I'm not worried since the FDIC has $51 billion to cover the nation's insured deposits (screw uninsured deposits) and new plush buildings & hotel for 'training purposes' in Arlington, VA it can sell. And, Sheila Bair is in charge at least until the election.
I think we can be more assured now that a systemic financial crisis is BBs true worry, and that he will bail out banks to the extent possible to offset the unavoidable pain that is coming. If it means inflation, he'll just keep saying we are keeping our eye on it, and isn't going to worry about it until it is so ridiculously out of control that someone important gets upset. If low savings rates and high inflation screw the poor, so be it. Why not skew the income distribution up a bit further and then compound the pain?
There really isnt enough evidence of any widespread economic recession (granted there are obvious auto and home related recessions) but there is a major amount of fear building. Even in the last recession, education and health jobs held up, just like now. But there are a few other legs still to stand on this time and Ben will try to keep them from snapping.
Massive rate cuts just look like the only action/reaction he has left. I mean, all this behind the scenes stuff the past few months has perhaps lubed the system a bit, but the trend is still to tighter credit, and all the bad loans are still there. MLEC, SuperSIV, bailouts, stimulus, GSE changes, all of that isnt doing squat and they are running out of PR tricks. There isnt much he can actually do other than change perceptions, try to fend off financial system crash, and do the one thing that will keep consumer sentiment from sinking - prop the market. I dont think he is directly the market's bitch, but it can appear that way because he has to bail it to make sure everything doesn't fall apart. At least this way, no one will say he didnt act.
Given his actions so far and especially after today's failure to prop market sentiment after a hefty cut, I'm pretty sure that more is on the way. We arent going to get wage inflation in an economic slowdown and rising unemployment "environment" so he couldnt care less about the other stuff inflating. It's the deflating assets that are the concern, and the fallout. That inflation line would have been cut out of the FOMC statement long ago if it would be allowed by the markets.
The U.S. Senate hereby declares the cration of Subprime Mess Fund L.P.
This fund's objective is to generate superior absolute risk-adjusted returns by buying any distressed credit-sensitive asset with cheap Japanese money and holding it forever. The investors' initial capital shall be guaranteed by the U.S. dpmt of treasury.
Oh what the heck, we went down to 1.0% last time around and the problem is bigger this time. After all the economy can do just fine w/o pets.com or even JDSU, eleiminating Citi and WAMU is a much more problematic situation. Before its all said and done 0.75 or 0.50% and kept there for at least 6 months.
The upstream stuff in tech is pointing down, Autos; RI & CRE;high end and midlevel retail, restaurants and financials are all weak and trending down. That's what, 60-70% of GDP?
Is the world relying on John Deere, CAT, Apple, Google and TI to save the world?
The stuff thats been sent to me...Yep,those losses are understated...
There is also 250-300B in syndicated LBO/IB debt still on the books. Anybody think the banks will see .95-.96 on the buck....I have 5 homes on my street I can sell ya .
Used tinyurl to keep the link from getting chopped up by the comment formatter.
Mancipatio | 01.30.08 - 6:05 pm
Thanks!!
Note:
Mortgage Pool Performance2006:
As of the December
2007 distribution date the total delinquency rate had increased to 28.79% and
severe delinquencies were 18.83%.
Mortgage Pool Performance2007:
As of the December 2007 distribution date, the
total delinquency rate had increased to 20.4% and severe delinquencies were
11.51%
--
Isn't it lucky for the bears that Fraudentials have the largest weighting in the Scam Market?
S&P500 Futures Down 50 Points From Today's Fed-Stimulated High
Burn-ass-ke (on the hot seat!) is bears best friend. He keeps on proving again and again.
No need to cover your shorts as long as Burn-ass-ke is in the chair with fire underneath and his hands tied behind his back. His ass is on fire, so he cant think. All he can do is to re-act.
O/T but rel'd to finance, subprime in the financials:
For those watching the Australian problems:
(The most likely reason a client goes to Tricom is because Tricom does not require the documentation of other margin lenders, such as ability to prove financial worth or ability to pay.)
Tricom yesterday belatedly settled its trades with the Australian Securities Exchange following a crisis that began just over a week ago when the share market lost 5 per cent in one day, triggering margin calls. Tricom's main creditors, ANZ, Merrill Lynch and Credit Suisse, then effectively froze Tricom's accounts.
Tricom, which holds about 29,000 accounts, was forced to sell shares it financed on behalf of clients, including a large line of Allco Finance Group shares, ultimately owned by Allco senior executives. It is also reported to have been the seller of shares in MFS held by staff and executives.
By Thursday, a Tricom client, a high-profile Australian private equity operator, is believed to have called Tricom demanding to know why some money was not in its account and a cheque paying for shares Tricom had sold had been dishonoured.
The next day Rosenberg was forced to hold a meeting of his 300 dealers to ask them to ring some clients and ask them to refinance their margin loans.
In September, Tricom's margin loan book was about $2.5 billion. Last week it had shrunk to $1.5 billion, and it has been ordered to reduce it to $1 billion by tomorrow.
The big concern is the quality of the remaining loan book, which includes Babcock & Brown satellites. These will be difficult to refinance, particularly if the market falls again and another margin call is triggered.
Alec, I sure dont mean many legs. But if you disaggregate the job numbers, there are still some pockets which arent screaming recession yet. Granted, they are likely heading that way, given CFO confidence and that firms are starting to plan for recession. The thing is, once that becomes the mindset, there isn't much you can do to cut off the self-fulfilling prophecy at the pass.
The more I consider this, the more I think the Fed is reacting to what it perceives as "The Greater Danger".
So what is the Greater Danger ? It seems like the vital signs of the banking system are near the top of the agenda today.
All the lesser dangers (inflation, etc) will just have to take care of themselves for the time being.
The markets had a nice bounce, then fell back on other interesting news. So now it shifts across the ocean to Asia (who should be just waking up about now). What are they going to think of the 2nd rate cut, and the implied banking system issues ?
Everything will be fine. We will change the rules so no investors really know the dodo we are in:
Jan. 30 (Bloomberg) -- Just when it seemed as if the mortgage mess had hit a new low, now comes this: The Securities and Exchange Commission's staff has granted the subprime-lending industry a huge exemption from the normal rules for off-balance- sheet accounting.
In effect, the move will let home lenders keep their balance sheets looking much smaller and less leveraged, even while the off-the-books loans they made get a makeover
The Aussie exchange is plunging, down 2.8% in the first 30 minutes...otherwise watch the various yen currency pairs for carry unwinding to take the pulse of the Asian markets until they open.
U.S. steel prices are set to rise significantly in 2008, according to several Wall Street analysts who see a cost-push inflationary environment outweighing a collapsed-demand deflationary scenario. Aldo Mazzaferro at Goldman Sachs Group has raised his 2008 price forecast for hot-rolled sheet in coil (HRC) to $650/ton, up from an earlier $580 outlook. Timna Tanners at UBS Securities has posted to clients an annual-price outlook of $644 for HRC, saying that a supply-side price push is materializing more quickly than expected.
The 2007 price HRC average was $527/ton when apparent supply dropped by 10%--and new calculations show that actual net use was down 15% to 94.2 million tons. With a 5% decline in apparent supply projected for 2008, and the metalworking economy skirting a depression, early forecasts for 2008 HRC ranged from $550 to $580 to account for some cost increases. The majority of the buyers polled early this month agreed that some sheet steel pricing increases were likely.
However, in less than a month, the mood on Wall Street has changed. In a nutshell (and speaking for the majority of steel analysts), Michael Willemse, the industrial products research analyst at CIBC World Markets, expects a sharp first quarter rise in North American flat-rolled prices and strong shipments from most steel producers due to increased buying by service centers, benign imports, and increased export opportunities. He says these factors will offset weak end-market demand in North America and allow the mills to get $660-$680 prices for March deliveries.
We are grinding down to new lows in NZ and Aussie. Markets unipressed with BB.
Good news is that its summer and its hot and.....
I wish I had the balls and $$ to short my market. we are going to get hit, we have just shut another timber mill because of slump in world timber prices.
Markel writes:
According to Mish's post, the entire banking system is "thinly capitalized"; they borrowed their reserves from the Fed.
Markel | 01.30.08 - 6:46 pm | #
Situation Normal... you know the rest.
I mean what does Mish expect from a fractional lending central bank driven and controlled fiat system? I mean anything OTHER than thinly capitalized should make you wonder, huh?
Kind of like being surprised by the dawn. Damn, you mean the sun came up again???
LOCAL stocks opened sharply lower today despite the US Federal Reserve cutting rates as investors focused on the US economic slowdown.
Investors also seized on a report by credit ratings agency Standard & Poors in the US that said credit losses in financial institutions could rise to more than to $298 billion.
The benchmark ASX/S&P 200 Index was down 109.2 points, or 1.94 per cent, at 5509.8 after the first 20 minutes of trading. The All Ordinaries was down 100.7 points, or 1.78 per cent, at 5564.6.
few ideas:
i think that the general economic analysis vastly understates the economy's sensitivity to interest rates.
just as no one could believe that the housing market could roll over based on a 5.25 fed funds rate and 6.5% 30 year mortgages, no one can now believe that the economy can get thru here, with fed funds at 3%.
The reaction of the stock market is not particularly unusual. Off the panic bottom of last week, when time looked like it was running out, we have had a 1000 point rally in the dow to todays high. The 'norm' of such reversals would have another fierce decline from somewhere around here (and here it appears to be given today's action and the SP ratings excitement after the close) which will not carry any where near the bottom. The psychology of this decline is the hardest for anyone that has held long thru the decline, or anyone that has held short thru the rally. For those that held long, it is usually this decline that forces them out, not because the p&l finds a new low but because they just can't take the pain anymore. We should see this with another high spike in vol and visitor counters at CR near or at new highs. On the bear side, the talk will be more tilted towards armageddon than ever. As p&l has gone backward recently, larger events are needed to fulfill the dream, so the talk should get even more wild.
I'm short at the moment, but will pitch the whole load probably sometime tomorrow and jump back into the things that will benefit most from an overshoot on the downside of fed funds which we most probably have seen. anything in the industrial economy should do the trick.
"The key elements of the restructuring program include:
-- The optimization of the Company's store portfolio, including the
closure of 117 underperforming stores over the 2008-2010 period;"
"NEW YORK, Jan 30, 2008 (BUSINESS WIRE) -- Concurrent with its rating action on Financial Guaranty Insurance Company (FGIC), Fitch Ratings has taken various rating actions on 114,577 bond issues (114,560 municipal, 17 non-municipal) insured by FGIC (further details below).
Fitch downgraded FGIC's Insurer Financial Strength (IFS) rating to 'AA' from 'AAA' earlier today following recent discussions Fitch had with FGIC's management team regarding their current capital enhancement plans. With FGIC remaining on Rating Watch Negative, Fitch expects to resolve this status after evaluating the progress FGIC makes in its future capital enhancement plans. " MarketWatch.com
Ijust read that S&P quote; I'm so inured to expecting all this to unwind that I'm desensitized, but this:
It is difficult to predict the magnitude of any such effect, but we believe it will have implications for trading revenues, general business activity, and liquidity for the banks,'' S&P said.
got to me. Its not just market mavens, sober blogs, traders trying to make a fast buck saying this - its S&P !
"We aren't going to get wage inflation in an economic slowdown and rising unemployment "environment" so he couldn't care less about the other stuff inflating. It's the deflating assets that are the concern, and the fallout."
Geoff, you can't support deflating assets without inflating incomes, that is the conundrum that the inflation crowd keeps missing. So the Fed can't "print" or any other such nonsense due to the global wage arbitrage. Any printing just kills JSP more and allows less money for the mortgage payment. Therefore, lower interest rates are not the answer. There is no answer, other than massively cheaper RE. I'm sure most of you noticed how mortgage rates are not falling that much. In fact, they went up after the cut, LOL!
"Its not just market mavens, sober blogs, traders trying to make a fast buck saying this - its S&P !"
Aren't these the same people that had all this crap as AAA in the first place? Why has their analysis or prognosticating ability suddenly become valuable?
Darth - I'm with you. I'm not saying he has the answer, I'm saying this is his thinking, and also saying that there is no answer. He's doing the simple things he can, because basically, he isn't going to win and doesn't want to appear to have tried. I dont fall in any of the deflation or inflation "camps". Lots of different variables are going to head differnt directions and they wont stay necessarily on that course for long. Cutting rates is going to send money flying somewhere. For a while it's oil, gold, etc. It's not housing, that's going to deflate no matter what. It's not US equities, save for some that are linked to above commodities. It's a mess, that's what it is. But you dont get wage inflation initially in a time of rising unemployment, unless inflation of all other things goes off the rails (which it hasnt yet by "official" figures). In my opinion, it's already off the rails for education, medical care, etc.
What exactly is new in this story? I thought estimates were already higher than 265 and that reported writedowns are already close to 150. This seems sort of like dog bites man, no?
Darth: I am in your camp, the central bankers down here are squeezing the life out of our RE bubble with higher rates. Only problem is its killing the productive economy too.
I don't think you can stop what has been created, its a monster..Its like a supertanker now and inertia has taken over.
Thank your lucky southern stars that your CB is trying to keep a speculative housing frenzy from going to the moon as ours didn't. It might suck a bit, but it's better than dealing with the debt bomb we are dealing with.
Aren't these the same people that had all this crap as AAA in the first place? Why has their analysis or prognosticating ability suddenly become valuable?
david_in_ct
Fair enough - to clarify my point - now the investing masses will pay attention, because its S&P; that's what I mean and will act upon.
Clayton Holdings Company in Connecticut is being investigated-and they are releasing all the information that will help in terms of revealing this huge conspiracy to the Gov. of NY.
"Aren't these the same people that had all this crap as AAA in the first place? Why has their analysis or prognosticating ability suddenly become valuable?
david_in_ct
Fair enough - to clarify my point - now the investing masses will pay attention, because its S&P;"
The raters acted in their own interest rating this trash top investment grade. They earned the fees from the issuers, not the buyers.
Now they act in their own self interest:
"hoocoodanood" we had some "administrative issues"
and are slowly downgrading to retain their supposed respectability.
Misean: Too late here too, sorry. Housing and debt bubble looks like the US cica early 2007. Easy al created bubbles all over the world. We didn't over build, thats the only difference. 100% house price rises in 4 years!
