After watching Bernanke last night on 60 Minutes, I still believe he has it backwards. He started the interview expressing his thoughts that they first have to stabilize the financial system and then everything will be ok and a recovery will ensue and that once Wall Street is fixed, Main Street will follow. However, it’s Main Street that is the crux of the problem, they have too much debt and that’s leading to the lack of mortgage, credit card, etc… repayments. While the banks were ridiculously leveraged also, the banking system gets ‘fixed’ once consumers start paying their bills again.

With the TALF trying to get banks lending again and other various gov’t steps, the gov’t is trying to put Humpty Dumpty back together again, the Humpty Dumpty that borrowed too much, spent too much and didn’t save enough. On the ‘Stress Test’ that Ben talked about, WFC chairman called the plan “asinine.” Banks led Asian and European stocks higher.

Category: Federal Reserve, Markets

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.

59 Responses to “Humpty Dumpty”

  1. E says:

    I agree that a bottom-up approach to recapitalizing taxpayer balance sheets, and ultimately the banks, is an alternative that needs to get more attention.

    I doubt that the Fed has ignored this option. If I were running the show I would ask how the Fed, which is owned by and for the banks, could possibly get money directly into the hands of Americans, rather than the banks. The mechanisms just are not in place. It’s up to the Federal and State governments to manage that trick.

  2. ottovbvs says:

    BR: Please….as if the two were mutually exclusive….Both the Fed and the Govt are literally pouring liquidity into this economy……Obviously Bernanke is viewing it from his perch but I’m not sure he’s not right by a nose in the relative importance of the two……The key to main street is confidence and while the financial system is on life support how do you build confidence…..I’ve watched all three interviews with the three key men Geithner, Summers and Bernanke and they’ve just confirmed my view that basically we’ve got three first class people working on this….and we should be rooting for them not trying to diss them.

  3. NJlou says:

    “…. While the banks were ridiculously leveraged also, the banking system gets ‘fixed’ once consumers start paying their bills again…”

    That could only come from higher incomes. Where are the high paying jobs?

    The evil Allan Greenscam instead of letting incomes rise focused on creating aggregate demand through
    debt (what he calls credit). Did you ever wonder WHY they exported all the jobs to cheap wage China and India and allowed all the illegal immigrants into the USA?

    What is the short answer?

  4. NJlou says:

    You can only sit back and laugh at HOW the US managed to impoverish itself with too many military bases around the globe, foreign aid to parasite nations and too many (economically self-defeating) pointless neocon wars.

    How is it possible for the US to borrow huge sums from China to fund its unsustainable deficits and then turn around and provide foreign aid to parasite nations that cannot sustain themselves without some extortion racket?

    The US is now on life-support from its self-inflicted wounds. There is nothing that can be done to save it. The vultures are circling above ready to pick at the rotting flesh of a decaying carcass.

    It had become clear that as the US became de-industrialized, financial services were the only way to prop up a failed empire of debt that was bent on increasing America’s unsustainable standard of living just for the sake of increasing the standard living. No thought was ever given (until now) that perhaps social stability was a far better goal and tradeoff.

    It became necessary to accumulate massive debt (peddled as credit) to increase the standard of living and to buy into the myth that prosperity can achieved by accumulating that debt.

    Americans are now learning a painful lesson on the accumulation of debt.

    The banks were long insolvent, only making money from ‘proprietary’ trading and not from traditional lending. This was clear to the accountants, the Fed, SEC, FASB and the general public.

    Proprietary trading produced nothing tangible that needed to be manufactured, required lots of factories, workers, transportation and inventory systems, and could be exported.

    If financial services were ever removed from GDP, it was would have long been clear that the US was bankrupt.

    You can smell the pending civil war in the air. The riots are about to begin as middle class Americans are suddenly poor overnight.

  5. wunsacon says:

    >> I agree that a bottom-up approach to recapitalizing taxpayer balance sheets, and ultimately the banks, is an alternative that needs to get more attention.

    $500/month ($2T/year) — “printed” without offsetting debt — to every American until their balance sheets are repaired.

