Bits Bucket For January 22, 2009
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This fellow makes some good points IMO in regards to the size of the next ’stimulator’ package…
Small stimulus best for US
By John Browne
As all hopes for a US economic recovery are now pinned on the efficacy of Washington’s next stimulus package, President Barack Obama has opened the bidding at US$825 billion. Most Republicans see this number as too big, and many Democrats see it as too small. If the question is one purely of impact, then under these circumstances, the Democrats are probably correct.
Measured against the erosion of some $20 trillion from American household wealth in just two years and the waste of some $3 trillion (including long tail medical liabilities) on a fruitless war in Iraq, populists and democrats will label Obama’s planned expenditure as relatively small. They will argue that to effect a noticeable change in the $14 trillion US economy, a much larger stimulus is needed. However, this would be the sort of change that would paralyze the economy for years, perhaps decades.
From my perspective, the size of Obama’s proposed stimulus may be just large enough to prevent widespread dissatisfaction with government inaction but small enough to leave room for a great opportunity - the genuine restructuring of the American economy.
For the past 30 years, an increasingly socialist Congress has drastically overspent in its errant attempt to “help” everyone. In so doing, it has depleted the wealth of a hugely productive economy by consistently encouraging citizens to consume more than they produce. Today, America’s standard of living is financed largely by depreciation of the US dollar, high taxation and by massive borrowing, from citizens, foreigners and from future generations.
The natural cure for such overconsumption is a cutback in consumer spending, or a recession. But recessions, by nature, involve high unemployment. They are socially painful and therefore carry a distinct political cost if leaders cannot quickly bring recovery. Politicians fear recessions and are loath to accept them as a natural cure of excessive spending. They are tempted therefore to keep exorbitant consumerism alive, by a progressive and unsustainable combination of taxation, inflation, currency depreciation and borrowing. What is happening today is a classic example of this unfortunate political/economic dynamic.
The tragedy is that this reaction prevents necessary restructuring and sustains failed systems. While claiming the converse, the vast sums spent by government have actually prevented the vital but painful restructuring of the American economy.
Some argue that Obama’s proposed stimulus package is not only too small, but also too late. Ironically, this may be a benefit. If it does come too late, it will prevent American politicians from “saving” individual industries and companies that have no hope of sustainability. By force of circumstance, it will allow a recession to do the hard and unpleasant job of restructuring the American economy.
In short, the political or financial inability of Congress to fund a larger stimulus package could be a major blessing in disguise. It may not help the current office holders, but it could benefit greatly America’s economy, its citizens and non-US citizens who trade with America.
If Obama sticks to his expressed intent to spend on “real” job-creating enterprises, there will be less and less money available for Congress to spend on “rescuing” defunct industries, companies and jobs. All this presages a possible major restructuring and turnaround in America’s economic fortunes. At long last, it’s possible to see such events unfolding. However, it will only be possible by a firm stance with no deviations.
This may mean that Obama’s policies may more likely be supported more by Republicans than by those in his own party.
To survive against a Democrat-dominated Congress, Obama must be able to speak over the heads of Congress directly to the American people to inspire them to accept the short-term pain of recession in return for the long-term gain of economic revival and the return to America of genuine wealth-creation. For those listening, there was a whiff of support for capitalism in his inauguration speech. Let’s hope his words were not merely fig leaves.
Therefore, as strange as it may seem, a stimulus package that is both too late and too small may be just the blessing that America needs to restructure its economy and return to the generation of long-term wealth-creation.
I dismiss anyone that speaks of $3 trillion cost of war in Iraq. The ONLY way you can come up with a number ANYWHERE close to that number would be to assume that the armed forces would have shrunk by an amount equal to the number of deployed troops.
Troops sitting at a base stateside, or in Iraq, the cost isn’t all that much different.
Heck, based on typical death statistics, the total number of deaths wouldn’t even have been much lower.
What about the 100K+ plus Iraqis?
Unfortunately it wasn’t 200K
“I dismiss anyone that speaks of $3 trillion cost of war in Iraq”.
As is your right, people quibble over numbers day in and day out. However that really wasn’t the crux of the article.
Besides people believe whatever aligns with their way of thinking, and I for one take any government data with a huge grain of salt.
“Troops sitting at a base stateside, or in Iraq, the cost isn’t all that much different. ”
Yes it is. It costs much more to supply troops in far flung corners of the world than it would at their home base. Almost everything they need has to travel half around the world through countless supply points and hostile territory. Keeping the equipment running is another costly problem. Storing a figther jet in a hangar at home base or flying it through sand storms exposed to hostile fire is an entirely different ball game.
Yeah… it was like $500 billion extra over 6 years, NOT $3 trillion.
You also have to count in all the equipment that has been degraded, depreciated, and destroyed in the course of the operation. Some munitions were old and would never have been used, and so probably don’t count, but lots of new equipment was used up and lost.
Also, the cost of all those mercenaries… not all of that comes out of the DOD budget, but that is a huge cost.
A billion here, a trillion there, pretty soon you’re talking about real money.
A billion here, a trillion there, pretty soon you’re talking about real money.
And real lives. Not just the people killed or wounded, but everyone who’s been stop-lossed or extended away from their families for months or years.
Let’s not forget about those costs, either.
the waste of some $3 trillion (including long tail medical liabilities) on a fruitless war in Iraq,
well for the last five years oil has continued to flow from the Saudi and Kuwait oil fields, the lid on the middle east has stayed on, Saddam Hussein is dead. It’s like having a tiger by the tail - if you hang on you’re in trouble, if you let go you’re dead.
The estimate appears to include medical costs, which makes the 3 trillion seem more believable. Body armour has been doing a good job of keeping people alive in Afghanistan and Iraq, but it isn’t preventing lost limbs. I don’t have any stats, but my experience from serving in Afghanistan is that there are a lot of troops going home with amputations and other injuries that require long term care.
The article mentions ‘long tail medical liabilities’, which are related to injuries that are sustained but aren’t identified soon after the event. These are commonly happening in Iraq and Afghanistan. An explosive device will go off near an armoured vehicle and it will seem as though no one was hurt, or only minor injuries. The problem is the concussive force of the blast can cause brain damage that is not readily identifiable and the symptoms don’t develop for months or years.
Away from the medical side, it wouldn’t surprise me to find out that the US has spent $10 million on bottled water alone.
‘Army Water’ Makes Debut in Balad, Baghdad
By Jim Garamone
American Forces Press Service
BALAD, Iraq, Dec. 29, 2005 – You can call it “Army water” or “No-name water,” but whatever you call it, servicemembers here will stay hydrated while keeping soldiers and civilian truckers safer.
Bottled water is a mainstay of life in this theater, and the 3rd Corps Support Command has opened a water purification and bottling plant at the massive logistical area here.
The corps has long wanted to open bottling plants in Iraq, officials said. Currently, bottled water - the preferred drink in Iraq - comes in via truck from Kuwait, Jordan or Turkey. Water is bulky and takes a lot of logistical space. Drivers run the risk of hitting improvised explosive devices, car bombs or small arms fire. Bottling the water in Iraq takes that many military and civilian truckers off the road, officials explained.
The water tastes fine and is pure. “The water comes from the Euphrates (River) to a canal to our intake pipes,” said Army Lt. Col. James G. Hay, the chief of contracting oversight for the 3rd Corps Support Command.
The plant has a capacity of 220,000 liters of pure drinking water each day. The plant uses a reverse osmosis processing unit and a “hyperpurifier” before bottling the water in one-liter containers.
There are no labels on the containers, but each bottle is etched with the date and time the water was bottled, Hay said. Army medical officials constantly monitor water purity. The plant will supply the bottled water needs of Camp Victory, Taji and Balad.
Officials plan another, even larger plant, in Camp Victory and four others around Iraq, Hay said.
I think one of the biggest unknown cost is dealing with the wounded. There were fewer deaths but there are a lot of guys getting out who suffered a brain injury.
From PBS
LINDA BILMES, Harvard University: For every person who’s actually been killed in this war, there are 16 wounded and injured, and this is an unprecedented number. In Vietnam, for example, there were 2.6 injuries for every fatality, and in Korea there were 2.8.
LINDA BILMES: In Vietnam, for example, a typical veteran who was claiming a disability claimed for maybe three different conditions. Now, a veteran typically claims for five different disabling conditions, but there have been 50,000 claims that have been received in the last few months for eight or more disabling conditions.
SUSAN DENTZER: The long-term costs of those disability benefits will vary, says Bilmes, depending how long the conflicts in Iraq and Afghanistan go on and how many veterans file for disability. But she says the costs over 40 years in today’s dollars could reach $75 billion to $150 billion, and even those sums could pale next to outlays for veterans’ health care.
LINDA BILMES: Assuming that 50 percent of the Iraq and Afghan veterans claim health care benefits at the Department of Veterans’ Affairs medical facilities, which is the same number that was claimed in the first Gulf War, then you can anticipate in today’s dollars a cost of somewhere between $300 billion and $600 billion of health care costs for these veterans.
Given the current economy and the fact that companies are dropping coverage my guess is that far more will claim health care benefits.
“If Obama sticks to his expressed intent to spend on “real” job-creating enterprises, there will be less and less money available for Congress to spend on “rescuing” defunct industries, companies and jobs.”
Does this writer not know who writes these bills, and fills them with company-specific “rescues” and other pork? Witness the WSJ story today about Barney Frank writing in a provision in TARP I for a specific Boston bank. The only thing The One can do is threaten a veto, which unfortunately would be the best possible outcome.
Good point, Bill. He will be eviscerated by his own party. Next.
Barney’s got a pair of brass ones, eh?
oh, we always knew that.
I hope this is the end of his political career, but that would mean he’d have to face some serious (not joke) opposition.
“Troops sitting at a base stateside, or in Iraq, the cost isn’t all that much different.”
You see, that’s because they are all drinking the same feces infested water that the locals have, eat rice, chick peas and sometimes mutton, and like the locals, their passtime is spent sitting in a dark room, with no electricity or entertainment.
Darrell, I am not sure you have thunk before you spake.
The other thing that I find astounding is during a time when we were at war (regardless of what you think of this war), Americans borrowed a dollar amount that exceeded the cost of the war to buy consumer goods and houses that they couldn’t really afford.
and we weren’t actually paying for either.
The expectations for 2009, this stimuloss, and the new adminstration are off the charts! Whether its the HBs looking for articficially low interest rates, retirees looking to have 401k balances restored, or just ordinary joes looking for a job - I can’t ever recall expectations being this high and centered on such a narrow timeframe and single group of people.
Can anyone else recall so many competing for so much over so little time and from so little resources?
This is still going to end badly.
The mysterious Spengler agrees consumers may not return to the debt yoke:
” I predict that Obama will do nothing much at all. The American economy is in trouble because Americans got too much cheap credit to buy houses, using their price appreciation to buy other consumer goods. Obama proposes to provide more cheap credit to homebuyers and incentives to buy consumer goods, which seems an odd response to the problem. Now that Americans are scared out of their wits and likely to save every available penny, it is hard to flush with enthusiasm over his program’s prospects.”
Right. Consumers are in the same boat as the banks. As the first stimulus proved, they will be unwilling to spend because they don’t know what their exposure to risk is. The TARP attempted to recapitalize the banks, but that is a bottomless hole because the banks don’t know what their liabilities are now, let alone what they will be in the coming months.
wmbz:
Little OT but why is SC unemployment supposed to get to 14%…i lived there before Hugo and was always able to get a real job or survival or dj gigs..What’s changed?
I think Obama will *do* a great number of things, but most of it will be ineffective in fixing the abysmal economy. However, his bailouts will be more effectively managed and better executed than W’s. More people will at least have a job and feed their families, even as they remain mostly insolvent.
boy, you’re optimistic.
I think a lot of “little guys” are going to lose their jobs.
Not “going to.”
“Are losing” even as we speak.
wmbz,
You’re right as usual, but let’s not forget what Warren Buffett called “weapons of mass destruction” the Derivatives Market. I can’t see how the deleveraging of Derivatives can be tinkered with.
Sen Hoyer on CNBC quoting Roosevelt. It isn’t hard to do the right thing, it is hard to know what the right thing is.
Maybe, there is no “right thing” that makes things go back to how they were the last 20 years.
Prices were rising faster than inflation, and we made up the difference with debt. Debt was rising MUCH faster than inflaiton. Well, there comes a time where we reach the max carrying capaicty of the debt/income ratio.
I think we’re there.
“Get the debt flowing again”, which is our government’s stated goal with all the bailouts, is doomed, in my opinion, because it will just generate more debt that people can’t pay the minimum payments on.
It’s Congressman Hoyer, not Senator, from the People’s Democratic Republic of Maryland.
Even one of the most liberal columnists in Florida, Daniel Ruth, made Hoyer the butt of one of his snidely jokes on the Friday night Florida pundit hour. Sort of a non-entity? I don’t know much about him.
Hoyer is fairly high up in the Dem ranks; he’s definitely not a back-bencher who gets elected and then you never hear from him again. The uber-libs must be unhappy with his hesitancy to spend everything that’s needed to fulfill all of The One’s campaign promises.
You better get on the bus Stenny, before they throw you under it.
think again. uber-libs didn’t put Obama in office (although some of them think they did–they are wrong).
also, even if he does owe them (which he does not), he can safely brush them off like W did the religious right.
No one with a brain seriously expects lending to increase, as stated by several officials involved with the bailout. They just want institutions to remain solvent so that they can be able to lend to qualified borrowers, once there is an economic recovery.
Un-fricking-believable…it’s like putting a barn full of pigs on life support because they all overate and can no longer stand on their own legs.
Making sausage=dirty business.
RE: just ordinary joes looking for a job
It’s more than ordinary joes lookin’ for work.
Just ask the Madoff investor’s.
