Its Saturday evening, and there is all sorts of things to discuss.
What is this coming week going to bring? Another bail out? More market turmoil ? Snapback, or crash?
What’s on your minds?
What say ye?
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Retail Sales in Jan rose .4% headline m/o/m, .7% ex auto's, .6% ex auto's and gasoline and .7% at the core. The headline figure was less than expected while the rest were slightly better. But, with respect to non headline sales, because Dec figures were revised lower, taking the two months together were about in line with forecasts overall. Sales rose in electronics, building materials, food/beverages, clothing, sporting goods, dept stores and restaurant/bars and fell interestingly for online retailers, health/personal care, furniture and motor vehicle/parts. Bottom line, headline sales were below expectations due to the greater than expected fall m/o/m...
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October 4th, 2008 at 7:40 pm
surprise fed cut monday morning
50 to 75bps
October 4th, 2008 at 7:43 pm
What’s going to happen to Americans retirement?
October 4th, 2008 at 7:44 pm
Barry,
The Guardian has a really interesting article on the possibility that many banks may opt to not pursue bailouts due to the many extra conditions that makes them less attractive.
It’d be great to hear your thoughts on this
http://www.guardian.co.uk/business/2008/oct/05/wall.street.bailout
October 4th, 2008 at 7:45 pm
Rate cuts are forthcoming. They’re going all in.
October 4th, 2008 at 7:47 pm
Where do we go from here?
Have you considered the fact that you are likely to be wrong at the bottom? Scoreboard is dollars, that you CC’ d with a pronounced bear is notable. You have nailed it, but is Buffet right or are you?
Roubini has been the shit, dead on. He was way early. He will be late and irrelevant on the way up.
I am amused that I take issue with your pats on the back, as I am significantly more bearish. But I judge my sentiment accordingly, do you?
Big soapbox, step up and have a Paulson moment.
John that is, if you did not get the hint.
October 4th, 2008 at 7:47 pm
Kass is talking about an imminent rate cut. How long would a bounce from a coordinated global rate cut last? Contrary to what Cramer claims, it wouldn’t be a “panacea”, but I think such a rally would have some legs right now. We’re pretty straight down right now. Could see a solid week at least off of something like that (of course, there would be selling pressures along the way).
October 4th, 2008 at 7:48 pm
If Bernanke doesn’t pull out a rate cut Sunday before Asia opens – potential crash Monday.
The markets lost around 9% each last week. If a Crash is going to happen – it is probably going to happen this week or next.
October 4th, 2008 at 7:49 pm
The most disturbing news today was that AIG has already used $61 billion of the $85 billion bridge loan and haven’t yet sold any assets. And we think $700 billion will save the entire financial industry? After AIG, what are the biggest underwriters of credit default swaps?
October 4th, 2008 at 7:50 pm
Tonight America’s Most Wanted features the hunt for Hank “the mole” Paulson, capo di tutti capi of the Wall Street crime families. This brazen con-man is believed to be planning the largest bank robbery in U.S. history…the $700 billion looting of the U.S. Treasury under the cover of TARP (Troubled Asset Relief Program). Paulson is known to frequent the Washington, D.C. metro area, and has been spotted visiting Barney Frank at odd hours. Paulson could also be hiding in the New York metro area where his mob associates have a network of plush hide-a-ways, including the Club Fed bordello on Maiden Lane in lower Manhattan. This week-end he may try to slip into Paris to show European Central Banksters how to blackmail legislators into giving their bankster buddies hundreds of billions of dollars or euros.
As Hank clawed his way to become boss of the Goldman Sachs crew in 1999, he got a rep as a brut, and many nicknames, such as the “Steamroller”,”the Iceman”, and “cold scungilli”. From 1999 to 2006 Hank as boss of the Goldman Sachs was overseer of the subprime CDO fraud and Ponzi schemes to fleece investors and pension funds. In 2004 Paulson’s mob and the 4 other investment bank mobs led the charge and got the SEC to change the net capital rule, allowing these mobs to recklessly increase leverage to more than 30 to 1.
http://www.nytimes.com/2008/10/03/business/03sec.html?_r=2&hp=&pagewanted=all
Paulson greatest coup, and the thing that made him “boss of all bosses” was his July 2006 appointment as U.S. Secretary of the Treasury. Why lobby (a.k.a. bribe) government officials when you can become a government official yourself. And not just any government official…the freaking U.S. SECRETARY OF TREASURY. In July 2006 the Wall Street crime families paid respects by kissing Hank on both cheeks, kissing his ring, licking his shoes, and promising his share of “our thing” would be waiting when Hank leaves the Treasury office.
Police hope that recent mob warfare may cause a break in mob ranks and lead to Paulson’s capture. Mobsters suspect that Paulson directed the take-down of the Bear Stearns and Lehman mobs to protect and enlarge Goldman Sachs territory. Police are hoping that a disgruntled mobster will step forward and bring this serial con-man Paulson to justice.
October 4th, 2008 at 7:51 pm
Barry, would you care to speculate on what percentage of selling last week was due to hedge funds raising cash for redemptions? Also, how many more bailouts will it take from here, in order to drastically tighten the TED spread?…Bular…Bular…anyone?
October 4th, 2008 at 7:51 pm
No coordinated EU banking response. Hard to see the Fed using up another bullet on Monday though a cut before the October meeting is surely possible. Earnings…can they possibly be spun in some way that brings hope? I don’t see it.
And my big picture question is about the “fact” that markets are forward-looking mechanisms. I just find that to be utter gibberish, at least in terms of accuracy. Yes, they look forward in terms of “tomorrow is another day” but I am baffled as to the evidence of predictive power.
But then I also think Sarah Palin is a vacuous git, so what do I know.
October 4th, 2008 at 7:52 pm
> What’s on your minds?
I saw this article a couple of days ago, and it was an eye opener. I am wondering just what is behind it.
October 4th, 2008 at 7:58 pm
Verizon shuts down access to Usenet
15 June 2008 16:11 by Andre “DVDBack23″ Yoskowitz | 43 comments
Verizon has announced that they will be stopping access to tens of thousands of Usenet discussion areas including the very popular alt.* groups that have been around since the late 1980s.
Verizon spokesman Eric Rabe said only a select few newsgroups/discussion groups would be offered to customers going into the future. It appears the decision is in response to political “strong-arming” from New York State Attorney General Andrew Cuomo who wants strong restrictions on all newsgroups.
Cuomo added that his office had found child porn on at least 88 newsgroups, although that percentage is tiny compared to the over 90,000 newsgroups that exist. “We are attacking this problem by working with Internet service providers…I commend the companies that have stepped up today to embrace a new standard of responsibility, which should serve as a model for the entire industry,” read a press statement from Cuomo’s office.
Newsgroups are a pre-Web technology that has relied on ISPs and Universities to operate servers in which users can exchange messages and files.
With the decision however, comes the shut down of many useful newsgroups such as symantec.customerservice.general, us.military, microsoft.public.excel, and fr.soc.economie. which have longed helped users.
One user of the alt.hierarchy was very upset over the decision. “This is ridiculous. I actually met my wife on alt.personals, 14 years ago… I still use usenet – there are a lot good discussions and a person can get answers to questions on specific topics pretty quickly. It’s nice to have a decentralized place to hold discussions, one that is not beholden to a sysadmin to correctly run a forum, one that’s free of blinking gifs and flash ads.”
http://www.afterdawn.com/news/archive/14493.cfm
October 4th, 2008 at 7:59 pm
I think I’m just gonna grab a sixpack, shoot up some meth, put on some porn, and imagine what a paridise it’s gonna be with
that hot chick as president.
