied tables.
As late as last year I would budget $5 for lunch at a sitdown place and that number is at least doubled now. Whatcha gonna do?
It’s not for nothing people have been saying on here that McDonald’s (and other .99 menu places) are going to be the soup lines of the next depression
Two hamburgers at McD’s: 500 calories, 18 g fat
Crispers chicken salad sandwich: 720 calories, 42 g fat
Save the dough AND reduce the chances of that future Bypass: Eat Scottish!
Eat Scottish!’
What, haggis? Scotch?
make a sandwich, perhaps?
I gain weight eating soup. must be the croutons!
I was making a judgment about the food quality, not the people buying the food. People are eating cheap crap out of necessity, not necessarily desire - hence the skyrocketing quarterly profits.
I am on the road a lot for work myself, usually far from inhabited areas. Often McD’s is the best I can do, in between stops (and I usually regret it). I don’t get per diem so I pinch pennies ’til we both cry.
Boeing is having a strike and air travel is down with the recession. Had to expect them to have a down quarter.
Mickey D’s and WMT - are these the “strong underpinnings” that the decider spoke about just three months ago?
I might suggest investing in septic tank companies.
Holy Crap stock market is open for a few minutes and it’s down 231 points, when does Bush gives us another pep talk ?
Suggested pep cheer for our dear glorious leader…
8,6,4,2… we are oh so very screwed
According to Google finance it dropped over 400 for a few!
Don’t worry — it seems likely that any day now, the Fed will announce that it is insuring stock prices against further declines. Buy stocks while they are still cheap!
I thought they would try something like that with housing - kind of shocked they haven’t pulled this out of their bag of tricks
I just suggest you do a simple calculation w.r.t net GDP of the US that they can waste all the money in the world and not keep up the market by even a token amount.
Please. Clue in.
All it takes is a few multiplications and one division.
Nasdaq 5000, anybody?
Stocks just got even cheaper!!! Buy now or get priced out forever.
October 22, 2008 3:38 P.M.ET
BULLETIN
DOW INDUSTRIALS DOWN 500 POINTS IN FINAL HALF-HOUR OF SESSION
Major stock indexes down 5%-6%
Profit worries slam Wall St.
Stocks pick up where they left off Tuesday — in decline. After quarterly results, McDonald’s and Apple seek to buck the Street’s bearish trend.
I actually see many positive signs for a change. LIBOR is falling and the financials are following the market rather than continuing an uncontrolled downward spiral, at least for now. The overall market downturn is more standard recessionary movement which is much less threatening. I know most on here hate intervention, but this would not have been the case if there was none. We will wait and see what the next 18 months bring. The goal is almost impossible (trying to decouple financials from housing so that devastating financial collapse can be avoided v. the expressed goals which are nothing but attempts to gain voter favor), but doing nothing would have been a guarantee for disaster.
TIm, so far I have appreciated your input, but I have always said that what caused this was the irrational increase in asset prices, including homes. The time that the slide stops, is when house prices are affordable to those with jobs. As it seems that we are still quite a ways from this, I think that the correction is still starting.
Right now I see a vicious cycle where house price declines lead to losses for the banks, that stop lending to companies, that lead to layoffs, that lead to people not paying their mortgages, and getting foreclosed, that leads to house price declines….
Until we break out of it with jobs that actually pay enough to live, or houses are cheap enough to buy with what the jobs pay, we still have some pain to endure.
All we need is a war.
Unfortunately I think that the US right now is not aching to fight anybody after Irak and Afghanistan. We are not winning either one, and will not win either one (not to sound too pessimist here, but we are really good at quick wars, but we do not know how to handle an insurrection). The way that we actually got out of the GD was to bomb into oblivion every other countries industrial asset. There was not an industrialized country on earth in 1945 with their production intact except for…. us…
That lead to an increase in production here, to rebuild every other country on earth, that led to wealth and jobs here, and jobs and wealth over seas. Europe became prosperous once again, and Japan became an engine in Asia. We also made lots of loans with the marshall plans that got paid back as those countries rebuilt, but the cost was the collapse of the previous large colonial economies. Great Britain was the largest loser in the long run as they lost all of their colonies. France, Germany, and to a lesser extent Italy also lost all of their colonies within 20 to 30 years of WW2.
And before we insist on another war, we are the Great Britain of the 1920’s… and China is the US…
The solution is simple, destroy China’s factories!
I will repeat for those who are not familiar with the “broken window fallacy” that wars and consumption to not drive economies, they destroy capital and reduce the overall standard of living.
Pinch-a-penny is one of the few to correctly identify that it was the destruction of the world’s industry that gave us a competitive advantage and not the “spending” caused by the war.
Lets begin an around-the-clock carpet bombing campaign which targets the world’s financial institutions with cash-bombs filled with newly-printed $100 bills. …Oh, wait we already are doing this.
There was not an industrialized country on earth in 1945 with their production intact except for…. us…
Ever hear of Canada? Australia?
Even in Europe there was Sweden and Switzerland.
Argentina was also in pretty good shape in those days. It made a bundle selling food during WWII. It only slid down to its present status after the war.
South Africa also had an industrial economy although only the white folks lived in it.
Those were all pipsqueaks compared to pre-war Britain, France and Germany. Certainly not competitive with the USA in terms of heavy industry.
It’s interesting that only Japan ever fully recovered from WWII. The UK and Germany have never fully achieved the economic level they enjoyed before WWII, and certainly nowhere near their status before WWI.
I agree housing must return to historical norms, and expect another 40% drop in many areas, more than that in some. What I was referring to was an easing with respect to the credit crisis which is related but distinct, and in my opinion much more serious. I think both housing and stocks will continue to fall, but am slightly more optimistic about the credit crisis causing its own systemic problems (and I do mean “more optimistic” rather than just “optimistic.” You may not have known this, but I was one of the “if we dont do something we will certainly experience Great Depression II crowd.” Thus, more optimistic as it relates to me does not have the meaning you probably think it does. Banks do have to take hits on the mortgages, which I don’t dispute, but to see them whipsawed into failing by market disruptions in the credit markets was a more imminent threat.
http://money.cnn.com/2008/10/22/news/economy/mass_layoffs/index.htm?postversion=2008102210
LIBOR. Who the heck can trust it for real anyway? The banks underreport their cost of borrowing and let’s face it even though rates might be lowering I’m guessing that nobody is lending to each other.
Im not saying you can trust it. The fact, however, is that it is tied to trillions in derivatives, so it being out of control is not a good thing. The part about lending to each other misses the point. LIBOR is the dominate variable rate component in derivative transactions, not to mention existing variable rate debt. Wild deviations throw off the existing hedges and place 1000s of counterparties at severe basis risk threatening systemic failures.
“even though rates might be lowering I’m guessing that nobody is lending to each other”
I replied earlier but it didnt show. Sorry if this is a duplication. Trust it or not, LIBOR is the most widely used variable rate component in connection with derivatives and variable rate debt. It relates to trillions in debt. These obligations are outstanding and disrputions create huge basis risk for 1000s of counterparties. I have to deal with what already exists, as opposed to just new deals.
some people are arguing that LIBOR is high now because the base rate is artificially depressed; LIBOR shooting up just means that the downward manipulation of rates is failing.
Exactly right. And so far the government hasn’t even opened its full financial weapons catalog. The Fed and Treasury are on page 3 of a 50 page working manual.
They’ve priced the pan!c. They haven’t priced the pain.
As share prices in the silver miners fall, and fall, and fall; does this effect their ability to continue functioning as we go forward? Might not the collapse of PM prices also collapse some of the biggest, oldest silver producers?
On my mind are CDE($.77), HL($3.09), etc. None in my book, I liked to daytrade them once upon a time…
If some of them collapse, what happens to the price of PMs then? Shuttered mines produce no shiny stuff.
The Silver rush is on. (not a pdf)
http://news.silverseek.com/TedButler/1224532979.php
Yes the silver mines will shut somewhere north of $5 silver because mining will be uneconomical. The wild card is copper mines which produce silver as a byproduct. If the copper mines stay open there will still be some supply; if copper price goes too low they will close too. Zero supply; bullish for price.
Prize for convoluted logic of the day. Falling demand is not bullish for price.