Here’s one with $7.3 mil kaput.
However, if you have millions in the bank and income of $400k per year, WTF is with a $2400.
per month mortgage payment?
My guess? Everybody’s fudging their books.
http://www.philly.com/philly/hp/news_update/20090122_West_Goshen_widow_s_riches-to-rags_story.html
No kidding. A mortgage and a car payment yet a multimillion $ net worth? No checking account balance or short-term savings? All her considerable nest egg invested with one private money manager? WTF?
The dollar vs. the British pound reach an exchange rate last seen in 1985.
Even gold has been pretty stable and oil is less than $40 barrel.
What exactly is the dollar depreciating against?
Yen.
This economic mess started with the housing market and likely won’t recover until the housing market recovers. Why can’t the banks/lenders drop mortgage rates to the 3.5% area, keeping them in line with the historical margin (1%) above the 10 year treasury? Maybe use some of the $350 billion+ bailout money to help subsidize it, if needed. Maybe get some useful help from the government.
If homeowners could refinance their mortgages and save hundreds of dollars every month on their payments it would have a much greater affect on the economy then a one-time check for $500 (which really does nothing), and it wouldn’t cost us taxpayers anything. If people saw rates at 3.5% and knew they were only going to be there for a few months to a year, I believe we would see people stampeding to buy houses.
The other thing that could/should be done regarding refinancing is figuring out a way to allow just about everyone to do it. No more Loan Modifications. Just let everyone get their payments to something they can afford and hopefully create extra income for most. Spending would pick up, saving many businesses, creating additional income and ultimately additional tax revenue.
Why wouldn’t this work? What am I missing?
So much for decoupling…
Property slump to aggravate Asian economic slowdown
Thu Jan 22, 2009 4:11am EST
By Susan Fenton - Analysis
HONG KONG (Reuters) - Slumping Asian property markets could intensify the region’s economic downturn this year, further undermining consumer and investor confidence and prompting homeowners to tighten spending.
Japan, Hong Kong, Singapore and New Zealand are already in recession, and data on Thursday showed activity in regional powerhouses China and South Korea is rapidly cooling as the full force of the global financial crisis hits home.
Goldman Sachs sees economic growth in Asia excluding Japan falling to 4.4 percent this year from an estimated 6.9 percent in 2008, but says the risk is to the downside.
“People are worried about losing their jobs and that the economy will get worse, so they are refraining from making very large investments,” said Michael Spencer, Deutsche Bank’s Asia economist.
Abu Dhabi throws a spanner in the works…
From The Times
January 22, 2009
Government prevented from taking Barclays stake by deal with Abu Dhabi
Barclays bank
Ian King and Patrick Hosking
A clause inserted during the Abu Dhabi Royal Family’s investment in Barclays last October has made it practically impossible for the Government to take a meaningful stake in the bank, The Times has learnt.
News of the clause is likely to reignite controversy over the way that Barclays raised the money — dubbed at the time by Vince Cable, Liberal Democrat Treasury spokesman, as “a scandal of mammoth proportions”. Barclays shares fell another 9 per cent yesterday, having collapsed by 35 per cent at one point, amid speculation that it is poised to raise more capital — either in the market or from the Government.
But the small print in the deal, in which Barclays raised £7.3 billion from Abu Dhabi and Qatar, means that if the bank raises fresh capital before the end of June, the Middle Eastern investors would receive a greater number of shares for their original investment without paying more. If Barclays were to raise fresh capital at last night’s closing price, for example, it would automatically hand almost 50 per cent of the bank to the Middle Eastern investors. The only way to get around the anti-dilution clause, should Barclays need more money before the end of June, would be if new capital was raised at more than the 153p-a-share at which paper issued to Abu Dhabi and Qatar is due to convert into Barclays stock.
This would mean that if the Government wanted to take a meaningful stake in the bank, it would have to do so by paying more than 153p for Barclays shares — which were trading at just 66.1p yesterday. The Treasury would face accusations of wasting taxpayers’ money were it to do this.
I wonder how long before that clause is changed?
Given how Third World countries have been expropriating in-country Western assets at will over the past several decades, it would be poetic justice if the Brits stuck it to the Arabs by nullifying that clause. It would teach Third Worlders that breaking promises is a two-way street.
More decoupling…
China’s GDP Grew 6.8% Last Quarter, Slowest Pace in Seven Years
Email | Print | A A A
By Kevin Hamlin and Li Yanping
Jan. 22 (Bloomberg) — China’s economy expanded at the slowest pace in seven years as the global recession dragged down exports, increasing pressure for more government spending and lower interest rates to buoy growth.
Gross domestic product grew 6.8 percent in the fourth quarter from a year earlier, after a 9 percent gain in the previous three months, the statistics bureau said in Beijing today. The figure matched the median estimate of 12 economists surveyed by Bloomberg News.
Plummeting Chinese demand for parts and materials for exports is reverberating across Asia and the Pacific, driving Taiwan, South Korea and Australia closer to recessions and worsening Japan’s slump. Premier Wen Jiabao said this week that the government must work urgently this quarter to reverse the slowdown and maintain social stability amid a “very grim” outlook for jobs.
“It’s an astonishingly steep slowdown,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. “We haven’t yet seen all of the pain.”
The yuan traded at 6.8360 against the dollar as of 4:47 p.m. in Shanghai from 6.8378 yesterday. The CSI 300 Index of stocks climbed 1.1 percent.
The central bank may cut the key one-year lending rate by as much as 81 basis points to 4.5 percent by the middle of the year, after 2.16 percentage points of reductions since September, Cavey said. Bank reserve requirements will also decline, he said.
Economic ‘Implosion’
The economy’s “implosion” poses a threat to the Communist Party’s rule and increases the likelihood that the government will devalue the yuan, prompting a trade war, according to Albert Edwards, a London-based global strategist for Societe Generale SA.
Industrial output grew 5.7 percent in December from a year earlier, today’s data showed, close to the weakest pace in almost a decade. Inflation cooled to 1.2 percent, the slowest in two years, giving more room for interest-rate cuts. Producer prices fell 1.1 percent.
“Korea’s exports fell 30pc in January compared to a year earlier. Exports have slumped 42pc in Taiwan and 27pc in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in shipments, led by steel, electronics and textiles.”
http://www.telegraph.co.uk/finance/4229198/Shipping-rates-hit-zero-as-trade-sinks.html
I don’t think there’s any way China can escape a contraction going forward. If their government is smart, it’s a good time for them to spend the dollars they’ve been hoarding.
If they sell dollars, the dollar devalues in relation to their currency. Dirving up the costs of their exports and making imports cheaper, further slowing their economy.
If they wait their dollar might be worth less or even worthless. Damned if you do, damned if you don’t.
But their energy usage was down.. what was it.. 12%? How are they using less energy? There were stories of striking taxi drivers because they’re pay was cut in half. Exports are way down. Imports are way down.
But somehow we’re expected to believe they had a 6+% GDP increase????
Some of that energy usage contraction was due to the shutdown of all industries within I don’t know how many miles of Beijing in order to improve the air quality for last summer’s Olympics.
Is there any government that doesn’t ‘massage’ it’s data?
Roubini Says China Is in Recession Despite ‘Massaged’ GDP Data
By Michael Patterson
Jan. 22 (Bloomberg) — China is in a recession despite government statistics today showing the world’s third-largest economy expanded in the fourth quarter from a year earlier, according to Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.
“China is in a recession regardless of what the highly massaged official numbers claim,” Roubini wrote in a note today on his Web site http://www.rgemonitor.com.
Roubini said China’s year-on-year economic growth figures are “highly misleading” because they fail to capture a sharp slowdown in output during the fourth quarter. Declining electricity output and contracting manufacturing suggest growth may have been negative, he wrote.
China’s gross domestic product grew 6.8 percent in the fourth quarter from a year earlier, after a 9 percent expansion in the previous three months, the statistics bureau said in Beijing today. The figure matched the median estimate of 12 economists surveyed by Bloomberg News.
Someone posted the other week that a potential 2009 Black Swan event would be negative growth in China.
Now, if so many think our gov’t fudges the numbers, what rationale is there to believe that they don’t?
Negative growth in China was a given in 2008 already. Ask the Australians.
Toys R Us death spiral.
I think someone here thought that the Olympics would be the high point for China and it would be all downhill from there.
I mentioned that, but I am not sure if I am the person you are crediting.
Was that you FPSS?
The reason people say that in China, anything less than 7% means negative growth is because the Chinese numbers are current year quarter on previous year quarter, rather than the G-7 standard, which is current quarter on previous quarter. Our numbers are G-7 standard - current quarter on previous quarter. Even if you believe China’s numbers to be true, if they used G7-equivalent numbers - the quarter-on-quarter growth would be negative. That’s right - negative. I suspect that the 6.8% 4Q08 on 4Q07 number reported might itself be a fib and in reality a negative number, which would plunge the G7-equivalent Chinese number deep into the red. Note that exports from Asian countries to China plunged plunged 20 to 40 per cent in December 08. These are big numbers.
I think credit card defaults will exceed the industries expectations in the coming years. The amount of people who switched to financing their ‘lifestyles’ once their HELOCS were no longer available is vastly underestimated…
American Express, Capital One Profits May Plummet on Bad Loans
By Hugh Son
Jan. 22 (Bloomberg) — American Express Co., the biggest U.S. credit-card company by purchases, and rival Capital One Financial Corp. may report that fourth-quarter profit declined as job losses caused more consumers to fall behind on payments.
Earnings from continuing operations at New York-based American Express probably plunged 73 percent to $227.7 million, according to 14 analysts surveyed by Bloomberg. Capital One, the McLean, Virginia-based lender reporting results later today, may say that profit fell 23 percent to $172.8 million.
American Express results are under “severe pressure” because of “accelerating credit and charge losses” Richard Shane, an analyst at Jefferies & Co. in San Francisco, said yesterday in a research note. Capital One has “no relief in sight” from rising losses, he said.
Consumers are struggling to pay their bills as the U.S. recession deepens, resulting in surging losses for American Express and Capital One. The two firms had to seek about $7 billion from the Treasury last year to ensure their survival. Unemployment climbed to 7.2 percent in December, the highest level in almost 16 years, and companies slashed payrolls by almost 2.6 million in 2008, according to the Labor Department.
Credit-card losses are “poised to get ugly” for American Express, said Shane, who boosted his estimate for charge offs this year to 9 percent from 7.9 percent. Growth in spending will rise 2 percent, compared with his previous 8 percent estimate. American Express reports fourth-quarter results Jan. 26.
American Express rose $1.27, or 8.1 percent, to $16.87 yesterday in New York trading, and has declined 61 percent in the past year. Capital One rose 4 cents to $22.96 yesterday and lost about 42 percent in a year.
Record Defaults
Defaults will probably set records this year as more delinquent accounts are turning into losses for credit-card companies, Fitch Ratings said in a November report.
Lenders are closing unused accounts and scaling back credit lines to insulate against further losses as the Federal Reserve approved rules last month to curtail interest-rate increases on current balances.
Card issuers, along with securities firms including Goldman Sachs Group Inc., insurers like Hartford Financial Services Group Inc. and commercial lender CIT Group Inc., sought status as bank holding companies to tap the government’s rescue fund.
“The amount of people who switched to financing their ‘lifestyles’ once their HELOCS were no longer available is vastly underestimated… ”
Credit cards are the last debt refuge for many people. What will they do when their credit cards are pried from their cold, stiff fingers?
“What will they do when their credit cards are pried from their cold, stiff fingers?”
Hold up “Will Work For Food” cardboard signs along the roadside.
“Lenders are closing unused accounts and scaling back credit lines to insulate against furthur losses …”
Meanwhile lenders are readily accepting monthly payments for loans already made. This taking-in-but-not-lending-out of money by lenders act to suck money out of circulation, making money scarce thus more valuable.
Cash rules.
I haven’t had accounts closed, just made “unusable” by having the rate increased from 10-12% to 25.99%.
Capital One has “no relief in sight” from rising losses, he said.
What’s in your balance sheet?
Ha ha!
So, a question…if you had a load of money parked in a 401k mmkt fund, and you knew hyperinflation was imminent, what do you do? Would reallocating into stock funds at least inflate along with the currency?
I can’t get out of this thing unless I lose my job..
How would you know inflation is imminant?
I too have 401(k) with limited investment options.
The problem with inflation in this cycle is that there will be no wage increases. Quite the contrary, every story I read on employment talks of layoffs, wage cuts, manditory timeoff without pay, reduced benefits, etc.
So, ANY inflation immediatly cuts demand for products.
1) I don’t see how inflation can take hold in that environment.
2) If is does, then corporations will see drastically falling revenue and profts, meaning stocks will get pounded anyway.
In the inflationary environment we’d be talking about, the only escape is to be in one of the foreign currencies that we’d be inflating against. So, perhaps a EuroPac fund???? Except that too is a stock fund, and if our currency is deflating, then it will KILL Asian profits as they won’t be able to sell to us.
In short, I don’t think there is much chance of avoiding loss to deflation in most 401(k) plans.
My plan does have a brokerage option with what I think are pretty high fees. However, atleast I can get into more specific stocks, like gold, oil and commodity stocks which should do well in an inflationary market.
Darrell,
Do you hate 401(k) bullsh1t. I do.
I wouldn’t mind seeing the current 401(k) set up and red tape get worked over. Returns come from good asset allocation desicions. Stock picking funds don’t get you anything compared to good asset allocations.
My wife’s plan is great. 50% match upto 4%, with DOZENS and dozens of options.
I liked my last one, since it had an “all treasuries” which morphed into an “all government” and started picking up freddie and fannie bonds after 10-year went under 3% and government began direct injections into the GSEs.
New plan offers me a money market with 70% corporate bonds… Or a bond option leveraged up against mortgage debt.