Our CB is nobody's bitch, everyone hates them except Belgian dentists and Japanese housewives betting on carry trades..
who in the hell is "Red Oak Merger Corporation", that splains everything-
This is not something sinister. I had a chapter-S corp I sold to a publicly traded company (which was in turn acquired and is now owned by GE.
They did the same thing, my corp was merged with some new artificial entity, which I assume was later merged with the acquiring company. Frankly, I have no idea why. The wire cleared and the money was in my account and after that, I couldn't have cared less what the hell they did.
I don't see a reason why a foreign investor would want to own long-term Treasuries here or forward.
There's not much price appreciation left in rate cuts. The dollar is weak. The yield is crummy nominal and zero or negative real.
Don't tell me flight to quality. If the dollar tanks another 5-10%, it's not quality. Besides, the U.S. has permanently lost it as the quality financial system.
Steeper yield curve won't help fixed rate mortgages. Only adjustable.
Greenslime and the Yen carry really puffed bubbles all over the place.
Hopefully B.S. Bernutty's panic cutting of FFR and Dicount Win...erm TAF's we'll break the carry. I just don't see a Zimbabwe as our next carry trade partner.
"Fair enough - to clarify my point - now the investing masses will pay attention, because its S&P;""
If the investing masses haven't figured out what the problem is/was/will be they certainly aren't about to get a clue now. I suspect that a fair number of the hangers on might bail out tomorrow much to their future chagrin....
Perhaps TPTB think it will slow jingle mail in the Alt-A meltdown...coming to theaters near you late summer.
I don't think they fricking care. All they want is to make sure there is enough dollars floating around to be able backfill the holes the FBs left behind. If those FBs get buried alive in those holes at the same time - so be it.
You missed my point. Of course they don't care if the peasants keep the house. But the banks and RMBS holders sure do. They want to keep them paying on the inflated price.
FC and jingle mail mark that McMansion to market, not fantasy.
I don't think they fricking care. All they want is to make sure there is enough dollars floating around to be able backfill the holes the FBs left behind. If those FBs get buried alive in those holes at the same time - so be it.
BTW - I'm not sure they care much about the investors or depositors or shareholders or management at the banks either... all they care about is the 'system'. If the names all change so what - we're all dead sooner or later anyway.
I think folks will look back at this period and see it as the biggest experiment in lifeboat economics ever. There's going to be a lot of cold stiff white bodies bobbing about those boats before this is over.
Mise - I don't think TPTB care about them either... as long as the banks continue to function. That's what TAF is all about. Don't care if they go broke - just keep functioning... If they go broke we'll scoop'em up into RTC II and bury some more dead.
who knows, carry trade is the big elephant in the room here. I think RE is going to hurt here soon, just my 2cents. 1st home buyers are locked out and its just the same people selling the same houses with ever increasing debt. Its sucking the air out of productive investment, no capital gains tax on RE!
Our CB rate is 8.25% US is now 3%, dollar up,more carry trade, exports more expensive for our trade partners...
i don't buy the insulated argument, we are exporters and about the siza of a small city anywhere else in the world, also stuck at the arse end of the world. the 97 asian crisis hit us hard, we never learn..
NEW YORK, Jan 30 (Reuters) - Washington, D.C.'s Georgetown University and a Nevada utility on Wednesday confirmed that a couple of their auction-rate municipal bonds had failed at auction, which experts said was believed to be the first time that this had ever happened.
Auction-rate debt is an instrument whose rates are reset periodically, and if an auction fails, the issuer must pay a higher penalty interest rate. An auction fails when no buyer can be found and the dealer does not take the paper back.
We are STILL on Act I - Subprime. Act II - the Alt-a's will be performing (or not) by the end of this year. Act III could be the climax of the play which will be the Option Arms. They are set to appear on stage within a few years.
Ladies and gentlemen, this is a very very long show. Sit back and get comfortable because it's going to be a while.
You haven't seen a real tearjerker till you see this one.
MBI should be up tomorrow on this news - I know there were a lot of people not expecting Warburg Pincus to make the investment.
Commenting on the closing of the Warburg investment commitment, Gary C. Dunton, MBIA Chairman and CEO, stated, We have now strengthened our capital position by $1.5 billion, including the recently completed $1 billion surplus notes offering, and we intend to raise additional capital in the coming weeks. Our comprehensive capital plan, which improves our position by over $2 billion, has been recognized by Fitch Ratings, which affirmed our Triple-A ratings with a stable outlook, and by Standard and Poors Ratings Services, which affirmed our Triple-A ratings with a negative outlook. We will continue to work with Moodys Investor Services, which has placed our ratings on review for possible downgrade, as our capital strengthening plan progresses. Our accomplishments send a strong message to those who doubted our determination to act quickly and decisively to defend our balance sheet. We remain firmly committed to enhancing our position as a leading provider of bond insurance.
Forgive me if this sounds naive, but what is the proper monetary policy for Bernanke to follow?
I was raised to believe that if you have indicators of economic stagnation (consumer spending down, industrial production down, credit crunch) you follow an expansionary monetary policy. I know the Fed can't force the banks to lend, but that the discount rate is a tool to increase the money supply. So, if you're thinking that the housing sector is only going to get worse, and the effect will spread to employment problems and further consumer spending cuts, isn't an expansionary monetary policy the 'correct' response? Would open-market operations send a different signal? If it's not the correct response, what's different about our situation that makes it incorrect? The concern here, clearly, is inflation, but you can't let a lot of hard-working people land with a thud to stave off inflation, or can you?
In other words, if you're sitting now where Bernanke is, what monetary policy do you advocate and why? (Adding the qualification that the health of the economy is the goal, not necessarily the health of the markets.)
dunham -
Dont get why this is news - deal was announced weeks ago and it was a firm deal. This is just the announcement that it closed and was funded. I dont know of anyone who thought this wasnt going to happen. Not even Ackman....
Note they are on credit watch now with a negative outlook.
Inexplicable Analyst Pick of the Day (Per Bloomberg Article):
"Walt Disney Co., the second-largest U.S. media company, had its stock rating raised to ``buy'' at Pali Research, which cited improved prospects at the company's theme parks."
Agreed that it was a done deal, but still think it might forestall some of the pain the financials will eventually feel. I also would be surprised if the mononlines don't rally a little on the news.
In an environment where Blackstone and others are getting out of every commitment they had, Warburg Pincus remained committed and funded - says something.
I'd love to get my hands on that $10 million Zimbabwean note, but as the text says, you must use "on or before 30th June 2008". Is it made of milk?
As an aside, my brother was a Marine in Somalia and told me stories of seeing their currency swirling around in the streets. Quite literally, it was used as toilet paper.
I'm not sure the MBI news is "nothingburger". Depends on the termination agreements on the deal when it was signed. Could they have walked away easily? If so, going through with the deal is a vote of confidence in the valuation.
Its highly doubtful that Pincus could have gone through the MBI portfolio with a fine tooth comb, and there are some who say the firm didn't have the expertise to do so. So the other question is why Pincus would want to make this investment in the first place. Clearly, they could have gotten it cheaper. Nothing they did sent the message that they were dealing from a position of strength in negotiations.
I'm an occassional member of the tin-hat brigade, and this deal makes me reach inside the drawer for that shiny sombrero...
RLHB: The concern here, clearly, is inflation, but you can't let a lot of hard-working people land with a thud to stave off inflation, or can you?
Is there a lot of unemployment now? 'Cause from what I see of the numbers there isn't. But what I see is growing inflation. So what is the agenda?
Maybe the Fed has another mandate besides monetary stability and economic well being... maybe their real mandate is asset price protection?
If it isn't their mandate it sure looks like it could be and that may be a bigger problem than if it actually was the official mandate... (you know, the big lie problem).
Just an FYI - I am NOT a hard core monetarist or 'Austrian'... I'm a pragmatist. I truly believe the Fed could and did about all it can do to fix the liquidity part of the problem many cuts ago... As others here have pointed out many times they can't fix the solvency part of problem with rate cuts alone.
There certainly are ways to fix* the solvency problems but those fixes aren't painless. They have consequences of their own.
the 'fix' I refer to can be looked at two ways: (1) to correct or repair (2) to manipulate as in 'fix a race'. You choose the one you prefer.
Thus, since Plan A ($15 billion recap of the monolines by the banks) is now faltering as being unfeasible one does hope that the Fed has a Plan B short of a public bailout - to avoid the financial meltdown that will follow the downgrade of the monolines. The trouble is that there is no sensible plan that one can conceive of that would resolve this total mess with a private sector solution and with private funds. And using public funds is out of the question.
So what is the likely result? The monolines downgrade will not be avoided and the next leg of this systemic financial meltdown will not be avoided. Then, the modest 2.2% drop in the S&P500 today from its post-FOMC announcement peak will look like spare change. A serious crack or better crash - in the stock market or the financial system as the one in 1987 cannot be ruled out at this point following a massive and at this point likely unavoidable - downgrade of the monolines. No wonder the Fed eased 125bps in eight days. But no wonder that such a massive ease and much more ahead will make no difference for the severe insolvency problems that the economy is now facing. Monetary policy is altogether impotent in dealing with these insolvency issues and the specter of a severe systemic financial crisis that is looming ahead.
Maybe the Fed has another mandate besides monetary stability and economic well being... maybe their real mandate is asset price protection?
my 2-cents... I think quite a few people here believe that there is a considerable amount of leverage that needs to unwind. Could the Feds mandate be as simple as survival thru this period of unwinding ?
The buyers and the sellers (of homes, mortgages, and CDOs) made a bet, and both sides lost.
Unless somebody comes up with some novel economic stimulant that no one else has thought of, but quick - and I don't put much stock in that happening - we're in for a really rough time.
Here's a novel idea: The wealthy and powerful will have to bail us out.
This approach is based on two factS:
1) the poor and what's left of the middle class are already so broke they can't pay attention - much less bail the fat asses out, and;
2) The wealthy have all of the wealth.
Hey, Big Tycoon class: Your incompetence and negligence are exceeded only by your greed.
Here's what you can do for your country: Bring the jobs home. Take a drastic pay cut. Stop hiring illegals. Build a factory or twelve. Forgive some of the debts you are owed. Take a freekin' loss for once. Pay more than your fair share of some taxes - we have a deficit. How goddamned much money do you need, anyway? Don'tcha' love America?
Sheesh.
And by the way, if we find out that you've been crooked during the run-up to this fiasco, we'll have your money and you will go to prison.
I gave it 50/50 given the probability of a downgrade. Putting in more capital only makes sense if they can write new business. If they lose their rating, the new business opportunities are gone (if they aren't already), and additional capital doesn't change anything for the investors.
"Jan. 30 (Bloomberg) -- Morgan Stanley, the second-biggest U.S. securities firm, wrote down $169 million after helping its money funds by taking on bonds issued by structured investment vehicles.
Morgan Stanley bought $1.06 billion of SIV bonds, including $160 million since Dec. 1, the New York-based firm said in a filing yesterday with U.S. Securities and Exchange Commission." Bloomberg.com:
News
Maybe these losses will suck capital out of the oil futures markets, which are the next asset bubble, in my view. I have seen several statements by Saudi officials stating that they don't think that the fundamentals justify current market prices for crude oil.
MARCUS AURELIUS: "Here's what you can do for your country: Bring the jobs home. Take a drastic pay cut. Stop hiring illegals. Build a factory or twelve. Forgive some of the debts you are owed. Take a freekin' loss for once. Pay more than your fair share of some taxes - we have a deficit. How goddamned much money do you need, anyway? Don'tcha' love America?"
So instead of a housing bubble you want to create a manufacturing bubble with people making bogus money-losing widgets which have no economic use?
Embrace the free market and let it sort things out. Asking wealthy people (believe me, I'm nowhere near one) to do stuff won't accomplish anything. You will just end up with lame factories churning out lame stuff.
I'm probably the only one here with this opinion but... THE GAME ISN'T OVER YET (lol that's why I'm still long Ambac )... even with the massive real estate unwinding last year, the US economy posted a 0.6% GDP growth rate. Corporate balance sheets are probably the best in 40(?) years and if there is capex spending, things may not turn out to be too bad. With the weak US$, exports are picking up a bit too, and the current account deficit should shrink a bit. The weak US$ is a temporary help: it's easier to export yourself out of problems than the other way around!
What the superbears are missing is that unemployment is nothing like it was in past cycles. Things can still fall apart but the proactive Federal Reserve, along with good corporate balance sheets, should mitigate the damage.
If you believe the employment numbers, I've got some AAA rated securities and a really nice house for you (no money down, easy payments, you can just skip the rest...).
Even if the numbers are correct (and I'm positive they're not), what kind of jobs are they? Americans are spending more than they make - and the credit is running out. Wages can't support the service of the debt, much less the growth of the economy.
On the other hand, it's always nice to think good thoughts!
What the superbears are missing is that unemployment is nothing like it was in past cycles. Things can still fall apart but the proactive Federal Reserve, along with good corporate balance sheets, should mitigate the damage.
Sivaram Velauthapillai | Homepage | 01.30.08 - 9:38 pm |
I'm not saying that all is well in monoline land but if anyone here honestly thinks they have a clear handle on the portfolio they hold, keep dreaming. Since when is it possible for so many people to understand so much about assets that are supposedly completely opaque and nearly impossible to value?
Also, if you're trusting rating agencies for your loss estimates, take a second to consider how that's working out for the last group of people that did so. Do you think they suddenly got religion and competence?
Forgive me if this sounds naive, but what is the proper monetary policy for Bernanke to follow?
I was raised to believe that if you have indicators of economic stagnation (consumer spending down, industrial production down, credit crunch) you follow an expansionary monetary policy. I know the Fed can't force the banks to lend, but that the discount rate is a tool to increase the money supply. So, if you're thinking that the housing sector is only going to get worse, and the effect will spread to employment problems and further consumer spending cuts, isn't an expansionary monetary policy the 'correct' response?
See, even though it seems correct on the surface I believe this is the kind of thinking that got us where we are today.
Yes, "expansionary monetary policy" is the "correct" response in the world according to Keynes, but what if the economy is in recession precisely because businesses have been using money improperly (for example, overinvestment in specific sectors)?
Is an expanding economy really the best thing in this scenario? If businesses are making poor use of resources, or outright destructive use of these resources (think Wall Street), is it really wise to further expand these counterproductive activities?
Maybe a recession is "just what the doctor ordered" in these cases.
"Roubini is a genius. People used to scoff at him. I'll bet they're not scoffing now."