The price for dirt of all flavors is in freefall. It will settle where production costs settle, and that is all about energy price.
Wrong.
This is the “cost-of-production theory of value” which is totally wrong. Nobody cares what it cost you to produce it. The demand is the demand and that’s all that matters.
No different from houses really. That’s why you expect housing prices to go under the cost of land + material + labor in AZ, FL, CA, etc.
I see your point on existing inventory, but eventually new houses will level out near cost.
Yep, this too was debated in the time of Adam Smith.
You are arguing equilibrium pricing assuming “steady, regular, predictable” demand and “steady, regular, predictable” supply, and a stable monetary system.
The actual claim is that equilibrium simply doesn’t exist. You alternately overshoot and undershoot.
New houses will level out below cost.
A correlation would be that GM is producing automobiles below cost right now to the tune of $1billion a month.
OK, you know of Adam Smith, so I concede.
I do think dynamic systems tend to approach equilibrium, or explode and approach entropy.
Explosions are fun, but entropy sucks.
My real issue is; when will the price of single malt come down so that I may stock up for the day of entropy?
Entropy happens!
and don’t forget the price of credit, which might be the major factor in this crash.
North American Palladium Ltd. (TSX: PDL)(TSX: PDL.WT)(AMEX: PAL)(AMEX: PAL.WS) announced today that due to declining metal prices it will temporarily place its Lac des Iles Mine (LDI) in Thunder Bay, Ontario on a care and maintenance basis effective October 29, 2008. The closure will result in the layoff of approximately 350 employees.
Hank Reardon lays off workers, joins Francisco d’Anconia and John Galt in the moutains.
Interesting to look at silver lease rates, and gold/silver ratio chart…No expert, but anytime I see a spike like that it corrects intensly…should be interesting.
—-
Also: Just on CNBC ECB intervention in Hungary..danger of default…and the dominos keep falling.
“Zero supply; bullish for price.”
Zero demand; bearish for price.
This isn’t a PM, but talked to a guy here in Moab, Utah the other day whose dad is a uranium exploration driller, and he said he knows of at least 6 such outfits that have bitten the bullet lately because of price falls. Since I don’t track this, not sure what’s going on there, but it sounds like the drillers can’t make a go of it.
Every variant of business is being effected by the credit crunch…
It was a tangled web we wove.
WBBR’s Tom Kean interview analyst from Miller Tabak. Excellent interview with plenty of confirmation and vindication of everything we’ve been discussing here for years. He indicated that the credit losses incurred by financials *is just beginning* and that 2009-2011f will make 2008 look like a picnic, at least from a credit contraction and loan loss perspective. This basically confirms SwissBancs ARM/subprime/prime/agency paper reset charts that have been kicking around here for 18 months.
Bloomberg Radio can be picked up through this website I think it’s the live feed of WBBR. XM radio also has a Bloomberg channel which runs 12 hours / day M-F.
We’ve been going on and on about housing defaults (rightly so; this is the HBB). There is another chain of defaults in the pipeline, corporates.
Oct. 22 (Bloomberg) — Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.
Oh and by the way…. He was calling 5000-6000 the floor for the Dow. The radio journalist had a cow in response.
disaster capitalism inside crony klepotcray in the waning hours of securitization in the bubble of golabalization.
12 month and 2 year treasuries inverted.
crash helmets are advised. The PTB are bringing in a real bad landing on this one.
Im ringfencing my yard to keep the bums away from my recycling.
what else, uhhhh… ‘”This suckers going down”
The Roving Hordes of Starving Masses will not be denied; better electrify that fence.
Vozzie
You can’t strip a 6 mo or 12 month. It is like putting a donkey into the Kentucky Derby. Stripping 2 yrs is very, very profitable. Few buy 2 yrs to hold, they are bought to strip.
what do you mean by “strip”?
A strip in bond terms is creating a set zero coupon bonds from the principle and interest payments of a number of regular bonds.
So if a two year bond is selling for par and will pay you $1.5 on Jan 30, 09 and July 30, 09, Jan 30, 09 and 101.50 on July 30, 2010 you can separate out those payments into a series of zero coupon bonds to sell.
When folks were paying 1.49 for the Jan 09 and July 09 payments, this causes lots of people to buy the bonds that can be converted in this way, so the yields on the 2 year drop.
A technical formation is developing which is typical of continuation, more selling. If it breaks to the downside, we could lose points. If it breaks to the upside, we could gain points. The fundamentals seem to favor a downside break, however. Whatever happens, do your own research.
Wall Street Journal
* REAL ESTATE
* OCTOBER 22, 2008
California Home Sales Revive, But Not Without Intense Pain
By MICHAEL CORKERY and JONATHAN KARP
This article has a pie chart that shows CA mortgages make up 34 pct of the non-agency MBS. Small wonder Ben, Hank, Sheila and friends are busy trying to figure out how to hide the price collapse in CA homes.
“California Home Sales Revive, But Not Without Intense Pain”
Intense economic pain is excess leaving the economy.
I can’t read all PB’s articles but you forgot a link.
PB you may post your articles in full!
No mas.
Google the title Ann.
From the article:
Mr. Sherman said that while he can afford his payments, he had planned to sell the house in a year or so to supplement his retirement income. But now, he figures, he couldn’t afford to live there as a retiree. So four months ago he stopped writing mortgage checks, setting the cash aside in his retirement savings. He says he’s waiting for his lender to kick him out or to reduce his loan amount. He’d also be happy for the government to modify his loan.
“I don’t deserve a bailout,” Mr. Sherman said. “Will I take one? You are darned right I will.”
latest news
Dec. crude drops $5.11, or 7.1%, to $67.08/brl on Globex
U.S. trying to stop millions of foreclosures, Paulson says
By Rex Nutting
Last update: 7:03 p.m. EDT Oct. 21, 2008
WASHINGTON (MarketWatch) — The Treasury and the Federal Deposit Insurance Corp. are working with the Federal Reserve and Fannie Mae to prevent millions of home foreclosures, Treasury Secretary Henry Paulson said Tuesday in an exclusive interview on “Charlie Rose” on PBS airing Tuesday night, according to a transcript of the interview.
Stag deflation? Nouriel’s latest prognostication. I have no idea what stag deflation is.
I think it’s consumer inflation and asset deflation at the same time and lame ass growth all coexisitng
Govt will move heaven and earth to prevent deflation. Can they succeed?
They can print as much money as they wish and destroy demand for the dollar… thus hyperinflation. If we get deflation then the government will default, thus no mater what the dollar will be destroyed.
That’s what we had in the 70’s and everyone calls that stagflation.
Only difference is that house prices didn’t fall because they hadn’t been overvalued.
Wasn’t there a housing bubble in the early ’70s?
I’m getting eerie flashbacks of 1976 all over, including the empty suit Democrat about to win the WH. I suspect we’re in for something that resembles 1978 more than 1933. As long as we don’t have to suffer through disco again, we’ll be ok.
RE: I’m getting eerie flashbacks of 1976 all over, including the empty suit Democrat about to win the WH. I suspect we’re in for something that resembles 1978 more than 1933.
1976 thru 1981-A very ugly 5 years…but at least there was some element of manufacturing infrastructure left when the worm finally turned in 82.
Plus the majority of Boomers were smack dab in the prime of their physical health and earning years.
Nothin’ but scorched earth and a boat-load of walking heart attacks out there there now.
these guys are just making up new terms to counterbalance the thousand blooming flowers of financial productizationary goodies.
ben, you culled a sweet post on this one…
dont hate,
ben
What will be the effect of the last trusted man in America, Warren Buffett, calling a bottom early?
And what is the timing of those hedge fund redemptions?
If Americans are tightening the belt as far as buying only needs, not wants?
Who really needs to buy stocks in this financial climate?
Once Warren is shown the door, we’ll have to rely upon the usual sort of financial whore, to show us the floor.
LOL
Or Big screen TV’s stereos, Circuit city is almost done…..
RV maker Fleetwood is now Fiddy Cents
who thinks this will be a good holiday season? Maybe its good for America we tank and finally put less emphasis on xmas..
But Sadly but we need to consumerize xmas..or what another million people will be tossed out of work in January forever.
————————————
Who really needs to buy stocks in this financial climate?