I think I’m going to eat the stupid fees, and move to the brokerage account…. $75 a year just to have the account, and $25-35 per trade.
A brokerage account must have a money market account (although I’d be careful here depending on the brokerage.) Can you move it all into cash until you think it’s time to buy then move back into the fee-free funds option?
“The problem with inflation in this cycle is that there will be no wage increases.”
Exactly, the lesson of the seventies that today’s youth can’t fathom.
In the early 80’s bank CD rates topped 20%.
Of course, that was when banks needed customer’s money. Now they just dial up the Sec of Treas and ask for a few million of that TARP money.
401K has been one of the worst financial mistakes of my life (well not nearly as bad as the marriage thing). The $$ I saved in taxes has long been dwarfed by the compensation scheme for the fund managers. And yes, trapped until you loose your job or age 59.5. One bright spot is the gov’t guarantee on mmkt funds (for now).
That said, fine to consider your options, but taking a defensive position against hyperinflation (and the associated risk of further stock market declines) in the midst of the largest contraction of credit & wealth in your life seems ill timed.
Those of us old enough to remember the 70s have an intuitive feel for inflation - we know what it looks like, what it feels like, and what to do about it. Even when most indicators point to deflation, we worry more about inflation.
My biggest fear is a whipsaw: a year of severe deflation, followed by a huge inflationary spike. Or vice versa. All that painful suffering to stock up on dollars, just to be wiped out, or rushing back into the market in order to find value for inflated dollars, only to have a second deflationary crisis.
Xenos,
I’m with you. As less gets imported, less manufactured, less produced, will the supply side shrink. Too few goods for too many people?
But on the other hand, was 80% of supply side just useless, garbage anyway and the true essentials will still be supplied in great quantity?
what? I can withdraw at 59.5 even without losing the job? I know that’s true for IRA. Losing the job you can withdraw at 55 IIRC.
that last refers to 401k. If Congress has changed the rules again, that’s great..
I think you can withdraw $ now, but you pay full income taxes plus 10% penalty, which can easily add up to about 50%. What you can’t do is roll your account over into a personal IRA. If I am wrong about this, please correct me.
I may not be up to date here, but the rule was that you can roll over to a “roll-over” IRA if you lose or leave your job. If you get a new job you can transfer the 401(k) to your new employer’s plan, or you can roll over the roll-over IRA to your new plan, or leave the 401(k) at your old employer, or leave the roll-over IRA alone.
The most sensible approach was to set up a self directed IRA and roll over all 401(k) funds into it whenever you change jobs. It has been nearly a decade since I was licensed to give advice on the subject, so talk to a pro if you are making a change.
As far as I know I can’t access the 401k money at all until this job ends. Not even borrowing is allowed. If I did leave of course I would roll it over to my own IRA. I wasn’t planning to use either my IRA or 401k unless I was forced into early “retirement.”
There is no Treasury or TIPS options in our plan..
I can withdraw any amount from my 401(k) after age 59.5 while I’m still in the same job, and I believe a lot of other plans have that feature also.
401k=wall street scam.
TIPS.
TIPS is based on official government CPI though, is it not? Not real inflation.
OK I know everyone hates 401k’s, so do I. I’m still wondering what I would do in a hypothetical hyper-inflationary environment. I’m not saying that will happen. Just wondering. It’s like when you make sure you know where the exits are, in case of fire. Would stocks inflate right along with the currency?
Hoz,
Is this the BOJ printing cash story you were afraid of?
http://www.cnbc.com/id/28784721
“The Bank of Japan said it would buy corporate bonds to ease an increasingly severe funding squeeze and warned the country faced two years of deflation, as the global crisis sends exports plunging. “
But aren’t we in the midst of hyperinflation, as we are often told here? Pay no attention to the zero interest rates, or crashing RE prices, or oil at half what it was a few months ago.
IMO, what gets missed in the inflation debate is this; sure, central banks want to inflate, but deflation isn’t a choice. It’s forced on the economy.
Last year our friend nhz posted the sarcastic question: “Where have all the deflationists gone?”
Proof again that popular opinion does not alter reality.
I was an inflationist, until I saw the effect the “stimulus” had on the country last spring/summer. Too many people saved it or used it to pay down debt.
When new data becomes available, I change my opinion.
Now we’re in full debt collapse mode.
Reiterating a point I made about a week ago - it seems clear to me that we need to differentiate between money supply inflation vs. price inflation.
Right now we are obviously seeing price deflation - anyone who disagrees I think is basing that on anecdotal evidence and ignoring the reams of clear macro evidence.
However I think we’re also seeing quite severe money supply inflation. I’m no expert on the subject - but that’s what I see as inevitable from all the bailout and stimulus money, and is borne out by the published money supply numbers (questionable as they may be).
In a “normal” economy - money supply inflation and price inflation are somewhat tied, because additional money pumped into the system gets filtered throughout and leads to higher prices. However we’re not in a normal economy right now. The money is being pumped in, but rather than being spent - leading to higher prices - it’s being saved (hoarded if you will), both by the banks (TARP money etc.) and by consumers (just not spending as much as they otherwise would).
If/when we return to a “normal” economy and the money that’s being saved/hoarded starts to flow again - that’s when we’ll start to see the real price inflation. Whether that ends up being just “high” inflation (less than 20% lets say) vs. “hyper” inflation is anybody’s guess. That most likely depends on other countries’ policies towards U.S. debt - whether or not they’re willing to keep buying it or not, and upon our government expenditures going forward.
To add to that - I also made the point recently that we actually have been having high inflation the last couple of years - primarily in real estate of course. This isn’t reflected in the CPI numbers. During all that time, we actually had a money supply expansion, in the form of tons of new loans (since debt = money).
Right now what we’re seeing is mortgage loan debt (money) being replaced by government and federal reserve debt (money). We’re seeing money supply contraction in one area, and expansion in the other. Again though - that money supply expansion isn’t leading to price increases since it’s being saved.
Later when that money does make its way out into the system, we’ll be exchanging the previous house price inflation for the new everything-else inflation.
Or heck maybe some new bubble will come along that will inflate instead, though I can’t think of what. Commodities is not a viable replacement because the average Joe can’t margin it like they can houses or stocks, and there have to be loans (e.g. margin) in order for this money supply to be maintained. Maybe another stock bubble is coming?
packman,
I follow what you are saying, but if you change your definition of money, the conclusion changes. If you count also money owed, the total becomes many multiples of the tangible. The owed money is going to the vapors. Do you consider yourself poorer when money you lend doesn’t get paid back?
Money owed is indeed money. E.g. see Wikipedia entry for “money creation”, and the video “money as debt”, etc. (I won’t link since it takes forever for links to show up).
If I, as a private individual lender (investor) lend money and it is not paid back - indeed I am poorer if I don’t get paid back. However that money is not gone - it’s only been shifted from me to whoever I loaned it to, who presumably spent it and it’s out there in the economy. So there’s a net of 0 regarding money creation or destruction.
However that’s not the case for banks. Due to the fractional reserve banking system - money that’s not paid back does make the lender poorer - but only by a minute fraction of the money created! That’s the key.
Well - kind of. In reality the entire loss has to be realized against the bank’s balance sheet. But what happens if the bank fails? Then the balance sheet doesn’t matter. Everyone who invested in the bank just doesn’t get their money back. They do lose their money - this is money that’s destroyed. The key is though that it’s still just a fraction of the money that was created! So the net end is not 0; it is money creation.
That’s what a lot of people don’t seem to get. All this deleveraging that’s happening right now via write-offs is indeed destroying money - but it’s only a small fraction of the money that was created in the first place. In the end when all the deleveraging is done - there will still be a lot more money in the system than there was when we started. Thus - money supply inflation. That’s true even with no government bailouts - it’s even more true when new money is being created on the back end - via new Fed and foreign lending - trying to stem the tide of money destruction, as is happening now.
All the deflationist are vacationing in Great Britain right now that the exchange rate has reached a record low not seen since Reagan was in office.
This summer the deflationist will be vacationing in Russian.
The GBP only has one place to go. DOWN.
The UK does not produce many tangible goods and services that the world needs. This financial bubble was their last hurrah.
They have serious trouble ahead.
I’ll be doing my part to save them tomorrow, when I go to town and buy a bottle of Glenlivet.
And I, for my part, ordered a buncha DVD’s, music CD’s and books from the UK but I don’t think that’s gonna plug the dike.
I’m looking forward to whisky prices falling. Hmmmm….
They were built on financials, real estate and tech. Wikipedia also notes manufacturing, pharma and tourism.
Now that the empire has long ago collapsed, they don’t have much going for them other than exploiting their educated labor pool.
I’m looking forward to whisky prices falling. Hmmmm….
Did Kentucky move?
Kentucky does not make Edradour.
I like my bourbons too. I’m equal-opportunity in all the dissolute aspects of life. LOL
RE: The UK does not produce many tangible goods and services that the world needs. This financial bubble was their last hurrah.
They have pretty decent “squatters laws” though…
http://www.thesun.co.uk/sol/homepage/news/article2158953.ece
I’m looking forward to whisky prices falling. Hmmmm….
Did Kentucky move?
Corn prices are down along with lumber.
I don’t remember posting that question … but I can understand some people in the US are talking deflation now.
However, in Europe and most of the developed world there is NO sign of deflation. Wages are increasing at the highest rate in 10-20 years here, up 3-6% while CPI is in the 1.5-3% range. In Netherlands, last months home prices were up again (+2% or so). With mortgage rates declining again as a result of ECB action (rates around 4% for a 5-10 year fixed now) I don’t expect strong price declines in the near future.
In most of EU mainland home prices are pretty stable, the fallout is in UK/Ireland, ClubMed and the Baltics and other new EU memberstates (the housing crash could move inwards, but that remains to be seen with the current extremely low rates).
CPI is Europe is still positive (current average 1.6%) and I don’t think it will fall below zero - although according to a poll this week a significant percentage of Dutch consumers expect strongly falling retail prices this year (maybe that is a contra-indicator, like optimism of the small investors always indicates a market top).
Don’t know details about UK, but there is no question that they will have serious inflation trouble for many items that they have to import now the Pound has been plunging. Of course, UK homeprices are going down but I doubt if affordibility is getting any better …
P.S.: euro gold price is hovering about 1% below its all time high lately. Doesn’t look like deflation to me, not even from a distance …
once the current US$ deleverage spike ends, things will start to look similar in the US.
nhz, if it wasn’t you I apologize. The who part wasn’t really my point.
It is interesting that when the inputs (metals, energy) drop drastically that prices of manufactured things do not immediately follow.
Blue Skye:
no problem
it’s just a bit surprising to me to hear all this deflation talk from the US, while there is no sign of deflation on the other side of the globalised economy …
NHZ, Way off topic and sorry but do you know of any websites where I can get an AZ Alkmaar jersey and shipped over to the US? I came over as a teenager many years ago during the summer and trained and played at their academy. Since they are doing so well and I’ve been telling my kids about it (leaving out the drinking and trips to Amsterdam parts
, I’d love to get a jersey or 2 but soccer dot com and other sites I’ve been able to find don’t carry AZ stuff.
realestateskeptic,
I’m not a soccer fan (yeah, unlikely in this country …) so I know very little about this kind of stuff. You could try the official site at http://www.az.nl/webshop (you will need some Dutch to navigate, and don’t know if they ship overseas).
“oil at half ” I think you mean, less than a third.
This is where the debate gets interesting. Hoz seems to maintain an undying faith that the Fed can reflate at will. I have my doubts, given what has happened thus far in the credit bust and given the way the Japanese “lost decade” (now in decade number two) played out. Does the Fed have some magic financial alchemy that the Japanese lacked?
If anything, it should have been easier for Japan. The rest of the world was “okay’ so they had control of their exchange rates. Now, the entire world is in a race to the bottom, giving each little to no control over the value of their currency.
I have always been on the deflationist side.
I even posted my calculations a few days ago. The $2T is a drop in the bucket they need to print to become inflationary.
Try 25x that number and then we would be in the ballpark.
Can they do it in theory? SURE.
My doubts are on the practice.
FPSS, thanks for sharing that calculation the other day; it was sobering to be sure.
I do think that assuming $100K in house appreciation for every household in the US is too high (considering that in fly-over country it was more like 60K -> 95K in many places, or even flat in places that should have been depreciating), but regardless your point is totally valid.
The numbers are staggering when you think about the appreciation on a global basis.
Just do a rough calculation for CA, FL, NY, NJ, CT and IL (most populous states with largest bubbles.)
You’ll find that the $100K “overall” number is rather conservative.
It takes serious credit firepower to make these things happen. Truly, the system has h*mped the p00ch on this one.
Hoz talks about reflating, which does make sense and I can see happen, or at least attempted.
But combo also talks about all the cash disappearing via elimination of MEW’s, credit card lines and the like, and his points make sense too.
Therefore, could it end up being some kind of wash, thus keeping things deflationary overall as they seem to be now??
I think Stagflation wins, wages go down and taxes go up.
In other words a lower standard of living.
The dollar that is another question ? Will it crash some time in the future ?
I also was an inflationist last year but changed my mind. Sold my oil and gas mutual fund in the nick of time !!
RE: I think Stagflation wins, wages go down and taxes go up. In other words a lower standard of living.
Here is Mazzland, there is a bill before the legislature allowing cash strapped municipals to not only up the meals and lodging taxes, but also to raise funds via a new property tax on utility poles.
Hey, we’re just getting started here!
Change has come!
Utility poles??? Boy, that’s some pretty creative thinking there. What’s next, fenceposts???
I think Stagflation wins, wages go down and taxes go up.
In other words a lower standard of living.
Does raising taxes get added into the CPI or inflation statistics?
Massive oversupply. Crashing demand. How can that possibly be inflationary?