    Those who can’t afford food will buy food.
    Those who can afford food but nothing else will rent a roof over their heads.
    Those who can afford housing but nothing else will pay for incidentals (e.g., uncovered health care).
    Those who can afford all living expenses will pay down their debt.
    Those without debt will bank the money or invest it in producing goods/services to extract cash from the people above.

    Will foreign governments complain? Not if they know what’s good for them, because (a) we’ll be keeping their citizens employed, (b) they’ll end up with many of the dollars, and (c) without combatting deflation, we’ll default at every level (personal, corporate, gov) with our present debt levels.

    It’s a social safety net, first, and financial/economic recapitalization plan, second. “People first, institutions second.”

  6. Professor Tim 1754 says:

    With respect to Ben’s statement: they first have to stabilize the financial system and then everything will be ok and a recovery will ensue and that once Wall Street is fixed, Main Street will follow – I disagree that he has it backwards. I don’t think he is 100% on the mark, but the reality is that a stabilized financial system (particularly the market itself) will likely translate into positive synergies, e.g., increased consumer confidence.
    regards,
    Tim

  7. Will says:

    This post is dead on. Bernanke and many have it completely backwards. wunsacon said it well in his comments.

    ottovbvs suggested “The key to main street is confidence”. You hear this a lot. What does this mean? Confidence in what? Confidence that “housing prices go up forever”, as it used to have? Confidence in the idea that being overleverage is OK? I have found that if I replace the would “delusion” where I see the word “confidence”, many of these statements appear to make more sense to me.

  8. CuriousCreature says:

    Love your work Barry-

    There are a lot of us out here who made reasonable financial choices all along. We bought houses we could afford. Paid off our credit cards and pay our bills every month. There is a slice of the population that over leveraged. You know them and I know them. They used those credit card checks that came in the mail each month and were always taking vacations and remodeling their house. It’s now game over for them.

    To group all American consumers together is not accurate. We are in fact your followers and the most outraged.

  9. ottovbvs:
    How many times now has Bernanke tried to pull the Kevin Bacon at the end of Animal House? And you think he is a first class person? Wake up!! He doesn’t understand the true nature of the problem. People have no confidence because jobs are being lost. Homes are being foreclosed. Not because we worry about whether Citibank or AIG survives.

  10. franklin411 says:

    CC,
    There’s a story that describes the attitude you reflect, which I stole from Wikipedia:

    Cutting off the nose to spite the face
    The phrase is believed to have originated from an event which was said to have taken place in AD 867: Viking pirates from Sjaelland and Uppsala landed in Scotland and raided the monastery of Coldingham. When news of the raid reached Aebbe the Younger (the Mother Superior), she gathered her nuns together and urged them to disfigure themselves, so that they might be unappealing to the Vikings. In this way, they hoped to protect their chastity. Saint Aebbe accomplished this by cutting off her nose and upper lip,[2] and the nuns proceeded to do the same. The Viking raiders were so disgusted by the resulting scene that they burned the entire building to the ground.

    NJLou:
    I completely agree. Main Street can only be fixed by long term government investment in infrastructure, education, and science. We have to have an industrial revolution in this country, and the Obama 2010 budget is the first real step towards prosperity since we began this disastrous course in 1980.

  11. some things should be re-read..

    Will Says:

    March 16th, 2009 at 9:57 am
    This post is dead on. Bernanke and many have it completely backwards. wunsacon said it well in his comments.

    ottovbvs suggested “The key to main street is confidence”. You hear this a lot. What does this mean? Confidence in what? Confidence that “housing prices go up forever”, as it used to have? Confidence in the idea that being overleverage is OK? I have found that if I replace the would “delusion” where I see the word “confidence”, many of these statements appear to make more sense to me.