Didn’t Warren tell everyone to buy stocks just a couple of days ago? I wonder if he would have done so if his crystal ball had accurately predicted today’s bloodshed (or yesterday’s, for that matter)?
I believe he was stating that the disruptions were creating opportunities with respect to certain companies rather than calling a bottom, and that buying on the huge downward plunges will probably pay off long term. I dont really disagree.
I don’t hear him say a whole lot that causes me to trust him.
Blano, I agree. I think someone got to him.
“What will be the effect of the last trusted man in America, Warren Buffett, calling a bottom early?”
What will be the effect when he kicks the bucket?
Buffet has a tendacy to be early. He looks not to make short term profits based on swings in the market but long term value that he sees. He wants to invest in a company forever!!
Roving Hordes of Starving Masses swell in number:
Oct. 22 (Bloomberg) — Merck & Co. will cut 7,200 jobs, or 12 percent of its workforce, as the third-largest U.S. drugmaker faces generic competition to big-selling pills and falling sales of cholesterol medicine and cervical cancer vaccine.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aEG7AKC0VZIE&refer=us
other news:
Nearly 15 percent of the work force at Rheem Air Conditioning Products in Fort Smith will be without jobs after Friday.
The 185 workers scheduled to be laid off will be notified Thursday, said Gary Hale, Rheem’s vice president of human resources.
Sypris Technologies plans to close its plant in Hardin County next year, eliminating the remaining 122 jobs at the facility.
Yahoo laying off 1500.
Cooper tire to close 1 of 4 US factories.
Man, talk about getting Rheemed.
RE:Man, talk about getting Rheemed.
LMAO…HBB Line of the Day Award to BillinC!
It’s okay - those are all jobs Americans didn’t want to do.
OTOH - WMT greeter - now’s there’s a career with possibilities!
snark off/
why should i not be buying a ton of GE stock?
i just have not been reading much about them lately and do not know what is going on with them but the 6.2% dividend yield is tempting.
That sounds like a good dividend yield, but I prefer to wait and see what the dividend yield is when we are a couple of quarters into the severe recession. Let’s see what divideds are being paid in say, the second quarter of next year before we calculate a yield.
Same with the PEs, with forward PE ratios still predicting a big increase in profits.
GE is a finance company. If you are interested in yield and believe GE will survive, buy the GE bonds yielding 13%.
Eventually the US will do what Italy just announced. “Italy’s government said Tuesday it was working on a package of economic-stimulus measures that could include guaranteeing corporate debt, a move that could give distressed Italian companies a new advantage over rivals elsewhere — and if enacted could set off a new round of cross-border competition, or complaints, about national aid. ” WSJ
Until the junk corporate bond market is resolved - there is currently little if any market - there is no reason to buy stocks.
probably more complaints; the EU office for unfair competition will be extremely busy.
I read today that many foreign banks (e.g. from Turkey) with small offices in Netherlands, and some Dutch banks with foreign offices, are now advertising their 100K euro deposit insurance, courtesy of the Dutch taxpayer. So - just like Icesave - they are going to attract loads of savings from all over Europe and then run with the money, thus bankrupting the Dutch (I’m sure the Dutch financial wizards did not think about this when they were so brilliant as to give their banks an unfair advantage).
Also, keep in mind that the government takeovers/guarantees sometimes have extra strings attached, like no dividend payouts (at least in Europe, but I guess it could happen in the US too - after all this is mostly a problem for the small investors and not for those with preferred shares etc.).
The problem with buying a stock for the dividend yield is that the dividend can be cut - this is especially likely for the financials. Arguably, GE is really a financial stock as much as anything.
The New York Times High Yield Bond Index.
http://www.nytimes.com/interactive/2008/10/08/business/economy/20081008-credit-chart-graphic.html
updated daily
http://stockcharts.com/h-sc/ui?s=LQD:TLT&p=D&st=2007-04-01&id=p65533112972&a=153417707
Investment Grade Corporates in relation to US Treasuries.
If you like that, WWE is paying 9.5%.
Are any of you noticing the attitudes of family members and friends starting to change? Many of the families at my church are buying (or want to buy) gold or silver and are stocking up on food. Of course, everyone at my church homeschools and homeschooling parents generally read much, much more than the general population. (For this reason, most of them also like Ron Paul.) So it’s not too surprising to me that they’d start preparing for rough times.
Last night, my mother-in-law, an average woman who gets her news from the TV (and whatever we and her husband tell her) said she wants to rip up the floorboards and hide her money under it. Either that, or have her husband install a safe somewhere in the basement. A few weeks ago, she probably thought we were a little kooky but now she’s starting to worry, too.
How long before average Americans decide to start keeping cash and a few months of food around in large numbers? Are you noticing a shift in attitudes among people you know?
Yeah. And most of them are a dollar short and a day late.
The cash part seems dangerous, but i’m of the opinion that everybody ought to have at least 3 months worth of food, on hand…
One of the biggest changes in business, was the “just-in-time” model, which has allowed corporations the idea that a store would only have to keep minimal inventory in stock, a good idea for a business based upon an endless supply of cheap oil and cheap money, and it also makes it easy for corporations to close down stores by the gross (149 Mervyn’s stores in California are all set to close), but it’s no way for us to live, as individuals.
Grampa lived through the GD as a Kansas farmer’s kid.
He kept a fully stocked pantry the entire rest of his life.
I’m way ahead of you here. Already got the Y2K Meltdown stash and the Bird Flu Pandemic stockpile.
I don’t think the attitudes of some church members afraid of the public schools are a good gauge of the national attitude as a whole.
You got that right Adam. So many of them are the last to figure out they got duped.
Hey, check this out, a new twist on using fear to sell real estate:
www dot survivalrealty dot com
Losty! Good to hear from you. Are you staying warm? And happy?
In defense of survival reality, there is legitimate demand and these types of properties are hard to market traditionally (you do not want to advertise all of your defensive features / secret stashes on the MLS yet these features do have value).
They are not trying to generate fear to sell properties, they are helping those who already have a healthy fear (for what ever reason) to find something they thing is prudent.
You may disagree with their investment approach, but survival reality is not trying to generate fear in order to move property.
“Legitimate demand” as opposed to…. illegitmate? And you call paying $10,000/acre for junk legitimate? Let me guess…. The clueless buyers of this junk are going to “farm” it. Dude, I have End Of World Survival Kits for sale and you need one.
The clueless buyers of this junk are going to “farm” it There’s even a Bluegrass song about that. “Forty Acres and a Fool.”
I agree that the members of my church are not representative of the nation as a whole. That’s why I added the comment about my mother-in-law. She is a regular person. I thought that if she’s starting to worry, perhaps many other average people are.
Good point. I am still having a hard time believing anybody “gets it” when I look at the real estate prices around here in a Colorado mountain town. Sure, we have a thirty year supply of houses (no joke), but nobody is moving for $300k for an uninsulated shack that rents for $650 a month.
meant to write, “nobody is moving FROM $300k for an uninsulated shack…”
Blame Game on tv now.
What caused the subprime meltdown?
So far the rating agencies are on the hot seat in front of senate. I hope they spill the beans and bring up the realtors, brokers, appraisers and flippers.
What a tight little mess.
Jane Byrant Quinn on Bloomberg: Gold’s “highest and best investment use is as insurance policy against a currency collapse. For that purpose, you need a lot of it, stored around the world. Owning 20 or 30 coins is nice but won’t protect your standard of living in a world where dollars are dust.”
For alternative info and news check out Jeff Rense. Rense.com
Wow. What a screeching moonbat website. Surfer beware.
Someone should shoot Rense’s web designer. One quick look and I could feel a headache coming on. Ugh. Next.
“The Starbucks predictor” The more fancy frappucino outlets in cities financial centers the more likely of economic bust…..
http://www.slate.com/id/2202707/
…the one across Bear Stearns has just closed…
In Romania, the “money market is dead,” said Florin Citu, co-head of financial markets for ING in Bucharest. Overnight rates have shot above 50%, eroding the relevance of the central bank’s official 10.25% policy rate.