October 4th, 2008 at 8:03 pm
if the market is a leading indicator, the Dow Transports suggest quicker pain than most realize…rate cuts soon…and no matter how right or wrong Paulson is about what he’s attempting, a blank check for that much money with few firm guidelines mixed with increasing social acrimony is a recipe for bitter politics in the year ahead. And if Nouriel is correct about all the bad banks needing to be cut now, then I fear the Economist article a few months ago was remarkably prescient…in a very bearish way
http://www.economist.com/science/displaystory.cfm?source=hptextfeature&story_id=11579107
There’s always football tomorrow.
October 4th, 2008 at 8:06 pm
She should have run for president Bob. Would have been a shoe in.
October 4th, 2008 at 8:06 pm
“But then I also think Sarah Palin is a vacuous git, so what do I know.”
Say it ain’t so, Joe.
October 4th, 2008 at 8:08 pm
I’m really interested in where exactly the next stages of growth for the world economy are going to be.
Warren Buffet is correct the American Economy is a superior athlete in the throes of a heart attack, but nothing unsurmountable.
As we deal with and overcome this crisis of confidence, what are the ways in which we will grow out of this?
An additional thought on my mind is why the low volume sell offs as of late?
October 4th, 2008 at 8:09 pm
Wachovia says: “Pandit–you bandit, you can go to Hell.. We’re hitchin our wagon to the horses at Wells..
October 4th, 2008 at 8:09 pm
Who will be hired and work with Paulson to buy up assests and benefit at the expense of taxpayers. Former employees of the failed investment banks? It won’t turn out well.
October 4th, 2008 at 8:15 pm
All this stuff about what a law says or what an act says means nothing. It’s the interpretation and subsequent enforcement of said acts. I can tell you from sad experience that an Act can be re-interpreted at will and a Federal goon can come in the office and fine you and threaten you with bankruptcy. Sample: the CFTC is charged with enforcement of all laws and acts concerning the futures markets…..but guess what they did? Why the assigned an industry group called the National Futures Association all discipline and enforcement unless criminal activity that is to serious to let slide is involved. It gets better, the big shots in the NFA are the biggest clearing firms, brokerages, and exchanges…..so guess what happens. I have a hunch that all the illegal trading is a result of this NFA. The CFTC stands aside and claims they are enforcing the law when in fact they do nothing.
October 4th, 2008 at 8:17 pm
They havent changed anything,the SPX is still hitting all support and resistance levels,just faster.
October 4th, 2008 at 8:19 pm
Large, coordinated, global interest rate cuts before the market opens on Monday. Yes, this includes the ECB that is suddenly awakening to the possibility that their policy may lead to the break up of the EU.
October 4th, 2008 at 8:20 pm
While DemoKrats and Repubs are stepping over each other’s small phaluses and giving and getting blame for the mess we are in. The real culprits, the Federal Reserve boys, are in a drunken stupor and confused in wonder as to why no one is yet pointing the finger at them… This is, folks, The Grat Greenspan Depression of the Millenium.
Read at http://www.floridabits.com/2008/04/great-greenspan-depression-of.html
October 4th, 2008 at 8:24 pm
All the conditions are in for a major low for the next 6 months. Im bearish longterm, but I think everyone is underestimating the government right now.
Ive been a SUPER BEAR and I think some good news is going to pop up soon.
October 4th, 2008 at 8:27 pm
The SEC changing the rules to prevent shorting caught a few by surprise I should think.
The level of fear in the money markets last week was a surprise to many.
What other surprises are in store?
I guess its a possibilty that next week will be worse than last week. Thats kind of what Nouriel Roubini is predicting.
The next stage is main street becoming disfunctional for similar reasons to wall street.
The money crunch continues….
Companies without the ready cash to support their immediate cash flow requirements unable to get bridging loans to keep their solvent businesses running.
Could we see large companies lining up at the feds window for short term loans?
Will businesses be unable to pay their staff and creditors because they are not being paid?
Where does that lead? Systemic failure…Financial armagedon…
The possibilty is there and it sure could get nasty.
Make sure you haver cash to last at least a couple of months in whatever enterprise you run.
Pay yourself first is a good rule of thumb for business.
October 4th, 2008 at 8:28 pm
50pt cut on Monday morning.
Markets open up a bit and vacillate until 2:30pm when the liquid lunches start to wear off. Dow loses 3% tomorrow by close. S&P off 5%.
Bernanke starts writing his resignation letter tomorrow afternoon. Paulson hides out.
The MSM acts stunned. Who knew it was so bad? they’ll say.
October 4th, 2008 at 8:32 pm
Bob Brinker spent the first segment of his show describing the bailout as necessitated by Congress encouraging and allowing the subprime crisis that they caused.
He is such a hack.
October 4th, 2008 at 8:33 pm
Next week, all hell will continue breaking loose.
October 4th, 2008 at 8:37 pm
http://www.strategerycapital.com
tom the taxpayer you will love this shit!!!
Good luck to everyone!
October 4th, 2008 at 8:38 pm
Sun Kill Moon, “Ghosts of the Great Highway”.
Memories of music on Friday/Saturday nights here at BP….
October 4th, 2008 at 8:43 pm
Want to have some fun?
Bloomberg just announced that Paulson is looking for ASSet manager firms. Barry, send your firm’s name in. Also find out how Mauldin is going to make out. Anyway, it might be fascinating to see how these new asset managers are connected to our politicians. However, with all the money involved, it is definitely not a quest for the feint hearted.
October 4th, 2008 at 8:45 pm
One tiny little company, that has been crushed, which I have large postion in issued a poison pill on Friday night. What do you think I should make of this?
October 4th, 2008 at 8:50 pm
Guys,
If the Fed cuts rates it is largely ceremonial. Check out the slosh, they basically have cut rates, they just didn’t announce it yet.
October 4th, 2008 at 8:51 pm
‘Warren Buffet is correct the American Economy is a superior athlete in the throes of a heart attack, but nothing unsurmountable.
As we deal with and overcome this crisis of confidence, what are the ways in which we will grow out of this?’
———
$700b for starters is not a crisis of confidence, it is a crisis.
The MBS’s are illiquid now and they will be in 5 years too. Who will buy them? The 3 banks left standing will still be holding plenty of the crap themselves, only their’s will be a bit higher in quality. They will have to compete with treasuries anyway, because the government will have to sell boatloads of treasuries. Of course, they can only do that after they slowly soak up the cash they will have airdropped in.
The whole time we will have to contend with a government that can be counted on to reliably choose the worst option from any set of options.
Maybe McCain will be elected and can appoint Coco the chimp as head of the Ministry of the Economy, and John Bolton as High Minister of State Apparatus.
Phil Graham will run the new GSE, Soylent Green.
October 4th, 2008 at 8:52 pm
Note: the short sale ban goes away 3 days after passage of the bailout bill. That would be Thursday 10/9.
Isn’t it interesting that Nouriel Roubini is invested 100% in stocks in his retirement account. He says he doesn’t try to time the market but maintains a buy and hold strategy.
I like international REITS in the long run. You get dollar protection, inflation protection, and a fat yield.
October 4th, 2008 at 8:56 pm
tom a taxpayer: “…made him “boss of all bosses”…”
Don’t you mean “loss of all losses”?
October 4th, 2008 at 9:03 pm
I track the top 12 (FNIAX FLSAX FNITX FBALX FEMKX FSENX FSESX FICDX FIGRX FNORX FPBFX FSEAX) perfoming Fidelity Mutual Funds in 2007. They are down 36.2% thru Friday. The caranage is so deep, so unbelieable and no end in sight.