    Delusion is the name of the game. those that remain deluded will be the game.

    the Endgame is the, continued, Wholesale looting of what’s left, of value, of this Economy/Society, from coast to coast to coast..
    http://www.thefreedictionary.com/coast

  12. Moss says:

    People need to realize that consumption is an act that reasonable people engage in. When I see the label ‘consumer’ used in the proper context then I will have confidence that a shift has occurred. I never considered myself a ‘consumer’ and despise the use of that term when used to describe the general populous. We are not consumers, we are citizens first and foremost, consumption is an action that we partake in. The general populous has been been brainwashed into believing that they are consumers first and foremost.

  13. ottovbvs says:

    Calvin Jones and the 13th Apostle Says:

    March 16th, 2009 at 10:18 am
    ottovbvs:
    How many times now has Bernanke tried to pull the Kevin Bacon at the end of Animal House? And you think he is a first class person? Wake up!! He doesn’t understand the true nature of the problem.

    …….Ben Bernanke….phD in economics at MIT…..head of the Economics dept at Princeton (where he hired Krugman btw)…….Probably foremost expert on Depression era economics on which he’s written widely…..Chairman of the Fed……and he doesn’t understand the true nature of the problem!…And you do

  14. otto,

    offered as salve for your delusions:

    http://www.nizkor.org/features/fallacies/appeal-to-authority.html

    administer promptly, get well soon~

  15. constantnormal says:

    @ wunsacon 9:49

    “$500/month ($2T/year) — “printed” without offsetting debt — to every American until their balance sheets are repaired.”

    Surely, sir — your tongue is firmly in your cheek.

    Let us examine this proposal just a bit. So Uncle Sugar prints (without offsetting debt) $2T/year and showers it onto the “little people” — or the “movers and shakers”, or anyone. What happens? The currency is diluted via inflation, and whatever short-term beneficial effect is achieved, is quickly wiped out. I suspect there is a net punishment that is inflicted, due to various frictions and a reluctance on the part of anyone to lend the Zimbabwe States of America any money at all.

    A better way for Ben to enhance the lives of the “little people” would be to create meaningful productive jobs within the Fed and employ those who are unemployed or underemployed.

    Can’t do that? Well then, I think we’re down to getting the economy running better, eliminating excess capacity everywhere — AND THAT MEANS LETTING BIG BANKRUPT COMPANIES COMPLETE THEIR DEMISE.

    Yeah, that’s not without its share of short-term (less than a year IMHO) pain, but at least it improves the overall picture and shapes the US economy into something approximating and economy that can work, just as layoffs in a faltering business help to put it back onto an even keel.

  16. ottovbvs says:

    Mark E Hoffer Says:

    March 16th, 2009 at 10:36 am

    ……If I may say so Mr Hoffer, and I say this in absolute sincerity, judging by nature of most of your comments the person who needs treatment of some kind is yourself

  17. cn,

    w/this: “Well then, I think we’re down to getting the economy running better, eliminating excess capacity everywhere — AND THAT MEANS LETTING BIG BANKRUPT COMPANIES COMPLETE THEIR DEMISE.

    Yeah, that’s not without its share of short-term (less than a year IMHO) pain, but at least it improves the overall picture and shapes the US economy into something approximating an economy that can work, just as layoffs in a faltering business help to put it back onto an even keel.”

    way to see “The Big Picture”..

  18. KidDynamite says:

    i agree completely… for the past 5 or so years, banks made ridiculous loans they never should have made. now they’ve adopted reasonable lending standards, and economists/politicians are screaming at them: “WHY WON”T YOU LEND MONEY DAMNIT!!!”

    WHO are they supposed to lend to? people they know can’t pay it back? isn’t that what we just chastised them for?

    the problem isn’t a lack of lending – it’s a lack of qualified borrowers. (for evidence of this, see what happened to GMAC back at year end – they had to lower lending standards so that they could lend more money http://fridayinvegas.blogspot.com/2008/12/gmac-theyll-make-up-for-it-in-volume.html )

  19. harold hecuba says:

    …….Ben Bernanke….phD in economics at MIT…..head of the Economics dept at Princeton (where he hired Krugman btw)…….Probably foremost expert on Depression era economics on which he’s written widely…..Chairman of the Fed……and he doesn’t understand the true nature of the problem!…And you do

    nope he still does not understand that it was the wreckless expansion of credit and debt that was fostered by the fed. credit is not the backbone of society savings is. the only thing to stop the deflationary forces and the deleveraging economy and falling asset prices is the destruction of the unprocuctive debt. anything the gov and it’s silly keynesian policies tries to enact will fail

  20. usphoenix says:

    IMHO Bernanke is right and he is wrong. He saw the immediate problem of a near meltdown and is printing money to preclude that. All the banter is just psycho-babble to make people fell good about it.