Oh, the government is going to print trillions of dollars and just hand it out to people. Okay, but there is $25 trillion in consumer and business debt. Last spring/summer shows that if we hand out big chunks of money, people will just put it in the bank or use it to pay down debt. That does not stimulate demand.
Okay…. maybe we get inflation because all the foreigners start selling their dollars killing us on the international exchange markets.
Okay…. Well, we don’t have any money, so we’re not going to buy anything not made in America if the price doubles. So, a few of our factories start back up making a few things…. but we don’t create jobs this way NEARLY as fast as we’ll be losing them in retail, finaicial, consturction, services, etc. So, demand just crashes all the faster.
My largest costs, by far, are my house payment, debt payments (all fixed rates), food, utilities, insurance, healthcare… NONE of these are all that affected by international exchange rates. I’m 7 miles to work and could ride a bike if I had to. My electircity mostly comes from Nuke.
I’m just not that afraid of inflation.
I have a question…are massive amounts of capital spent on Ponzi schemes and other fraud deflationary for the economy or neutral?
That money didn’t wink out of existence…it was merely redistributed. I suspect neutral, as M1 is stable but M2 would shrink (unless you count cancelled debts for victims). Thoughts?
“Last spring/summer shows that if we hand out big chunks of money, people will just put it in the bank or use it to pay down debt.”
Last spring/summer was a WARMUP to the main event! How much MORE likely are people to save that money now than they were then, considering that now almost everyone knows someone who has lost their job recently, and many are wondering how long it will be until they lose theirs?
Handing out money as stimulus only works when people are optimistic about the future.
Another view of the Messiah from The Telegraph, (UK):
Barack Obama inauguration: this Emperor has no clothes, it will all end in tears .
By: Gerald Warner Jan 20, 2009
This will end in tears. The Obama hysteria is not merely embarrassing to witness, it is itself contributory to the scale of the disaster that is coming. What we are experiencing, in the deepening days of a global depression, is the desperate suspension of disbelief by people of intelligence - la trahison des clercs - in a pathetic effort to hypnotise themselves into the delusion that it will be all right on the night. It will not be all right.
We have been here before. In the spring of 1997, to be precise, when a charismatic, young prime minister entered Downing Street, cheered by children bussed in for the occasion waving plastic Union Jacks. A very few of us at that time incurred searing reproaches for denouncing the Great Charlatan (as I have always denominated Tony Blair) and dissenting from the public hysteria. Three times a deluded Britain elected that transparent fraud. Yesterday, when national bankruptcy became a formal reality, we reaped the bitter harvest of the Blair/Brown imposture.
The burnt child, contrary to conventional wisdom, does not fear the fire. After the Blair experience there is no excuse for anybody in Britain falling for Obama. Yet today, in this country, even some of those who remained sane during the emotional spasm of the Diana aberration are pumping the air for Princess Barack. At a time of gross economic and geopolitical instability throughout the Western world, this is beyond irresponsibility.
To anyone who kept his head, the string of Christmas cracker mottoes booming through the public address system on Washington’s National Mall can only excite scepticism. It is crucial to recall the reality that lies behind the rhetoric. Denouncing “those who seek to advance their aims by inducing terror and slaughtering innocents” comes ill from a man whose flagship legislation, the Freedom of Choice Act, will impose abortion, including partial-birth abortion, on every state in the Union. It seems the era of Hope is to be inaugurated with a slaughter of the innocents.
Obama’s American Recovery and Reinvestment Plan is like one of those toxic packages traded by bankers: it camouflages many unaffordable gifts to his client state. With a federal deficit already at $1.2 trillion, Obama wants to squander $825 billion (which will undoubtedly mushroom to more than $1 trillion) on creating 600,000 more government jobs and a further 459,000 in “green energy” (useless wind turbines and other Heath-Robinson contraptions favoured by Beltway environmentalists).
It is frightening to think there is a real possibility that the entire world economy could go into complete meltdown and famine kill millions. Yet Western - and British - commentators are cocooned in a warm comfort zone of infatuation with America’s answer to Neil Kinnock. We should be long past applauding politicians of any hue: they got us into this mess. The best deserve a probationary opportunity to prove themselves, the worst should be in jail.
It is questionable whether the present political system can survive the coming crisis. Whatever the solution, teenage swooning sentimentality over a celebrity cult has no part in it. The most powerful nation on earth is confronting its worst economic crisis under the leadership of its most extremely liberal politician, who has virtually no experience of federal politics. That is not an opportunity but a catastrophe.
These are frank, even ungracious, words: they have the one merit that, unlike almost everything else written today about Obama, they will not require to be eaten in the future.
This guy seriously needs to get laid.
What a waste of trees.
Hahahahahaah! Testify!
“It seems the era of Hope is to be inaugurated with a slaughter of the innocents.”
I stopped reading at this point.
+1
BORING. NEXT.
I agree with his opening, it’s a euphoria of hope and illusion, but I agree, darrell_in_phx, he lost me on the coupling of abortion.
At least I respect “O’s”intelligence and he is a great motivational speaker.If he can give us some respect for the presidency again, I’ll be ok with that.
“great motivational speaker…”
As I put it recently, “He gives great teleprompter.”
(ok, semi-stolen from a friend who used to say that someone “gives great Powerpoint”.
E.g. great with canned/prepared material. No necessarily a great speaker on an ad hoc basic.
In agreement with Muir here. The excitement about Obama is that he may actually take on some of the serious, structural problems this country has. After decades of BS being shoveled at us, people are thrilled that there is a chance some progress will be made. Expectations for actual, dramatic, and immediate improvements are pretty low.
The whole Obama-Messiah shtick is just an attack on a straw man.
“just an attack on a straw man”
I see it as mocking not the man, but the manic expectations of the mob.
Blue,
I’ll tell you a little story I’ve never told here.
I’ve got a relative that was a the board of Enron.
Relative was also head of Chase private banking for wealth accounts. (I’ve said too much and wont say more)
The idea, just the idea, that these institutions were the “victims” of any government (cue CRA) or any political party, is ludicrous.
It drive me batty to hear people in this blog, who are otherwise intelligent, fall for this. It matters not to these people which political party is in.
When NAFTA was signed, were not all the past presidents standing together in support, both Democrats and Republicans?
Another example:
Clinton is blamed for repealing Glass-Steagall Act.
Yet from wiki: “Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm-Leach-Bliley Act, which passed the U.S. Senate in one form on a party-line vote of 54 (53 Republicans and 1 Democrat) to 44 (all Democrats) and on a 343-86 vote in a different form in the House of Representatives.”
Signed by Clinton, voted party line in the Senate by Republicans.
There are so many examples related with deregulation.
Yet, day before yesterday, I swear I heard somebody say in CNN that “Greed is a fundamental dynamic that is good for the economy.”
So, I’m left quoting movie titles. Which I’ll do later but is less silly than this stupid article.
I’ve got a relative that was a the board of Enron.
Dang, I thought you were gonna spill some dirt about our former leader, The Most Vacationin’ President Ever.
Well, we have that in common; my great uncle was a VP over at Chase.
I never cease to marvel at the credit everyone in the world gives to the CIC for the laws that come out of our Congress.
I’ve had my time in corporate management. The numbers were all in millions. Spent most of the time in meetings, socializing or writing a report. I depended on my staff tremendously to give me the distilled summary of what was going on. Sure, sometimes I could go turn rocks over, but couldn’t focus everywhere.
Multiply that times a million to get a trillion (US economy). The Pres is mostly just along for the “Head of State” ride IMO. The congress people are in charge of the details and we have pretty much had the same crowd through all the presidents in living memory, and they are pretty much incenitized by the same bankers as a generation ago.
When NAFTA was signed, were not all the past presidents standing together in support, both Democrats and Republicans?
The term “bipartisan” usually means some larger-than-usual
government deception is taking place.
–George Carlin
“” I see it as mocking not the man, but the manic expectations of the mob.”"
The bar has been set so low by the last president that what you see as manic expectations of the mob is really just the hope that the next president actually thinks about and debates the issues. A president that won’t tar and feather anyone who objects to or argues against his actions. One to uses diplomacy rather than the middle finger when dealing with the rest of the world. The hope that he will actually create an energy policy that will reduce our dependance on foreign oil, that understands that oil finances Russia, Iran, Saudi Arabia, Venezuela ect.
We’ll see if this holds true, but I guarantee he can’t be worse than GeeeW
One to uses diplomacy rather than the middle finger when dealing with the rest of the world.
This is my hope with BO. I think its the one thing on your list that might reasonably happen. If everything else stays the same this one measure would be an improvement. Good start today closing gitmo, hopefully its not a token gesture.
Actually I have one other hope, that we see 920 just one more time…
Yes, we plan to talk and negotiate and ingratiate ourselves with people who have already said they won’t talk to us until we surrender our positions. We intend to consult and strategize with paper allies who will support no actions (because anything that is worth supporting requires effort on their part.)
But at least all the cool sophisticated countries will welcome us back into the clubhouse, and stop insulting us in public. They’ll still whisper about us, of course, but that won’t bother those here in the U.S. who were bothered about being ostracized: they spend most of their time whispering the same things (only louder) and so won’t even hear it.
Reading Gerald Warner’s comments on Obama is like listening to a good Father speak to his son on the morning after the Prom! And it is very much this dose of reality that Obamamania needs right now.
Barack Obama is one man. And he is and will be limited in what he can do.
When one of my dear liberal friends said to me, on the day after the Federal Election, “now you know how I felt eight years ago”. To which I replied, “what do you mean, Ron”? And he said, “I was so full of despair and worry for our Country when George Bush was elected”. To which I replied, “you see Ron, that is the difference between you and me. You believe that one man can change the economy and control my life. I do not. Actually, I felt fine the morning after the election, because I believe that I will be responsible for finding solutions to my own problems, not Barack Obama.”
Excellent post.
And besides, Rahm’s the one to watch.
As Cheney, Addington, Yoo, Negroponte, Wolfowitz, Goss, Paulson et al were the ones to watch in recent years.
No, Shane doesn’t get it, I’m afraid. Neither do his friends, I guess.
Shrug.
Let’s not forget Libby, Gonzales, etc..
I really get a laugh out of those comments, that Obama is going to be any more or less sucessful than previous presidents.
Anyone with half a brain, who has actually read the definitions of the three branches of our government can surmise, that the President alone really can’t do much.
The President proposes,
The Congress votes up or dowen on those proposals,
The President signs into law, The Supreme Court Validates or dismisses the law.
Now, NAFTA, Chinas trade status, are treaties…must be ratified by Congress.
Federal banking regulations are derived under Congressionally passed laws…administration.
The budget is proposed by the President and passed by Congress.
How can anyone with intelligence state, that this president is going to fix this mess. The real culprits of this economic mess, reside in the Congress. Let it be said, that the American people got rid of an ineffective president, but left in place a bunch of bumbling idiots in Congress.
Nothings going to change!
The president has some not so trivial powers. They are known as Executive Orders and have the force of law.
The president is also the day-to-day boss of most federal regulatory agencies. I understand they have a little bit of influence as well.
Don’t discount that Obama won’t be spending more money on unnecessary wars or cutting taxes in times of record profits.
Responsible stewardship (all things considered) and responsiveness in government will help set the tone for the states and business community as well.
I believe it is congress that cut the taxes, no? It really irks me that people attribute so much to the president that is Congress’ doing, and their power under the constitution (not saying that income tax is constitutional…don’t want to open that can of worms
Congress cut the taxes under the vice president’s ‘leadership’ (2000-2006 was a “rubber stamp” Congress), and the president signed the tax cuts into law.
They do work together. The party of fiscal responsibility created legislation diametrically opposed to that philosophy in order to honor their party chief’s every wish, and he signed it. We have to live with that now.
The party of fiscal responsibility created legislation diametrically opposed to that philosophy in order to honor their party chief’s every wish, and he signed it. We have to live with that now.
Exactly.
The party of fiscal responsibility created legislation diametrically opposed to that philosophy in order to honor their party chief’s every wish, and he signed it.
How do they retain the title of “party of fiscal responsibility”? Seems we have none of those…except maybe for the next HBB meetup.
I believe it is congress that cut the taxes, no? And congress gave bush the power to go to war.
It really irks me that people attribute so much to the president that is Congress’ doing, and their power under the constitution (not saying that income tax is constitutional…don’t want to open that can of worms
Eeek, sorry for the double post. Stupid internet connection.
“I was so full of despair and worry for our Country when George Bush was elected”.
I am a social liberal and a fiscal conservative.
When Bush was re-elected in ‘04 with a Republican majority in congress, I said, to anyone who would listen,
“Things are now going to get much better, or the GOP is going to be devastated”
the thing that was miserable under W is that those worries came true…
Was this meant as an art piece or a commentary on drug usuage? I found no substance.
Tim,
Consider it substance abusage.
“will impose abortion” ????
“Christmas cracker mottoes”: did not hear these so much…
“Western … commentators are cocooned in a warm comfort zone of infatuation” Not true for German media. They lived up to their famous pessimism, already on inauguration day, by helpfully declaring that he will fail.
That author will not be added to the ‘have to read’ list.
And so for those who want to try to prop up housing prices and builders, what does this do the median income/cost of housing ratio going forward?
Pay freezes spread during brutal recession
Thursday January 22, 7:11 am ET
By Jeannine Aversa, AP Economics Writer
More employers freezing pay because of recession - even the White House
WASHINGTON (AP) — What do Tropicana Casino and Resort, Avis and the White House now have in common? They’re all freezing the pay of some of their workers. It’s part of a growing trend by employers facing the fallout — economic and political — from a brutal recession.
For companies, pay freezes are a key cost-cutting tool for surviving hard times.
For President Barack Obama, who ordered a pay freeze for White House employees earning over $100,000 a year, the move on his first full day in office sent a message to a nervous country: We’re in this together.