October 4th, 2008 at 9:04 pm
Bill Gross spoke too soon: saying he’d manage the TARP for free.
Dennis Gartman keeps blaming “Clinton” for the current financial mess. Cred killer. His Fast Money calls have on average also have been cred killers.
Richard Bove’s absolute bottom for the financials back in March hasn’t held.
Sheila Bair accolade shouters are going to turn on her when they see the sloppiness of her contribution to the upcoming Citi / Wells Fargo war.
Brian Wesbury wants to return to Priceline accounting (name your own price.) Mark-to-market is not the problem, but it’s part of the solution.
Where is the online wager market for the first day the TARP distributes assets?
Can somebody pull together all the Barron’s letters to the editor criticizing Alan Abelson in this cycle? That would be a hoot.
Arnold, the Debtinator’s transparent letter to Paulson pleading for a bridge loan of $7B (1% of the TARP?) was a dramatic gesture that’s been mis-interpreted. Californians are desperate for double tax free munis (ironically Arnold could sell more if they raised taxes even higher.)
Heisman watch: Juice Williams broke a record held by Red Grange today, which the Galloping Ghost set prior to the Great D. everyone’s been on about lately.
October 4th, 2008 at 9:05 pm
Fake Jeff Macke hates me.
October 4th, 2008 at 9:06 pm
Steve,
The poison pill may just be a canard for the sake of investor’s confidence. I have seen a number of penny stock companies structure poison pill arrangements only to never, ever have a suitor / hostile bidder show-up for years.
It sure does give investors the idea that management has a strong belief in the value of the company going forward…
That said, if the shares have been beaten down due to the tide going out on all the boats, it could be authentic. I think the best measure is how concrete is their success. If they have sure & solid profits growing every year, then it probably is authentic.
If they keep promising that next quarter is the one when they will finally make a profit or reduce losses, the poison pill is fake.
October 4th, 2008 at 9:09 pm
MONEY MARKET = CASHED OUT
401K = WITHDRAWN
CREDIT CARDS = MAXED OUT
FICO = 520
HOUSE = FORECLOSED
AUTO LOAN = REPO’d!
PIGGY BANK = BROKE WITH HAMMER (2 months ago)
October 4th, 2008 at 9:13 pm
Barry, another international citation of you….
Canada’s Globe and Mail has a decent article on what they call a “flight to authority”, detailing how people are going to trusted sources. Your are cited as:
“9/11 was a big story,” Mr. Ritholtz says, “but this is a lot more fun. This is obviously history in the making. We’re on the grassy knoll. We’re watching the Kennedy motorcade come around the corner.”
It’s not just that “Wall Street as we knew it no longer exists.” By his estimate, 80 per cent of the professionals on Wall Street today “were not around in the ’87 crash.” No wonder they hunger for information.
And hunger they do. Until September, Mr. Ritholtz considered 50,000 hits a good day – especially for a “quant” blog that likes to riff on abstruse subtleties such as the implied volatility of index options. Now, his numbers are pushing 150,000 hits a day – so many that he’s worried “the traffic is going to grow beyond where it’s possible to have an intelligent conversation.”
Details at http://www.theglobeandmail.com/servlet/story/LAC.20081004.MEDIA04//TPStory/Focus
October 4th, 2008 at 9:17 pm
Stop preaching about “free market zealots”. It’s ridiculous, and shows a total lack of understanding of our system, which is closer to corporatist fascism that any kind of capitalism. You and Roubini are so asinine on that stuff.
October 4th, 2008 at 9:18 pm
banks pulled support for hypo real estate this afternoon. without coordinated rate cuts, monday is shaping up to be a rout. lots of we’ll get through this and be OK talk is mind boggling to me. welcome to japanese style deflation the manuscript is playing out page by page. s+p 750
October 4th, 2008 at 9:20 pm
This is a fast moving market… to forecast a whole week is futile. It appears that rescue for German bank Hypo failed… we’ll see.
I went long a small position late on Friday (EM ADR involving currency and energy). Too much negativity flushed and a lot of high level talks everywhere could provide some support or a short term bounce on Monday. But that Hypo falling might make quite a splash…
October 4th, 2008 at 9:21 pm
I bet this mess would have been avoided if CPI used house prices rather than rents. The Fed would have been forced to raise rates when the bubble was forming.
October 4th, 2008 at 9:22 pm
“Shifting debt from the financials to the government won’t bail out this stagnant supertanker, and I fear that will be the subsequent sentiment when the bailout bill is passed” -Ned Davis
October 4th, 2008 at 9:22 pm
AIG is taken over-loan didn’t work and fire sale starts.
October 4th, 2008 at 9:31 pm
“Not only is the recently passed Banker Takeover bill larded up with pork, it also contains dictatorial provisions. In addition to making former Goldman Sachs chairman and current Treasury Secretary Hank Paulson an economic czar — a provision completely at odds with the Constitution — the bill grants police state powers to the IRS. Declan McCullagh writes for CNet:”
http://www.infowars.com/?p=5076
October 4th, 2008 at 9:33 pm
The economy is at a dead end. Consumerism as an economic model is over. It’s not clear what replaces it. The infrastructure is not in place for anything but consumption.
The Fed has no choice here but easy money. Everybody refinances everything.
October 4th, 2008 at 9:34 pm
Tom A Taxpayer, Bob A, Bad Bank Poet, great stuff!
Mark Hoffer, that is chilling!
October 4th, 2008 at 9:51 pm
We are grossly oversold by almost every measure and sentiment is almost universally negative, which are both positives.
I’m also encouraged that high yield credit spreads blew out to record levels last week. The last time credit spreads were this high was in Oct. 2002, which proved to be the ultimate bottom of the last bear market, although a near retest occurred in March 2003.
I suspect a similar pattern will develop this time. A higher market for 2-3 months as underperforming hedge funds try to manufacture performance to justify their existence, then a gradual selloff early next year that tests the recent lows.
October 4th, 2008 at 9:55 pm
Thinking about how to play the eventual transition from deflation to inflation, thinking about moving to Japan, thinking about a glass of bourbon.
October 4th, 2008 at 9:55 pm
If Paulson had any brains, he would take that $700 billion to Japan and turn it into $7 trillion and begin buying shit through third parties. The FED has already burned through $2 trillion in the last two weeks alone, and another $1 trillion since Aug 07. It is fucking ridiculous to think that they will figure this out in time, however. It will take a tidal wave of Tbills to cover this plan, precisely at the wrong time, too. Rates are going to go higher unless they win the game of Chicken they are playing with Asia. Interestingly, no one is following what is going on with the USD. Obviously, the Fed produced unimaginable amounts of electronic credit wihtout telling anyone, and now that redemptions and fire sale liquidations are becoming popular, it has been forced to quadruple normal dollar swaps around the globe. This is the black harbinger of the abyss, foretelling of much more assfucking to come.
October 4th, 2008 at 9:55 pm
Barry,
Most credit indicators are at insane levels. If they dont tighten significantly, and fed doesnt do anything with rates, something negative will happen.
We cant have this kind of stress, and no fairly large negative surprises. I think the fed will cut, and they should do it intermeeting to maximize effect.
I hate to say it, but no matter what, we have lots of pain ahead. Stocks are still way overvalued, but I hope we rally a bit to provide more shorting opps…Yes, I guess its guys like me thats causing all the turmoil, cause I have been focused on shorting since last August.
October 4th, 2008 at 10:00 pm
@Darin: Kiss your mother with that mouth? Seriously, I like the frank commentary. F**k yeah!!!!!