    The bigger issue that will take longer is the absurd amount of debt we have taken on at a time when jobs and income are shrinking quickly. Bernanke can’t fit that into his depression paradigm. He’ll simply cater to the big banks and hope for thee best.

    After all, monetary policy can only go so far.

  21. EAR says:

    AHHHHH!!!

    I lost my job! My home is losing value by the minute! My neighbor lost his home completely! My investments are gone! I can’t send my kids to college! I lost my… Hey, check it out. Bernanke without a tie on… I can’t pay off my credit card, I can’t pay off my car, no one comes to the mall anymore, no one will lend anyone anything, I don’t want to own AIG or Citi, I want my old life back!

    AHHHH!!!

  22. cjcpa says:

    My problem with him is that he has several options, but that he keeps pumping the idea that the key to all our collective happiness is to Stabilize the Financial Sector. Which, to date, has involved throwing billions to trillions of dollars to the major banks. And it’s not very popular. Thus, by saying “it is the only way,” he is engaging in rhetorical gamesmanship// political maneuvering, and

    1- no, I don’t trust him to get it right
    2- yes, I do resent the duplicity/maneuvering in presenting one way as ‘the only way’
    2a– and then saying — if you do it my way, the recession COULD end this year. (which he cannot Know.)

    He’s plugging for more authority and dollars.

    cjc

  23. James says:

    On the ‘Stress Test’ that Ben talked about, WFC chairman called the plan “asinine.” Banks led Asian and European stocks higher.

    —————

    It may be, but this characterization coming from a big bank head doesn’t quite have the right ring to it.

  24. DL says:

    The question is not what’s best for the country, it’s what’s best for Obama’s re-election campaign in 2012.

  25. Mannwich says:

    @DL: With all due respect, how is pissing off the populists on the left and the right what’s “best for Obama’s re-election campaign” if it does not then improve the economy?

  26. Boomer says:

    We need “trickle up” economics.

  27. Winston Munn says:

    @ ottovbvs

    I respectfully submit that the problem is not a lack of confidence but an overabundance of reality. Until the productivity-wage gap is resolved, there can be no genuine recovery.

  28. mvrk says:

    If the government really wanted to provide targeted and temporary stimulus, it would have allocated $300 billion to provide every man, woman and child in the U.S. with a $1,000 debit card. That’s $4,000 for a family of four. The debit card would have an expiration date, e.g. 6, 12, 18 months. You either use it in that time period of lose it. The card could only be used to buy goods and services…it could not be converted to cash that’s saved in a bank or used to pay down debt. The last four digits of the recipient’s social security number could be used as a security measure to prevent fraud/theft. For all those who are concerned about the government deficit/debt getting out of hand, they can simply let their debit card expire without using it and save the taxpayers some money (yeah, there’ll be a lot of those folks out there). With this method, the expenditure of the $300 billion stimulus truly reflects the needs and wants of the American people, not 535 people sitting in Congress plus one guy sitting in the Oval Office. Add another $50-$100 billion of true infrastructure spending to this plan, and I believe you’d have a very effective stimulus for about half the cost of the current one.

  29. ottovbvs says:

    Winston Munn Says:

    March 16th, 2009 at 12:26 pm

    ” Until the productivity-wage gap is resolved, there can be no genuine recovery.”

    …….I’m well aware real incomes for 80% of the country have been stagnant or actually shrunk for the bottom 20 percentile over the last seven years…..but you’re not going to cure this overnight are you….The problem at the moment is a pull back in consumer spending which represents about 70% of GDP (that’s too high btw but that’s another matter)……the govt is going someway to fill the gap but until, to take one example, you get the car market back to what I would term it’s natural level of 12-14 million units a year (still well below its peak of 17.5 million) you’re not going to see the car companies functioning properly…For this to happen you need credit to loosen up (the banking part of the equation) and folks to be confident enough to go back into showrooms.