(disclosure: I'm long Ambac)
I respect Roubini because he has been going against the crowd all throughout his life (although he was wrong in the late 90's with some of his calls). His views on the monolines have been completely wrong. As recently as a few weeks ago, he was saying that any business that needs a AAA rating to operate isn't viable. Well, Buffett set up Berkshire Hathaway Assurance, whose sole business activity depends on a AAA rating (he capitalized it with only $100 million so, like other monolines, it will likely use something like a 100-to-1 leverage). There goes that argument...
Now his argument that the downgrade of the monolines will result in financial catastrophe is going to turn out to be wrong as well IMO. If the monolines can't raise capital to maintain a AAA rating, they will likely go into run-off (that's what's best for shareholders and that's what I would support). If they go into run-off, watch nothing happen....
"Walt Disney Co., the second-largest U.S. media company, had its stock rating raised to ``buy'' at Pali Research, which cited improved prospects at the company's theme parks."
Anonymous,
This is a good catch on your part, and I agree with you this sounds strange. Another industry that is discretionary useless spending on steroids is retail jewelry, and it is tanking.
Gold + silver are more expensive as consumers decide to waste less money on frivoous crap. There could be a bankruptcy soon at Findlay, one of the largest chains. Strangely, they just spend a leveraged $200 million to buy another chain, Bailey Banks & Biddle, last fall from Zale. So, two companies and $200 million of loans could be down the drain.
What the superbears are missing is that unemployment is nothing like it was in past cycles. Things can still fall apart but the proactive Federal Reserve, along with good corporate balance sheets, should mitigate the damage.
Unemployment was somewhere around 3% at the beginning of the Great Depression. At the time it was commonly argued that the era of mass unemployment was over.
"Thus, since Plan A ($15 billion recap of the monolines by the banks) is now faltering as being unfeasible one does hope that the Fed has a Plan B short of a public bailout - to avoid the financial meltdown that will follow the downgrade of the monolines."
This is starting to get ridiculous. So if we are to believe Roubini, it is no longer the economics which matter, it is no longer the cash flows, the countless market transactions which apply, but the blessing or lack there of of a bunch of fools sitting around at S&P or Moody's who are going to decide upon the economic collapse of the western world.
Why don't we just send in the black helicopters and abduct them until the dust blows over.
And another thing: We can't export our way out of sh!t! we can sell natural resources (including agri) and raw materials - call them "exports" if you will. We have a few manufactured exports, but not enough to be taken seriously on the manufacturing front. That's why we need factories and industry.
Things we will not be exporting (net):
Cameras and optical equipment
Televisions and Consumer electronics
Furniture
Clothing and shoes
Automobiles
Motorcycles
Toys
Household durable goods
Energy
Steel
Medical Electronics
Workers
Things we will be exporting (net):
Weapons Systems and Technology
Food
Bad debt
Tractors
Trees
Coal
Entertainment
And another thing: We can't export our way out of sh!t! we can sell natural resources (including agri) and raw materials - call them "exports" if you will. We have a few manufactured exports, but not enough to be taken seriously on the manufacturing front. That's why we need factories and industry.
We don't have much to export due to our lack of investment and excessive focus on consumption. Worse, due to excessive investment overseas it may be unprofitable for US companies to invest in production capacity anytime in the near future.
ROWDYRODDYPIPER: "Also, if you're trusting rating agencies for your loss estimates, take a second to consider how that's working out for the last group of people that did so. Do you think they suddenly got religion and competence?"
Well, EVERYONE--including the bond insurers themselves--got it wrong before. That's done with. Markets are forward looking after all
The question is what is happening now. My GUESS is that the rating agencies have a better handle on things now. In fact they are going into la-la-land by using subjective "market" factors (due to pressure from Bill Ackman et al). The numbers that the agencies are using are almost like Great Depression type numbers (not quite the same but sort of big).
However, since most of these structured products have non-linear effects and depend on specifics of the underlying MBS, no one really knows what the outcome will be. So it will come down to subprime default performance and recoveries over the next year or two. It's all a guess but I think the rating agency models are ok now. It's just down to the actual default rates now...
What is it that the fact the ratings agencies ratings are written into law that is unclear?
These rated securities can ONLY be carried on the books of MANY holders if they are AAA or close. Ratings gone causes sales. Sales = mark to market. Mark to market = level 3 needs to be marked to market.
It's a chain reaction. It's cascading cross defaults. It's not going to get swept under the rug. Too much trash valued at par worth zilch on the balance sheet.
For those of you with an historical bent, you might want to look at a December 2005 article in the NYT by Martin Flackler that compares and contrasts the 1991 housing bubble in Japan with the then developing bubble in the US. As someone once said, "We are not alone." The link is below:
I find all of this quite interesting. However, I keep seeing people talk about trouble in the "banking system". The pain is not spread anything like evenly. Some banks with little RMBS exposure will see little or no pain. If anything, a bank in very good condition will have capacity constraints. The rush of customers looking for a well-run, solvent bank to do business with can't always be serviced.
Look at the losses to date. Some banks have very little. Other banks of similar size will implode or be taken over.
OT.
Since it appears the taxpayer is going to pay for this
mess through higher taxes. Would that not mean a preference for traditional IRA's verses Roth IRA's ?
Assuming of course that IRA plans aren't modified
or eliminated.
MARCUS: "And another thing: We can't export our way out of sh!t! we can sell natural resources (including agri) and raw materials - call them "exports" if you will. We have a few manufactured exports, but not enough to be taken seriously on the manufacturing front. That's why we need factories and industry."
I'm not saying USA wouldn't benefit from some factories but the fact of the matter is that it is not feasible right now. USA is just too uncompetitive in manufacturing whether you like it or not (believe me, I'm in Canada and Canada is even worse with the strong dollar (Ontario, which is dependent on manufacturing is 10x worse than US states). Anyway my point was going to be...
Exports aren't necessarily physical goods anymore. You might want to check things like information technology and intangible exports. Last time I check, info tech companies export far more than they import. Companies like Microsoft, Cisco, and so forth, have HUGE exports. Companies like Disney (someone was quoting theme parks above) export their brand all over the world. Hollywood movies are exported all over the world. Companies like Boeing and other industrials are export-oriented. And so forth.
That's sort of the point of my original rant. We have invested overseas. Our middle class (the one we grew up in) cannot be sustained in the global economy. We'd better start making something to sell - we're going to need the jobs.
Profit? I can't guarantee that - at least not right off the bat.
We seem to have accepted the meme that moving backward more slowly is moving forward (if last Qs losses aren't as bad as the previous Q's, we see that as an improvement) - we might get to the point where subsidized industry is considered economic progress.
We'd better make some capacity and get competitive.
We don't have much to export due to our lack of investment and excessive focus on consumption. Worse, due to excessive investment overseas it may be unprofitable for US companies to invest in production capacity anytime in the near future.
ac | 01.30.08 - 10:09 pm | #
I've been telling you guys for a long time - the week dollar doesn't dig us out by exporting more, it digs us out by importing less (in quantity & quality if not in inflated dollar amounts).
Instead of us importing we substitute domestic production instead - 'cause those are priced in weak dollars. And many of those new substitutions will be 'inferior goods'... economically speaking that is. Buying domestic beer instead of French wine or vacation at Disneyland instead of Greece.
Meanwhile we keep working but for 'less' in terms of wealth and global buying power. The alternative is to keep the dollar strong and see a WHOLE lOT fewer people working as the imbalances adjust (strong dollar driving more and more off-shoring of mfg, research and services).
Either way those imbalances re-balance - they have to. Its the price we pay for decades of deficits (trading paper and promises for real things and real activities).
"These rated securities can ONLY be carried on the books of MANY holders if they are AAA or close. Ratings gone causes sales. Sales = mark to market. Mark to market = level 3 needs to be marked to market."
So your thesis is that there are banks which have huge amount of unmarked to market cdo^2 etc. (tier 3 stuff) on their books which have not been traded by say pension funds who also own them. now the pension funds are going to be forced to sell them, because they are no longer aaa, and the prices realized will cause the banks to mark these assets down and thus cause their bankruptcy.
While all the folks from swf's and other investors that just invested 10's of billions of dollars in these banks neglected to look at these assets.
I visit Canada regularly (I actually have bank accounts there). The weak US dollar will cause the Bank of Canada to cut again. The traditional rate differential (my guess is 1 USD = 1.05 to 1.10 CAD would be about right) works the best for you, and your bank will try to maintain that rate.
When the devaluation of the USD began, I figured that we were going to try to inflate our way out of our debts - public and private. Canada can't afford to let us do that, and they will follow us down.
Don't count out mfg exports. I was in a hydraulics plant before the Holidaze and was told they export over half of what they make... I was flabbergast. The primary reason is the products are specialized, expensive and involve all kinds of IP you wouldn't realize.
And this was a major MNC - plants all over the world. i was told the US plant was the lowest cost anywhere for this particular mix of products.
With the dollar as weak as it was they were moving related production back from Asia to keep this plant at max capacity.
One more interesting point - it didn't employ a lot of folks (couple hundred)... but the activity associated with that plant required five times as many office workers spread out around the country (world actually)... sales & marketing, accounting & finance, logistics & supply chain, engineering and R&D...
People don't understand the dynamics & synergies of this whole thing. That is both good and bad... good that a few workers generate activity for many others... bad in that if you lay off a few hundred factory workers in Bumfuck there is no reason to employ thousands of office drones somewhere else.
Well, many purchasers require local engine manufacture. Brits want RR engines, Europe..if they buy at all want airbus engines (France & Germany). Others want the config that's the cheapest...doesn't necessarily mean GE engines.
Software..bah!
Vista sucks. China doesn't care about copyright laws, and the Germans, Indians, South American software geeks are pumping out O.S. software that competes well with U.S. closed source firms, especially in EM's.
about"...the Systemic Financial Meltdown Risk from the Monolines Crisis"
it seems clear that, moral hazard aside, we either have a government bailout and or take-over of the monolines or face a significant risk that the financial system is about to come apart.
so many of those at the top are in love with ann rand that the solution may be impossible for them to embrace.
"You're argument is illogical. SWF's are gov't entities, they act politically. Further, the mark to market HASN'T happened yet..which is my point."
So the billions of dollars invested were done purely as a favor to MER, C, etc, without looking at their books and with the expectation that these assets might be marked down within 3 weeks causing the bankruptcy of the bank and the total write off of their investment.
Let me guess, these guys did this as a favor to george bush because he is their hero and carries such great respect that it was an honor for them to come to his aid.
Nobody at the top is in love with Ayn Rand (not that I am either..blow hard is my word). They love Keynes.
That said, since they ARE pursuing Keynsian policies to fix a Keynsian blow up...we'll see.
Buy the way, if you have any evidence other than in the 60' RETIRED fed chairman Greenslime was a Randian...and all of those at the top CURRENTLY ARE Randian's....I'd like to see it.
it seems clear that, moral hazard aside, we either have a government bailout and or take-over of the monolines or face a significant risk that the financial system is about to come apart.
I think the definition of 'come apart' is the key. It will come apart one way or another... either the market forces screwing things up blows it all apart or a gov't take-over bailout 'disassembles' it.
Regardless it isn't going to be anything like what it was before.
BTW - the funniest part is the A Rand connection. My wife and I were discussing that last night. If revenge is a dish served cold, how does one serve irony?
Mise - they don't understand Keynes either. If they did they'd have run surpluses in the boom.
These folks - so called conservative and liberals a like - only understand self interest. Keynsian stimulus on the down beat and market forces on the up stroke. The only know how to talk their book.
George Bush never touched an enterprise that didn't go under and leave the shareholders holding the bag (baseball doesn't count - they had dudes following him around making sure he didn't do anything stupid or illegal). Why should the US be any different? He'll be moving to Paraguay when he's done here. Lots of brush in Paraguay.
If you're going to discount geo-political politics...your business, be my guest.
I guess you also believe that China's peg to the deteriorating dallar, and Japan's as well is about the ultimate soundness of the U.S. banks. To each his own.
"Let me guess, these guys did this as a favor to george bush because he is their hero and carries such great respect that it was an honor for them to come to his aid."
"Mise - they don't understand Keynes either. If they did they'd have run surpluses in the boom.
These folks - so called conservative and liberals a like - only understand self interest. Keynsian stimulus on the down beat and market forces on the up stroke. The only know how to talk their book."
I'll give you that. But who saves in an uptrend. "INSERT ASSET HERE" prices only go UP!
"The question is what is happening now. My GUESS is that the rating agencies have a better handle on things now. "
And you are right, you guessed. The last commercial mortgage-backed deal they rated was: Countrywide 2007-MF1. If I had to come up with a deal with scary risk characteristics in Dec. 2007, I could not have done better than:
- Countrywide-originated loans
- Multifamily, since we know that MF tracks SF
- lots of interest-only (in this case 40+%)
- lots of California (35+%)
- Texas and Florida exposure
OK, I can go on and on, but my point is that rating agencies are only human despite pretending to be otherwise. They are going to make mistakes, and they made huge mistakes in rating deals based on diversity. It's only recently that someone senior at Moodys has come clean and said they fucked up.
Oh, and the irony arg. I've been tweaking the Super Colander Tin Foil Hat with that one for a while. Is that what Greenslime was up to all along...some Randian plot?
Took my skin out of the game when I knew it would get burned. Found the safest places I could, and I'm hunkering down in my bunker. Unfortunately, I, like every other middle-class American, still have my balls in the fire. This is the economy I have to operate in, after all.
BTW: You sound like you've got a really soft and pretty mouth. Wanna dance?
Regarding your comment on Greenspan & Rand: there has been some speculation that Greenspan remained true to the cause and played the role of Francisco D'Anconia: outwardly playing the part of the media-hungry playboy, while fostering the destruction of an unjust system.
You can even remove your tin foil hat for this one: given the way he ran the Fed, no one would have questioned what he was doing. It's not even a conspiracy. (Far-fetched as it may be).
Oh, and the irony arg. I've been tweaking the Super Colander Tin Foil Hat with that one for a while. Is that what Greenslime was up to all along...some Randian plot?
Mise I actually liked reading Rand - my wife and I decided last night it was time to re-read due to all the crap I'm reading about her.
Understand - I don't go over board on stuff like Rand... I mean I read some Marx too & don't wave red flags.
Point is the funniest thing is I've KNOWN a bunch of hardcore Randians from WAY back (late 70s)... we'd drink & discuss this stuff when done with chem reactor design or quantum. I was called the 'Token Socialist' because I was by far the most 'liberal' of the group.