October 4th, 2008 at 10:00 pm
Fear indices VIX and VXO are as high as 2001 levels (50+). But I doubt there will be a significant bounce here (at most to 1200). Shorting SPY and long AAPL and GOOG. May add some INTC. If I am the manager of a sovereign wealth fund, I may consider well known American tech names to be bargains here. US still leads the world in tech especially IT.
October 4th, 2008 at 10:12 pm
i love it when Congress, esp Dems, say “we had to take a tough vote for the good of the country”, right, it’s always tough for Big Government to send money to Wall St, which can be counted on to send some small portion back to their election campaigns, usually in approx a 50/50 split Dems v Reps. real tough vote. it’s called hush money. the important vote which occurred Friday as well, the House voted by a large margin to extend unemployment benefits, something that would actually help real people in a financial crisis RATHER THAN THIS EXERCISE TO SHIP MONEY DOWN A RAT-HOLE, and the vote was wider than the margin for the Bailout, but guess what? this one isnt expected to actually become law because President Chimp has said he’d veto it, and the Dems actually rolled over for that. so they get to vote for benefits by large margin JUST BECAUSE they know it has no chance of passing. nice guys. and gals. this is exactly how Depressions start.
October 4th, 2008 at 10:17 pm
I wonder what would happen to the elections if at the last moment McCain, due to health reasons, was forced to drop out….
I wonder why reversion to mean is called a crisis….
I wonder how we went from a “bailout” that was voted down to a “rescue plan” that was passed yet nothing changed….
I wonder, wonder, wonder, wonder, who, who wrote the book of love….
October 4th, 2008 at 10:17 pm
This article is a great rebuttal to all this “free market zealotry” crap:
http://www.lewrockwell.com/north/north659.html#
especially this:
We are living in a time in which the fundamental religion of our era has been faith in the redemptive power of the State. Whenever there is a crisis, citizens call upon the State to bail them out. They are convinced that the State has a separate existence which enables it to intervene into the affairs of men, thereby improving the life of almost everyone under its jurisdiction.
October 4th, 2008 at 10:17 pm
DJI -9300 or less at the end of the week.
.50 Fed rate cut on sunday
National City taken over tomorrow.
Citibank losses lawsuit drops 5 more points.
American express -10% more.
SP below 1000
MSM says why is the bailout not working.
Mark it 4th inning. (ALT-A continue to cause problems through 2009)
No bottom till housing stops dropping like a rock
unemployment by the end of the year passes 7% (real number is around 14% factoring in underemployment and those who have giving up)
DJI 5300 before the end of the year.
PUTs for oct 18,Jan 18 on all major financial players, JCP, Sears, GE.
October 4th, 2008 at 10:20 pm
Someone characterized the $700B bail-out as a hair on the dog that bit you. LOL
Anyway, when “Joe Sixpack” is out of a job, he’s going to be looking for his bail-out too. The political pressure will be too hard to ignore.
All this money has to come from somewhere, and I think we’re looking at much higher Treasury rates. And if foreign governments need their money back home, treasury selling could get out of control.
Has anyone given any serious consideration to the fact that massive bank failures typically lead to currency crises?
October 4th, 2008 at 10:20 pm
Those who would give up market freedom to obtain a little temporary market stability, deserve neither.
October 4th, 2008 at 10:38 pm
They are convinced that the State has a separate existence which enables it to intervene into the affairs of men, thereby improving the life of almost everyone under its jurisdiction
yeah, well, that’s *my* “religion”. The very definition of “state” is that which transcends time. The State is the collective community investment of thought, labor, and capital investment. It is what served our grandfathers and what will serve our grandchildren.
In 1783 the framers of the constitution didn’t sit down to establish the perfect minarchist paradise.
In my thinking, free market fundamentalism is centrifugal — the hereditary rich get richer and increasing enslave the rest of the population, who get increasingly dispossessed and disadvantaged over time.
The State, in my theoretical world at least, is there to provide an extra-market centripetal force in opposition to free market forces of exploitation. Its primary purpose is to provide the goods and services that enable everyone to become and remain a productive member of society, regardless of ability to pay, to provide for the collective where private enterprise would be less efficient.
October 4th, 2008 at 10:39 pm
This week, I think, the shows moves temporarily to Europe. Huge outflows from European banks into the US based on the perception that the Euro union will fight only with words, not cash. So: big pressure on Euro banks by the end of the week, and therefore on the governments
October 4th, 2008 at 10:39 pm
Two things to watch…
1) Now that the banks are “bailed out”, the States will be next in line…Arnold in Caleefornyah has already said he will need $7 Billion from the federal government. Watching NY munis tank the last month, I have to believe NY is next on line.
2) Rick Santelli said something awhile back that went by without much attention. In the context of Caterpillar having a disastrous paper issuance, he said that $800 Billion in corporate paper is rolling over by year-end at probably horrible terms. This will be a killer for corporate earnings.
October 4th, 2008 at 10:40 pm
UH OH. I just read this:
Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA). Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points.
In fourth-quarter 2008, the 10, 20 and 30-percent decline levels, respectively, in the DJIA will be as follows:
Level 1 Halt
A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.
Level 2 Halt
A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.
Level 3 Halt
A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.
Background:
Circuit-breakers are calculated quarterly. The percentage levels were first implemented in April 1998 and are adjusted on the first trading day of each quarter. In 2008, those dates are Jan. 2, April 1, July 1 and Oct. 1.
Contact: Mirtha Medina
NO, NO, NO these circuit breakers changed as of 10/01/08 have nothing, nada, zip to do with anxiety or fear. Everything is just fine. Really. They set them quarterly! Yeah, I know you’ve never (or hardly ever) seen a press release on this end of the world shit but don’t worry. Relax. Remain calm. Take a deep breath and repeat after me: It’s only money…
October 4th, 2008 at 10:44 pm
Is it not an ominous sign that both California and Massachusetts are petitioning the treasury for low interest loans to avoid running out of cash? This tight credit situation looks like it might cause failures way beyond the financial sector. This is looking more and more like a house of cards; a ponsey scheme; a shell game.
October 4th, 2008 at 10:52 pm
“International Swaps and Derivatives Association has scheduled an auction…:
Oct 6, 2008: Fanny/Freddie
Oct 10, 2008: Lehman
Oct 23, 2008: Washington Mutual
U.S. annual gross domestic prod: $ 15T
U.S. money supply: $ 15T
U.S. max legal debt was: $ 9T
U.S. mutual fund companies manage: $ 12T
World’s GDPs for all nations: $ 50T
Unfunded Soc Sec and Medicare: $50-$ 65T
Tot world’s real estate: $ 75T
Tot world’s stock/bond markets: $100T
BIS valuation derivatives, 2002: $100T
BIS valuation derivatives, 2007: $516T
Tot derivatives, Qtr 1, 2008: $692T
Tot CDS? about: $ 56T
October 4th, 2008 at 10:52 pm
Deregulation in and of itself is not the problem. Zero OVERSIGHT certainly was. As much I believe in minimal government intervention in most things, government regulators’ job is not to NOT REGULATE which is what the SEC did. If you don’t BELIEVE in regulation, don’t get a career as a regulator! Now they start regulating by saying ‘no short selling’? Real effective, assholes…
The Fed stepped in with their ‘put’ on every minor downward spasm in the past that now they have no ammo. 1% Fed funds meant people do crazy things for normal yields.
Treasury said everything is fine and now those who could not see the muck coming get a giant wad of cash to get us out of it? Gentlemen, start your printing presses…
Dems use CRA to achieve social goals. Ok, so I don’t think that was right, but certainly it doesn’t mean to lend to UNQUALIFIED lower income individuals. Of course, the Dems will gain A LOT of power over the next decade because the Republicans dropped the ball.