  30. ottovbvs says:

    mvrk Says:

    March 16th, 2009 at 12:30 pm

    ……I’ll send you some Hughie Long “share the wealth” campaign literature…….And there was some doctor in the thirties who became famous for wanting to give all retirees two cows and a milking stool or something similar

  31. DL says:

    Mannwich @ 11:42

    If I were giving Obama POLITICAL advice, I’d tell him to do whatever it takes to minimize the unemployment rate in 2012. And that would include throwing more money at the banks.

    (I’d also tell him to do whatever it takes to minimize Republican gains in the Senate in 2010).

  32. ottovbvs says:

    usphoenix Says:

    March 16th, 2009 at 11:11 am
    “After all, monetary policy can only go so far.”

    …….He’s already gone way beyond using just monetary policy to deal with this

  33. ottovbvs says:

    DL Says:
    March 16th, 2009 at 12:48 pm
    Mannwich @ 11:42

    ……I’d say Obama and the democrats are very well aware their futures depend on what happens with the economy……..If were talking pure politics I’d say his timing is not too bad……Contrary to the Cassandra’s here who are convinced Armageddon is around the corner the odds are actually on a recovery starting by early 2010…..unemployment is going to lag but the mere fact the mood has changed….the economy is starting to grow etc will produce a very favorable landscape….This is reality.

  34. DL says:

    ottovbvs @ 12:56

    At the present time, I’m inclined to agree with you.

    As a corollary, I’m inclined to think that the final low for the SPX will occur by the end of June.

  35. constantnormal says:

    I never believed that America would follow the Japanese Example — until we did.

    Now I am scared to death that we will also follow the Zimbabwe Example.

    Will somebody please show me how this is not the case? I know that we are not now experiencing inflation, but the lag time between monetary creation and the resultant inflation is somewhat mushy — around 6 months, but definitely not a fixed interval of time — and I really doubt that (based on the evidence to date) the will exists within the administration to raise rates and choke off inflation while there is still historically high unemployment and the economy is still on life support.

    The choices we are sailing toward and stoking the boilers for MORE SPEED, MR BERNANKE are either severe and lasting stagflation (the Japanese model) or hyperinflation (the Zimbabwe model).

    Surely there is another course that the mindless idiots steering the ship can see their way toward following?

    Oh, and to all those still clamoring for a return to the Good Old Times of yesteryear — wake up and smell the coffee folks — there’s no pony in there, and we cannot return to a fairy tale past based on imaginary prosperity.

    As Bones McCoy would say, “It’s dead, Jim”.

    We need to focus on making a new prosperity, one based on reality rather than wishes. Such a prosperity cannot include copious amounts of corporate welfare, kingly rewards for incompetents and thieves, or guaranteed incomes for sheer laziness and just showing up for work (most of the time).

    A Good Start would be passing legislation that includes being TBTF within the antitrust statutes, requiring such companies to be broken up, simply for becoming too big relative to the economy as a whole. There is no danger to stockholders and bondholders here, as the breakups would be done before they begin to fall apart, and the resultant pieces would thrive when unshackled from the corporate obesity. There are plenty of examples of this, I will offer up only one — when the original AT&T was broken up into the Baby Bells, their aggregate market cap grew much faster than did that of their former parent company (yes, I am in favor of repeating the process).

    Also (and here I repeat myself) clear the decks of the dead and dying TBTF behemoths, regardless of the collateral damage (which will be less than people fear, Lehman having scared sensible investors into avoiding such filth).

    America still has (barely) a choice other than between the Japanese and Zimbabwe models.

  36. ottovbvs says:

    DL Says:

    March 16th, 2009 at 1:02 pm

    My scenario is a bit but not much different….I think this little rally will have legs but we’ll get a fade in the summer……tread water into fall…… and then a nice sharp little rally at y/e….If the economy is starting to hum again, even a small hum, by mid 2010 the O man and Pelosi are going to be gods believe me.