Fast forward to today... I am the only one of them who has spent most of his life (1) self employed and (2) living in a town even close to a Galt's Gulch... all the rest are corporate wage slaves, bureaucrats or college professors. The irony just rips me up sometimes.
BTW - I didn't plan it this way, it was all an accident. Seriously.
I figured u to b middle class which is great 2 those that hard lend. We can charge 16% now versus 8% 2 years ago. These times are great not good. Wanna buy a house? Just show me 40% equity, fool. LOL.
I gave it 50/50 given the probability of a downgrade.
Zigurrat,
That's crazy. The odds are over 90% of a downgrade.
Aside from all we've covered here ad nauseum about ratings agencies backed into a corner, Charles Gaspaparino is a decent journalist who moved a trillion dollars of capital today. He works for the most bullish network in world history. CNBC would not have let him on the air on a rumor.
His report was a way of letting the air out of the balloon slow. Nobody wanted to broadcast bad news and interrupt the rate cut party. They had to.
Lawrence Summers stated in an article in the FT London that:
"It is critical that sufficient capital is infused into the bond insurance industry as soon as possible. Their failure or loss of a AAA rating is a potential source of systemic risk."(snip)
"It appears unlikely that repair will take place without some encouragement and involvement by financial authorities." snip (who are they , smirk)
"Though there are many differences and the current problem is more complex, the Long-Term Capital Management work-out is an example of successful public sector involvement."
In 1998 about one dozen companies came forth at the urging... and i assume "support" of the new york fed...they were:
Bankers Trust, Barclays, Chase, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch, J.P.Morgan, Morgan Stanley, Salomon Smith Barney, UBS, Société Générale Lehman Brothers, Paribas:
some of these entities no longer exist in their previous form...an many cant afford to belly up to the bar this time and help out...because many themselves need a hand.
So summers idea that the "authority" is going to help out like they did last time with LTCM is wishful thinking.
maybe this time, it's the printing press or nothing.
The gold market is telling you there's something bad happening tomorrow. It's back down now where it was before rate cut, after spiking. Gold traders are anticipating an unwind and rush for cash.
Just came back from the Obama rally. He sounded pretty good. Almost makes you think we could fix some of these problems if we would elect a person who was serious about trying.
I gave it 50/50 given the probability of a downgrade.
Zigurrat,
That's crazy. The odds are over 90% of a downgrade."
Err...exactly. I meant that I gave the WP deal a 50/50, given the [high] probability of a downgrade. It being the probability of WP not getting cold feet - not the probability of a downgrade.
Just hold on to your holdings, I'm sure your superior wisdom will win out. In fact, why don't you take some on margin too? Why not try to corner the market?
(Isn't it amazing how these guys show up at every big new leg down?--It's a great indicator!!)
DucFuc, what I mean is that you're a good indicator that the bottom is past.
Continue on, and leave the ducks alone, there is an SPCA, you know.
Rich - Can you expand your theory on Gold a little bit? Asia action is relatively impressive, but considering the poor run they've had, its not surprising.
Futures are holding up - S&P is only down 6.50 right now after being down as much as 14 earlier in the evening.
"Fast forward to today... I am the only one of them who has spent most of his life (1) self employed and (2) living in a town even close to a Galt's Gulch... all the rest are corporate wage slaves, bureaucrats or college professors. The irony just rips me up sometimes."
yes interesting, and maybe resonates as the rightist version of "liberal guilt"?
Read the Ackman letter/tome and this is going to suck.
I have to attend the funeral of a friend's son tomorrow, so I'll miss the one that is apparently going to be on CNBC.
I agree that the exec caste has sold out the Joe6Packs for profit. I used to work for a multinational telecom in the Risk Management/Treasury Group; execs would talk about showing the market how serious they were by cutting back on labor costs. They'd close small ops in rural areas and screw the folks...so no wonder that I took the chance to take care of the kids.
Times are gonna suck. And yet, living in Central PA amidst the Amish/Mennonites, it's interesting to see how folks adapt. Land gets too expensive and they can't subdivide the farms any further, they move into boutique and furniture manufacturing.
FWIW, I still don't see many places in the world where you can still be quite as nimble as here. I hope that this is true...
rich writes:
"The gold market is telling you there's something bad happening tomorrow. It's back down now where it was before rate cut, after spiking. Gold traders are anticipating an unwind and rush for cash."
Thanks for pointing that out rich. Been waiting to get back in.
yes interesting, and maybe resonates as the rightist version of "liberal guilt"?
Kou Jie | 01.30.08 - 11:27 pm | #
Absolutely. It is exactly the same (but opposite) of 'liberal guilt'. I could go on that rant too - have friends who come across as 'diversity freaks' to everyone they meet yet live in the wealthiest & whitest gated enclaves you can imagine.
I thought Kucinich would have been a good choice. Too bad he didn't have charisma. Obama is okay with me. Actually, any Dem is okay with me at this point. I just can't understand why anyone still wants the job.
Misean...the present administration makes no secret that they follow in the Reagan mold and see government as the problem not the solution and disdain regulation...in that sense they are Randians.
I read that this crisis is about several factors and one big one is government failure at oversight and regulation.
individual irresponsibility also plays a major part.
Duc..
you said you "guess" that few here have "skin" in the game.
i can't speak for others... but my job and my meager life savings in the lower 6 figures is invested and is at stake.
by the way..about the others...my sense after lurking for a year and posting recently is that the people here are well educated and experienced on topic.
you made a bold forecast here about the monolines. we will see if you are correct...and accolades will follow if you are. otherwise, well, you can take your turn in the confessional.
I once saw a 60 minutes interview with the CEO of a major corp (Coke? Xerox?) who had been raised Quaker, but who had decided, at the age of majority, to join the "English." (He wasn't shunned, because he made the decision before joining the Quaker church as a young adult). He said that the quakers were so self-sufficient, prosperity would be their downfall. I'll bet they could teach us a thing or two about capitalism (without the liberal guilt).
I met a family setting up a "colony" (their language) in Yadkin County,NC. They took the money and ran so that they can once again continue to subdivide amongst the kids as they grow.
Now the kids are probably running small mfg plants.
"Really Ducfuc..the way it sounds to me big mouth, is your head is already up your arse..one can tell by the smell of shit everytime you speak.
borkafatty | 01.30.08 - 11:19 pm
the main point is that hey, people need to do what they need to do and generally speaking, please stay out of their way.
my favorite scene is when the food is rotting while waiting to hop on the rail lines to get to the cities.
its more of a statement about the interdependency of human kind and the need to work together than it is about the individualist at costs mentality the books spawned.
dry- wish my wife had read all of rand like i had. she's an architect, so naturally, she read fountainhead only. the day we sit around an decide to re-read Rand is the day i look around for my two kids and realize they're both upperclassmen at some state school somewhere where they got in state tuition cause i live in DC.
how do you pull off humble, secure, successful, educated and wise without being a total prick?
"This is starting to get ridiculous. So if we are to believe Roubini, it is no longer the economics which matter, it is no longer the cash flows, the countless market transactions which apply, but the blessing or lack there of of a bunch of fools sitting around at S&P or Moody's who are going to decide upon the economic collapse of the western world.
Why don't we just send in the black helicopters and abduct them until the dust blows over.
david_in_ct | 01.30.08 - 10:02 pm | #"
And it's not like people haven't been given plenty of warning. Not to over state market efficiency, but people know this is going to happen, so it should already be reflected into prices.
If we really have a few billion in capital supporting the entire financial system, then lets find out.
Frankly, I think we are well past the denial stage and that MSM has caught up. Last weeks NYT's article where a rough landing was just assumed, the sixty minutes piece, another on npr, all the wsj coverage.
The MSM isn't fully on board, but may, in fact, be closer to right then the uber bears.
"Misean...the present administration makes no secret that they follow in the Reagan mold and see government as the problem not the solution and disdain regulation...in that sense they are Randians."
I asked for evidence. You use guilt by impliation, and are wrong on that. Please elucidate how Reaganite big gov't regulation is Randian. Or anything else they did.
Remember, to win this arg you have to show TOTAL fed register regulations DECLINED under Reagan.
O/T he first Hippies the Gypsies
This life is looking more and more attractive by the day !!
Version 1: The Bengali Gypsies: Bauls
Baul means wind, so bauls wander without stop, singing and dancing inner joy coming from the heart which is considered the only temple of God.
ct wrote Regarding your comment on Greenspan & Rand: there has been some speculation that Greenspan remained true to the cause and played the role of Francisco D'Anconia: outwardly playing the part of the media-hungry playboy, while fostering the destruction of an unjust system.
It's tough for me to believe that, though this exchange shortly after retiring (Oct 2007) is interesting. You've probably heard it already.
"Fox News: "So why do we need a central bank?"
Greenspan: "Well the question is a very interesting one. We have at this particular stage a fiat money which is essentially money printed by a government and it's usually the central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or currency board or something of that nature because unless you do that, all of history suggests that inflation will take hold with very deleterious effects on economic activity. ... There are numbers of us, myself included, who strongly believe that we did very well in the 1870-1914 period with an international gold standard".
Fox News: "We did well without the Federal Reserve. People forget that."
Greenspan says that he is a Libertarian on the off days when he says he will vote Republican. But, and this matters more, Greenspan's entire career has been as a federal government gadfly. When there is an opinion needed, he got hired to deliver it.
Contrast Greenspan and Roubini, Roubini has an academic career, and he has a private firm hiring people, seeking clients, trying to deliver value by giving advice. Greenspan is in a money grubber phase of his career, the tin plated expert getting hired for a $1 million per pop.
Rich - Can you expand your theory on Gold a little bit? Asia action is relatively impressive, but considering the poor run they've had, its not surprising.
What we've seen several times, especially in the downdraft last Feb., was a big sudden unwind in gold to generate liquidity and cover losses. For gold dealers, the dip is a buying opportunity so maybe they are lightening up ahead of it.
What's interesting is that silver has been holding up a little better than gold lately. Silver is more of a commodity, less of a hard currency of last resort. If gold does unwind 40-50 bucks, I would buy some.
Ayn Rand's special appeal was to the little guy who thought he too would become the captain of industry. That same little guy likes tax cuts for the rich because one day, that little guy might be rich himself even though the odds are well stacked against him.
The same logic bought McMansions, 60" plasmas, and crew cab trucks that haul nothing more than groceries.
but i accept your challenge to find evidence that this administration loosened oversight and regulation in the banking and investment arenas, and will own up to what i find.
but the larger issue is the trend which has taken place from Carter thru Reagan and Bush x 2 and Clinton...one of deregulation. I hope you would agree that most if not all of the Glass-Steagll like regulation is gone AND this administration is less likely than any since Reagan to impose on business...
"What we've seen several times, especially in the downdraft last Feb., was a big sudden unwind in gold to generate liquidity and cover losses. For gold dealers, the dip is a buying opportunity so maybe they are lightening up ahead of it.
What's interesting is that silver has been holding up a little better than gold lately. Silver is more of a commodity, less of a hard currency of last resort. If gold does unwind 40-50 bucks, I would buy some."
I'm thinking something similar as the Gold charts Shot up with the dollar downdraft and stock market updraft today.
I think some of the 10yr up interest caused the Gold spike today. Spots still ~923:
With all due respect to Roubbini, if the entire financial world as we know it rests on the $12 billion sliver of capital held by mbi and abk, then it deserves to blow up.
We shouldn't have long to wait.
I'm sure it's bad luck quoting the decider, but bring em on.
yes G-S act stemmed from the great depression and was in force until Carter / Regan era. it was systematically gutted over 4 administrations with executive orders and finally the Clinton-Rubin people put a fork in it.
question re gold v silver. My understanding is that while gold is a universally recognized store of value, silver also has industrial uses. This also then plays a part in its attraction. If we're looking a global downturn - esp including industrial - then wouldn't there be a significant downside to silver at present?
"Though there are many differences and the current problem is more complex, the Long-Term Capital Management work-out is an example of successful public sector involvement."
If by success he means turning the US economy into Bubble Hell, the yes, by all means, absolutely.
I had also heard that about the Quakers in southern Maryland.
On the other hand, I was only talking about capitalism and frugality - comparative mating habits of religious sects are, and will remain, outside my area of experience (as far as I can tell).
just saying the irony is rich and deep at our expense.
i mean hell, hoocuddnowd that having the same institution sell, underwrite, analyze, market, and broker the same products would be bad for the consumers?
You know, when the number of comment entries in a thread is larger than the number of billions reported lost or marked down in the original main article (in this case its '265')... it's probably time to go to bed. My look at the comment count says we're gettin' close.
so like, i can't find the source, two-buck chuck killing my momentum given the bong water is stale, so here are some sites that quote the 1991 library of congress survey stating that atlas shrugged is the most influential book on americans besides the bible. i know it aint specific to congress....but whocouldaknowed?
he makes his usual points about the losses that Ambac and MBIA are sitting on. The really new thing here is that, if you download the "Open Source Model" you will see all the details behind his assertions. This is remarkable, in part, because now any interested party can get a realistic look at how the effect of the underlying securities adds up to the disaster at hand.
Are you arguing Federal Reserve Deregulation of the the Gov't cartel, or are you arguing deregulation of a guy like me?
Cuz if you're arguing dereg of the cartels...well what's your bloody point? The Gov't created them. Did it also remove the cartelization regs? No! Didn't think so. So please spare me the Glass Seagal crap. A cartelzed industry must be reg'd because it has special privileges.
That BOTH PARTIES agreed to dereg is a problem, but not one of the market.
IF your arg is one of Financial system dereg...well you did not make that clear in your original argument.
So essentially you're arguing that the Fed controlled (i.e. regulated) cartel, was allowed to run wild...well OK.. no argument here...it's just that people on this board ten to associeate that with some sort of wierd free market. It is nothing of the sort. It is a protected, cartelized, crony market.
Silver is industrial, but also has a long history as a monetary metal. Lately, silver has decoupled from gold somewhat (probably more due to gold's price volatility as opposed to silver's inherent stability.
Gold is weird. Many good arguments can be made as to why it should be worthless. On the other hand, if I offer 1/8 oz. of gold to anyone anywhere in the world (pretty much), they'll take it and they'll keep it. Why is it that jewelry is made of gold in any culture that has gold? Because gold is valuable. Inherent value. Weird.
dc1000- apologies for not being able to explain my lame joke yesterday (daughter woke up). It was a feeble attempt at humor since I get the impression that a lot of the commenters around Ventura are gold hoarders.