WSJ: Eastern Europe Faces Deepening Chill
It’s Black Swans all the way down…
Did anybody see Nassim Nicholas Taleb on PBS last night? For a guy who might be the leading statistician in the world and saw this crash coming years ago his interview last night was chilling to say the least. He said he thinks this depression will be far worse than anyone is predicting.
http://www.pbs.org/newshour/bb/business/july-dec08/psolman_10-21.html
“…leading statistician in the world…”
Huh?
Prof…
My mistake, sorry. I read both his books and maybe probability expert might best describe him. Did you read his book “Fooled by Randomness”?
Yes. He struck me as an interesting thinker, but he hardly qualifies as a mainstream statistician or probabilist.
Yes I saw it. He didn’t lay out the worst case scenario, but he said it would be the worst situation since the American Revolution. What does that mean?
No laws, no government, no currency, no ability to transact business beyond the local level? You had all of those in the Civil War and Great Depression.
Sounds like real estate is a great investment — it only goes down by 2/3, except in declining cities where it drops to zero.
Senate Investigators Target SEC Officials
Inside Knowledge on Bear Stearns Cited
“…In a letter sent last night to the SEC, Grassley asked for information about all SEC investigations into Bear Stearns, as well as communications between SEC officials and J.P. Morgan Chase about those cases.
“Such conduct would reinforce the appearance that Enforcement decisions, and disclosures of information about them, are sometimes based not on the merits,” he wrote in his letter yesterday, “but rather on access to senior officials by influential representatives of power brokers on Wall Street.”
An SEC spokesman declined to comment last night. J.P. Morgan Chase did not respond to a request for comment last night.
The inspector general, H. David Kotz, issued a report last month that criticized what some agency employees called the “common practice” of outside lawyers gaining access to senior SEC officials. He also said the agency should consider disciplining Thomsen for such behavior while she was in charge of an insider-trading case. …”
WaPo
Since March, the Federal Reserve and Treasury have given or loaned JP Morgan $213B, so why not give them inside information.
There was a time J. P. Morgan could bail out the US government.
Hoz,
Did i hear right during the hearing that they are predicting in public, the next shoe to drop is that the investment banks are going to give the investors money back using the FED and Treasury monies?
If so, can you explain it in lay terms so i can wrap my head around this? and also include a $ figure if known?
thanks,
Good morning, HBBers. Posting from an internet cafe. This is a bit OT, but there are houses involved, so maybe it’s OK. Last night I couldn’t sleep, wondering if it’s really true that wherever you go you’re always directly above the center of the earth. I finally got up and looked out the window to what appeared to be flames in the little park next door (I’m in Moab, Utah). I dialed 911, mostly because we were having high winds and thought it would be the thing to do, even though it took me awhile to look up the number. Sure enough, a fire, they already knew about it, but it was about 6 miles down the valley from me. The Moab Wetlands was burning (it’s not so wet this time of year, obviously).
The wetlands is a large area, hundreds of acres, between the Colorado River and the actual town, flanked by hotels and houses (see, not OT). Those hotels are crammed full of tourists, as it’s high season here for MTBers and such. This kind of news is boring to you Californians, who are more daring about where you put your houses and also are more daring about the size of fires you have to consume them, but this is big here. Anyway, I figured maybe Moab had at one time had some Californians here, as there are houses bordering this wild area of trees and tall grasses. One of them belongs to a billionaire, huge (the house), but I can’t remember his name, just another billionaire in my book. I could call my billionaire friend in Aspen, Prince Bandar, he would know, but I’m too lazy to look up his number.
So, I grab my camera and head out. I got on the other side of the river from the fire and managed to get some absolutely spectacular fire shots with my new HD film camera with 20x zoom standing about 200 feet away. You can hear the fire roaring and see the ashes being tossed around in the firestorm. I thought of people who die filming because they’re so engrossed they’re not aware of the danger, but the river was between me and the wildfire. The film makes me look either very daring or outright insane. I’ve seen a lot of fires in Colorado, but never this close.
They evacuated a lot of the area, don’t know if any houses burned, it’s still burning. Anyway, just a report on my film career, it’s off to a real hot start.
So then I came home and still couldn’t sleep (by now it’s 3 am), thinking about how I’m now renting one of the nicest houses in the area for $1200/month and could bail if there were a natural disaster, grab my cats/dogs/camera/espresso machine and just leave and not worry about the dang house. Renting’s pretty carefree. So anyway, just checking in, thanks for thinking of me out here in the maw of the wilderness facing extreme dangers and whatnot to capture nature at her finest.
(And I didn’t think about the economy the entire time.)
You are awesome! De fumo in flammam! lol
Fury in Da Hood! Hey, off to take more photos, have an assignment - big SLC newspaper, will post if it goes.
Hey, check out sltrib dot com for a photo…
I’m too anchored down by “stuff”. I’m jealous, but hopefully someday I’ll be able to part with all of it and move on.
Hey, fire works great…
Anecdotal on my trip to Seattle this week.
The traditional trip time from Portland to Seattle (and vice versa) is about 2.5-3 hours (170 miles). Depending on when you left Seattle, and where in Seattle you left from, you might be able to do it in 3.5 but increasingly as much as 5 the last few years due to the battle with Seattle commuters on their way home to Tacoma (30 miles away) and even Olympia (another 30 miles). 4 lanes of stop-and-go at 20-40 mph for 60 miles. As a general rule I try to be south of Seattle by 2PM on the day I leave.
Yesterday I was cringing as I pulled out of Seattle at 4PM, expecting at least 4 hours of gridlock and general road-ragery. Well, I skated right through both cities at 70 mph with a slowdown only on the north side of Tacoma for a few minutes down to 50 mph.
Maybe it was a fluke, but it sure seemed quiet out there. Like we were back to 1998 traffic levels. Pleasant actually.
The cause of your fluke (at least the Seattle bit) is an IAM strike. There’s a lot of Boeing machinists who got priced out of the Seattle market and all moved down to Puyallup/Tacoma/etc. Doing the math… gas at $3/gal. means they’d spend more on gas than they’d get from their strike fund checks. And I bet the WAMU failure is starting to reduce traffic as well… (Can’t say on the latter as I’ve been out of town for a few weeks.)
Police shut down a seminar in which participants were asked to provide their bank account and Social Security numbers to get a $5,000 award.
The Akron police were alerted to the presentation, held in a room rented from the Urban League, by the president of the League, who thought the presentation sounded too good to be true.
‘Once I saw the flier, I became suspicious,” she said. ”I’m so sad that people are so desperate and would listen to these things.”
Many participants in the Akron seminars filled out applications for the program, financial crimes detective Joe Smith said. Anyone who did so should shut down his or her bank account and notify Smith at 330-375-2600.
(from the article)
‘The suspect, from Shaker Heights, presented the seminars under the name of Santina Gibbs. He told Smith he had had a sex-change operation. Smith said the suspect’s real name is Darnell Nash.’
This person lives a fascinating life, clearly. If only they had also had a parrot on their shoulder that could sing ‘Long Way from Tipperary’. Then I would be so overcome with joy and pleasure at the Mysteries of the Universe and become so sure that God enjoys a good laugh, that I would have fainted with delight.
sltrib dot com
WEST VALLEY CITY - From Brigham City to Park City and places in between, demand at food pantries has nearly doubled, forcing them to reduce how much food poor families receive. In at least one case, the shelves are nearly empty by the end of each week.
Utahns are looking out for their neighbors. At the Utah Food Bank, the main supplier for many food pantries across the state, donations are up about 5 percent to 10 percent compared with the same time last year.
But need is so much greater. The bank collected 4.5 million pounds of food during July, August and September, but distributed 5.6 million pounds during the same period.
Wow! A second loaves and fishes miracle!
“The bank collected 4.5 million pounds but distributed 5.6 million pounds”
it’s because Utoids are industrious and good at making things stretch, little bees in the beehive state..
C’mon!!! it’s just a clueless reporter.
Just means their inventory is being depleted.
Funny though.
Lost,
B.i.C apparently doesn’t believe in eating, as he constantly mocks the practice of saving foodstuffs for a rainy day…
I posted this yesterday in the NW thread, but I realized that this was something that every HBBer deserved to read. It’s a true story, and was a truly shining moment in my life, I hope you enjoy it too:
I was relaxing at the steam/sauna/spa at my local national chain gym a couple weeks ago. I won’t say which national chain, but I will say that it is a “twenty four hour” operation.