  37. Bob A says:

    the chairman of WFC.. he’s a banker right?

    and we trust bankers…. right?

  38. leftback says:

    DL said: “As a corollary, I’m inclined to think that the final low for the SPX will occur by the end of June.”

    March winds, April showers. May flowers, June swoon.
    The low will be in July-August when no-one cares that Q2 earnings are not quite so stinky.
    Johnny Retail is long gone from the market and institutional investors will be at the beach.
    Sell in May and Go Away. Indeed. Q3 earnings, October, should be constructive. Post Labor Day rally.

  39. ottovbvs says:

    leftback Says:
    March 16th, 2009 at 1:59 pm

    …..Basically my scenario…..I really think they have the banking problem corralled in the US at least…..not all the solutions worked out….but they’ve got their arms around the problem…….and I just don’t see any suprises coming out of left field….I could be wrong that’s why they are called surprises but things just don’t feel like they did last Spring…All this AIG stuff is smoke….irritating smoke….but not material…..I still have contact with a couple of manufacturing companies both tell me their o/b have strengthened a tad in the past few weeks….

  40. leftback says:

    otto:

    There are more problems ahead for banks in the jumbo loan, credit card and CRE areas.
    But, my outlook, like yours, is based on TWINE: The World Is Not Ending.

  41. Bruce N Tennessee says:

    Well, the Empire State Index today shows an all time low for orders…not a lagging indicator.

    http://fidweek.econoday.com/byshoweventfull.asp?fid=438114&cust=mam&year=2009

    “The Empire State manufacturing index in February dropped more than 12 full points to minus 34.7. Meanwhile, the new orders index fell nearly 8 points to minus 30.5. Both these readings are record lows for the series going back to July 2001.”

    By the way, Lefty…tried your daytrading a little today…with C…worked out fine…still ain’t my cup of tea…

  42. Porsche87 says:

    BR is at least partially correct, it’s bottom up that is needed. The main “problem” we have is that technology has enabled virtually all labor to be accomplished more efficiently (aka with less people) while the population has expanded. What is needed is a recovery with jobs and there just aren’t many industries beyond construction that require many people. The “tanning salon” economy doesn’t provide what is needed to sustain the bulk of the population. Until some industry can fill the jobs void, I think we are stuck in decline, and I don’t think it will be an industry we even recognize as such as this point in time that will pull us out.

    Personally, I think taking over Mexico is a solution (thousands of miles of warm beachfront property, undeveloped farmland, populated cities for redevelopment), but I’m sure that won’t fly.

  43. leftback says:

    “By the way, Lefty…tried your daytrading a little today…with C…worked out fine…still ain’t my cup of tea…”

    Nice work, Bruce. Looks like I am well ahead on the burger bet for now, but there are eleven more trading days to the end of March. I am banking on fund managers wanting to post a decent Q1 to boost this market.

    Reflationistas will be watching the PPI and CPI with interest, as gasoline prices have been rising for a couple of months now, so we wouldn’t be at all shocked to see these numbers run hotter than expected. Perhaps hot is an exaggeration, but we are not in the deep freeze any more.

  44. constantnormal says:

    How do people think the HappyTalk Express will do when this quarter’s earnings are reported in another month? Will there be a flurry of bullish corporate guidance to assure people that the worst is behind us? Maybe a (small) hiring boom, as people are being called back to work?

    Or will we continue to see a flood of unemployed gracing the headlines, and increasingly dour earnings guidance, if there is any guidance offered at all?

    So long as we are seeing the ranks of the unemployed swell by 600,000 per month, I don’t see how we can be approaching a bottom in economic activity. Yes, I am aware that employment does not recover until sometime after the economy has rebounded, but that argument could have been employed last month, and the month before than, and the month before that … and it is equally valid today. I am only pointing out that our productive capacity is still declining in lockstep with our consumption, and that is not the picture of a bottom — rather it is the portrait of a deflationary spiral or stagflation, take your pick.