Now I realize I shouldn't exacerbate their paranoia.
Anyway, just trying to lighten the mood.
how fun is it explaining future prospects to a wife based on eat what you kill projections?
dc1000 | 01.31.08 - 12:15 am | #
That's why my wife went out and got a job as soon as the kids went to school - my kill is some times 'less filling'.
I've actually thought about getting a real job just to do one for a while - talked to headhunters from time to time. They say I've been inde so long I'm totally unemployable. They'd consider me a safer hire if I'd spent all that time in prison (prisoners after all know how to follow rules).
"question re gold v silver. My understanding is that while gold is a universally recognized store of value, silver also has industrial uses. This also then plays a part in its attraction. If we're looking a global downturn - esp including industrial - then wouldn't there be a significant downside to silver at present?"
You could be VERY correct. And I have been following silver for years. Second, never take investment advise from ANYONE. Do your own due diligence. However, I ONLY do physical in metals, never margin. Gold at this price is hard to play.
Silver for 1000's of years has hovered around 20:1 silver:gold. That means silver COULD go back to that value. Which puts silver at $50 approximately.
I bought 80% of my silver at ~$4.50.
It's the only metal play I have left without smashing my cash savings. I gotta run with what has been good to me in the past and what I see in the markets.
At these prices, I would not suggest you get in, unless you got some reserves, but a serious run up is quite possible...especially if gold keeps popping up.
the same headhunter types told me that i'm right on the cusp. 6 years. track record of success with the slight chance of re-programability
another year or two more and i'm totally committed/screwed to be indie forevah
then again, when i was selling duplicate copies of michael jackson's thriller with my dad's early adopter purchase of the dual cassette deck - i shoulda seen it coming
I'm working on a theory of why silver may be doing better than gold. Gold has had a big bullion price run-up the last year, while recently gold jewelry sales have plunged.
I posted earlier about a chain called Findlay that runs fine jewelry stores in big department stores. They owe GE Capital more than $400 million and they could go bankrupt. But they also own a lot of gold jewelry in inventory.
Say they bought a gold bracelet at wholesale a year ago for $200 and it had $150 worth of bullion. Now, the bullion alone is worth $200. So, they could get back their cost, generate cash and pay back GE by melting down the jewelry and selling it. Maybe they could even avoid BK. Multiply this across the whole jewelry industry and it could put a lot of gold supply back on the market.
Silver is different because bullion is a smaller part of the wholesale jewelry value. So, silver might have better supply/demand.
"dc1000 writes:
totally. i get it. and smoot hawley sucked.
just saying the irony is rich and deep at our expense.
i mean hell, hoocuddnowd that having the same institution sell, underwrite, analyze, market, and broker the same products would be bad for the consumers?"
dc1000......i coodanode.....the same way the abandonment of regulation in the derivatives field is going to send us into another depression once we hit the cascading cross defaults.
The old rules, only permit a borrower to borrow 2-3x income for a house and keeping IB's separate from banks existed because they worked and kept us out of a depression for 80 something years.
Look at this idiotic quote from MarketWatch:
Economists believe that the lower rates engineered by the Fed will help offset such risks. "A 3% federal funds rate may be just what the doctor ordered to start reviving home prices, home sales and refinancing," said Ed Yardeni, president of Yardeni Associates."
Reviving home prices? They're still too high. How out of touch are these people? What a dunce. No wonder Wall Street messed up the economy so much.
"sdtfs writes:
Damn dc1000- Tell you what. While some people are out in the desert, what say you fly into LAX and we'll go gold mining in Ventura. I heard there's a lot of gold in them thar hills.
sdtfs | 01.30.08 - 12:10 am | #"
thanks for the apology but i still have ZIRP clue what this means
"Gold is weird. Many good arguments can be made as to why it should be worthless. On the other hand, if I offer 1/8 oz. of gold to anyone anywhere in the world (pretty much), they'll take it and they'll keep it. Why is it that jewelry is made of gold in any culture that has gold? Because gold is valuable. Inherent value. Weird."
The meme that gold has value is thousands of years old, and it's got tons of support in the culture, the literature, history, and so on. There are reasons that it won't die.
But aside from all that, there is to me at least something about it that appeals. Something about the look and heft of a gold eagle in the palm that's oddly impressive. That's one reason I don't keep any of it around the house: the Gollum factor. "My precious..."
yeah, i'm not talking about all kinds of reg and not talking about regulating private individuals.
i agree with your last sentence...talking about sec and banking regulation and the likes.
so maybe we agree more than not.
but hey, it is a good exercise t see if i can document my perception.
good night...getting up early to read the tape...and move the last of the IRA money out of harms way.
ps i like silver and gold...and for different reasons.
yes silver is an industrial metal as well as a precious metal...but also you can..and may have to spend your silver dollars in place of green backs, in a worst case scenario...the gold i hold is more (though not exclusively) for trading.
I have an 'interest" in palladium as it is the only element or compound that can filter hydrogen (hummm alternative energy)
Thanks for the information. I also have limited amounts of cash and don't want to get further into gold.
I've just been struck by the disconnect between gold/silver. When gold made it's run in early 80s, silver ran up too, although that was a fair amount due to the Hunts.
Appreciate the insight. I've got to get up earlier than I would like.
Incredible! Now the Feds are aiding and abetting bank fraud and cover-up of bank losses.
Excerpts from Jan 30 Bloomberg article by Jonathan Weil.
"Just when it seemed as if the mortgage mess had hit a new low, now comes this: The Securities and Exchange Commission's staff has granted the subprime-lending industry a huge exemption from the normal rules for off-balance- sheet accounting.
In effect, the move will let home lenders keep their balance sheets looking much smaller and less leveraged, even while the off-the-books loans they made get a makeover." Subprime Lenders Get Big Accounting Break at SEC: Jonathan Weil - Bloomberg.com
This is a must read article, but please, lay down and take your blood pressure medication before reading the article. Your blood will boil.
My new theory on inflation (since its clearly not interest rate related - otherwise, Ben wouldn't cut 1.25% in one week), is that somwhere, sometime in the future, time travel was discovered.
Once that occurred, the lucky thousands with access to the time machine traveled back in time, and made a killing in the stock market, since they knew what was going to happen the next day/week/month/year.
Now that the future has imploded due to runaway inflation from 9000% returns made in the stock market, time travelers are bringing their substantial cash back to the current present, from the future.
money supply is thus increasing.
look out for these time travlers, they may also be bringing weapons and diseases from the future.
the only question is whether their existence now in the present precludes their ability to live in the future, which would mean they could never have traveled back in the first place.
I don't think so. Film and prints were responsible for hugh industrial demand. Years ago when silver was $40/oz., there was some talk of dredging the river downstream from the Kodak plant in Rochester. At that price, silver recovery would have been profitable. Not so much at $16.80.
Hey I recommend downloading Bill Ackman's letter, and the openSource model definitions and the xls itself.
Talk about infoporn - enough to keep me occupied for weeks I expect and come out with a hell of an understanding of modeling CDOs...
Of course with CDOs going to the investment products graveyard fat lot of use that will be - like so many other skills that are now obsolete. Still it will be fun.
The Fed's actions and Congress's stim pack while continually misunderstood by CNBC, et.al., as hope for the markets, should be recognized for what it is: fear-induced credit creating panic.
They. Cannot. Let. Velocity. Fall.
It'll take 30+ years to dig out from under this global solvency blunder... during which we'll witness the evaporation of multiple trillions of apparently ephemeral financialized asset prices.
Honestly, I wish I was seeing inflation. I've only lived through inflation.
My Grandparents didn't. My mom's mother was a great story teller. She told stories that made the the Great Depression funny. Kinda like the Three Stooges, Marx Brothers, and The Little Rascals.
Id oubt it was as funny as she and they portrayed.
OF the 265 B losses that S&P predicts, here's 2.3B of them:
Jan. 31 (Bloomberg) -- MBIA Inc., the world's largest bond insurer, posted its biggest-ever quarterly loss and said it is considering new ways to raise capital after a slump in the value of subprime-mortgage securities the company guaranteed.
The fourth-quarter net loss was $2.3 billion, or $18.61 a share, raising concern the Armonk, New York-based company will lose its Aaa rating at Moody's Investors Service. The loss came a day after FGIC Corp.'s insurance unit became the third company to be stripped of its AAA credit rating.
...
Excluding writedowns and some other items, the loss was $3.30 a share, MBIA said today in a statement distributed by Business Wire. The average analyst estimate from a Bloomberg survey was for a loss of $2.98.
Misean,
Consider reading Studs Terkel's "Hard Times" an oral history of the GD. It's refreshing in the ice-cold shower meaning of the word. Robert McElvaine's "The Great Depression" is another chilling, sobering and wisened recounting of the causes of the panic, crash and economic collapse, and the hardships, starvation, misery, death and the breeding ground for extremism and global war, that followed.
``In the absence of a credible bailout plan, I think investors and issuers need to assume that MBIA, along with all of the other companies, will face continuing, worsening downgrade pressure all year,''
yawn
did the fed cut again yet?
Cheer and happiness everywhere you look.
Yep, the dow looked like it was flipping you off by the end of the day.
market went on a eight day bender thanks to the fed. Now its waking up covered in its own vomit.
I'm not worried since the FDIC has $51 billion to cover the nation's insured deposits (screw uninsured deposits) and new plush buildings & hotel for 'training purposes' in Arlington, VA it can sell. And, Sheila Bair is in charge at least until the election.
Tough year for Fractional Reserves....awwww.
Here is a link. S&P sees more than $265 billion in losses for banks...
S&P sees mortgage-related bank losses topping $265 billion
| Reuters
I think we can be more assured now that a systemic financial crisis is BBs true worry, and that he will bail out banks to the extent possible to offset the unavoidable pain that is coming. If it means inflation, he'll just keep saying we are keeping our eye on it, and isn't going to worry about it until it is so ridiculously out of control that someone important gets upset. If low savings rates and high inflation screw the poor, so be it. Why not skew the income distribution up a bit further and then compound the pain?
There really isnt enough evidence of any widespread economic recession (granted there are obvious auto and home related recessions) but there is a major amount of fear building. Even in the last recession, education and health jobs held up, just like now. But there are a few other legs still to stand on this time and Ben will try to keep them from snapping.
Massive rate cuts just look like the only action/reaction he has left. I mean, all this behind the scenes stuff the past few months has perhaps lubed the system a bit, but the trend is still to tighter credit, and all the bad loans are still there. MLEC, SuperSIV, bailouts, stimulus, GSE changes, all of that isnt doing squat and they are running out of PR tricks. There isnt much he can actually do other than change perceptions, try to fend off financial system crash, and do the one thing that will keep consumer sentiment from sinking - prop the market. I dont think he is directly the market's bitch, but it can appear that way because he has to bail it to make sure everything doesn't fall apart. At least this way, no one will say he didnt act.
Given his actions so far and especially after today's failure to prop market sentiment after a hefty cut, I'm pretty sure that more is on the way. We arent going to get wage inflation in an economic slowdown and rising unemployment "environment" so he couldnt care less about the other stuff inflating. It's the deflating assets that are the concern, and the fallout. That inflation line would have been cut out of the FOMC statement long ago if it would be allowed by the markets.
Interesting times...
S&P's estimate is signficantly understated.
Bloomberg: S&P Lowers or May Cut $534 Billion of Subprime Debt
S&P Lowers or May Cut $534 Billion of Subprime Debt (Update2) - Bloomberg.com
"There could be rating actions for selected banks, especially for those that are thinly capitalized"
Whew... for a minute there I was worried, but I can see now that it's only the thinly capitalized banks that are at risk.
125 bps of rate cuts this month and stocks are still lower than on 1 Jan.
I hear you jm - try as BB may, it ain't really working. Expect him to try harder yet again in a few days/weeks.
We're gonna need a bigger container.
I think another 175bps or so should do it, would take us down to 1.25% FFR...just about right
and a stimulus package for the US consumer of another 800Billion for total of 950Billion, that will also help against these downgrades
Rob,
make it a Super duper pooper SIV;-}
Otherwise known as Son of RTC,
bigger, badder, and certainly not faster.
I can hardly wait for the commercial to go over the falls.
Um, that homebuilder rally. Send it to the gravediggers.
Someday this war's gonna end...
Here's a link to S&P's announcement (PDF)
http://tinyurl.com/37ovgq
Used tinyurl to keep the link from getting chopped up by the comment formatter.
So, this is contained, yes?
The U.S. Senate hereby declares the cration of Subprime Mess Fund L.P.
This fund's objective is to generate superior absolute risk-adjusted returns by buying any distressed credit-sensitive asset with cheap Japanese money and holding it forever. The investors' initial capital shall be guaranteed by the U.S. dpmt of treasury.
Oh what the heck, we went down to 1.0% last time around and the problem is bigger this time. After all the economy can do just fine w/o pets.com or even JDSU, eleiminating Citi and WAMU is a much more problematic situation. Before its all said and done 0.75 or 0.50% and kept there for at least 6 months.
Ahh, for the days when $1 billion in losses was front page news, and enough to sink a company.
Barley writes:
So, this is contained, yes?
Silly question, its been contained for nearly a year now.
Wait is this the same S&P that said all these securities were AAA? That CDO-squareds could have a AAA tranche?
Credibility gap?
Geoff, what legs are you thinking of?
The upstream stuff in tech is pointing down, Autos; RI & CRE;high end and midlevel retail, restaurants and financials are all weak and trending down. That's what, 60-70% of GDP?
Is the world relying on John Deere, CAT, Apple, Google and TI to save the world?
winjr | 01.30.08 - 5:56 pm |
The stuff thats been sent to me...Yep,those losses are understated...
There is also 250-300B in syndicated LBO/IB debt still on the books. Anybody think the banks will see .95-.96 on the buck....I have 5 homes on my street I can sell ya
.
Chris
Mancipatio writes:
Here's a link to S&P's announcement (PDF)
http://tinyurl.com/37ovgq
Used tinyurl to keep the link from getting chopped up by the comment formatter.
Mancipatio | 01.30.08 - 6:05 pm
Thanks!!
Note:
Mortgage Pool Performance2006:
As of the December
2007 distribution date the total delinquency rate had increased to 28.79% and
severe delinquencies were 18.83%.