Anyway, I started up a conversation with a couple guys sitting around the spa, and it turned out they were mortgage brokers. Well, the one guy claimed he was a MB, an appraiser, and a day trader. I think you can guess where a good HBBer like yours truly was about to steer the conversation….
I began by innocently asking about how the housing market looked. He gave me a major sigh, rolled his eyes, and said it was really bad.
Then I thought, “ok, maybe this is one of the good MBs.” It didn’t take long for that assessment to go out the window.
I told him that houses were WAY overpriced compared to family incomes in this area. He retorted by say “actually, there are some excellent opportunities out there right now.”
I immediately did what ANY good housing bubble blog devotee would do at that point: I laughed in his face.
Truly this was turning farcical. I smelled blood and was now going for the throat.
He proceeded to start throwing out every cliche in the book - not making anymore land, housing always goes up(all evidence to the contrary), you can deduct all that interest(wow, you mean I can pay $1000 to the bank and get back $200 from the gubmint? Golly, what a deal!), etc. etc. etc.
I pretty much went on autopilot using nothing more than ordinary HBB-fu to counter each of his inane statements. It was like the scene in “The Matrix” where Neo starts countering all of Agent Smith’s moves using only one hand, without even really looking at him either.
The various onlookers were highly intrigued, dare I say impressed, with my performance. In fact I had a number of people come up and ask me for advice later, but I digress.
After about 20 minutes of this, our dear MB looked quite depressed. As he held his head in his hands, he declared something to the effect that he should just jump off a building. He sounded like he was only half joking, so I decided to go in for the kill: I told him that was rather messy and instead described this informational poster:
http://www.ebaumsworld.com/pictures/view/74210/
“Remember kids, it’s down the road, not across the street - make it count!”
I just want to thank everyone here for making this truly shining moment possible. Your voices, wisdom, knowledge, and good information were there with me every step of the way, and with any luck the world now has one less sleazy mortgage broker.
HBB: We eat sleazy mortgage brokers for snacks.
SR
Nice job, carry on.
whoops - just looked at the poster, like the one commenter said, WTF? Not so good.
Keep in mind - the guy got a kick out of the description. That poster’s an old standby for blog discussion threads about emo kids.
Nevertheless, considering how many lives this guy has likely taken an active role in ruining, I have no problem implanting the idea…. But that’s just me. YMMV.
but…i just read yesterday how it’s diffierent in Seattle.
It’s different everywhere.
Quick followup: I forgot about the OTHER mortgage broker….
Well, he just sat there totally silent and looking just a tad nervous through the whole thing.
Then back in the locker room we spoke briefly about credit scoring and mortgages, and he said he wanted to get his card and give it to me.
He then got in his car and drove off without even saying goodbye.
When I think of these guys losing their houses to foreclosure, I can’t help but think of the “Scott Tenorman” episode of South Park: “Mmmmmmm let me lick your tears Scott.[slurp slurp] Let me lick them, they’re so delicious….”
BRAVO!!! Well done! This one belongs in the HBB Hall of Fame.
Thank you exeter. I certainly can’t take credit except for maybe the execution.
Hell, if it wasn’t for you guys, I might have ended up getting a mortgage from this guy someday!
I owe you guys so much, the least I could do was be “representin’ mah posse’ yo”.
Peace.
I…I…I think I just had a gazm. I’m at the office today. I hope no one noticed.
Thanks, seattle renter, that was a great post.
Olympiagal,
I forgot to mention, that out of all the HBB “voices” backing me up that day, yours was one of the most prominent!
I kind of thought to myself “how would Olygal respond to this?” Then I blended it my my personal utter contempt for people like this guy, and voila! - we have one Severely depressed broker!
Funny thing is, this was just a few days before the stock market took a major dump. I remember him talking about his day trading, and saying how he’s always “one step ahead of Mr. Institutional investor,” “looking for where Mr. Institutional is putting his money,” or something equally inane.
Here’s hoping that “institution” was Leyman brothers! Or maybe a mental institution….
I spent a summer on a Ford Foundation scholarship attending this thing called the Linguistic Institute, grad studies, moves from univ to univ each year, top-notch profs from everywhere. We all referred to it as “the Institute” instead of the univ, and when townspeople asked, we just said we’re with “the Institute.” Ah, the innocenc and self-centerdness of youth…come to find out, the univ. was close to a mental institute. Pretty fitting.
HankDaddy Whorebucks is like the comic-strip Daddy Warbucks, always helping out little business orphans…
from wiki:
“Despite his immense wealth, Warbucks is, now and then, reduced to such poverty as to be forced to raid Annie’s piggy bank. He always leaves an I.O.U.”
Wall Street Journal
* OCTOBER 22, 2008, 11:11 A.M. ET
Wachovia Swings to a $23.7 Billion Loss
By DONNA KARDOS
Wachovia Corp. swung to a large third-quarter loss, as the bank posted $18.8 billion in goodwill write-downs and $8.71 billion in other charges and costs related to market disruption, investing and other crisis-related losses.
“the bank posted $18.8 billion in goodwill write-downs”
Goodwill Hunting…
“Swung to” a loss? As if they were profitable last quarter or the one before that?
Press Release:
Effective today, I guarantee everything in the Empire to be double-plus-good.
Some of the evildoers fess up.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2EMlP5s7iM0&refer=home
“Raymond W. McDaniel, chairman and CEO of Moody’s Corp., said his company observed weakening conditions as early as July 2003. “We saw and took action to adjust our assumptions for the portions of the residential mortgage backed securities market that we were asked to rate,” McDaniel said in written testimony. “We did not, however, anticipate the magnitude and speed of the deterioration in mortgage quality or the suddenness of the transition to restrictive lending.” ”
“Waxman cited a transcript of a September 2007 meeting in which McDaniel described “a slippery slope” of events. ”
““What happened in ‘04 and ‘05 with respect to subordinated tranches is that our competition, Fitch and S&P, went nuts. Everything was investment grade,” McDaniel said in the meeting. “We tried to alert the market. We said we’re not rating it. This stuff isn’t investment grade. No one cared because the machine just kept going.” “
Just got a call from India.
They approved my request for a gold AMEX card. No fees.
No physical address, since I move so much, just a PO box that changes every so often. No job/income. No nothing.
Credit can’t be too tight…
Now I’m picturing you carrying your red sack on a stick across the Northwest territories, with a gold card worn like a badge across your chest.
Are you the last true hobo? Living life on the rails?
Hey, I will NOT let AMEX down, their faith in me was rewarded today as I actually made some money from photos of the Moab fire. I can’t remember the last time I made some money, though I can recall the last time I spent it (about 2 hours ago, a tall iced latte from Dave’s Corner Market).
Do you think I could maybe make even MORE money by doing an ad for AMEX???
I wish the govt would get on the ball and send me another stimulus check. I want more.
Don’t worry - it’s on the way. Once the Fed Chairman throws out such a proposal into the political world’s Santa Ana wind, it cannot be retracted.
Thanks for the link, losty. http://www.survivalrealty.com
My favorite of the available ‘Awaiting and Eager for Armageddon’ real estate offerings:
http://www.survivalrealty.com/2008/09/the-bear-den.html
‘The Bear Den’
‘…yet still has a level of comfort that one might not expect to find in an underground home…’
Actually one photo looked pretty cute and Hobbit-like, but that is a gosh-awful kitchen. But…JUST REDUCED $50,000…. NOW ONLY $450,000!
Then it goes on to list all the likely events that will kill and/or disfigure anyone not living in the Bear Den. There turns out to be nearly a zillion horrifying possibilities. Heckfire, I ‘bout near made a stinky in my pants, I was so terrorized by the end of the article.
I knew a fella in the 60s who went and lived in a cave. Never heard from him agian.
Bear caves are for bears.
More recently, there have been reports about the possibility of nuclear terrorism on American soil using suitcase nukes. On December 5th, 2004, CNN had a special documentary about the inevitability of nuclear terrorism. When the controlled secular media is reporting on such a controversial topic as this with such candor, it should be taken very seriously.
The Center for Disease Control, along with the World Health Organization, the Department of Health and Human Services, and the Department of Homeland Security have been repeatedly warning us that another flu pandemic, worse than ever before, is bound to occur. In fact, they are now routinely using the word pandemic, instead of epidemic.