Republicans lost their free market credentials long ago… Instead of competition, capitalism, and free markets, we have cronyism and large corporation welfare. Too big to fail, baby! I don’t get how we got to low taxes AND high spending. I’m pretty sure any 1st grader would look at that equation and say “that’s fucked up shit, mommy”.
Finally, what the hell are the ‘owners’ thinking? Why do the REAL owners of companies (mutual funds, hedge funds, pension funds, individuals) let boards and CEOs run the place like their own fiefdom? Why does the electorate let the president and congress run the country into the ground without getting voted out? I guess as long things were going swimmingly and we all appeared to be getting rich and prosperous, very few people cared to see what was going into the sausage. I guess we all now have a front row seat at the factory, and apparently, the sausage contains rat poison, melamine, lead paint, and the ground up, dead body of Lady Liberty.
Enough ranting for now.
I’m just glad I’ve been in all cash and short ETFs for the last year or so, so at least I’ve slept pretty soundly thus far =)
October 4th, 2008 at 10:53 pm
The crash will happen the day before all the morans who are still long anything in their 401k’s and IRA’s figure out that the buy and hold (for the loooooonnnnnngggg term) strategy that most every financial advisor advocates may not be the best strategy. And I think that will happen Tuesday. Rate cut Sunday, Monday, Tuesday,…. will be meaningless…. unless they cut it 4 points. Now that would give us something to talk about.
October 4th, 2008 at 10:56 pm
“This is looking more and more like a house of cards; a ponsey scheme; a shell game. ”
If walks like a duck, quacks like a duck….
October 4th, 2008 at 10:59 pm
A couple questions, then an observation.
What’s to prevent banks in the bailout from highgrading their CDOs, once the “auction rate” is established by Treasury and their “asset managers”? This isn’t limited only to retroactive CDSs, what’s to keep banks from regraded their CDSs into higher high junk assets? And going forward, what’s to keep them from doing what they have been doing, creating even more CDSs, once they know the spread?
The only observation is Paulson says about a month to set this auction up, then half a $trillion by January 1, would be minimum 400,000 failed assets per asset manager over 40 working days, that’s 10,000 assets auctioned off in a 6-hour Wall Street day, one asset every two seconds, unless they blind-block them and bid dutch auction on blocks of 1,000 at one bid every half hour.
?Then how are Mom & Pop investors to know which of those 1,000 meet fiduciary claims by the brokers, who will break and junior them that, “fair value was established at Fed auction, and your investment is 100% liquid at all times”. I mean, seriously!
Finally, where will the 30% yield come from for brokers to split up the blind- blocks and toss J6P 10% on non-performers?
Lastly, where will the class action funds come from to bail out the brokers, after J6P realizes he just bought toilet paper?
Many of us still remember S&L 1 grifters, and that cost US, what, 10x the assets?
October 4th, 2008 at 11:04 pm
Either Wells Fargo or maybe CitiBank are going to wind up with Wachovia, thus vastly increasing the winner’s size. So we are still manufacturing entities that will be “too big to fail” likely leading to more bailouts in the future. We never seem to learn!
What we should be doing instead is breaking up these big financial powerhouses at every chance we get into smaller entities. What better time to start than right now?
October 4th, 2008 at 11:05 pm
paul:
How old is Roubini? He probably doesn’t expect to use that money for a long time anyway, and most people don’t actively trade stocks in their 401(k).
October 4th, 2008 at 11:05 pm
paul:
How old is Roubini? He probably doesn’t expect to use that money for a long time anyway, and most people don’t actively trade stocks in their 401(k).
October 4th, 2008 at 11:07 pm
a hastily drawn cardboard sign from a protest march in front of the New York Stock Exchange on Wall St. It read, “Jump you f—ers”.
October 4th, 2008 at 11:10 pm
The post titled “Financial Eugenics” (10/2/08) at the London Banker blog is far and away the best summation of the Bush/Paulson Wall Street bailout I have seen; why it was put forth and the likely results.
Just wanted to share it with the BP community since this fellow only recently began blogging and I assume he is not widely read yet.
Profile: “London Banker has been a central banker and securities markets regulator during a varied and interesting career in global financial markets”.
October 4th, 2008 at 11:12 pm
Short-term
- Rate cut
- USD value and inflation
- Volatility
- Europe markets (possible rescue package)
- Shorting rules… or lack of forced buying because of no shorting
- How will the 700 Billion be used (if there is a short term related play)
- Is 700 Billion enough?
- Change in regulation on wall st. and related play
Mid-Term
- Holiday sales
- Unemployment
- Housing
- Commodity and oil pieces
- Earnings in the next few quarters
Long-term
- Elections
- Possible Reversal after the elections
- Deficit budget and trade balance
- Next boom bust cycle
October 4th, 2008 at 11:13 pm
- Our Congressfolk have already borrowed $9.6 Trillion or about $120,000 per household…and need to borrow another $40 Trillion to pay for Soc Sec and Health
- We the people love the Enron off-book accounting used by Congress. The MSM finds it boring and irrelevant.
- Federal Expenses are $2.5 Trillion FY08
- Federal Revenues are $2.9 Trillion FY08
thus
Deficit, yearly >> ($.4 Trillion)
- I am sure we can get the $400 Billion from the rich this year and $40 Trillion over the next 20 years.
October 4th, 2008 at 11:19 pm
I can see Fed shenanigans Monday am right before the market opens. Monday we end down -300 or more. Tuesday is the big one.
Re states – here’s one from Illinois..behind on $1.8 billion in payments..
http://www.sj-r.com/news/x453210528/Comptroller-State-falling-further-behind-in-bills
October 4th, 2008 at 11:22 pm
When I mentioned the other day what it might be like if everyone were to line up at their bank widows asking to withdraw their balances in cash (which the banks don’t have)….
…I got the same puzzled silent stares I got when I suggested a couple months back, to someone who suggested buying Wamu at 4, that “well you know, it could go bankrupt”
All I can say is, you all better damn well hope the bailout works. But I also think this bailout is only act one.
October 4th, 2008 at 11:30 pm
Since I don’t short, and rarely buy short funds I will tell those of you who are like me something that has worked for me in down markets. A little late this time, but something you can think about and accept or reject.
Investors are always told you can invest, say, ten per cent at a time or twenty per cent as you build a large position in a stock or fund.
Well, the inverse works just as well when you think you are in a down market, but don’t want to sell your entire position at once.
Early in what you think is a bear market, and you just want to unwind it, sell 20% and wait your week or two. If things still look weak, sell another twenty. If you were wrong, and your position doesn’t weaken, you don’t sell, and could even, if you didn’t read it right, add back.
This gets you out of persistently down markets in a relatively short period of time. I see people here who are still, say, 60% in stocks, and haven’t a real method of getting out of bear markets, or even thought about completely exiting.
But it is just as wrong,in my opinion, to hold on through a bear market to say, 50% of your long position. If you have a method, like the one outlined above, you can be out of stocks entirely in say, 5 weeks, and yet test your decision to sell on a weekly basis. All you do is see if your residual position has made money or not, in the 1-2 week interval. If it is still losing, you sell more, if not, you don’t.
…just a thought. Has helped me get out of the tech bubble on a timely basis, and at the start of this mess.
This is probably someone else’s already described method, if so, sorry for appearing to be a nimrod, but I was not a business major.
It is my “Time to Exit?” strategy…
October 4th, 2008 at 11:32 pm
– 700Billion is only the headline number, the fine print probably says they can print as much as they deem necessary.