Mortgage Pool Performance2007:
As of the December 2007 distribution date, the
total delinquency rate had increased to 20.4% and severe delinquencies were
11.51%
OUCH by any historical measure.
and the CEOs will compensate by driving down wages and off-shoring jobs.
Why can't we just fire all these traders? Would someone in India be as STUPID as these "smart people" on Wall St?!?!?!
Is it time to start the carry trade with zimbabwe?
--
Isn't it lucky for the bears that Fraudentials have the largest weighting in the Scam Market?
S&P500 Futures Down 50 Points From Today's Fed-Stimulated High
Burn-ass-ke (on the hot seat!) is bears best friend. He keeps on proving again and again.
No need to cover your shorts as long as Burn-ass-ke is in the chair with fire underneath and his hands tied behind his back. His ass is on fire, so he cant think. All he can do is to re-act.
Jas
O/T but rel'd to finance, subprime in the financials:
For those watching the Australian problems:
(The most likely reason a client goes to Tricom is because Tricom does not require the documentation of other margin lenders, such as ability to prove financial worth or ability to pay.)
Tricom yesterday belatedly settled its trades with the Australian Securities Exchange following a crisis that began just over a week ago when the share market lost 5 per cent in one day, triggering margin calls. Tricom's main creditors, ANZ, Merrill Lynch and Credit Suisse, then effectively froze Tricom's accounts.
Tricom, which holds about 29,000 accounts, was forced to sell shares it financed on behalf of clients, including a large line of Allco Finance Group shares, ultimately owned by Allco senior executives. It is also reported to have been the seller of shares in MFS held by staff and executives.
By Thursday, a Tricom client, a high-profile Australian private equity operator, is believed to have called Tricom demanding to know why some money was not in its account and a cheque paying for shares Tricom had sold had been dishonoured.
The next day Rosenberg was forced to hold a meeting of his 300 dealers to ask them to ring some clients and ask them to refinance their margin loans.
In September, Tricom's margin loan book was about $2.5 billion. Last week it had shrunk to $1.5 billion, and it has been ordered to reduce it to $1 billion by tomorrow.
The big concern is the quality of the remaining loan book, which includes Babcock & Brown satellites. These will be difficult to refinance, particularly if the market falls again and another margin call is triggered.
"Ripple Effect"?
Is that the ripple from a truck going into a river or the ripple they were drinking when they concocted these products?
Alec, I sure dont mean many legs. But if you disaggregate the job numbers, there are still some pockets which arent screaming recession yet. Granted, they are likely heading that way, given CFO confidence and that firms are starting to plan for recession. The thing is, once that becomes the mindset, there isn't much you can do to cut off the self-fulfilling prophecy at the pass.
The more I consider this, the more I think the Fed is reacting to what it perceives as "The Greater Danger".
So what is the Greater Danger ? It seems like the vital signs of the banking system are near the top of the agenda today.
All the lesser dangers (inflation, etc) will just have to take care of themselves for the time being.
The markets had a nice bounce, then fell back on other interesting news. So now it shifts across the ocean to Asia (who should be just waking up about now). What are they going to think of the 2nd rate cut, and the implied banking system issues ?
Ray
Barley,
It's OK. It's all just an administrative issue.
Cheers,
Im with you RayOTF. This is all about averting a financial system collapse; the cost be damned.
i agree with geoff this is definitely the true story
Ray,
Only problem is the one tool available is the one that caused the problem in the first place. They can try it again, but it won't work.
Cheers,
Everything will be fine. We will change the rules so no investors really know the dodo we are in:
Jan. 30 (Bloomberg) -- Just when it seemed as if the mortgage mess had hit a new low, now comes this: The Securities and Exchange Commission's staff has granted the subprime-lending industry a huge exemption from the normal rules for off-balance- sheet accounting.
In effect, the move will let home lenders keep their balance sheets looking much smaller and less leveraged, even while the off-the-books loans they made get a makeover
Barley,
Read that this morning. We're turning Japanese for sure now.
Cheers,
On the bright side, now BoA can send the stuff to CFC and be done with it. Come out smelling like a rose.
Here's the link for the Aussie settlement issue...
Tricom crisis hits shares | The Australian
--
Fed's Mission Statement:
Help Bankrupters & Fraudsters of New York City at the expense of honest hardworking Americans and other businesses.
Jas
aussies pitching down nearly 3% just after open.
RayOTF,
The Aussie exchange is plunging, down 2.8% in the first 30 minutes...otherwise watch the various yen currency pairs for carry unwinding to take the pulse of the Asian markets until they open.
RayOnTheFarm | 01.30.08 - 6:30 pm |
Ray,
That is all the fed is trying to control right now. The speed of the unwind. It might of just gotten out of hand.
Chris
OT: Steel Price Inflation from purchasing.com...
U.S. steel prices are set to rise significantly in 2008, according to several Wall Street analysts who see a cost-push inflationary environment outweighing a collapsed-demand deflationary scenario. Aldo Mazzaferro at Goldman Sachs Group has raised his 2008 price forecast for hot-rolled sheet in coil (HRC) to $650/ton, up from an earlier $580 outlook. Timna Tanners at UBS Securities has posted to clients an annual-price outlook of $644 for HRC, saying that a supply-side price push is materializing more quickly than expected.
The 2007 price HRC average was $527/ton when apparent supply dropped by 10%--and new calculations show that actual net use was down 15% to 94.2 million tons. With a 5% decline in apparent supply projected for 2008, and the metalworking economy skirting a depression, early forecasts for 2008 HRC ranged from $550 to $580 to account for some cost increases. The majority of the buyers polled early this month agreed that some sheet steel pricing increases were likely.
However, in less than a month, the mood on Wall Street has changed. In a nutshell (and speaking for the majority of steel analysts), Michael Willemse, the industrial products research analyst at CIBC World Markets, expects a sharp first quarter rise in North American flat-rolled prices and strong shipments from most steel producers due to increased buying by service centers, benign imports, and increased export opportunities. He says these factors will offset weak end-market demand in North America and allow the mills to get $660-$680 prices for March deliveries.
Gee I wonder what happened over the last month...
According to Mish's post, the entire banking system is "thinly capitalized"; they borrowed their reserves from the Fed.
In particular, some large European banks have not reported yet, and we currently expect upward revision of losses.
And yet the ECB is holding firm.
I feel like I am missing a piece of the puzzle.
RayOnTheFarm:
We are grinding down to new lows in NZ and Aussie. Markets unipressed with BB.
Good news is that its summer and its hot and.....
I wish I had the balls and $$ to short my market. we are going to get hit, we have just shut another timber mill because of slump in world timber prices.
Markel writes:
According to Mish's post, the entire banking system is "thinly capitalized"; they borrowed their reserves from the Fed.
Markel | 01.30.08 - 6:46 pm | #
Situation Normal... you know the rest.
I mean what does Mish expect from a fractional lending central bank driven and controlled fiat system? I mean anything OTHER than thinly capitalized should make you wonder, huh?
Kind of like being surprised by the dawn. Damn, you mean the sun came up again???
a f/u to andy in NZ - Australia opening markets
LOCAL stocks opened sharply lower today despite the US Federal Reserve cutting rates as investors focused on the US economic slowdown.
Investors also seized on a report by credit ratings agency Standard & Poors in the US that said credit losses in financial institutions could rise to more than to $298 billion.
The benchmark ASX/S&P 200 Index was down 109.2 points, or 1.94 per cent, at 5509.8 after the first 20 minutes of trading. The All Ordinaries was down 100.7 points, or 1.78 per cent, at 5564.6.
The article says $ 90 billion already reported. Surely it's higher than that? UBS had $ 14 billion just today. Anyone have the latest count?
Barley: we are used to it, he he
Don't worry we will be fine with our new chinese overlords
Check out the first three paragraphs from this AP article.
Expired
andy - if you are in NZ congrats on the trade surplus
3.0% fed funds, well, can't say we didn't know that was coming.
We are going lower, just a matter of time, this is gonna be one, long, cycle.
chicken reel, that is a good one
powerful new relief to people
I'm going to go out on my street and ask all the people walking by if they realize they just got some powerful new relief.
Apparantly, the stock futures see something bad coming tomorrow!
Stock Futures on Bloomberg
Andy - congrats on a decent currency - and thanks too
-K
Stupid OT question: would you or is it better to buy etf's after hours or wait till the market opens?
Thanks
if you are in NZ congrats on the trade surplus
yep Aucland NZ. We have been working hard on the surplus. NZD going toward 80c US could wipe the collective smiles off faces here...
congrats on a decent currency
most volitile in the world, its a shit job but someones gotta do it...
few ideas:
i think that the general economic analysis vastly understates the economy's sensitivity to interest rates.
just as no one could believe that the housing market could roll over based on a 5.25 fed funds rate and 6.5% 30 year mortgages, no one can now believe that the economy can get thru here, with fed funds at 3%.
The reaction of the stock market is not particularly unusual. Off the panic bottom of last week, when time looked like it was running out, we have had a 1000 point rally in the dow to todays high. The 'norm' of such reversals would have another fierce decline from somewhere around here (and here it appears to be given today's action and the SP ratings excitement after the close) which will not carry any where near the bottom. The psychology of this decline is the hardest for anyone that has held long thru the decline, or anyone that has held short thru the rally. For those that held long, it is usually this decline that forces them out, not because the p&l finds a new low but because they just can't take the pain anymore. We should see this with another high spike in vol and visitor counters at CR near or at new highs. On the bear side, the talk will be more tilted towards armageddon than ever. As p&l has gone backward recently, larger events are needed to fulfill the dream, so the talk should get even more wild.
I'm short at the moment, but will pitch the whole load probably sometime tomorrow and jump back into the things that will benefit most from an overshoot on the downside of fed funds which we most probably have seen. anything in the industrial economy should do the trick.
Andy
You may not like the job, but you can't really complain about the location.
recall a quip from a friend...meeting a Kiwi always gives me the woolies
Andy does NZ trade a lot with Asia ?
"The key elements of the restructuring program include:
-- The optimization of the Company's store portfolio, including the
closure of 117 underperforming stores over the 2008-2010 period;"
Expired
"NEW YORK, Jan 30, 2008 (BUSINESS WIRE) -- Concurrent with its rating action on Financial Guaranty Insurance Company (FGIC), Fitch Ratings has taken various rating actions on 114,577 bond issues (114,560 municipal, 17 non-municipal) insured by FGIC (further details below).
Fitch downgraded FGIC's Insurer Financial Strength (IFS) rating to 'AA' from 'AAA' earlier today following recent discussions Fitch had with FGIC's management team regarding their current capital enhancement plans. With FGIC remaining on Rating Watch Negative, Fitch expects to resolve this status after evaluating the progress FGIC makes in its future capital enhancement plans. "
MarketWatch.com
"rc writes:
Apparantly (SP), the stock futures see something bad coming tomorrow!"
Huh? I see a 125bpts rate cut before the open. The FOMC probably agreed to a future cut in advance over the past 2 days so no need for a phone call.
"We'll leave it up to you, Ben, when to use up one of our last rounds".
Ijust read that S&P quote; I'm so inured to expecting all this to unwind that I'm desensitized, but this:
It is difficult to predict the magnitude of any such effect, but we believe it will have implications for trading revenues, general business activity, and liquidity for the banks,'' S&P said.
got to me. Its not just market mavens, sober blogs, traders trying to make a fast buck saying this - its S&P !
Jeez.
-K
What states are "recourse" and what states are "non recourse".
A full list would be great but how about WA, NV and CA for a short list.
TIA
CA no
"We aren't going to get wage inflation in an economic slowdown and rising unemployment "environment" so he couldn't care less about the other stuff inflating. It's the deflating assets that are the concern, and the fallout."
Geoff, you can't support deflating assets without inflating incomes, that is the conundrum that the inflation crowd keeps missing. So the Fed can't "print" or any other such nonsense due to the global wage arbitrage. Any printing just kills JSP more and allows less money for the mortgage payment. Therefore, lower interest rates are not the answer. There is no answer, other than massively cheaper RE. I'm sure most of you noticed how mortgage rates are not falling that much. In fact, they went up after the cut, LOL!
^TNX: Summary for 10-YEAR TREASURY NOTE- Yahoo! Finance
julieng: Yes and becoming more importatnt.
We are part of ASEAN we invited China into the WTO and are working on first free trade agreement too.
NZ snapshot for you: beware pdf
http://bnz.co.nz/binaries/w240108.pdf
http://www.stats.govt.nz/NR/rdonlyres/1C559AFD-693B-4932-B847-2CB9408AF681/0/NewZealandExternalTradeStatisticsJune2007.pdf
Ben is like the guy in a B-Movie zombie flick that keeps shooting the zombies and then he runs out of ammo "click..click..click" Damn!!
And the zombies are still coming....
"Its not just market mavens, sober blogs, traders trying to make a fast buck saying this - its S&P !"
Aren't these the same people that had all this crap as AAA in the first place? Why has their analysis or prognosticating ability suddenly become valuable?
Throw the gun at 'em, Ben!
here is a good link to foreclosure laws in all 50 states.
United States foreclosure laws
I can see them on CNBC in the AM PreMkt, cooing and smiling, calling the bottom again... "EMERGENCY FF RATE CUT"
Darth - I'm with you. I'm not saying he has the answer, I'm saying this is his thinking, and also saying that there is no answer. He's doing the simple things he can, because basically, he isn't going to win and doesn't want to appear to have tried. I dont fall in any of the deflation or inflation "camps". Lots of different variables are going to head differnt directions and they wont stay necessarily on that course for long. Cutting rates is going to send money flying somewhere. For a while it's oil, gold, etc. It's not housing, that's going to deflate no matter what. It's not US equities, save for some that are linked to above commodities. It's a mess, that's what it is. But you dont get wage inflation initially in a time of rising unemployment, unless inflation of all other things goes off the rails (which it hasnt yet by "official" figures). In my opinion, it's already off the rails for education, medical care, etc.
argh!!! to appear to have NOT tried.
What exactly is new in this story? I thought estimates were already higher than 265 and that reported writedowns are already close to 150. This seems sort of like dog bites man, no?
Why fear the undead.
YouTube - A Guy's Guide To Zombies
Cheers,
well, la-de-freakin-da-
who in the hell is "Red Oak Merger Corporation", that splains everything-
Expired
Darth: I am in your camp, the central bankers down here are squeezing the life out of our RE bubble with higher rates. Only problem is its killing the productive economy too.
I don't think you can stop what has been created, its a monster..Its like a supertanker now and inertia has taken over.