    Fixing the banks (and I am not so sanguine to believe that we have the banking systems’ problems in any way/shape/form “under control”) is one thing, but there are also problems in pensions, insurance companies are struggling, and I seriously doubt that there are any new companies taking flight in this economic climate (I can’t recall when I last saw an IPO).

    When I see evidence that GM or Ford is able to operate with only mild amounts of losses, with new car sales at some level above absolute zero, then I might be convinced that the consumer is trying to get up off the mat. I see no such signs, and am starting to notice our grocery bills climbing. There is no lessening of fear on my part.

  45. CapitalistCanuck says:

    Wow, has sentiment changed around here! We pick-up a bounce and suddenly things are rosy again and the bottom callers are out.

    I’ve sold into this strength, made a quick buck in financial (about 67% in 8 days) and almost 90% cash, looking to re-enter short when risk/reward is favorable. Lots of resistance at 775, 800 and the 50-day MA, we touched 774 on the high today and faded.

    This rally might have some legs, but I just don’t see the volume and fundamentally nothing has changed except that we’re no longer over-sold. Aside from the obvious credit problems (Alt-A, Option-ARM, CC, CRE) unemployment is still rising and Eastern Europe could implode at anytime. Is this really the best time to go long equities?

    See you suckers at the bottom!

  46. constantnormal says:

    This whole thing looks more and more to me like a ginormous “pump & dump” operation.

  47. ottovbvs says:

    leftback Says:

    March 16th, 2009 at 2:40 pm

    …..oh sure there are…..but one has the sense they are in the field of knowledge whereas from the run up to BS right through to the end of last year there was the sense of what’s next?……..Basically Uncle Warren is not far off the mark….the real economy is in the dumpster until later in the year……And

    constantnormal Says:

    March 16th, 2009 at 3:01 pm
    How do people think the HappyTalk Express will do when this quarter’s earnings are reported in another month?

    ….Not really a state secret earning are in the dumpster for the next couple of quarters is it? And you’re ahead of me in saying the banking sector is “under control” I just think they’ve stopped the bleeding…the scale of the problems is recognized and they have the rudiments of a plan for dealing with it……The situation is not remotely like that prevailing a year ago when BS went…..On the auto market it’s annualizing at 9-9.5 million units at present……it needs to get back to 12-14 million….how long will it take…..can’t tell you

  48. Winston Munn says:

    ottovbvs wrote, “For this to happen you need credit to loosen up (the banking part of the equation) and folks to be confident enough to go back into showrooms.”

    This crisis was not caused by a tightening of credit; the tightening of credit was a consequence of the crisis. The way to restore confidence is with buyers who can and will repay their loans.

  49. ottovbvs says:

    CapitalistCanuck Says:

    March 16th, 2009 at 3:05 pm
    Wow, has sentiment changed around here! We pick-up a bounce and suddenly things are rosy again and the bottom callers are out.

    …..My sentiment hasn’t changed one bit……..I was never a member of the sky is falling party (apart from the odd moment) and I realize this is going to take time to fix…..I’m not terribly worried about the odd default in Eastern Europe in fact it wouldn’t surprise me but in the last analysis I suspect the Fatherland and Austria who are the ones most involved will step up to the plate.

  50. ottovbvs says:

    Winston Munn Says:

    March 16th, 2009 at 3:25 pm
    This crisis was not caused by a tightening of credit; the tightening of credit was a consequence of the crisis. The way to restore confidence is with buyers who can and will repay their loans.

    ……..You don’t say…..The vast majority of people are repaying their loans everyday because they have the cashflow to do so but are nervous about taking on new committments…….Ergo the importance of confidence

  51. EDF says:

    @constantnormal
    …”pump and dump”…

    It may not be a managed scheme but it sure looks like that’s what’s going on.

    Not only are projected earnings heading south but who would be surprised if the confidence that now supports a P/E of, say, 15, fades to support only 10 (or even lower)? Why would an S/P 500 around 500 be unreasonable?