– Fed and treasury (Paulson) are consulting with friends like Bill Gross who is talking up the idea of Pimco’s Zero Interest rate policy (a’ la Japan). Probably seriously considering buying and destroying houses to remove them from inventory too. Gross hasn’t published his October outlook which is usually right on time. Little time for outlooks when you’re making the fixes up in real time. Gross is a good guy.
– Short selling ban to be extended before the 3rd?
– China has likely already sold many of it’s Treasuries via derivative arangements that set a floor on the currecy below where it is presently. Only a matter of time before the trap-door opens and the dollar declines precipitously. The Chinese are shrewd mercantilistic investors and will surely have hedged their monsterous positions in dollars.
–Buffet was strangely early on his 3 and 5 Billion investments in GE and GS. Pehaps his insurance company was one of the next to fail (Harry Reid insurance statement), was a few dominoes down from it.
–Election to be suspended (directive NSPD 51) if economic collapse intensifies. Would explain McCain calling suspension of his campaign so abruptly after the stock collapse intensified, if he got the call saying there would be no election so ‘come-on home.’
October 4th, 2008 at 11:33 pm
Everywhere we hear “Banks are not loaning each other” (Concerned they will not get it back) what if the Fed put out “Protection” on each transfer or insured the transactions?? and told the banks “YOU WILL GET EVERY PENNY BACK NOW START LENDING!!”
October 4th, 2008 at 11:34 pm
Settlement day approaches for derivatives
By Aline van Duyn in New York
Published: October 1 2008 03:00 | Last updated: October 1 2008 03:00
The $54,000bn credit derivatives market faces its biggest test this month as billions of dollars worth of contracts on now-defaulted derivatives on Fannie Mae, Freddie Mac, Lehman Brothers and Washington Mutual are settled.
Because of the opacity of this market, it is still not clear how many contracts have to be settled and whether payouts on the defaulted contracts, which could reach billions of dollars, are concentrated with any particular institutions.
According to dealers, insurance companies and investors such as sovereign wealth funds, which are widely believed to have written large amounts of credit protection through credit default swaps on financial institutions, could have to pay out huge amounts.
“There is a lot at stake,” said an executive at one big dealer. “This is a crisis time, and if these auctions do not go well, or if the amounts investors and dealers have to pay is seen as not being fair, it could have further negative repercussions on the CDS market.”
October 4th, 2008 at 11:36 pm
Do you think the banks that get bailed out will really be lending money or hoarding it?
Is Paulson is going to bargain – a la Buffett – or pay up for the mortgage securities ‘we’ are buying?
October 4th, 2008 at 11:38 pm
@Al Czervic
Thanks for the link to London Banker – quite a piece. Here is the money quote to me:
“This bill is about engineering survivor bias to friends of the Bush administration so that they profit disproportionately from the collapse of these markets using the funds provided by the taxpayer via the unreviewable and unconditional authority of the Secretary of the Treasury.
The basic plan is to set up a federal money laundering operation. Bad assets come in, get laundered by the Treasury and put in a new AAA “wrapper” (as it’s termed on the call), and good assets go out, issued as Treasury guaranteed securities.”
I also did not make the connection he did that this bailout will also help the Fed clear its balance sheet of trash, for those assets can now be reclaimed from the Fed and sold, washed, and rinsed through the Treasury.
October 4th, 2008 at 11:58 pm
short-term
-rate cut monday
-earnings disasters, Alcoa/GE
-Hypo iimplodes
-selling rally’s new typical as buying dip used to be
-rate cut discounted, rate cut rally sold
-Russian navy docks syrian port Tartus, Peter the Great
-israel receives 25 F-35 Strike Fighters
-USS Howard sinks Somali pirate as Terror Ship
-Monday 160 Blackjack/Tu-95 MS Bear-H strategic bombers fly sub-Arctic Russia/Belarus close Alaska
-Now,3rd Infantry’s 1st BCT trains for a new dwell-time mission
-another AAPL/GOOG crazy price event, or three
-short-selling band extended, again
-Tuesday, Level 1 Halt A 1,100-point drop in the DJIA
-Euro’s thrash Ireland for insuring all deposits
-Euro falls
-NCC toast
-Mitsubishi plans takeover of Morgan
-Syria invades Lebanon, US reacts unfavorably
-Gold gains $100 ea day four consecutive days.
-oil goes $65.00bbl
October 5th, 2008 at 12:02 am
“I wonder what would happen to the elections if at the last moment McCain, due to health reasons, was forced to drop out…. “
I wonder what would happen if Obama suddenly decided that 2009 was not a good time to be president and dropped out to run again in a few years …
I mean, really, why would anyone want to step into that job now? Two quagmires (three counting the perpetual, amorphous “War on Terror”), the worst economy in 70 years, with no bottom in sight, and the US government facing possible default on some of it guarantees or other obligations, a dollar collapse, or eventually even bankruptcy.
Oh come on Barack somebody’s got to take the job; you can do it… please?
The stock market will move inversely to the Ted spread next week. If the credit markets don’t thaw fast, equities crash.
October 5th, 2008 at 12:05 am
We need to crash, so the elliotwavers can finally say that they got this one right, after 35 years?
October 5th, 2008 at 12:06 am
I recently heard a very excellent collection of lectures on the Byzantine Empire. My surprise take away was how much good or bad leadership could swing its fate. A stupid war, raid on the treasury, ignore infrastructure or overbuild… then poof, blood in the streets.
Certainly this has been a bad eight years, maybe the worst so far. Even if we suspected about the markets, the speed of unraveling came as fair a shock. And with a new sense of history, I suddenly no longer feel it is just the economy that is vulnerable here. Hopefully we all just bumble through, a little poorer and a little wiser. I do have the feeling though, that it would just take a stray shot, a dashed symbol of hope, or even an avenged symbol of greed… Things could drop for real, and in a hurry.
At one point people, its only money. Steady keel, steady keel. I can make a long list of things I really don’t want to lose in the coming downturn, and most of them aren’t priced on an index. Not family, not sense of place, not community, not even self esteem.
So maybe its a good weekend to take stock on a personal level, and recalibrate. Yeah, what do we really have, if not each other. Aim high, but aim there.
October 5th, 2008 at 12:07 am
The day after the crash, the bag holders will figure out the bag they’re holding is full of kaakaa. On that same day, a “market holiday” will be called, leaving the bagholders holding their kaakaa for several more days, if not weeks. During the holiday, their financial advisor will tell them not to panic; hold for the long term; at 10% per year it will only take 36.29 years to break even. During the “holiday” the powers that be will cover the shorts, at a price that the powers that be determine is appropriate. Trading will eventually resume, but not until NYSE traders are trained in the basics of far east and middle east languages.
October 5th, 2008 at 12:16 am
If a rate cut was all that would have been required to unfreeze the credit markets, don’t you guys think they would have done that long before now???
In order for a rate cut to really have any impact, it’s probably going to have to be global. But the only two countries that would probably tolerate it would be the U.S. and the U.K.. I would be very VERY surprised if the ECB participated, particularly given that they value their credibility, which would become toast if they cut now only days after saying they would stand-pat. If there was any chance of getting the ECB on-board with a global rate cut, they probably would have cut last week.
So the only real hope for “global participation” is the U.K. (which is already expected to cut on Thursday – and yes, it’s probably largely already priced into the market) and perhaps Canada and Australia.
The problem is that without European involvement, a rate cut by the U.S. probably will do diddly-squat. In fact, it may have significant adverse effects: aside from decreasing the value of the U.S. dollar (and increasing oil prices [again]), it would further reduce the appetite for foreign investment – and that is something the U.S. desperately needs right now.