Someday this war's gonna end
Andy,
Thank your lucky southern stars that your CB is trying to keep a speculative housing frenzy from going to the moon as ours didn't. It might suck a bit, but it's better than dealing with the debt bomb we are dealing with.
Aren't these the same people that had all this crap as AAA in the first place? Why has their analysis or prognosticating ability suddenly become valuable?
david_in_ct
Fair enough - to clarify my point - now the investing masses will pay attention, because its S&P; that's what I mean and will act upon.
-K
Clayton Holdings Company in Connecticut is being investigated-and they are releasing all the information that will help in terms of revealing this huge conspiracy to the Gov. of NY.
I say turn up the heat. I like bull-stew!!
Did anybody catch the fund manager on CNBC this morning? Piketree Management or something.
Said something along the lines of the "The Fed has to cut 50 bps in order to restore faith in the stock market."
Even the CNBC analyst called him out, saying that that would be starting down a long and ugly road.
sk,
"Aren't these the same people that had all this crap as AAA in the first place? Why has their analysis or prognosticating ability suddenly become valuable?
david_in_ct
Fair enough - to clarify my point - now the investing masses will pay attention, because its S&P;"
The raters acted in their own interest rating this trash top investment grade. They earned the fees from the issuers, not the buyers.
Now they act in their own self interest:
"hoocoodanood" we had some "administrative issues"
and are slowly downgrading to retain their supposed respectability.
Cheers,
Misean: Too late here too, sorry. Housing and debt bubble looks like the US cica early 2007. Easy al created bubbles all over the world. We didn't over build, thats the only difference. 100% house price rises in 4 years!
Our CB is nobody's bitch, everyone hates them except Belgian dentists and Japanese housewives betting on carry trades..
We are all screwed.
who in the hell is "Red Oak Merger Corporation", that splains everything-
This is not something sinister. I had a chapter-S corp I sold to a publicly traded company (which was in turn acquired and is now owned by GE.
They did the same thing, my corp was merged with some new artificial entity, which I assume was later merged with the acquiring company. Frankly, I have no idea why. The wire cleared and the money was in my account and after that, I couldn't have cared less what the hell they did.
Risk Capital, I presume Red Oak is just the merger sub set up by BofA for purposes of the merger.
I don't see a reason why a foreign investor would want to own long-term Treasuries here or forward.
There's not much price appreciation left in rate cuts. The dollar is weak. The yield is crummy nominal and zero or negative real.
Don't tell me flight to quality. If the dollar tanks another 5-10%, it's not quality. Besides, the U.S. has permanently lost it as the quality financial system.
Steeper yield curve won't help fixed rate mortgages. Only adjustable.
Andy,
Well, at least you're not overbuilt.
Greenslime and the Yen carry really puffed bubbles all over the place.
Hopefully B.S. Bernutty's panic cutting of FFR and Dicount Win...erm TAF's we'll break the carry. I just don't see a Zimbabwe as our next carry trade partner.
Cheers,
Risk Capital, I presume Red Oak is just the merger sub set up by BofA for purposes of the merger.
Hey man, it's just a container...
"Fair enough - to clarify my point - now the investing masses will pay attention, because its S&P;""
If the investing masses haven't figured out what the problem is/was/will be they certainly aren't about to get a clue now. I suspect that a fair number of the hangers on might bail out tomorrow much to their future chagrin....
Steeper yield curve won't help fixed rate mortgages. Only adjustable.
rich | 01.30.08 - 8:20 pm | #
It helps bank earnings though... borrow short & lend long... banking 101. And there is a constituency for that kind of thing...
rich,
"Steeper yield curve won't help fixed rate mortgages. Only adjustable."
Perhaps TPTB think it will slow jingle mail in the Alt-A meltdown...coming to theaters near you late summer.
Cheers,
thx andy, hey your exports are all about
China, Asean and Australia you'll be hit be your are pretty well insulated too
do you think that the reversal of your RE market will be a big drag ?
Perhaps TPTB think it will slow jingle mail in the Alt-A meltdown...coming to theaters near you late summer.
I don't think they fricking care. All they want is to make sure there is enough dollars floating around to be able backfill the holes the FBs left behind. If those FBs get buried alive in those holes at the same time - so be it.
Thread music: Lil Scrappy's 'I got money in da bank'
YouTube
- Broadcast Yourself.
dryfly,
You missed my point. Of course they don't care if the peasants keep the house. But the banks and RMBS holders sure do. They want to keep them paying on the inflated price.
FC and jingle mail mark that McMansion to market, not fantasy.
Cheers
I don't think they fricking care. All they want is to make sure there is enough dollars floating around to be able backfill the holes the FBs left behind. If those FBs get buried alive in those holes at the same time - so be it.
BTW - I'm not sure they care much about the investors or depositors or shareholders or management at the banks either... all they care about is the 'system'. If the names all change so what - we're all dead sooner or later anyway.
I think folks will look back at this period and see it as the biggest experiment in lifeboat economics ever. There's going to be a lot of cold stiff white bodies bobbing about those boats before this is over.
Warburg Pincus funds $500 Million:
Expired
This makes tomorrow even more interesting.
Selloff after the Fed cut, AMZN earnings tanking, MBI/ABK ratings questions, jobless claims, PCE/PI, and this.
Mise - I don't think TPTB care about them either... as long as the banks continue to function. That's what TAF is all about. Don't care if they go broke - just keep functioning... If they go broke we'll scoop'em up into RTC II and bury some more dead.
Its to banking what Stalingrad is to warfare.
Julieng & Misean:
who knows, carry trade is the big elephant in the room here. I think RE is going to hurt here soon, just my 2cents. 1st home buyers are locked out and its just the same people selling the same houses with ever increasing debt. Its sucking the air out of productive investment, no capital gains tax on RE!
Our CB rate is 8.25% US is now 3%, dollar up,more carry trade, exports more expensive for our trade partners...
i don't buy the insulated argument, we are exporters and about the siza of a small city anywhere else in the world, also stuck at the arse end of the world. the 97 asian crisis hit us hard, we never learn..
NEW YORK, Jan 30 (Reuters) - Washington, D.C.'s Georgetown University and a Nevada utility on Wednesday confirmed that a couple of their auction-rate municipal bonds had failed at auction, which experts said was believed to be the first time that this had ever happened.
Auction-rate debt is an instrument whose rates are reset periodically, and if an auction fails, the issuer must pay a higher penalty interest rate. An auction fails when no buyer can be found and the dealer does not take the paper back.
UPDATE 2-Nevada, Georgetown Univ say muni auctions failed
| Reuters
dryfly,
Stalingrad...you won't have much fun in Stalingrad Mr. Hilter.
"as long as the banks continue to function. That's what TAF is all about. Don't care if they go broke - just keep functioning"
Fair enough, however, this IS a way to keep them functioning.
Cheers,
ron,
Well, I guess those monoline downgrades just might affect muni's.
hoocoodanoode?
Cheers,
Mise, the only relevant question is BB playing the role of Paulus or Zhukov. I can't answer that.
Karl Denninger/Market Ticker linking to this letter in today's blog:
http://www.denninger.net/letters/bfm370.pdf
The Market Ticker
dryfly,
If Shrubboy slaps a Medal of Honr on B.S. Bernutty's chest, we'll know for sure.
I suspect he will.
Cheers,
We are STILL on Act I - Subprime. Act II - the Alt-a's will be performing (or not) by the end of this year. Act III could be the climax of the play which will be the Option Arms. They are set to appear on stage within a few years.
Ladies and gentlemen, this is a very very long show. Sit back and get comfortable because it's going to be a while.
You haven't seen a real tearjerker till you see this one.
This really is a bear den!
Expired? .v=1
MBI should be up tomorrow on this news - I know there were a lot of people not expecting Warburg Pincus to make the investment.
Commenting on the closing of the Warburg investment commitment, Gary C. Dunton, MBIA Chairman and CEO, stated, We have now strengthened our capital position by $1.5 billion, including the recently completed $1 billion surplus notes offering, and we intend to raise additional capital in the coming weeks. Our comprehensive capital plan, which improves our position by over $2 billion, has been recognized by Fitch Ratings, which affirmed our Triple-A ratings with a stable outlook, and by Standard and Poors Ratings Services, which affirmed our Triple-A ratings with a negative outlook. We will continue to work with Moodys Investor Services, which has placed our ratings on review for possible downgrade, as our capital strengthening plan progresses. Our accomplishments send a strong message to those who doubted our determination to act quickly and decisively to defend our balance sheet. We remain firmly committed to enhancing our position as a leading provider of bond insurance.
I broke the link, sorry:
Expired
If Shrubboy slaps a Medal of Honr on B.S. Bernutty's chest, we'll know for sure.
Make him Field Marshall Bernanke.
What's a Fed Chief to do?
Forgive me if this sounds naive, but what is the proper monetary policy for Bernanke to follow?
I was raised to believe that if you have indicators of economic stagnation (consumer spending down, industrial production down, credit crunch) you follow an expansionary monetary policy. I know the Fed can't force the banks to lend, but that the discount rate is a tool to increase the money supply. So, if you're thinking that the housing sector is only going to get worse, and the effect will spread to employment problems and further consumer spending cuts, isn't an expansionary monetary policy the 'correct' response? Would open-market operations send a different signal? If it's not the correct response, what's different about our situation that makes it incorrect? The concern here, clearly, is inflation, but you can't let a lot of hard-working people land with a thud to stave off inflation, or can you?
In other words, if you're sitting now where Bernanke is, what monetary policy do you advocate and why? (Adding the qualification that the health of the economy is the goal, not necessarily the health of the markets.)
Cheers,
RLHB
dunham -
Dont get why this is news - deal was announced weeks ago and it was a firm deal. This is just the announcement that it closed and was funded. I dont know of anyone who thought this wasnt going to happen. Not even Ackman....
Note they are on credit watch now with a negative outlook.
Agreed. This was a done deal. And it's still a pittance compared to the capital they would need to be solvent. Nuttin burger...
Is it time to start the carry trade with zimbabwe?
ugh | 01.30.08 - 6:25 pm
Funny which remminded me of this...
Zimbabwe bank issues $10 million bill - but it won't even buy you a hamburger in Harare.
Zimbabwe bank issues $10million bill - but it won't even buy you a hamburger in Harare | Mail Online
And the zombies are still coming....
Darth Toll | 01.30.08 - 7:46 pm |
Yes, BB and the FED appear to be experiencing 'Night of the Living Dead'
The greatest B movie ever !
Inexplicable Analyst Pick of the Day (Per Bloomberg Article):
"Walt Disney Co., the second-largest U.S. media company, had its stock rating raised to ``buy'' at Pali Research, which cited improved prospects at the company's theme parks."
Agreed that it was a done deal, but still think it might forestall some of the pain the financials will eventually feel. I also would be surprised if the mononlines don't rally a little on the news.
In an environment where Blackstone and others are getting out of every commitment they had, Warburg Pincus remained committed and funded - says something.
I'd love to get my hands on that $10 million Zimbabwean note, but as the text says, you must use "on or before 30th June 2008". Is it made of milk?
As an aside, my brother was a Marine in Somalia and told me stories of seeing their currency swirling around in the streets. Quite literally, it was used as toilet paper.
Insert your dollar joke here:
I'm not sure the MBI news is "nothingburger". Depends on the termination agreements on the deal when it was signed. Could they have walked away easily? If so, going through with the deal is a vote of confidence in the valuation.
Its highly doubtful that Pincus could have gone through the MBI portfolio with a fine tooth comb, and there are some who say the firm didn't have the expertise to do so. So the other question is why Pincus would want to make this investment in the first place. Clearly, they could have gotten it cheaper. Nothing they did sent the message that they were dealing from a position of strength in negotiations.
I'm an occassional member of the tin-hat brigade, and this deal makes me reach inside the drawer for that shiny sombrero...
RLHB: The concern here, clearly, is inflation, but you can't let a lot of hard-working people land with a thud to stave off inflation, or can you?
Is there a lot of unemployment now? 'Cause from what I see of the numbers there isn't. But what I see is growing inflation. So what is the agenda?
Maybe the Fed has another mandate besides monetary stability and economic well being... maybe their real mandate is asset price protection?
If it isn't their mandate it sure looks like it could be and that may be a bigger problem than if it actually was the official mandate... (you know, the big lie problem).
Just an FYI - I am NOT a hard core monetarist or 'Austrian'... I'm a pragmatist. I truly believe the Fed could and did about all it can do to fix the liquidity part of the problem many cuts ago... As others here have pointed out many times they can't fix the solvency part of problem with rate cuts alone.
There certainly are ways to fix* the solvency problems but those fixes aren't painless. They have consequences of their own.
A really ominous prediction from Nouriel Roubini:
Thus, since Plan A ($15 billion recap of the monolines by the banks) is now faltering as being unfeasible one does hope that the Fed has a Plan B short of a public bailout - to avoid the financial meltdown that will follow the downgrade of the monolines. The trouble is that there is no sensible plan that one can conceive of that would resolve this total mess with a private sector solution and with private funds. And using public funds is out of the question.
So what is the likely result? The monolines downgrade will not be avoided and the next leg of this systemic financial meltdown will not be avoided. Then, the modest 2.2% drop in the S&P500 today from its post-FOMC announcement peak will look like spare change. A serious crack or better crash - in the stock market or the financial system as the one in 1987 cannot be ruled out at this point following a massive and at this point likely unavoidable - downgrade of the monolines. No wonder the Fed eased 125bps in eight days. But no wonder that such a massive ease and much more ahead will make no difference for the severe insolvency problems that the economy is now facing. Monetary policy is altogether impotent in dealing with these insolvency issues and the specter of a severe systemic financial crisis that is looming ahead.
RGE - Stock Market to the Fed: “It’s Insolvency, not Just Illiquidity, Stupid!”...and the Systemic Financial Meltdown Risk from the Monolines’ Crisis
dryfly-
my thoughts exactly.
"Hey man, it's just a container..."
dunham,
That $500M is going into the maw of something nasty.
Watch the video.
YouTube - Star Trek: The Doomsday Machine - MST3K Style
Cheers,
Maybe the Fed has another mandate besides monetary stability and economic well being... maybe their real mandate is asset price protection?
my 2-cents... I think quite a few people here believe that there is a considerable amount of leverage that needs to unwind. Could the Feds mandate be as simple as survival thru this period of unwinding ?