  52. mickslam says:

    E,

    I agree fully. There are three different sets of balance sheets that need to be fixed (consumer, company, and bondholder) , and the programs in place have only fixed 2 of those.

    It is a little criminal to keep the mortgage payers on the hook while giving money to the mortgage holders. They might be getting paid 2X then, right?

  53. CapitalistCanuck,

    way to trade the Market you see..

    cn,

    this: “HappyTalk Express” has to be a MagLev, as in Magically Levitating–to your point about “ginormous pump ‘n dump”..
    ~~
    we should remember that the Mighty Wurlitzer still plays a seductive tune..

  54. CyHastings says:

    Off Topic…..sorta…..

    Word on the street is that GMAC has turned off the lending faucet to dealers. They want to go from 6400 stores to under 4000 stores. What better way to make that happen fast than to stop buying the new car paper.

    Mid MO dealer just shutdown today. He owned all the land, buildings, equipment, lock stock and wrench free and clear. GMAC told him “Too Bad. If you ain’t moving 100+ new vehicles a month we aren’t lending to you anymore.”

    Say goodbye to your country Chevy dealer.

    ps. Fuck You Ben.

  55. willid3 says:

    i think the real problem is wage destruction. with it, it matters not a whit what the banks do. the consumer can’t afford new debt. and it might be years before they can (since we have wages that without adjustment are less than they were 8 or 9 years ago). the debacle of today was caused by trying to make up the difference using credit ( a Greenspan invention maybe?). and trying to keep the economy going in spite of reality using credit is a short term trick at best . trying to re-inflate that the economy using more credit is no long term solution. but considering business has gotten rid of as many jobs as it could. and pushed the remainder to compete with the third world while in a 1st world standard of living. and there are no solutions for this situation according to the experts except find better jobs. except when pressed they can’t point to any. mean while the executive class was being wine dined at over inflated wages trashing any chance of improvement.
    there is no shortage of skilled workers. there is a shortage of workers who can live on third world salaries in a first world country.

    is this the great equalization of America’s standard of living with the third worlds?

  56. willid3 says:

    not sure GM wants the country stores gone. what they really want is the number of dealerships in cities cut down. a lot. cause thats whats cause the transaction prices of their cars to go down and a sideswipe keeps other car prices down. GMAC probably is coming up with reasons to not lend. since they are really having trouble getting funding for loans by selling the loans they already have (some thing all of them are having problems with. including Toyota, to the point they have asked for government loans to help them fund lending!). when it was easy to sell loans to others, it was easy to not care about fratricide

  57. Cy,

    see:

    http://georgewashington2.blogspot.com/2009/03/why-patient-is-not-getting-better.html

    these ‘bailouts’, to the connected and corrupt, will continue until the, remaining, viable enterprises are ground to dust–much like the ’30s..

    with that, this is Economy Rampn’Crashv.2.0

  58. Let me expand a bit on what I just said — it matters not whether the money is given to the man in the street or the Men in Wall Street. It also does not matter whether the money is “printed without debt” (ie, instant inflation) or “printed with debt ” (the way money is actually created) — you still get more money representing the same amount of value, and inflation results.

    This is EXACTLY the line of action that Mugabe has employed in Zimbabwe, for God’s sakes, take a look at the success that has been achieved THERE.

    More money is NOT the answer. More productivity, more jobs — those are helpers, but without more consumption those are simply pushing on a string. And we have plenty of (too much, in fact) “stuff” already. It is most certainly not equitably distributed, but that is a different problem, and I’m not ready to take on the hordes of budding communists and socialists out there at the moment.

    LESS DEBT is the answer. And the quickest, surest way to get LESS DEBT is to allow those entities who are choking to death on debt to expire. I mean AIG, Feddie, Fannie, GM, Citi, etc — not Joe and Jane Consumer, whoose way of life is well on its way to expiring without any additional help.

  59. EDF says:

    @constant normal

    Re LESS DEBT:

    Question (not rebuttal):
    Who gets hurt when these many entities are allowed to expire? Is there not a tradeoff? Loss of employment, loss of production and employees from parts suppliers, associates?