“During this period of economic emergency,” Obama said, “families are tightening their belts, and so should Washington.”
The unemployment rate has bolted to a 16-year high of 7.2 percent. Last year, 2.6 million jobs vanished, the most since World War II. The jobless rate is expected to march upward and layoffs to pile up even with a multibillion-dollar stimulus package being crafted by Obama and Congress.
More squeezed employers, though, are seeking an alternative to layoffs. They’re turning to pay freezes, pay reductions and other cost-cutting options, such as ending their contributions to 401(k) accounts.
“All of that hurts, but nothing hurts more than losing a job,” said Allen Sinai, chief global economist at Decision Economics Inc. “It is a growing trend as companies try to cut costs. Going forward, we will see more of this, absolutely.”
The Federal Reserve has taken notice. In a recent survey of economic conditions, it observed that in some parts of the country, companies were resorting to “pay freezes or reductions in compensation”.
If he gets congress to freeze their pay, now that would be an accomplishment.
Pay freezes, they’ll work only in the short run. Worker disatisfaction will rise, sicktime will rise, those capable enough will move on. A pay freeze is just another form of price control, and as such will fail.
“A pay freeze is just another form of price control, and as such will fail”.
Cap & trade, price controls are on deck, and as you state, will fail, always have nothing new this go round.
The question on the pay freeze should be how much of a raise did those people get last year(which was only a few weeks ago)?
Highly inflationary.
Lol.
I was informed we have a pay freeze where I work.
Great, I said, my real wages will go up this year, rather than down like last year.
Others, of course, are having pay cuts. That’s one thing that is “different this time.” Long term, with an aging population, businesses don’t want to lose workers, so they are cutting wages and hours and not just heads.
No, they are doing both.
They are laying off workers by the thousands and freezing the wages of the rest.
Oops. dislexic today. Missed the last part of the last sentence.
“I was informed we have a pay freeze where I work.”
Pay freezes were announced at my work recently as well.
Now I’m just waiting to hear that there will be no bonuses this year either (my expectation); bonuses are a non-trivial component of pay here (about 10-15%).
No bonus is essentially an across-the-board pay cut.
Whiff of deflation?
Well now, starts and permits miss expectations by ~50k each. New jobless claims also up about ~50k more than expected.
Well now, starts and permits miss expectations by ~50k each. New jobless claims also up about ~50k more than expected
Yeah, but new housing starts were up 12% in the Northeast… WTF. Just reinforces my belief that prices still have a long way to fall in the Northeast in general and Massachusetts in particular. If builders are still building here, then there is still profit to be had and that means prices can and will go lower…
A fitting epitaph for the Times
…”be it citizen, bank or state, the more cheap money they got, the more cheap money they squandered”.
Here lie a few of our Dearly Beloved Friends, Housing Toast, Mortgage Madness and Depleted Tax Revenue.
Amen
Funny he says this, as last I checked, home prices were falling at the fastest rate in history against a worsening foreclosure glut and increasing rate of job loss — hardly the conditions under which one expects housing to bottom out…
MICROSOFT TO CUT UP TO 5,000 JOBS; CEO BALLMER: ‘WE ARE NOT IMMUNE’ TO ECONOMY
Irwin Kellner
IRWIN KELLNER
The end is near
Commentary: Could the economy be fixing itself?
By Irwin Kellner, MarketWatch
Last update: 5:56 a.m. EST Jan. 22, 2009
PORT WASHINGTON, N.Y. (MarketWatch) — And now for some good news: The mother of all housing corrections appears to be nearing an end.
“The end is near”
Albeit he may have a point there…
The light in the tunnel kind of end.
Yeah, the “correction” is over. Let the capitulation begin.
Bingo! That’s what Irwin doesn’t perceive — we aren’t out of the woods until capitulation happens, and it hasn’t (at least in our local market). However, the recent uptick in sales at 50 pct off peak prices may herald the onset of capitulation; eventually sellers who have been holding out for a return to bubble pricing will throw in the towel and add their homes to the inventory pyre.
Cramer said on MSNBC last night that two places where housing purchases are picking up is California’s Inland Empire and West Coast of Florida. He said prices there had fallen 45-50%, while average for rest of the country is 18%. Don’t know if these figures are accurate or where he got them. Regarding the supposed uptick in CA and FL, I would like to know who is buying and if these are cash purchases or mortgages, since banks are not lending.
He’s a little late to the party. He should stick to enticing desparate wannabe early retirees to lose more money in Tech.
He’s been telling Cramerica to buy stocks for dividends, and now dividends are being cut. Oh, the humanity!!!
Plus I find his countdown to the housing bottom (160 days now I think) quite annoying.
I have a friend who had a house in Florida under contract in ‘05 for $405,000. The contract fell through. 3 1/2 years later, the house is in short sale for $95,000. They bought the house in ‘00 for $109,000.
This is a mile from the beach. I’m thinking of moving to florida.
That’s great if you don’t have a house to sell, have a sizeable down payment, and don’t need a job in Florida.
If I recall correctly, Irwin Kellner lost a substantial amount of his wealth in the Bernie Madoff ponzi debacle.
So did Zsa Zsa Gabor and her German aristocrat ‘rainbow press fodder’ husband. Mr. Madoff has made himself quite an enemy.
ECONOMIC REPORT
Housing starts plunge to another record low
Home construction falls 33% in 2008 to lowest level in at least 50 years
By Rex Nutting, MarketWatch
Last update: 8:56 a.m. EST Jan. 22, 2009
WASHINGTON (MarketWatch) — Construction on new homes took another turn for the worse in December, falling more than 15% to a seasonally adjusted annual rate of 550,000, the lowest on record, the Commerce Department reported Thursday.
Permits to build single-family homes fell 12.3% to a record-low 363,000 in December, while total permits including apartments dropped 10.7% to a 549,000 annual rate, also a record low. Building permits are considered a more reliable guide to the state of the housing market, because they are less affected by weather conditions than the housing starts figures.
Well, a few years of that will clear to glut eventually.
This is the result of all those years of excess production. It used to be an average year was 1.5 million, a weak year 1 million. But all those 2 millions in a row have led to this.
But with 100 million households (legal) and 1% population grown (excluding illegal immigration), was the 1.5 million really maintainable… Assuming we’re going to kick out 30 million illegals that are occupying 5 million housing units…
Microsoft misses — Oh, the humanity!
Second-quarter net income was $4.17 billion, or 47 cents a share, compared with $4.71 billion, or 50 cents, a year earlier…. Sales were $16.6 billion in the period, which covered the last three months of 2008.
Analysts predicted profit of 50 cents a share and sales of $17.1 billion, according to a Bloomberg survey. In October, the company forecast profit of 51 cents to 53 cents a share on sales of $17.3 billion to $17.8 billion.
Bloomberg: Microsoft Cuts 5,000 Jobs as Recession Curbs Growth
GE tomorrow, anybody smell blood in the water?
176k put contracts on the FEB 10’s,7.5’s, and 5’s…does not look good. the global bellweather tolls for thee.
If they cut the dividend, it’s all over.
heavy call buying in the 14’s, I smell a leak.
Extraordinarily high put-selling too.
Add me to those suspecting a leak.
Im asking myself right now,
were the calls in the 14’s the false move?
Im shorting the open.
selling a covered call is a protection instrument only.
I HATE INSURANCE !!!!!
Oregon umemployment rate hits a 25 year high at 9.1%.
AZ reporting 6.3%… Up from 4.1% a year ago. In my opinion, a total joke.
Individual income tax receipts for the first half of the fiscal year are off 10% YoY, and accelerating down. Corporate income tax receipts off 34% YoY for first half of fiscal year. Transaction and usage fees (wide variety of stuff in here, including building permits, drivers’ licenses, vehicle registrations, legal filings, etc.) off 10%.
Come on! They are talking 40% slice from the state university and college budget… and they want us to beleive 6% unemployment?
10.6 % in Michigan, highest since ‘84 or ‘85.
10.6 % in Michigan, highest since ‘84 or ‘85.
Imagine what it would be using the old formulae. 25-30%?
A local landmark is closing. The Mountain View Inn on Route 30 is closing due to “significant extraordinary declines in business” and a lack of credit. The place has been in business since 1924 and has played host to many celebrities, Presidents, and even the Dalai Lama.
I have been to many, many events at this place and it has always been a well maintained establishment. It’s sad to see this business close. This is one of this area’s first shots across the bow. We’ve had layoffs but this is one of the first prominent business closings.
http://www.pittsburghlive.com/x/tribunereview/news/westmoreland/s_608294.html
Remember a couple of years ago when the housing market experts assured us that San Diego rents always go up?
Apartment rental, occupancy rates slip in S.D. County
Decline follows on 7 years of growth
By Emmet Pierce (Contact) Union-Tribune Staff Writer
2:00 a.m. January 22, 2009
A victim of the weakening economy, the San Diego County apartment market saw rental rates and occupancies fall slightly in the fourth quarter among large complexes of 100 units or more, the RealFacts research firm reported.
In a survey of properties representing 99,256 rental units within the county, the Novato-based firm found an average asking rent of $1,394 in the final quarter of 2008, compared with $1,405 in the third quarter, a drop of less than 1 percent.
The average rent was down 1.8 percent from a year earlier, according to a RealFacts report being released today.
The average occupancy for the recent quarter was 95.1 percent, a drop of 0.7 percent from the previous quarter and 0.11 percent for the entire year.
While small, the declines in rental rates and occupancy are significant because the local rental market for large complexes had seen steady growth throughout this decade, said Caroline Latham, chief executive officer of RealFacts.
Between 2000 and 2008, the average rent in the county among various-sized units within large complexes increased by 41 percent, RealFacts found.
Well Microsoft announced 5,000 layoffs today. Looks like this is a trend among the techs - high paid engineers will be staying home, not buying gasoline, not traveling on airplanes. This will produce further deflation.
Most of the highly paid engineers I know (I work in IT) are already staying home. 80% of the highly paid IT people I know don’t work in an office. They travel for work (as I do, quite frequently), but don’t actually have an office to report to.
This is definitely the way of the future; a bunch of people sitting in a glass tower in NYC is a dying model.
Code monkeys=engineers?
BWHAHAHAHAHAHAHAHA
“Code monkeys=engineers?
BWHAHAHAHAHAHAHAHA”
Microsoft certified as “engineers”.
I tried to post this up yesterday, but the blog was very hungry and ate all my posts.
Anyway, this was in response to another post, but I thought that others may find it interesting.
The problem with all the programs focused (and I like your idea, just pointing out what I see as a problem) on helping first time buyers is that there is just a TINY fraction of them out there with anything that even resembles a downpayment (call it 10K), excellent credit, good and verifiable income, and most importantly, THAT DON’T OWN A HOUSE.
Yeah, there are a bunch of us on here. But, frankly, with those criteria, I would guess you’re looking at… 1-2% of the population? (total guess, feel free to add your own).
The fundamental problem, IMHO, is that the homeownership rate is at least 3-4% too high. That means that more homes have to come back on the market, and there’s just not nearly enough responsible buyers left to soak up that inventory. The bubble stole 5-10 years of demand; it’s going to take at least that long to get enough people who are ready to buy (which in my book, means at LEAST 10% down, 720+ FICO, and verifiable (household) income that is <3X the price of the home). There is no quick fix to this with the possible exception of relaxing immigration requirements, or allowing immigration with the purchase of a home (for example). There’s just not enough people, and there’s only a tiny fraction of the population that can possibly be “stimulated” into buying.
Now, all that said, I’m all for your program because I am in that tiny fraction. But I don’t think that it solves any of the problems. The “fix” for the problem is to let it happen, and let the natural regrowth occur. We’ve been like the firefighters in Yellowstone (I’m going this summer, so I’ve been reading about it!) who prevented the fire (credit explosion) for so long that when the fire finally comes, it’s a real disaster. But, after the fire, the forest will regrow stronger. Throwing water on it is futile at this point.
This is just fantastic!
http://www.youtube.com/watch?v=7iPaiylUYW0
How about saving the Pound?
I want to be a driver for a CEO…. Thain paid his drive $230K last year.
Jan. 22 (Bloomberg) — Former Merrill Lynch & Co. Chief Executive Officer John Thain agreed to leave Bank of America Corp., CNBC reported.
“You did what, boss?”
I’d rather be his decorator! He spent $1.2MM on his office.
http://www.cnbc.com/id/28793892
The following is a list of the items in his suite:
Area Rug $87,784
Mahogany Pedestal Table $25,713
19th Century Credenza $68,179
Pendant Light Furniture $19,751
4 Pairs of Curtains $28,091
Pair of Guest Chairs $87,784
George IV Chair $18,468
6 Wall Sconces $2,741
Parchment Waste Can $1,405
Roman Shade Fabric $10,967
Roman Shades $7,315
Coffee Table $5,852
Commode on Legs $35,115
Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.
The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.
Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.
Last week, BofA said it would be receiving $20bn in Tarp money, in addition to the $25bn that had been earmarked for it and Merrill last year. It was then revealed that Merrill had suffered a $21.5bn operating loss in the fourth quarter.
Despite the magnitude of the losses, Merrill had set aside $15bn for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank’s losses were smaller.”
“Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as “ridiculous”.
BofA said: “Merrill Lynch was an independent company until January 1 2009. John Thain (Merrill’s chief executive) decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision.”
BofA declined to specify when Mr Thain informed the bank of his decision.
A source familiar with the matter says Mr Thain, in the weeks leading up to the December 8 compensation committee meeting, had been weighing the possibility of requesting a bonus of at least $10m for himself before ultimately deciding against such a move.”
From FT dot com, Jan. 21
January 20, 2008, Barack Obama says to America: “We’re all in this together”.