Bernanke is caught between a steam-roller and a rock crusher.
For those of you who don’t trade for a living, there is a type of behavior that can inflict a person who takes loss after loss after loss. They risk more and more and make increasingly stupid decisions, which feeds further losses and accentuates the stupid decisions. Eventually, a point is reached when the trader, frustrated beyond reason, decides that “since I’m going to lose anyway, I’m going to throw out everything I have left and if it works, great – if not, I quit.” I fear Bernanke and particularly Paulson are at that stage now. Nothing they have done up to this point has helped. The amounts they are throwing at this problem are increasing at a seemingly exponential rate. Paulson’s desperate tone was evident in his 3-page proposal wherein he was asking for full authority over the use of the 700 billion and where he was granted impunity from legal action. Bernanke can’t be far behind. These two are showing signs of emotional desperation.
Paulson should know better. Bernanke, not having traded on Wall Street and therefore not having experienced this degenerate behavior, may be even more irrational than Paulson was when he experiences this trait.
No matter what, this will not end well. We may have had a decent chance for survival if emotion could have been tossed from the mix. But Bernanke and Paulson are emotional and how they react will define the limits of the damage that ensues.
Bernanke has already done nearly irreparable damage to the Feds once-pristine balance sheet. I can only imagine his frustration that his efforts have not worked. His last hail-mary will very likely be to print his way out of the mess. I have no clue if that will unfreeze the credit markets. But what I do know is that it will create such a voracious inflationary beast, that he may spend the rest of his career trying to tame it.
As I said, it doesn’t really matter what they do this weekend. Cut rates, or not. The effect will not be long-lived. Bernanke and Paulson will then have shot the last of their bullets and will be left sitting helplessly while the markets get a much closer view of what hell really looks like.
October 5th, 2008 at 12:24 am
@ winston Munn,
It is my opinion that London Banker is a complete hoax. There is no way he was ever anyone of any importance.
He pretends to be someone who used to be an important central bank figure who has seen the error of his historic policy “monitary I assume” ways.
Because of his previous responsibilities he can’t say who he is or what he did. It’s a clever disguise. It’s a complete sham in my opinion.
He also believes 9/11 was an inside job as was pearl harbor. He/She is nuts.
October 5th, 2008 at 12:28 am
Read THP every day. Best of its kind.
Champagne-filled bathtubs
Some men have more than they need
Seeds of violence
Corn field castles
Addiction to abundance
The Blob starring us
Newest IPO
Wall Street Army Navy Stores
Golden parachutes
Collection agents
Free harassment seminars
Gold in them thar bills
For profit prisons
Midas screws turn locks to gold
Dividends from hell
Stock market’s falling
Energy costs are rising
Does fear take Visa?
Will we lose our houses?
Darks clouds pregnant with chaos
Will we lose ourselves?
Life in Zimbabwe
Bare shelves and empty stomachs
Are we far behind?
Empty blood stained malls
Pitbulls and shit from China
Lucifer’s yard sale
October 5th, 2008 at 12:28 am
The correct order is Markets Crash first, then seller moves his assets into another currency, then exiting currency devalues.
No dollar spiral will begin without a serious market crash. Now, if the treasury/fed begin using their new warchest to buy the markets via conduits in an effort to restore confidence, you could still see a dollar crash as the real money leaves the building and the funny money sticks around to play games.
October 5th, 2008 at 12:28 am
The correct order is Markets Crash first, then seller moves his assets into another currency, then exiting currency devalues.
No dollar spiral will begin without a serious market crash. Now, if the treasury/fed begin using their new warchest to buy the markets via conduits in an effort to restore confidence, you could still see a dollar crash as the real money leaves the building and the funny money sticks around to play games.
October 5th, 2008 at 12:51 am
Will Ferrell on CNBC…old but funny
http://www.youtube.com/watch?v=dT2DxkEHnJc&feature=related
October 5th, 2008 at 12:56 am
Finance/Insurance/Real Estate: Long-Term Contribution Trends
1990-2008
Rep: $1,160,131,255
Dem: $918,920,738
A difference of $242,000,000 over 18 years.
Just sayin’ is all.
October 5th, 2008 at 1:37 am
Another lehman scale bankrutpcy?
Hypo Real Estate, Germany’s second largest real estate lender, teeters on the verge of collapse. The bank has a €400 billion balance sheet, which would make for a failure of a similar scale to Lehman’s (Hypo’s footings are roughly $550 billion, while Lehman’s were $660 billion as of its last balance sheet date).
http://www.nakedcapitalism.com/2008/10/hypo-bank-rescue-fails-threatening.html
October 5th, 2008 at 1:44 am
It is nice to see the market responding to fundamentals again. Yes, the economy is very much driven by employment. Market manipulations, bail out packages, rescue plans, and other gimmicks do not work. They produce no value. They are used solely and purposely only for the wealth transfer. Moving money from one pocket to another does not make you wealthier, more productive, more efficient, or more financially stable. Moving money around does not create value. Cheers!
~Penguin~
October 5th, 2008 at 1:57 am
1. Goldilocks is dead!
2. Welcome to the “Great Recession”
3. In light of the financial/economic crisis we are in, I sure hope the moderators for the next two presidential debates really grills the candidates on their economic vision and policies, because it looks like whoever wins the job might be the next Hoover or FDR.
October 5th, 2008 at 2:03 am
March, head of Bank of England says banks should not be bailed out when they get into trouble. Two weeks later, the Bank of England announces bail out of Northern Rock bank.
September, Henry Paulson announces that no government money would be used to bail out Lehman Brothers. Three days later, he lends $85 billion to AIG, then approaches Congress two days later for $700 billion.
Yesterday, German Finance Minister announces he is opposed to a cross Europe fund to bail-out banks in trouble. During the meeting with French and English Finance Ministers, he receives word that the rescue of HRE, a large german bank, is unravelling and may require more government money.
You couldn’t make this stuff up. No one would believe you.
October 5th, 2008 at 3:00 am
Rate cuts and bailout are designed only with Wall Street in mind. Short term they could reinflate the stock market bubble (the fundamentals stunk long before the market caught on), but they do absolutely nothing to address the underlying problems of overeducation, underemployment, and a generation that doesn’t want to compete.
Many of the folks living off the home ATM were actually boomers who’ve been struggling ever since “that giant sucking sound” wiped out most of our manufacturing, including managers, engineers, and other skilled support positions. We didn’t just lose the grimy assembly line jobs, we lost all the jobs at the factory.
Now we’re losing software and other “information economy” jobs even faster because they require less infrastructure and because our next generation would rather make money day trading or simply surf the web all day.
As a country, we have no direction whatsoever. That’s a bipartisan problem which requires a bipartisan solution, and it better be something fresher and more applicable than the mid-twentieth century “make work” infrastructure proposal being floating by the Democrats. You can’t sell your own infrastructure overseas to balance the trade deficit.
The real paradigm shift behind this crisis is the shift from a manufacturing economy to a service economy. The blow was softened by cheap imports and easy credit,
(not to mention looting accumulated retirement savings through the dot-com and real estate bubbles) but in the end we can’t all work at Starbucks and buy Chinese goods by borrowing more money from Chinese banks.
The American economy has been broken for years, but we’ve been living in denial and making things worse by misallocating our resources into luxury homes on postage stamp lots in the middle of nowhere.
October 5th, 2008 at 3:04 am
Several people are saying rate cut on Monday – I am actually expecting an emergency Fed meeting on Sunday evening where they cut 50 points, and say they might cut more “as needed”.
Equity markets gyrate wildly up and down (just like over the past two weeks) for the next several days, until suddenly the dollar takes a huge dive (end of the week?).