To put this prediction into proper perspective it is important to realize that the great Spanish Influenza epidemic of 1918-1919 killed well over 20 million people worldwide, more people in one year than the Black Plague killed in the entire four years of its outbreak.
The government officials are not only worried about a flu pandemic, but also about the possibility that a major smallpox outbreak will happen. In fact, they are so worried about smallpox that, in June of 2001, they conducted a major simulation of a terrorist smallpox attack against 3 American cities. It was named Dark Winter, and it lived up to its name.
The results of this exercise were grim, to put it mildly. According to the National Security Council, the worst case scenario was that within seven weeks, one million Americans would be dead, many millions others would be sick, and the disease would have spread to 25 states and to 13 foreign countries.
One can only imagine what the results of the Dark Winter exercise would have been if it was done with such an airborn killer virus, instead of just smallpox….
“On December 5th, 2004, CNN had a special documentary about the inevitability of nuclear terrorism. ”
What, more GOP scare tactics?? LOL
Hey Oly, that one’s my fav too. Down by Durango, CO.
I picture this place full of grizzly bears hiding out, which are supposed to be extinct in Colorado, but some biologists say they still live in the Weiminuche WIlderness, which isn’t that far from Durango…
Saw in the Desert Sun this morning one of those routine city council reports–the Rancho Mirage planning board approved a building permit for a 12,000 sq foot house (on a 54,000 sq. foot lot.) For this valley, not extraordinary (there are 30,000 ft. houses) but for this TIME? Who would choose now to build a 12000 square foot second home? Apparently, some fat cats still have plenty of money. A fact that the MSM coverage tends to obscure. From the way they tell it, all the Wall Streeters and MB’s are broken men. Not! Some folks are walking away from the bubble with plenty of cash …
Dow down 410 points at 10:40 am, pacific. Any bets on how long till the PPT shows up?
Gotta be quick to follow this market action…
October 22, 2008 3:44 P.M.ET
BULLETIN
DOW INDUSTRIALS DOWN 600 POINTS AS CLOSING BELL APPROACHES
Major stock indexes down 6%-7%
Dow down nearly 700
Stocks pick up where they left off Tuesday — in decline. After quarterly results, McDonald’s and Apple seek to buck the Street’s bearish trend.
Main Street’s Body Count Rises
As suicides and murders emerge in the wake of the financial crisis, the fallout is increasingly measured not only in dollars but in blood.
http://www.salon.com/news/feature/2008/10/22/economy_america/
I had to look it up: canicide- killing of dogs.
it makes sense.
I could never “off” myself because i love my doggies.
This is highly thought provoking, luckily I have many months of stored food and beauty products on hand for this downturn in cali life.
and shoes…
Baseball Hit by Money Woes as Phillies-Rays Sell Out (Update1)
Oct. 22 (Bloomberg) — Baseball is counting pennies on everything from seats to sponsorships as it prepares to play next season in an economic slowdown.
With the Philadelphia Phillies and Tampa Bay Rays about to open the World Series tonight at sold-out Tropicana Field, three other teams — the San Francisco Giants, Seattle Mariners and Cincinnati Reds — are freezing the cost of tickets for 2009. The Washington Nationals, Oakland Athletics and San Diego Padres have lowered tickets by as much as 25 percent.
Professor:
What about the long-term mega-million $ contracts most of the players have?
A Gold-glove all-field-no-hit shortstop might have been worth $33 Million over the couuse of 5 years, last summer when he signed his contract…
Good for those who signed l-t contracts before the onset of the credit crunch.
Sporting events, concessions and memorabilia — another sector where prices jumped while people felt flush, another sector where a reset is in order.
The A’s should not be allowed to charge any admission, given the dump that is the Coliseum.
Where is a good place to weather the troubles? I am thinking a third world country, provided you have enough cash (and/or gold).
No place left to hide…
Prof, you may be right, but I gotta think some places are better than others.
Chile was the consensus some months ago.
Post earlier another day.
I will have to do that. I am on the West Coast though.
btw, i am thinking more along the lines of Thailand.
Think of some places that are easy to leave but hard to enter (NZ comes to mind…).
Gold price is falling today at an annualized rate of
((733/(733+35))^360-1)*100 = -99.9999949 pct
time to buy the dip?
Only if you want to get dunked
And the fallacy of static linear projection raises its nasty head.
Also, you should not use 360 but 252 since you only have that many trading days in a “typical” trading year and hence, you only have that many data points to observe prices.
In deference to the world’s banking community, I used the banker’s rule. And obviously there is no reason that the price of an asset cannot continue moving while markets are not open. (Witness the ongoing decline in stock market valuations when the shorts were on the sidelines as a case in point…)
Wrong.
The “theoretical” price may be moving but there is no way to observe it. The prices are actually set by the market-makers who are trying to make money off the spread so you need to observe the quotes. Now, if there was another market that market-makers were posting quotations on, that would be a valid input.
If you have an unobserved variable that may be moving then your best Bayesian prior in absence of any information is the last closing price (technically, the last quotes.)
My prices reflect bayesian beliefs, not current market transactions (or the lack thereof). For example, just because homes in Del Sur are “priced” at $1,299,000 does not mean they will ever sell for anywhere near that level. If none are selling because no would-be seller dares to figure out the current “price” on the demand curve, does that mean there is no demand (and hence no price), or just that the price is unknown?
“(technically, the last quotes.)”
The housing analogue is the ‘comps.’ But don’t tell me the comps are any good if there are none since July (as in the case of the aforementioned Del Sur homes…).
Comps are not quotes. There is no market-maker for houses, and houses are not fungible.
However, 1 oz of gold is 1 oz of gold, and 100 shares of BRKa are 100 shares of BRKa.
There is a reason why you can be very confident in these, and that reason are the market-makers. They are risking their own capital to set the price.
Price-formation is not “magic”. There’s an actual observable process out there which sets it. That’s why the Bayesian prior for houses fails but for gold, etc. works. You have an active deep liquid market.
“They are risking their own capital to set the price.”
And what exactly is a good old fashioned mortgage lender assisted by an honest appraiser doing when he decides to make a loan to a well-qualified borrower on the reasonable assumption that said borrower has a high probability of repaying the loan?
Not to suggest that the mortgage market works this way in practice…
Nothing at all as long as they are risking their own capital.
It’s identical with the exception that houses are not fungible, and so you don’t have a lot of trades and hence, not a lot of observations.
Which is not to say that you can’t have a reasonable appraisal but you have far fewer observations.
Just to be on the conservative side,
((733/(733+35))^252-1)*100 = -99.9992144 pct
just proves it cannot go on forever.
I just do it to rank the chains of certain true believers in gold. But properly interpreted, there is nothing wrong with an exponential (not linear) projection — it merely shows what would occur if a short term rate of change continued for a longer period. Any reasonable person realizes that the price of gold is not going to drop by 99.9999 pct over the next year, but it is nonetheless informative to show the current (exponential) rate of change at an annualized rate.
rank = rankle / yank?
You should be allowed as much naive extrapolation as was exercised by your critics on the way up.
Except that would take you into negative numbers.
The nice thing about exponential (as opposed to linear) extrapolation is that it cannot take you below 0.
How about silver and copper…..
Oh my word. Gold has turned into a turd. Blowing through its near term floor of 740 on 9/11/08.
Sink turd sink!
Doesn’t good looks account for anything anymore?
That spikey do thing to 720 today kind of leaves the support lying at $650. If it blows that, the 1980s will look like happy days.
Remember, gold owes nothing to noone.
The condition that obtains when the futures price is above the spot, or the more distant futures price is above the nearby, is called contango and, the opposite, backwardation. Thus the basis is positive or negative according as the spot market is in contango or in backwardation. The prevalence of contango is a necessary condition for the warehousing business. Unless there is an expectation for contango to return after sporadic and temporary backwardation, warehousemen would go out of business and supplies for future delivery would be all but unavailable.