January 21, 2008, Barack Obama puts a salary freeze on staffers making “more than $100,000″ a year.
If we’re really “all in this together”, why doesn’t everyone have a salary freeze? Be prepared for a rough 4 or 8 years if Obama thinks you make too much money or are too productive.
To be fair, my wife’s work did a salary freeze on executives, and pay cut to top executives, but for the “workers” they said to expect about half the wage increase of past years.
well, that sets the right tone. We’re ALL in this together!
If, for example, we must raise taxes to cover expenses for the war, or rebuilding infrastructure, what’s wrong with bumping up each and every tax bracket 1%?
That’s pretty generous. I know people at IBM and HP who haven’t been given a raise in 5+ years.
…and yet both companies posted record profits during that time.
I still don’t understand why the morons stayed. No raise the first year? My resume is going out I won’t be far behind it.
Now they are both having layoffs. Nice reward there, huh?
I still don’t understand why the morons stayed
Probably for the pension. Of course new hires at both corps. don’t get a pension.
You’re remarkably uncritical of Bush’s socialist policies. Don’t forget Obama is making these decisions out of necessity from the wreckage of the last CIC, whom you seem to think would have done a better job making fiscal decisions.
Good God…lol!
There is no more money, reuven, and only a socialist would argue that everyone should be treated the same. The republicans
spentsquandered all the money, and subsequently their credibility.The problem is, this mess was caused by both rich and poor. For every wealthy hedge-fund manager packaging up bad mortgages, there were 1000 people making next to nothing signing up for mortgages they couldn’t afford.
Let’s make EVERYONE tighten his or her belt.
And who created, offered and approved those liar’s loans? The poor?!
There is nobody to blame but the greed of the rich. Period.
Yes. Advocates for “the poor” created these toxic mortgages.
I’m actually quite liberal.
Are you telling me that all those strawberry pickers and welfare cases who bought houses they couldn’t afford by lying on mortgage applications (which is where a lot of “our money” went) are all Republicans?
From what I’ve read, the mortgage brokers encouraged them to lie, the underwriters were told to “produce” and therefore ignore negative information, and the banks created exotic mortgages to help them qualify. I suspect that all of those professions were composed predominantly of Republicans (they certainly are in my community).
Most people taking out mortgages they couldn’t afford weren’t poor or minority. Even millionaires have defaulted…unless you count 90% of the US population as impoverished?
“I suspect that all of those professions were composed predominantly of Republicans”
BS. You can’t prove that. Our local Realtors and bankers et al are all over the boards, the fat cats backing both parties or their candidates and the rest mostly apolitical. The local Rotarians would faint dead away if a speaker got partisan lest it hurt someone’s bidness..
Exactly. I would like to know how the to-poor-to-afford-a-house approved their own loans.
you must be joking.. most the demy’s I knew screwed their family with option arms for the 3% rebate.. give a demy some money and watch them be a rep quick!
“You’re remarkably uncritical of Bush’s socialist policies. Don’t forget Obama is making these decisions out of necessity from the wreckage of the last CIC, whom you seem to think would have done a better job making fiscal decisions.”
That’s not the reuven I read on here at all. Liberal, yes, but not a crazy one. To his credit he understands the blame doesn’t lie totally at the feet of one person, and that there’s plenty of blame to go around, from W and his minions to the Dems in Congress down to the strawberry pickers and lots in between.
And his rough 4-8 years comment may indeed prove prophetic to the entire spectrum of producers and high earners.
NoSingleOne,
Bush was no doubt a fascist/corporatist but he was far far from having any socialist tendencies.
Trillion dollar government bank bailouts, signing the largest agricultural subsidy bill in history, adding on the prescription drug benefit is a great way to redistribute the wealth…from the next generation to this one.
I’m not alone in thinking that:
Andrew Sullivan, Times Online 2005
…A few years back, your correspondent noticed something a little odd about George W Bush’s conservatism. If you take Margaret Thatcher’s dictum that a socialist is someone who is very good at spending other people’s money, then President Bush is, er, a socialist.
http://www.timesonline.co.uk/tol/news/article570387.ece
Agreed, but at the end of the day and assuming both jobs are secure, which would you rather be making: $100K with no increases for a few years or $50K with a 3% “cost of living” adjustment each year?
I am, however, interested in why they chose that number specifically.
Jan. 22 (Bloomberg) — KBC Group NV, Belgium’s second- biggest financial-services firm, rose by a record in Brussels trading after writing down the value of its most toxic assets to zero, reducing the risk of future capital depletion.
The Brussels-based bank and insurer completely wrote down the portions of collateralized debt obligations that are first to take losses in the event of default and will receive 2 billion euros ($2.6 billion) from the Flemish regional government to shore up capital. KBC jumped as much as 53 percent on Euronext, the steepest intraday advance since its creation in a 1998 merger.
Let the next wave of write-downs begin!
So, it really does work. Well, well.
No mid-day lull, just continuous selling. At the current rate, absent any divine interventions, we’ll break through 800.
Nevermind, we got a bounce. Curios to see what happens after 1:30 - 2:00, however.
With all the selling and talk about the shorts in GE, have been wondering if maybe Mother Of All Short Squeezes Part 2 might make an appearance sometime soon.
It’s a monster bounce. WOW!
Whats the propeller of this bounce?
Just meant in general, not today.
Nevermind, this must be it? Lol!!!!
“Wall Street cuts losses on stimulus hopes”
Is there somfing special about DJIA = 8K?
The market does always seem to bounce off that level. It’s as if the PTB know that if we go through 8K there is no stopping until 6K. And, that wouldn’t bode well for the debt-pushers.
You know, you guys should really learn something about the actual mechanics of trading - kinda like the mechanics of a car.
Humans are strange beasts - they like to place their orders at round numbers. Nobody places an order at 80.07. They place it at 80.
Running the stops is a time-honored tradition, and if you have no idea what I’m talking about, maybe you should look it up.
“Running the stops is a time-honored tradition,…”
I think I get the concept: Buy below 8K, sell above 8K, lather, rinse, repeat until the market hovers about 8K no more. In the short run, markets are mean reverting.
look at the thirty year chart.
or perhaps you are a leg man.
smoking crater into the close..down the rabbit hole she goes.
At the end of the day, she looks coiled — successive lower highs and successive higher lows. Tomorrow will be interesting.
Bubbling Teapot, Crashing Mountain
Saudi Arabia has its oil. South Africa has its diamonds. And here in China’s temperate southwest, prosperity has come from the scrubby green tea trees that blanket the mountains of fabled Menghai County.
Over the past decade, as the nation went wild for the region’s brand of tea, known as Pu’er, farmers bought minivans, manufacturers became millionaires and Chinese citizens plowed their savings into black bricks of compacted Pu’er.
A pleasantly aromatic beverage that promoters claim reduces cholesterol and cures hangovers, Pu’er became the darling of the sipping classes in recent years as this nation’s nouveaux riches embraced a distinctly Chinese way to display their wealth, and invest their savings. From 1999 to 2007, the price of Pu’er, a fermented brew invented by Tang Dynasty traders, increased tenfold, to a high of $150 a pound for the finest aged Pu’er, before tumbling far below its preboom levels.
For tens of thousands of wholesalers, farmers and other Chinese citizens who poured their money into compressed disks of tea leaves, the crash of the Pu’er market has been nothing short of disastrous. Many investors were led to believe that Pu’er prices could only go up.
“The saying around here was ‘It’s better to save Pu’er than to save money,’ ” said Wang Ruoyu, a longtime dealer in Xishuangbanna, the lush, tea-growing region of Yunnan Province that abuts the Burmese border. “Everyone thought they were going to get rich.”
But that was before the collapse of the tea market turned thousands of farmers and dealers into paupers and provided the nation with a very pungent lesson about gullibility, greed and the perils of the speculative bubble. “Most of us are ruined,” said Fu Wei, 43, one of the few tea traders to survive the implosion of the Pu’er market. “A lot of people behaved like idiots.”
BWAHAHAHHAHAHAHAHHAHAHAHHAHHHHHHHHHHHHHH!!!
Note to those who believe the average US citizen is dumber than a bag of hammers:
We have a lot of global competition.
and that spells Tulips, with a capital Tea !
it’s probably more of an echo bubble though; I think tea was FAR more expensive long ago (e.g. when the Dutch started messing around with the region).
No, it was a real bubble. There is no such thing as an “echo bubble”.
EVERYONE in China was going to be rich-rich-rich off of that free-flowing credit, and they spent freely on Chinese luxuries.
This is precisely and exactly identical to the Tulip Bubble.
All bubbles require exactly three things - talk of a new paradigm, freely flowing credit, and a suspension of disbelief.
and I thought China was going to get rich from the stock market bubble; I remember the news talking about nearly 1 million new trading accounts opened in just one day …
did they switch from stocks to tea, or other way round?
They decided to be smart and go into ALL of them at the same time.
ALL ABOARD!
“All bubbles require exactly three things - talk of a new paradigm, freely flowing credit, and a suspension of disbelief.”
Without fail.
And that’s why, muchachos y muchachas, it’s a bad idea to partake in bubbles, no matter how tempting they look.
There are never any new paradigms whether for internet stocks or emerging markets or commodities or gold.
It’s called D-E-B-T and there are only two things that you can do with it — pay it back out of current operating income, or refinance or default.
The compressed disks are not the same Pu Erh that you get at Ten Ren, the latter is cheap, but maybe the bubble has something to do with the fact that the Ten Ren brand tastes nothing like it used to.
I saw these compressed disks in HK tea shops and they said the rich from mainland China will buy one for thousands of dollars. My jaw dropped to the floor, sort of.
In that case, you should never look at the dried abalones.
Also keep your eyes away from the swift’s nests!
PS :- I agree with you about Ten Ren. At some point, they got absurdly popular and their prices sky-rocketed. At least, some of the NYC stores got mauled because buyers didn’t show up.
yes, maybe I will be able to afford nice tea again!
In the meantime, I am drinking Rose. It’s really not that bad.
And I love pu er.
Somehow I find this story to be heartwarming. In a schadenfreudy kind of way.
My wife made me green tea the other day. I couldn’t finish it. It tastes like liquid mold. Maybe it goes better with rice.
Jan. 22 (Bloomberg) — Cemex SAB, the largest cement producer in the Americas, fell to a five-week low after Standard & Poor’s cut its credit rating to below investment grade amid a slump in demand in the U.S. and Mexico.
…
S&P yesterday lowered Cemex’s rating one level to BB+, or junk status. The downgrade of Cemex’s credit rating will make it more expensive to borrow money and increases the risk of debt defaults as the global recession hurts cement demand.
…
Cemex used short-term debt to finance the $14.2 billion purchase of concrete maker Rinker Group Ltd. in July 2007 just as the U.S. construction market faltered….
To all of you, like ET-Chicago, who think I (and those like me) don’t get it:
I am an employer, and I pay payroll taxes, B&O taxes, license fees, State and City licensing and corporate related taxes. And the folks out there, “in the field” do get it.
I do not put my faith in Government to solve my problems.
I do not believe that Government Agents (regardless of their political pursuasions or leanings) have the capacity to provide me with health care, housing, retirement, and employment for the rest of my life.
I do not believe that Governments grant rights. I believe that they are inalieble! Therefore, I do not look to my Government(s) for permission to be, or to act, or to think!
If Washington, Jefferson, Madison, Hamilton, Jays, Adams, etc. were alive today, there would be another revolution. From my perspective, many of you see Barack Obama as the means to a peaceful revolution. To me he appears to be an accentuation of what has not worked (more Government intervention).
Honestly, I hope you are right, and that, a few years from now, I can “reply” that I was wrong. That I can say, I was wrong about Barack; that he made good decisions, restored the economy, and made decisions that improved life in the United States.
Based on my own perception of how the world goes around (and having lived overseas for extended periods of time), this is a time of economic reckoning for 40 plus years of bad public policy, highlighted by deficit spending in the name of progress. All of the hand wringing and finger pointing will not turn the tide. It is as inevitable as the rising of the sun.
The housing bubble was just the final straw to break the proverbial economy’s back (coinciding with the bubbles in education, medicine, and retirement oriented equities). There is more at work here than simple “raider-bandit behavior” on Wall Street. All of the economic realities (demographics, geo-political, financial) are converging in a tidal wave of deflationary restructuring and forced structural changes, most of which are still ahead of us.
A President may make us feel good, but he will not be able to pre-empt the inevitable….whatever form it takes.
I do have faith in people, and in our capacity to ride out the storm. My preferred role of Government would be to preserve its precious resources to help pick up the pieces, instead of trying to prevent the market failures that will certainly overwhelm the banks, pension plans, and industries, and even Governments that try to stand in the way.
No, I get it! And I do not like what we are about to Get!
Exeter I am in total agreement.
If Obama is successful in implementing his policies the U.S.A. will become like Argentina after Peron. After the 2nd World war Argentina was the 4th richest country in the world then Peron came along with his social programs and it has been downhill ever since.This adulation of Obama gives me the creeps and is eerily similar to the devotion inspired by Eva Peron.
I have lived in Brazil for 25 years.The “Salvador de Patria” ( Saviour of the Country) phenomenon is very common in Latin America and I had always assumed it was a Latin characteristic. I never thought I’d live to see it in an Anglo-Saxon country . I’ve always thought that the Anglos would be far to sceptical and cynical to deposit their hopes in one person. Well you live and learn!
Janet, those are certainly the opposite words of what Exeter would say. The author of the post above is Shane, not a d.g. socialist.
All the different usernames…. so little time heh?
I would love to be “rescued” by Argentina’s President. Quite the hottie.
The final wails of the shrinking band of fear mongering crazies and rhetorical tripe of ideologues fading away. Good riddance.
