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?

Category: Weblogs

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

123 Responses to “Saturday Night Open Thread”

  1. john says:

    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.

  2. jeh says:

    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

  3. Penguin says:

    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~

  4. dave says:

    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.

  5. Rajesh Raut says:

    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.

  6. Frank Jewett says:

    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.

  7. HelicopterBen says:

    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…

  8. 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..

  9. Brion says:

    “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”™

  10. Steve Barry says:

    @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.

  11. brion says:

    So, who are all y’all writing in for Prez?

  12. bitplayer says:

    Bernie Sanders.

  13. Bill says:

    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.

  14. Rob p says:

    Consider this… what IF The FED doesn’t have one of there Sunday Hail Mary meetings??? What then?

  15. coler says:

    @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.

  16. coler says:

    Ooops… sorry, I meant @Rob p…

  17. Jeff M. says:

    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”.

  18. 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..

  19. D.L. says:

    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.

  20. wally says:

    “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.

  21. Frank Jewett says:

    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.

  22. Mike in NOLa says:

    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.

  23. tom a taxpayer says:

    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