Backwardation can certainly occur, in particular, when supplies are drawn down just before the new crop of agricultural goods is ready to be brought in. However, backwardation for monetary metals is a gross anomaly, a red alert indicating potential breakdown of the payments system in the not-too-distant future.
http://www.safehaven.com/showarticle.cfm?id=7083
===================================================
You day-thinkers slay me with your short-term memories…
Can you translate this for the unwashed masses? Does this mean a huge increase in physical Gold price due to the paper market not being able to provide delivery?
That’s what it’s all about…
The price has been brought down artificially, in order to get rid of the longs, which are due metal from the shorts, which unfortunately doesn’t exist on the open market.
This is the very 1st time there has ever backwardation in Gold’s modern era 1975-onwards…
golds a sellers market?
I wonder though…when it returns, much like “real” thingys….
lets say>
milk,
wheat,
oil,
gold,
copper,
natgas….even silver or even houses and cars.
are dollars real thingys?
we are bout to find out.
From today’s NY Times comments to editorial:
let me get this straight.
10 million reckless people bought houses they couldn’t afford with mortgages they didn’t bother to read so….
80 million renters could have their tax dollars spent keeping those reckless people in those houses they couldn’t afford so…
the real estate prices will stay sky high so…
the renters will never be able to buy their own homes…
that, my friends is downright un-american
— kevin hunter, los angeles
Pass it on.
“that, my friends is downright un-american”
It is also downright un-capitalistic. As Anna Schwartz adroitly noted in a recent WSJ Op-ed piece, ‘Everything works much better when wrong decisions are punished and good decisions make you rich.’
66 years ago, a Black Swan event happened…
The Fall of Singapore.
The British thought that no army could possibly come overland from Malaysia and threaten them, so all of Singapore’s big guns were pointed the wrong way, thinking if an attack came, it would surely come by sea…
Sending out their battleships HMS Prince of Wales and Repulse, without air cover only got them as far as Davy Jones locker…
Old ways of thinking and reliance upon past performance were actually a hinderance, as the British outnumbered the Japanese by a ratio of nearly 3 to 1, but had no answers against new tactics, and 80,000 of the King’s soldiers found new homes in prisoner of war camps…
http://en.wikipedia.org/wiki/Battle_of_Singapore
The British really didn’t do too well against the unorthodox tactics of the colonials here either.
I’ve got to hand it to you, you argue for and against blind adherance to old beliefs, out both sides of the mouth, without apparent insight into the irony of it.
New beliefs are what got us into this mess, not old ones…
Oh MY!
Let us pour a drink and have a good laugh on the universe.
Hello everyone. I still read the blog as much as possible but have not posted in some time.Just been busy plus the area I am watching still has a long way to go.Wouldnt touch anything in this environment right now.
While im here Id like to share a video I got from a friend yesterday.Its from this summer and not sure if it was ever posted here.
Its a comical way of looking at this sad state of affairs.
http://www.youtube.com/watch?v=7R-o-bdH_S4
As always, Thanks Ben for all the work you do here.
We’re a couple points away from Armageddon heading into the close. Oh, the drama.
We’ve broken through Oct 10 closing lows and possible support, spx. We need volume, more selling.
Nasdaq is breaking down too. Run for the hills….
Where is the cavalry? Are they coming?
dow down 641.
naz down 102
oil down 5.72
s p down 72
gold down 45
Ann’s weight 119.8 up from 118.6
Putting away the fattening comfort foods and going to air.
PPT brings it up from there, but just short of the old lows!
Can’t these guys do anything right?
Just take off the heavy hiking boots and put on some sandals, problem solved.
well it looks like Jas was right big deflation.
Can this chart possibly be accurate? Shows intraday volatility on the AMEX from 1500 down to 830 or so then back on two recent days…
If you convert it to pennies, and each penny weighs 2.5 grams, $700,000,000,000.00 would weigh 121,500,000 TONS!!
Put THAT in yer gumball machine!
The real Q is, how many boxcars is that? I don’t have my calculator…
Pennies prior to 1982 weighed 3.1 grams. 2.5 grams resulted from the removal of most of the copper in favor of zinc.
Uncle George is smiling now.
currencies
Look who’s smiling now
The dollar soars against the euro and British pound, with speculation mounting that central banks will aggressively cut rates.
How low can the stock market go?
Financial Times
Overview: Recession fears fuel fresh wave of risk aversion
By Dave Shellock and Michael Mackenzie
Published: October 22 2008 18:42 | Last updated: October 22 2008 18:42
Mounting concerns about a global recession fuelled a fresh wave of risk aversion across markets on Wednesday and Wall Street closed at new multi-year lows.
Redemption requests from investors sparked the liquidation of positions in equities, emerging market currencies and commodities. That benefited the dollar, yen and western government bonds.
The more dollars they print the more valuable they become…
World Economy is busted, fortunatly for me I have parked most of my worth in Treasury Money market mutual fund with Vanguard
A guy at work asked me how much I’ve lost and I told him my US dollar is up in value but he disagreed saying how can 1000 dollars be worth more today than yesterday? Misery loves company and he sure didn’t need mine today, too bad he owns many rental homes.
International Herald Tribune
Wachovia posts record $23.9 billion loss in third quarter
By Eric Dash
Published: October 22, 2008
Myths about the
Financial Crisis of 2008∗
V.V. Chari, Lawrence Christiano,
and Patrick J. Kehoe
Working Paper 666
October 2008
“…Clearly, the United States and the world economy are undergoing major financial crisis. Interbank borrowing and lending rates have risen to unprecedented levels relative to U.S. Treasury Bills. Several major financial institutions have failed. These real problems have also been associated with four widely-held myths about the nature of the financial crisis and the associated spillovers to the rest of the economy. The financial press and policymakers have made four claims about the nature of the crisis.
1. Bank lending to non financial corporations and individuals has declined sharply.
2. Interbank lending is essentially nonexistent.
3. Commercial paper issuance by non financial corporations has declined sharply and rates have risen to unprecedented levels.
4. Banks play a large role in channeling funds from savers to borrowers.
Here we examine these claims using data from the Federal Reserve Board. At least based on data up until October 8, 2008, we argue that all four claims are false….”
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4062
They have access to current data. I am not surprised the allegations of the problems are false. If the data is accurate….
Fessin’ up time for naked swimmers…Note how much easier it is for the new guy to spot mistakes through the lens of the rear view mirror than it was for the old guy to see them in real time.
Crisis ‘brought AIG to its knees’
Mr Libby has freely admitted that AIG made mistakes
The new boss of US insurance giant American International Group (AIG) has shed more light on why the firm had to be rescued by the Federal Reserve.
…
‘Mistakes’
Mr Liddy said that in retrospect, the company was wrong to move out of its general insurance expertise to add policies covering financial products and transactions.
“We would have been OK except when the credit crisis hit, it really exposed some mistakes we had made,” he said.
“…The credit crunch was about unacceptable levels of private debt and now this burden is being taken on by governments too who are suddenly abandoning monetarism with its low interest and inflation rates to a discredited Keynesian model where spending at all costs will get us out of this mess. Politicians who are around for such a short period of time can cause havoc. Bush enjoyed a massive surplus and is leaving office with a massive deficit. The problem with increasing debt as we hit recession are as follows:
1. Public Sector Pensions - future liability unknown. These are not accounted for and in most Western countries the number of civil servants is at record levels and rising.
2. Much of the West is facing an ageing population who are not tax payers. They are servants to the civil servants and expensive to run.
3. Interest Payments on debt have to be serviced for many years in the future. Our children will be paying off our credit exuberance for the next 50 years.
4. More government debt crowds out the private sector and investment will fall.
5. Government bond auctions will require higher interest rates to attract buyers.
6. Tax must go up to pay for it all.
7. The price of iPhones will collapse….”
Fintag
and also from Fintag
“…Consumers are riddled with debt and so are governments. In 1946 consumers had virtually no debt - just hope for the future. This time it is very different. I expect personal bankruptcy to go through the roof and taxes to rise rapidly too. Why do we all believe that debt will help us escape? This is politics of fantasy and debt is what got us into this mess. This is the death of the West. Asia - it is your turn now….”
“6. Tax must go up to pay for it all.”
This writer obviously never read BB’s helicopter drop speech.
Do WH announcements regarding planned participation in global economic meetings cause stock market crashes?