And then it starts to get bad…
October 5th, 2008 at 3:14 am
Calls to the Southwest Florida Crime Stoppers hot line in the first quarter of this year were up 30 percent over last year. San Antonio had a 44 percent increase. Cities and towns from Detroit to Omaha to Beaufort County, N.C., all report increases of 25 percent or more in the first quarter, with tipsters telling operators they need the money for rent, light bills or baby formula.
“For this year, everyone that’s called has pretty much been just looking for money,” said Sgt. Lawrence Beller, who answers Crime Stoppers calls at the Sussex County, N.J., sheriff’s office. “That’s as opposed to the last couple of years, where some people were just sick of the crime and wanting to do something about it.”
http://www.nytimes.com/2008/05/18/us/18crimestopper.html?_r=2&hp&oref=slogin&oref=slogin
yes, there’s always a Bull Market somewhere..
October 5th, 2008 at 3:29 am
“When I mentioned the other day what it might be like if everyone were to line up at their bank widows asking to withdraw their balances in cash (which the banks don’t have)….”
I actually did. I got more of an annoyed, yet worried stare from the branch manager….
They’ve raised FDIC coverage to $250,000. They’ve hired Suzie Orman to make PSA’s about the “safety” of FDIC deposits…Wow! THAT really makes me and every other pissed/ripped off taxpayer feel SO safe!
Bank runs will be system wide- from the high to the low. They’ll cut 100 bips……”something must be done”™
October 5th, 2008 at 3:31 am
@KJ…You may be onto something about McCain or Obama dropping out. The minute I found out Palin had been outside the US once in her life and had met McCain one time for only 15 minutes, I assumed he was throwing the election. Can a soccer Mom who says “you betcha” and winks into the camera be President? I would vote for her over GW Bush though.
As for creating banks that are now “too big to fail”, that’s a clear result of the moral hazard in the system. Banks think getting bigger is going to make them eligible for a bailout and they are now going to overpay to do so.
October 5th, 2008 at 3:41 am
So, who are all y’all writing in for Prez?
October 5th, 2008 at 6:37 am
Bernie Sanders.
October 5th, 2008 at 8:40 am
So much said about subprime. But what about commercial real estate? Ridiculous sums from being paid for buildings and shoppping centers nationwide; how is that going to work out?
About what about the untold borrowed billions corporations used in the leveraged buyout mania? How is _that_ money going to be repaid?
And finally, swaps? Is there no solution? Somebody suggested recission; why not? Insurance companies rescind policies all the time. THREE YEARS AGO I remember reading articles about the Fed complaining that the banks didn’t have their swaps accounting in order (wonder why!), and yet the Fed didn’t insist they get them in order. How is THAT problem going to be resolved?
In sum, it’s not just subprime; there’s a host of other severe, systemic problems.
October 5th, 2008 at 8:49 am
Consider this… what IF The FED doesn’t have one of there Sunday Hail Mary meetings??? What then?
October 5th, 2008 at 10:05 am
@Bill… if they don’t do a hail mary (and if Hypo Real Estate doesn’t get a rescue), you’ll see the markets tumble into the black hole on Sunday night. Asia will start to slide. Europe will accelerate the slide, and the U.S. will top them all.
Those circuit breakers might actually see some use this week.
But I suspect the Fed and Treasury will pull some kind of creature out of their hat to try and avert the crash. They always do. Whether it works this time is another question altogether.
October 5th, 2008 at 10:06 am
Ooops… sorry, I meant @Rob p…
October 5th, 2008 at 12:34 pm
Am going to go contrarian here and say we get a little bounce this week due to rate cut.
Crash coming over the next few week though.
Dennis Kneale will still be advising 401k-holders that “it’s not a lose if you don’t sell”.
October 5th, 2008 at 12:38 pm
So here’s a Q.. If sovereign wealth funds were really stupid, and took the wrong side of derivative bets (to insure Frannie, the banks, etc), and they cover those bets with redeemed treasuries… Is that good or bad?
Presumably that’s inflationary, but as the treasuries are already in circulation, wouldn’t that be a wash, and probably DEflationary as it removes imaginary dollars from the overall supply?
Or will they simply default on those bets, and remove those imaginary dollars anyway as they evaporate?
It may not be terribly wise to put your faith in the stupidity and naivete of foreign government investors, but if this ends up being Orange County writ huge (with China et al. being the Orange County), could this all wind up being a perversely beneficial (and most likely unintenional) swindle?
Unless, of course, it means war..
October 5th, 2008 at 12:39 pm
Hank and Ben will do something tonight or early next week to scare the shorts.
But we still need a chastening, 500 point-down-day on high volume before the next rally can begin.
October 5th, 2008 at 12:45 pm
“Is Paulson is going to bargain – a la Buffett – or pay up for the mortgage securities ‘we’ are buying?”
Paulson has no motivation to bargain for anything other than to assist the world that he knows. And the world that he knows is quite limited. His considerations will not include taxpayers, Federal budgets, states, trade, dollar value, or any business but those he knows. So, from that you may draw your conclusions.
October 5th, 2008 at 3:30 pm
Paulson specifically said that he would not buy distressed assets at lowball prices because that would defeat the purpose of the bailout. Paulson is attempting to make banks whole. The only way he sees to do that is to give them the mother of all mulligans on mortgage backed securities.
The hope or fantasy, depending on how you look at it, is that taxpayers won’t take a bath because in the long run those distressed assets will recover their value as most people actually make payments.
The big gotcha is that the wall street bailout does nothing to stem falling home prices, so we still face two major problems.
1) Homeowners walking away due to negative equity
2) Greatly reduced spending power due to inability to convert bubble equity into spendable cash through the refi ATM
The second problem is one the government doesn’t want to talk about because it argues for a long and painful depression with no solution.
Stimulus checks are a drop in the bucket compared to the (paper) home equity that was cashed out and spent over the last four years.
One possibility would be allowing the Fed to offer home mortgages to individuals (one per SSN) at 4%. That would eliminate the issue of banks refusing to lend or lending recklessly, it would reinflate home prices to a degree (buyers focus on monthly payment, not total price, which is why Alan Greenspan’s cuts caused the housing bubble), and it would actually be fair to everyone, as opposed to proposals that only bailout greed and stupidity.
October 5th, 2008 at 6:24 pm
Now have to rethink what currency to hide in. Euro may be trashed by the Irish, of all people.
How Ireland Will Destroy the Euro
I suppose that’s the weakness of the Euro system: any group of politicians can screw your currency. Here, it takes the Congress to do it.
October 5th, 2008 at 9:18 pm
Leprechauns save Irish banks!
The Irish government was first European government to guarantee all bank deposits. Skeptics wondered how the Irish did it. The answer, as reported in the Irish Times, is a successful appeal to the Leprechauns to back bank deposits with their pots of gold.
In desperate trouble, the Irish government sent to the leprechauns a complex 1000 page plea filled with all kinds of Wall Street financial engineering blarney. The leprechauns had a good laugh at the 1000 pages of gibberish and shenanigans. But the good-hearted leprechauns took pity and sent the Irish government this simple reply:
Too-ra-loo-ra-loo-ral
Too-ra-loo-ra-li
Too-ra-loo-ra-loo-ral
Hush now, don’t you cry.
Too-ra-loo-ra-loo-ral
Too-ra-loo-ra-li
Too-ra-loo-ra-loo-ral T
hat’s an Irish lullaby, and
Here’s your pots of gold!
http://www.irishtimes.com/newspaper/ireland/2008/1004/1222959350571.html?via=mr