We will see Exeter, we will see!
excreter,
I take it you are going to step up and adopt one of those (soon to be realeased into a neighborhood near you) GTMO detainees.
…hmmm….smells like fear.
Why release them here? Try ‘em for a crime as they should have a long time ago. Not guilty? Box ‘em up and put ‘em on the next C5 to Afghanistan.
They are all “not guilty” to zealots.
since we suspended their right to a fair trial,we wouldn’t really know now would we?
Who cares about zealots? Why are we using taxpayer money to hold them without being charged? If they are guilty, sentence them. Last I checked, it was innocent until proven guilty, no?
I’m not afraid of zealots or terrorists.
Rent free.
If Banks Are Really Sound, Why Are Investors Scared?
http://www.cnbc.com//id/28774167?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo
Surprised no one’s mentioned Geithner’s approval.
For a sample of what we’re getting:
“The major economic policy challenges facing the nation today—pick your favorites among the usual suspects of low public and household savings, concerns about educational quality and achievement, high and rising income inequality, the large imbalances between our social insurance commitments and resources—are not about monetary policy.” April 1, 2005 - Timothy Geithner.
That would be either stupidity or audacity - take your pick. Either way, in my opinion this man has no business being our Treasury secretary (tax shenanigans - also either stupidity or audacity - aside).
this guy is a drunken fratboy who got where he is by being a genius at giving “props” at the right time to the string pullers in charge.
looks like he’s a shoo-in. Newsweek said his body language is so flattering to the Senate that they can’t help themselves.
Does this mean he’s a “toe tapper?”
A braindead journalist on Marketwatch saying the housing bottom is in.
http://tinyurl.com/cg5gpe
I guess they have enough journalists there to call the bottom at least every week for the next few years?
No, no, no……it’s not for another 160 days. Cramer says so.
Come on, FBs… just three more mortgage payments and some GF will write a check for your rescue! You can do it!
/sarcasm off
This same guy will point to an increase in the housing starts data in a few months and say “See - I told you so!”, totally ignoring the actual meaning of that number.
(It’s inevitable that housing starts are bottoming - they’re dropped from 2,300k to 500k - they just can’t drop much further!!! Even in an all-out armageddon there will always be *some* housing starts)
“All that is needed now is a good dose of buyer confidence — and a willingness on the part of the banks to resume lending to those who qualify for a mortgage.”
And here we have the fatal flaw in his argument. What is the median household debt/income ratio? What is the average savings of the medain household then vs. now? Average credit score.
AND!!!!! What was the needed ownership % to take all the houses off the market?
If I recall, home ownership rates typically ran 55-60%, but we pushed that to 70%, and even at 70% there were way too many houses on the market and way too many still being built.
So, maybe 2.9x median, with good savings and credit history worked in 1980 with 55% ownership and houses balanced with that demand. However, 2.9 x median income won’t work today with no savings, suck credit histories, soaring unemployment, and the needed 80% home ownership required to balance demand to the supply.
Another odd thing… He mentions the non-bubble locations. He mentions the bubble places no approaching 50% drop….
Why no mention of the bubble areas that have not yet dropped much? Seems like the remaining square on the matrix.
I tried posting this about 4-5 hours ago, but it never came through:
resident defationista Mr. Jain was namechecked in the most recent issue of the New Yorker, in an article titled, “The Dystopians.”
Only the article summary is available online for non-subscribers, unfortunately.
Congratulations Jas! What’s a dystopia? Is it better than two utopias?
Dystopia is the antonym of Utopia.
Ah, Jas must have hit them with the Evildoers go to Hell speach.
It was probably the “Born and Bred American Dopes” rant.
Dys-topia or dat-topia, it’s the same difference! But there is some difference between Jas Jain and them that reside in India, I believe.
Immodium AD clears up that dystopia in a few days.
How many Mr. Jains reside on the planet? There must be upwards of 100,000 of them, at least…
From the article (whew, hand-typing):
” … A corollary, peak debt, was coined in 2006 by a former Cisco employee named Jaswant Jain, who calls himself the Prophet of Doom and Gloom, and first observed the deleterious effects of unrestrained borrowing as an eight year-old in a village near the city of Jodhpur, where debt-ridden Brahmins appeared worse off than solvent untouchables …”
Dystopic outlook? Peak debt? Doom and gloom? If that isn’t the same Mr. Jain, I’d be extremely surprised.
Did you make that up? Whether or not you did, I think you nailed the description…
Oh, were art thou… heloctopia?
Not sure if this has already been posted, but it’s worth visiting several times:
http://www.youtube.com/watch?v=Pduy96-kES4
US House gives symbolic thumbs-down on TARP cash
The money will be released, nonetheless, because the Senate last week voted not to block the funds. That vote deprived the House’s decision of any legal weight since the funds could only be blocked by a vote of both chambers of Congress.
“The Senate has already killed this … Why are we still voting on it? Because there is a degree of anger in the American public,” said Massachusetts Democratic Rep. Barney Frank. “We are here today because of that anger.”
http://www.reuters.com/article/marketsNews/idINN2218792120090122?rpc=44
Pandering to the public! Thats all this was about, how sickening.
“The Senate has already killed this … Why are we still voting on it? Because there is a degree of anger in the American public,” said Massachusetts Democratic Rep. Barney Frank. “We are here today because of that anger.”
The old banking queen can’t help himself, he has been pushed out of the lime light and will do or say anything to get attention. It goes back to his childhood.
2/3rds of the senate dont’ face reelection for 4 or 6 years. What do they care about voter anger?
They don’t, but once a media whore always a media whore. If it wasn’t so pathetic it would be hilarious.
They have to hold their noses while allocating TARP funds or else risk becoming targets of voter anger.
One family kicked out of their home every 10 minutes as repossessions rocket 92%
By Becky Barrow
Last updated at 3:44 PM on 22nd January 2009 (UK)
Repossessions soared by 92% last year
One family is being kicked out of their home every 10 minutes after failing to pay their mortgage, shocking figures have revealed today.
The figures, from the City watchdog, the Financial Services Authority, show repossessions have rocketed nearly 100 per cent over the last year.
Between July and September, 13,161 families were evicted from their homes.
The Tories warned that the soaring number of repossessions is only ‘the tip of the iceberg’.
The economic crisis has got dramatically worse since September, which means even more families will now be losing their battle to keep their home.
With 85 firms going bust every day, unemployment is exploding, which is one of the most common triggers for losing your home.
Adam Sampson, chief executive of the housing charity Shelter, said: ‘These figures are not just numbers. They are heartbreaking tales of real people losing their homes.’
He dismissed the Government’s attempts to stem the rising tide of repossessions, warning they will help only ‘a fraction of those in trouble.’
The figures show that a growing number of people are also in the ‘last chance saloon’ before being repossessed.
Around 340,000 people have fallen behind with their mortgage. Unless they find the money to pay their debts, they will be the next victim.
Some are in such dire financial straits that the arrears on their mortgage are worth more than 10 per cent of their total mortgage.
For example, they have a mortgage balance of £100,000 - but their arrears are worth £10,000 or more.
Shadow Housing Minister, Grant Shapps said: ‘Gordon Brown’s famous boast that he’d ended boom and bust will provide no comfort for the 13,000 more families who were repossessed over the summer.
‘Even more worrying, these figures are from before the banking collapse so they may be just the tip of the iceberg.’
Lib Dem Shadow Housing Minister, Sarah Teather, said: ‘This has been a miserable winter for thousands of families who were forced out of their homes.
‘The sad fact is that the growing number of people in mortgage arrears suggests this will only get worse.’
For families who lose their homes, the future looks bleak, according to figures sneaked out yesterday by the Department for Communities and Local Government.
A record 1.8million families, equal to about 4.2 people, were on the council house waiting list in England on 1 April last year, up 10,000 in just 12 months.
Mr Shapps accused Labour of ’sitting back while the social housing waiting list has exploded.’
He said: ‘When it comes to housing, this Government’s record is appalling.
‘Every MP from every party will have people coming into their surgeries begging for help with housing yet Gordon Brown just doesn’t seem to understand the problem faced by millions of hard-pressed families.’
The DCLG insisted that it is determined to do ‘everything possible’ to protect homeowners during the economic downturn.
This includes the Homeowner Mortgage Support Scheme, which will allow people to defer the interest on their mortgage for up to two years on loans of £400,000 or less.
But full details of this scheme are still not available and there is no date for its introduction.
It comes as the Council of Mortgage Lenders predicts there will be 75,000 repossessions this year, close to the highest level ever recorded in Britain.
In fact, the actual number could be even higher because it only includes ‘first-charge’ repossessions, that is evictions by the mortgage lender.
Unlike the Financial Services Authority, it excludes ’second’ or ‘third’ charge repossessions, typically other loans secured on the family home.
Capital One swings to $1.45 billion loss in 4th quarter as bad debt surges, credit costs rise
Capital One Financial says it swung to a $1.45 billion loss in the fourth quarter as the bank set aside $2.1 billion for loan losses amid rising credit card delinquencies and took an $811 million impairment charge connected to its struggling auto finance business.
Listening to the Capitol One conference call today it dawned on me, all these Banksters are still expecting hyperconsumtion to resume in their forward looking models at the end of this downturn. IMO, dont hold your breath!
Exactly. They still don’t understand that they’ve killed, roasted and eaten the golden goose.
I’m considering charging up some remodeling onto my credit card then transferring it to a no interest Cap One card for a years float, rather than using savings. I can help their percentages, help my bottom line, be a patriotic consumer, AND raise the savings rate all in one deal!
“well, that sets the right tone. We’re ALL in this together!
If, for example, we must raise taxes to cover expenses for the war, or rebuilding infrastructure, what’s wrong with bumping up each and every tax bracket 1%?”
There is A TON of money in the ecnomy. Unfortuantly, it isn’t helping the economy becuase it is all in the hands of the mega rich, while the bottom 80% of the population has been living on debt.
IF we want to get teh economy moving again, then we have to get money into the hands of people that will spend it.
And, NO, I don’t mean through handouts.
I think we should flip the Social Security tax. Instead of 7.6% on any amount upto $100K, how about we make in $7.6% on any amount OVER $50K. (Actually, I’d like to se it just rolled into the income tax).
Instead of 15% capital gains and mush higher income tax brackets, flip that and make it 50% tax on short-term capital gains (any asset held less than a year) and all longer-term gains treat just like regualr income.
Let’s start going after the employees of these banks getting TARP money ,and confiscate the ill gotten gains they’ve looted.
We need to let the poor keep more of what they earn, while getting those with the giant stacks of money to pay the costs of creating this society they so handsomely profit from.
I think too many, mega rich treat money like poker chips… he with the biggest stack of chips in the end wins the most.
WRONG!!!!
This ins’t a game. We need to create an economic structure where hard work is rewarded more than wild specualtion. We need to creare an economic structure where money represents a unit of labor, not a unit of wager in a giant, rigged casino.
We do NOT have the economic system that we need.
We need jobs, not handouts. We need wages, not to “get the debt flowing again”. We need reward for hard work, not insane reward for wild, speculation sure to end in economic disaster.
In case you can’t tell, I’m back in anger stage again. The $4 billion in handouts just before running for $20 billion in TARP has really sent me over the edge. You will never convince me those Wall Street playa’s worked 1 million times harder than your typical farmer, miner, factory worker, cook, waitress, child care provider…, and therefor deserved a wage 1 million times larger.
They just cashed in everyone elses chips at the giant U.S. Economic poker game. It is bunk and needs to END!!!
JAIL!!!! Confiscation! Shame and humiliation. Public floggings.
A couple more of these and it will be pitchforks and torches.
“We need to let the poor keep more of what they earn, while getting those with the giant stacks of money to pay the costs of creating this society they so handsomely profit from”.
The poor have a very bad track record of holding on to money.
As J.D. Rockefeller once said, ” You could take all of the money from all of the very wealthy and they would have it all back within five years time”.
“As J.D. Rockefeller once said, ” You could take all of the money from all of the very wealthy and they would have it all back within five years time”.”
Proving we need higher taxes on the rich to constantly filter the money back to the bottom. Why are the rich so worried about us taking more from them, when they should know it is all coming right back to them.
This isn’t poker where we want all the chips in the hands of one person so the tournament ends. We want the game to continue.
Again, I’m not saying we nationalize all business and hand out everything to the poor.
I’m saying that we need to keep the chips moving. Create a system where hard work is rewarded more than wild specualtion.
Look, what is the problem right now? We have this massive savings rate, as Hoz points out in Fed reports. But, no one is spending! WTF?
Simple. All the chips are in the hands of the very few, and they keep saving more and more. The people that do the real consuming were living on debt because wages did not keep up with inflation. Now that they can’t live on debt, demand is GONE and the economy is crashing.
For the last 40 years, businesses didn’t worry about whether or not customers had money. The customers had debt, and that was just as good as money.
Well, debt went pop, and unless we figure out how to get money into the hands of customers, and have them actually spend it instead of use it to pay down debt, there will be no business… Business can’t survive without customers, and the customers are toast.
OK. But how do you classify a growing segment of society that is not technically “hard working”
-retirees (16-20% of the polulation)
-welfare/Medicaid recipients (10-15% of the population)
While there is plenty of blame at the top of the income spectrum, perhaps there is room for improvement at the bottom, too (and everywhere in between)! I know that is hard to hear, but the reality is that there is disproportionate effort by a segment of each income tier. There is also a significant lack of effort at each income level. You have your “loaders” and you have your “loafers”.
Government cannot allocate the rewards of hard work more efficiently than the market. Check out Russia, Cuba, China, and my favorite, North Korea, for recent successes with respect to Government allocation of resources.
If half of the Wallstreeters had been forced to absorb their own failures, as the Market would have required, then they would already be deposed of their wealth and income. It is Government that is keeping the money in their hands.