Japan leads Asian shares’ plunge
Japan’s Nikkei stock index plunged amid fears of a global recession
Japan’s benchmark Nikkei tumbled more than 7% in early trading echoing heavy losses on Wall Street, where fears of a global recession have shaken investors.
South Korea’s Composite Stock Price Index opened down nearly 6%.
The falls came as new figures showed Japan’s trade surplus plunged 94% in the last year due to weak exports and soaring energy import costs.
Meanwhile, the White House has said a global summit to tackle the financial crisis will be held next month.
We are really lucky the U.S. economy is not in a recession, because if it were, the stock market most likely would crash.
BBC News
Bernanke supports higher spending
Ben Bernanke says the outlook for the US economy remains uncertain
US Federal Reserve chief Ben Bernanke has said more government spending may be needed to combat economic weakness.
A fresh round of stimulus would be a good idea, he told the US House of Representatives budget committee.
Although Mr Bernanke stopped short of saying the US was in recession, he said the American economy was now in a “very serious slowdown”.
http://www.uncrate.com/men/style/tees-polos/f-the-economy-tshirt/
dont hate me ben
Gold prices are within $100/oz of Fall 2006 price levels. At what point will physical metal hoarders lose the faith and dump their mother lode on to the crashing market?
Could the PPT please step in and prop up my Asian stock market holdings?
October 22, 2008 9:51 P.M.ET
BULLETIN
Japan, South Korea plunge
U.S. sell-off reverberates throughout Asia. Tokyo indexes also hammered by stronger yen, which sends exporter shares to losses. Australian stocks also drop.
• Japan eyes market-stimulus plan
• Australia’s inflation running at 13-year high
• For business news in Chinese, see Chinese.wsj.com
lol
Just be grateful they aren’t banana republics yet and that the Asian countries are still solvent.
Well, the PPT are the only ones to blame for creating the expectation of a new rescue/bailout plan every evening.
It used to be a new plan at every crisis, then it was every weekend, and at this rate they’ll have to come up with something new every hour…
New bailout/stimulus/rescue…on the 8’s
immpossible asian ecomomies have decoupled from the US
Of course, the 10 pct is the national average. I am thinking maybe another 30 pct or more should work for local coastal markets formerly known as a bit frothy. For San Diego, thirty percent down from here would translate into a median sale price of
(1-0.3)*$350,000 = $245,000, which almost seems affordable.
Economists: US Home Prices Likely to Fall Another 10 Percent
By Barry Wood
Washington
22 October 2008
…
“So prices have now been falling for 2.5 years,” said Mark Zandi. “And prices are back to what they were in early 2004. So anyone who bought a home in the intervening period and didn’t put much down in the process is now underwater [owing more than the home is worth].”
Zandi says the nationalization in September of two government-sponsored housing agencies (Fannie Mae and Freddie Mac) and the collapse of Lehman Brothers investment bank, turned a housing crash into a financial panic.
” … as far as we can tell, the American consumer is basically only still spending because he thinks that magic beans grown on the Internet will pay for everything. The strong suspicion is that when the Yanks look under the bed and discover that all of their magic Internet stock market money has turned back into rotting leaves, they’re going to feel a little bit embarrassed (and broke), and stop buying goods from Asia with money borrowed from Europe, a process which doesn’t look like it would be enough to keep the world going but in fact is. And given that the stock market’s been performing pretty badly these days, and is beginning to appear on the cover of USA today, lots of people are beginning to worry that the day of reckoning might be at hand. Which would obviously, leave us in the shit.
This is the doctrine of the “wealth effect”, and if you can dig up a few factoids and linear regressions to illustrate it and avoid using the word “shit”, you can make a quite decent living as a pundit by repeating the paragraph above. On the other hand, if you had been placing bets on a US double-dip recession so far, you’d have lost them, because Alan Greenspan and his merry gang at the Fed have a solution to this problem. Basically, the solution’s pretty simple and it involves screwing interest rates down to the floor until mortgage rates follow them down to Low Low Prices levels, and pointing out to the Great American Consumer that it’s “Bye-Bye, Magic Stock Market Bubble Money!” but “Hello, Magic Housing Market Bubble Money!”. Marvellous….
…
“Yeah, yeah, laughing boy, but what happens when the housing bubble bursts then?”
Thursday, August 15, 2002
http://d-squareddigest.blogspot.com/2002/08/were-forever-blowing-bubbles.html
Just a little memory bubble.
It’s different this time. Anyone who bought stocks immediately after Black Monday (Oct 19, 2008) would have made out like a bandit over the next couple of years, thanks to the first instanciation of the Greenspan put. Once markets habituate to policies that are used too often and too much, the policies lose their heft. The 5-year low on the DJIA is in nominal, not real terms (i.e., it would be even lower w/ inflation adjustment).
OCTOBER 23, 2008
Currencies in Turmoil; Dow Nears Its 5-Year Low
By JOANNA SLATER and PETER A. MCKAYArticle
The stock market and currency market both sent a loud warning Wednesday that investors believe the global economy is heading into a deep recession.
The fears drove down currencies and stocks around the world, while the U.S. stock market touched a five-year low.
The declines were broad, including most commodities. Oil dropped 7.5% to its lowest point since June 2007. Copper’s price fell to its lowest level since 2005. The British pound is now trading at the same level versus the U.S. dollar as it did in 2003.
Shares fell on the New York Stock Exchange on Wednesday on concerns over a worsening world-wide economic slump.
The dollar, to which many investors retreat in times of stress, gained. So did the Japanese yen, as traders who had borrowed yen to invest elsewhere unwound those bets and sent the cash back to Japan.
Wonder if Helicopter Ben knows about the carry trade or whether he believes the No-Arbitrage Theorem?
Anyhoo, carry trade unwinding furiously. Heli Ben better watch out. There are more consequences here than his simple “money printing” model can handle.
look for adoption of laungage in the common vernacular, it seems to be working.
this was a private offering to my friends last year, December 07.
——————————————————-
An Asymmetrical Unwind of the Credit Bubble
Assuming we do muddle through, there is still a strong likelihood for
a continued asymmetrical unwind of the credit bubble.
Muddle Through Assumptions
Housing is going to continue to be weak
Commercial real estate is going to be weak
Capital impairments at banks will be an issue
Unemployment is going to rise
Consumer spending will be weak
Credit card defaults will rise
Foreclosures will rise
Corporate earnings will be weak
The Yen carry trade will unwind
Implications of that last point are particularly ominous. A carry
trade unwind has the potential to affect nearly every equity class.
In addition, there are obvious implications on emerging markets and
China if US consumer spending is weak.
Final random thoughts for the evening:
Will this be the crisis that finally eliminates the Keynes/Friedman economic models so favored by the government?
Since one of the variables in the Black-Scholes equation is Treasury Bill rates, is the illiquidity a result of the skews in the T-bill curves? Can one trust the answer from Black-Scholes when part of the equation is tainted?
“Will this be the crisis that finally eliminates the Keynes/Friedman economic models so favored by the government?”
Can you offer a superior alternative?
Not a crash in Asia, but a sweep… I guess this means the U.S. stock markets will rebound tomorrow in a relief rally?
MarketWatch.com
October 23 2008 2:07 A.M. ET
Sell-off sweeps Asia
Fear of global recession scuttles stocks in major, regional markets
Wall Street’s red ink, strong yen send Japan’s Nikkei 225 to lowest level in more than five years, Hang Seng below psychologically important 14,000level for first time in three years, South Korea’s Kospi to 10.3% loss before markets calm, begin to recoup losses.
Dayam. 60%-ish off sale on the Hang Seng in just over a year and 55% off the Nikkei?
At that rate S&P would be 700. And volume HAS been way up recently.
I am starting to smell capitulation. Not to say that prices have capitulated, but rather the will to go long and bid up the market index levels seems to be waning. A price bottom cannot be far off if it looks like there will be no new highs are in the foreseeable future.
Actually, I disagree.
You are going to see one or a few violent downward moves which seriously break the previous lows (guessing 700 or so on the S&P)
That’s gonna be a tradeable bottom for “going long” in the intermediate term (few months or so) but then the final capitulation which washes out all the players (slow and grinding.) That’s the true bottom.
You can pull a Buffett after that.
Wow, sign of the times:
http://sfbay.craigslist.org/sby/roo/889292171.html