Yes, many “innocent” participants would be impacted by Market failures. But, guess what, they already have been “impacted” without their permission, in the form of obfuscatory future tax commitments.
” You could take all of the money from all of the very wealthy and they would have it all back within five years time”
Lets test that statement!
Easiest way for you to achieve that wish is for you to move to North Korea. Start packing and take fellow commie Excreter with you please
Does every government lie?
Earlier today I posted what a joke the November unemployment figure for AZ were. 6.3% my hind end.
Well, coincidentally, today we get December data. Unemployment rate from 6.3% to 6.9% MoM and up from 4.1% YoY.
But, digging into the details… The the total number of people with jobs, they claim, is actually higher than 1 year ago. The total increase in unemployment is because… wait for it… 100K people added to the labor force.
Seriously… They say 2.9526 million had job last month and 2.9355 million had jobs December ‘07.
So, with MORE people working, why were individual income tax receipts down 21% November to November?
But, wait… the BLS numbers would have you beleive that the U.S. population is making more money. I know, I know. AZ is not U.S. If BLS is right and wages are up, they must be counting the bllions in bonuses to Wall Street, because here in this half of the country, wages are down, and A LOT!!!!!
We can agree here: Governments always are in a position to cook the books in the name of protecting damage to “future expectations”.
The entire “expectations” dilemma (what to tell the masses) has become a curtain call for truth during the last 40 years. Government has every incentive to look you in the eye and tell you that “everything is fine” and “things are looking up”, while the proverbial water from the upstream damn comes roaring down the canyon!
I have to applaud Barack Obama for being more frank than his Republican predecessor, with regard to the current economy.
http://www.cnbc.com/id/28790989
“When it comes to money there are two kinds of people, grasshoppers and ants. Aesop nailed this distinction 2,500 years ago, but he messed up the moral of his story ”
“…the grasshopper dies, and we all learn about the value of hard work and long-term planning.
That’s the fable. What about the facts? In 2008 the ants got crushed underfoot…”
“The grasshoppers? Same as always: they may have spent all of their money, but at least they got to use all of it, when most ants probably lost over 30% of the money they tucked away, if they tucked it away in stocks. Aesop should’ve accounted for spoilage.”
“From 1999 to 2007, the price of Pu’er, a fermented brew invented by Tang Dynasty traders, increased tenfold, to a high of $150 a pound for the finest aged Pu’er, before tumbling far below its preboom levels. ”
Electricity usage down 10+%.
Bubbles popping all over (stocks, tea, exports. Macau casinos). Others?
Illegal strikes by workers that have wages cut in half.
And we are expected to believe they are experiencing 6% GDP growth?
HEY, a glossy advertising campaign may put an end to the housing collapse in the Hamptons. Goiod luck!
January 22, 2009 5:40pm
Reluctance To Spend Stymies Local Real Estate Market As Most Wait For A Sign Of Hope
The once robust sellers market is now a buyer’s market driven by simple supply and demand economics that has empowered buyers to bargain hunt the Hamptons looking for properties at half-price as the economy weakens, hoping someone’s loss will be their gain.
“I get a lot of calls from the city from people asking me if I have any Madoff houses,” broker Susan Breintenbach said noting the reference to the on-going financial scandal involving hedge fund manager and Montauk resident Bernie Madoff.
“In my first year, I had a lot of people who wanted to buy in the Hamptons,” Schultz noted. “Now I have people who want to sell.”
Despite the trend towards office hopping brokers at Prudential Douglas Elliman’s offices on the South Fork remain confident the market will turn as their own glossy advertising campaign continues to move forward hoping to lure buyers by distributing impressive booklets featuring homes of the Hamptons.
Brennan attributes the market lull to a reluctance to spend, particularly at the high end, rather than to a shortage of funds. “People have the money but they are holding on to it,” Brennen commented. “Now is not a good time to spend $20 million or $30 million on another home when you are laying people off at your company. It’s not good or proper.”
Brennan also attributed the market slow down to pricing, noting a tendency for sellers to react too slowly to changing market conditions and adjust their listing price to a realistic value to attract buyers.
http://www.hamptons.com/detail.ihtml?id=6080&apid=12560&sid=27&cid=54&hm=1&iv=1&townflag=
HOPE NOW™!!!
LOL
“…Brennan attributes the market lull…”
Obviously, not a person who has ever sailed without a motor…
There are two kinds of losses, Yamada explains: A loss of capital and a loss of opportunity; but there will always be another opportunity if you protect capital.
Louise Yamada sees trading swings at best, with possible new lows ahead.
Barron’s — RANDALL W. FORSYTH — Cpaital Idea: Preserve It
PA widow’s riches-to-rags story. Bernie made off with her $7.3 million nest egg, now she can’t make her payments & has to go back to work.
Jan. 23 (Bloomberg) — Stocks will retreat around the world because of shrinking demand from China as growth in the third- biggest economy slows, said Nouriel Roubini….
Global equities will fall 20 percent this year from current levels as China, which contributed 19.5 percent to total growth in 2007, contends with its slowest expansion in seven years….
…
Roubini’s view is shared by Societe Generale SA global strategist Albert Edwards…. Edwards says the China slowdown will reduce earnings at industrial, energy and raw-materials companies, sparking a selloff in emerging and developed-market stocks that may send the S&P 500 down 40 percent to 500.
In the mail today I got my Executive Gold Star Membership Annual Renewal Notice from Costco! Whoop-de-do. Came with a rebate check. Another whoop-de-do. Then, 10 minutes after I open the letter, the phone rings. It’s Costco! I thought for a second, these guys must really be desperate, but then I realize it’s a recording, a Costco recall notification on some “Zone Perfect All Natural Nutrition Bars” I bought last month! Ya see, I had bought the “Chocolate Peanut Butter” type (”with other natural flavors”, in small print), and Costco had been notified by Peanut Corp of America (wonder if Jimmy Carter is on the B of D)that they contained suspect peanut product and don’t eat them. Salmonella risk.
Fortunately for me, all 12 bars were still in the box.(I’ve been hitting the apples, pears, grapes and saltines pretty hard since New Year’s.) Then I thought, wow these guys at Costco must know who bought not only these things, but also bottles of Jack Daniels, underwear, razor blades, tampax, rubbers, and BagelBites. Sure is the Information Age we live in. And Costco is just a piker compared to Homeland Security, FBI, CIA, NSA.
Just thought I’d pass the recall notice along; life is queasy enough sometimes.
“It was impossible to see this bubble”
As a stock picker I’m a good programmer. However, thanks entirely to the HBB, My Marketocracy.com fantasy mutual fund has recently out performed 99.9% of the others, measured over the last 2 years (82% higher return than the S&P 500 over that period), breaking into the top 100. In the top 10 over the 4th quarter of 2008, yet at the 1 percentile level over just December, 2008. This means even the third graders of Mrs. Grundy’s class beat me in December. (An ultra short flesh wound, underestimating the effect of TARP Euphoria.)
Yes, it was clearly nearly impossible to see any of this turmoil approaching. Only a handful of the “lunatic fringe” of vocal professionals (were there even a full 5?), some bloggers, and a certain amateur stock picking chimp had any idea something might be out of kilter.
Is anyone else noting the full court press on Global Warming since the inauguration? Yesterday a study (???) was released stating that definitely (well maybe if you hold your nose just right) that the Antarctic was warming and today another study(???) is released that all the trees in the West are dying because of increased temperatures. Quick! Man the machine guns! We must eliminate those large SUVs before we ALL DIE!!
It’s my birthday today.
I want a stimulation package.
Something nice, probably that ‘tiffany blue box’ kind of
stimulation. Or something else, kinda nice, say, $350 billion
in MY wallet.
Happy Birthday desertdweller.
You have the desert…what more do you need?…rain scented induced euphoria?
All the Best!… to you!
Hedgemonium continues…Who would be crazy enough to buy stocks in this environment (as a former economics professor of mine once mused)?
P.S. Six years after he rhetorically questioned the wisdom of stock market investing, its value had been doubled by Greenspan’s bubble.
Hedge Fund Assets May Fall $450 Billion After Worst Performance
By Saijel Kishan
Jan. 23 (Bloomberg) — Hedge funds lost more money in 2008 than any year on record. It may get worse in 2009, forcing fund managers to overhaul investment strategies, reduce fees and make it easier for clients to withdraw cash.
The $1.2 trillion industry may shed as much as $450 billion in assets, or 37 percent, through market losses and client withdrawals this year, according to Morgan Stanley analyst Huw van Steenis in London. That’s on top of the $600 billion that disappeared last year and would leave hedge funds with $750 billion, the lowest since 2002.
“It’s hard not to be bearish in this environment,” van Steenis said in a telephone interview.
As long as you got into your hedge circa 1990 (near the beginning of Greenspan’s bubble), you would still be ahead
End of the hedge fund era as credit crunch prompts $525bn exodus
* Andrew Clark in New York
* The Guardian, Thursday 22 January 2009
The scale of the crisis gripping the global hedge fund industry was illustrated yesterday by figures showing that panicked investors withdrew $525bn (£380bn) in the second half of 2008 to avert huge losses on volatile global financial markets.
Total capital invested in hedge funds shrank by more than a quarter, dropping from an all-time peak of $1.93tn mid-year to $1.4tn at the end of December.
Hundreds of once high-flying firms ceased trading, with the global number of hedge funds dropping from 10,096 to 9,176 over the course of the year, according to Chicago-based Hedge Fund Research.
Years of dramatic growth came to an abrupt halt as it became clear that sophisticated strategies were proving unsuccessful in shielding clients from heavy falls in the stockmarket.
Kenneth Heinz, president of HFR, said an era of easy access to borrowing and low volatility in asset prices had come to an end. “What we’re now seeing is a consolidation, which is a normal functioning of the economic system,” he said.
Worst hit were convertible arbitrage funds, which use complex mathematical techniques to exploit anomalies in stock prices. These funds slumped by 34% during the year, compared with an 18% decline for the hedge fund industry overall.
The traditional “long-short” model fared little better. These hedge purchases of shares with short positions, and they lost 26% of their value.
Funds specialising in distressed assets or companies undergoing restructuring found their high-risk approach to be wanting, with their value slumping by 25%. “Event-driven” funds, which typically capitalise on mergers and acquisitions, dropped in value by 21%.
“There’s no question this was a challenging year for these types of strategies,” said Heinz. He pointed out, however, that hedge funds could still boast an annualised return since 1990 of 11.8% - more than four percentage points higher than typical Wall Street stocks.
Hedge fund math (based on what I can glean from this article):
Losses in 2008 = $600 bn
Projected losses in 2009 = $450 bn
Amount left after 2009 losses = $750 bn
Amount that was there at the beginning of 2008 =
$750 bn + $600 bn + $450 bn = $1800 bn ($1.8 trillion)
Projected percentage decline over two years =
$1050 bn / $1800 bn *100 = 58.3 pct decline
Residents of Richistan are getting creamed. The next shoe to drop will be high end residential real estate, as this black hole in the hedge fund industry will suck lots of potential real estate investment capital out of the top of the income distribution.
“It’s hard not to be bearish in this environment,” van Steenis said in a telephone interview.
Dear Mr .Bear,
Surely you’ll be on Oprah…please, spontaneously… jump up & down on her sofa and sing the praises of Ben’s HBB!
I’m scratching my head over this Maxine Waters publicity stunt reported on ABC News
http://abcnews.go.com/Blotter/Story?id=6702731&page=3
People are shocked, shocked that it takes several hours to get a mortgage renegotiated (albeit with a bit of the runaround on the phone.)
Let me get this straight: People want to get special permission to modify a $500,000 contract and then are disappointed that it takes a few hours? I’ve spend days, on and off, negotiating $10,000 contracts for my small business. It’s clear that these people don’t take the responsibility they signed their names to seriously.
Ring around the rosie
A pocket full of posies
Ashes, ashes,
We all fall down.
Wall Street Journal
* BUSINESS
* JANUARY 23, 2009
Banks Die Too Fast for the Regulators
By DAMIAN PALETTA
WASHINGTON — Banking regulators across the country are struggling with a new phenomenon: Banks are failing with accelerating speed, exposing holes in the regulatory infrastructure designed to catch collapsing institutions.
The two small banks that failed a week ago, National Bank of Commerce in Berkeley, Ill., and Bank of Clark County, in Vancouver, Wash., both fell before regulators hit either one with public enforcement actions that would have alerted the public to their condition and allowed regulators to demand changes. National Bank of Commerce, for one, was reeling from losses related to its investments in mortgage giants Fannie Mae and Freddie Mac.
Of the 25 banks that failed in 2008, nine toppled before regulators publicly cracked down, including IndyMac Bank and the banking operations of Washington Mutual Inc., two of the biggest seizures in U.S. history. Two banks failed after being under an enforcement action for only two or three days.
Regulators also agreed to prop up Bank of America Corp., Citigroup Inc., and Wachovia Corp., even though none of them faced any type of formal enforcement action related to their safety and soundness.
The problem illustrates a fundamental weakness in the country’s regulatory infrastructure. The government is positioned to help banks if there is erosion in their capital levels, referring to the cushion banks hold against unexpected losses.
But that isn’t what happened last year. Instead, many banks faced a liquidity crisis as customers and business partners lost faith, shutting off the banks’ access to short-term cash.
“In 2008, we have seen institutions fail with greater velocity than in prior years,” says Scott Polakoff, senior deputy director at the Office of Thrift Supervision. “That greater velocity is driven by liquidity crises, not capital crises.”
“…both fell before regulators hit either one with public enforcement actions that would have alerted the public to their condition and allowed regulators to demand changes”
Dear Mr. Bear,
“Eyeore awards” are not granted to those that promote …or…advocate: “Optimism”
subtract x1 award from Mr. Bear…(like that’ll make much difference.)