RayOnTheFarm,
Could the Feds mandate be as simple as survival thru this period of unwinding ?
Looks that way from my vantage point!
WARNING, Pointless Rant:
The buyers and the sellers (of homes, mortgages, and CDOs) made a bet, and both sides lost.
Unless somebody comes up with some novel economic stimulant that no one else has thought of, but quick - and I don't put much stock in that happening - we're in for a really rough time.
Here's a novel idea: The wealthy and powerful will have to bail us out.
This approach is based on two factS:
1) the poor and what's left of the middle class are already so broke they can't pay attention - much less bail the fat asses out, and;
2) The wealthy have all of the wealth.
Hey, Big Tycoon class: Your incompetence and negligence are exceeded only by your greed.
Here's what you can do for your country: Bring the jobs home. Take a drastic pay cut. Stop hiring illegals. Build a factory or twelve. Forgive some of the debts you are owed. Take a freekin' loss for once. Pay more than your fair share of some taxes - we have a deficit. How goddamned much money do you need, anyway? Don'tcha' love America?
Sheesh.
And by the way, if we find out that you've been crooked during the run-up to this fiasco, we'll have your money and you will go to prison.
End of Rant.
I gave it 50/50 given the probability of a downgrade. Putting in more capital only makes sense if they can write new business. If they lose their rating, the new business opportunities are gone (if they aren't already), and additional capital doesn't change anything for the investors.
So, yea, its news.
FACTBOX-U.S. bond insurers and amount of debt insured
| Reuters
How about a headline, $2.2 trillion in possible downgrades, and be done with it.
"Jan. 30 (Bloomberg) -- Morgan Stanley, the second-biggest U.S. securities firm, wrote down $169 million after helping its money funds by taking on bonds issued by structured investment vehicles.
Morgan Stanley bought $1.06 billion of SIV bonds, including $160 million since Dec. 1, the New York-based firm said in a filing yesterday with U.S. Securities and Exchange Commission."
Bloomberg.com:
News
Maybe these losses will suck capital out of the oil futures markets, which are the next asset bubble, in my view. I have seen several statements by Saudi officials stating that they don't think that the fundamentals justify current market prices for crude oil.
Roubini is a genius. People used to scoff at him. I'll bet they're not scoffing now.
MARCUS AURELIUS: "Here's what you can do for your country: Bring the jobs home. Take a drastic pay cut. Stop hiring illegals. Build a factory or twelve. Forgive some of the debts you are owed. Take a freekin' loss for once. Pay more than your fair share of some taxes - we have a deficit. How goddamned much money do you need, anyway? Don'tcha' love America?"
So instead of a housing bubble you want to create a manufacturing bubble with people making bogus money-losing widgets which have no economic use?
Embrace the free market and let it sort things out. Asking wealthy people (believe me, I'm nowhere near one) to do stuff won't accomplish anything. You will just end up with lame factories churning out lame stuff.
I'm probably the only one here with this opinion but... THE GAME ISN'T OVER YET (lol that's why I'm still long Ambac
)... even with the massive real estate unwinding last year, the US economy posted a 0.6% GDP growth rate. Corporate balance sheets are probably the best in 40(?) years and if there is capex spending, things may not turn out to be too bad. With the weak US$, exports are picking up a bit too, and the current account deficit should shrink a bit. The weak US$ is a temporary help: it's easier to export yourself out of problems than the other way around!
What the superbears are missing is that unemployment is nothing like it was in past cycles. Things can still fall apart but the proactive Federal Reserve, along with good corporate balance sheets, should mitigate the damage.
Sivaram Velauthapillai,
"What the superbears are missing is that unemployment is nothing like it was in past cycles."
You're right, in previous cycles they counted things much better.
Cheers,
If you believe the employment numbers, I've got some AAA rated securities and a really nice house for you (no money down, easy payments, you can just skip the rest...).
Even if the numbers are correct (and I'm positive they're not), what kind of jobs are they? Americans are spending more than they make - and the credit is running out. Wages can't support the service of the debt, much less the growth of the economy.
On the other hand, it's always nice to think good thoughts!
Employment is lagging. LAGGING. A point which certainly won't be made on Friday after the new jobs number comes in at 100k....
What the superbears are missing is that unemployment is nothing like it was in past cycles. Things can still fall apart but the proactive Federal Reserve, along with good corporate balance sheets, should mitigate the damage.
Sivaram Velauthapillai | Homepage | 01.30.08 - 9:38 pm |
RU Serious or smoking something really good ;~)
km4,
"RU Serious or smoking something really good ;~)"
If that's the case I need to go clean my bong...cuz I want some.
Cheers,
"Agreed. This was a done deal. And it's still a pittance compared to the capital they would need to be solvent. Nuttin burger..."
Just to point out Ackman thought that this was not necessarily a done deal. He said as much in his letter to the Rating Agencies.
SEC Investor - Ackman on MBIA and Ambac (MBI, ABK) - The Insider's Guide to SEC Filings
I'm not saying that all is well in monoline land but if anyone here honestly thinks they have a clear handle on the portfolio they hold, keep dreaming. Since when is it possible for so many people to understand so much about assets that are supposedly completely opaque and nearly impossible to value?
Also, if you're trusting rating agencies for your loss estimates, take a second to consider how that's working out for the last group of people that did so. Do you think they suddenly got religion and competence?
Misean exactly right or perhaps Sivaram Velauthapillai has been repeatedly hitting these...
Marijuana vending machine
Marijuana vending machine - Boing Boing
link to Bill Ackman's letter on MBI/ABK
http://www.denninger.net/letters/bfm370.pdf
km4,
ROFL
Cheers,
Forgive me if this sounds naive, but what is the proper monetary policy for Bernanke to follow?
I was raised to believe that if you have indicators of economic stagnation (consumer spending down, industrial production down, credit crunch) you follow an expansionary monetary policy. I know the Fed can't force the banks to lend, but that the discount rate is a tool to increase the money supply. So, if you're thinking that the housing sector is only going to get worse, and the effect will spread to employment problems and further consumer spending cuts, isn't an expansionary monetary policy the 'correct' response?
See, even though it seems correct on the surface I believe this is the kind of thinking that got us where we are today.
Yes, "expansionary monetary policy" is the "correct" response in the world according to Keynes, but what if the economy is in recession precisely because businesses have been using money improperly (for example, overinvestment in specific sectors)?
Is an expanding economy really the best thing in this scenario? If businesses are making poor use of resources, or outright destructive use of these resources (think Wall Street), is it really wise to further expand these counterproductive activities?
Maybe a recession is "just what the doctor ordered" in these cases.
"Roubini is a genius. People used to scoff at him. I'll bet they're not scoffing now."
(disclosure: I'm long Ambac)
I respect Roubini because he has been going against the crowd all throughout his life (although he was wrong in the late 90's with some of his calls). His views on the monolines have been completely wrong. As recently as a few weeks ago, he was saying that any business that needs a AAA rating to operate isn't viable. Well, Buffett set up Berkshire Hathaway Assurance, whose sole business activity depends on a AAA rating (he capitalized it with only $100 million so, like other monolines, it will likely use something like a 100-to-1 leverage). There goes that argument...
Now his argument that the downgrade of the monolines will result in financial catastrophe is going to turn out to be wrong as well IMO. If the monolines can't raise capital to maintain a AAA rating, they will likely go into run-off (that's what's best for shareholders and that's what I would support). If they go into run-off, watch nothing happen....
"Sivaram Velauthapillai"
That handle is the blog equivalent of finger nails on a chalk board.
"Walt Disney Co., the second-largest U.S. media company, had its stock rating raised to ``buy'' at Pali Research, which cited improved prospects at the company's theme parks."
Anonymous,
This is a good catch on your part, and I agree with you this sounds strange. Another industry that is discretionary useless spending on steroids is retail jewelry, and it is tanking.
Gold + silver are more expensive as consumers decide to waste less money on frivoous crap. There could be a bankruptcy soon at Findlay, one of the largest chains. Strangely, they just spend a leveraged $200 million to buy another chain, Bailey Banks & Biddle, last fall from Zale. So, two companies and $200 million of loans could be down the drain.
What the superbears are missing is that unemployment is nothing like it was in past cycles. Things can still fall apart but the proactive Federal Reserve, along with good corporate balance sheets, should mitigate the damage.
Unemployment was somewhere around 3% at the beginning of the Great Depression. At the time it was commonly argued that the era of mass unemployment was over.
"Thus, since Plan A ($15 billion recap of the monolines by the banks) is now faltering as being unfeasible one does hope that the Fed has a Plan B short of a public bailout - to avoid the financial meltdown that will follow the downgrade of the monolines."
This is starting to get ridiculous. So if we are to believe Roubini, it is no longer the economics which matter, it is no longer the cash flows, the countless market transactions which apply, but the blessing or lack there of of a bunch of fools sitting around at S&P or Moody's who are going to decide upon the economic collapse of the western world.
Why don't we just send in the black helicopters and abduct them until the dust blows over.
And another thing: We can't export our way out of sh!t! we can sell natural resources (including agri) and raw materials - call them "exports" if you will. We have a few manufactured exports, but not enough to be taken seriously on the manufacturing front. That's why we need factories and industry.
Things we will not be exporting (net):
Cameras and optical equipment
Televisions and Consumer electronics
Furniture
Clothing and shoes
Automobiles
Motorcycles
Toys
Household durable goods
Energy
Steel
Medical Electronics
Workers
Things we will be exporting (net):
Weapons Systems and Technology
Food
Bad debt
Tractors
Trees
Coal
Entertainment
Don't look too good for the home team.
And another thing: We can't export our way out of sh!t! we can sell natural resources (including agri) and raw materials - call them "exports" if you will. We have a few manufactured exports, but not enough to be taken seriously on the manufacturing front. That's why we need factories and industry.
We don't have much to export due to our lack of investment and excessive focus on consumption. Worse, due to excessive investment overseas it may be unprofitable for US companies to invest in production capacity anytime in the near future.
ROWDYRODDYPIPER: "Also, if you're trusting rating agencies for your loss estimates, take a second to consider how that's working out for the last group of people that did so. Do you think they suddenly got religion and competence?"
Well, EVERYONE--including the bond insurers themselves--got it wrong before. That's done with. Markets are forward looking after all
The question is what is happening now. My GUESS is that the rating agencies have a better handle on things now. In fact they are going into la-la-land by using subjective "market" factors (due to pressure from Bill Ackman et al). The numbers that the agencies are using are almost like Great Depression type numbers (not quite the same but sort of big).
However, since most of these structured products have non-linear effects and depend on specifics of the underlying MBS, no one really knows what the outcome will be. So it will come down to subprime default performance and recoveries over the next year or two. It's all a guess but I think the rating agency models are ok now. It's just down to the actual default rates now...
david_in_ct
What is it that the fact the ratings agencies ratings are written into law that is unclear?
These rated securities can ONLY be carried on the books of MANY holders if they are AAA or close. Ratings gone causes sales. Sales = mark to market. Mark to market = level 3 needs to be marked to market.
It's a chain reaction. It's cascading cross defaults. It's not going to get swept under the rug. Too much trash valued at par worth zilch on the balance sheet.
Cheers,
Even if the numbers are correct (and I'm positive they're not), what kind of jobs are they?
1099
Thanks Misean, I thought I was going to choke on my soup.
jo6pac
For those of you with an historical bent, you might want to look at a December 2005 article in the NYT by Martin Flackler that compares and contrasts the 1991 housing bubble in Japan with the then developing bubble in the US. As someone once said, "We are not alone." The link is below:
Take It From Japan: Bubbles Hurt - NY Times
I find all of this quite interesting. However, I keep seeing people talk about trouble in the "banking system". The pain is not spread anything like evenly. Some banks with little RMBS exposure will see little or no pain. If anything, a bank in very good condition will have capacity constraints. The rush of customers looking for a well-run, solvent bank to do business with can't always be serviced.
Look at the losses to date. Some banks have very little. Other banks of similar size will implode or be taken over.
OT.
Since it appears the taxpayer is going to pay for this
mess through higher taxes. Would that not mean a preference for traditional IRA's verses Roth IRA's ?
Assuming of course that IRA plans aren't modified
or eliminated.
MARCUS: "And another thing: We can't export our way out of sh!t! we can sell natural resources (including agri) and raw materials - call them "exports" if you will. We have a few manufactured exports, but not enough to be taken seriously on the manufacturing front. That's why we need factories and industry."
I'm not saying USA wouldn't benefit from some factories but the fact of the matter is that it is not feasible right now. USA is just too uncompetitive in manufacturing whether you like it or not (believe me, I'm in Canada and Canada is even worse with the strong dollar (Ontario, which is dependent on manufacturing is 10x worse than US states). Anyway my point was going to be...
Exports aren't necessarily physical goods anymore. You might want to check things like information technology and intangible exports. Last time I check, info tech companies export far more than they import. Companies like Microsoft, Cisco, and so forth, have HUGE exports. Companies like Disney (someone was quoting theme parks above) export their brand all over the world. Hollywood movies are exported all over the world. Companies like Boeing and other industrials are export-oriented. And so forth.
Marcus,
Buyer: 'Ello, I wish to register a complaint.
Buyer: Ello, Miss?
Bad Debt Seller: What do you mean "miss"?
Buyer: I'm sorry, I have a cold. I wish to make a complaint!
BDS: We're closin' for lunch.
Buyer: Never mind that, my lad. I wish to complain about this CDO what I purchased not half an hour ago from this very boutique.
BDS: Oh yes, the, uh, the AAA CDO...What's,uh...What's wrong with it?
Buyer: I'll tell you what's wrong with it, my lad. 'E's worthless, that's what's wrong with it.
YouTube -
Cheers,
dryfly:
Ha! Exactly.
ac:
That's sort of the point of my original rant. We have invested overseas. Our middle class (the one we grew up in) cannot be sustained in the global economy. We'd better start making something to sell - we're going to need the jobs.
Profit? I can't guarantee that - at least not right off the bat.
We seem to have accepted the meme that moving backward more slowly is moving forward (if last Qs losses aren't as bad as the previous Q's, we see that as an improvement) - we might get to the point where subsidized industry is considered economic progress.
We'd better make some capacity and get competitive.
We don't have much to export due to our lack of investment and excessive focus on consumption. Worse, due to excessive investment overseas it may be unprofitable for US companies to invest in production capacity anytime in the near future.
ac | 01.30.08 - 10:09 pm | #
I've been telling you guys for a long time - the week dollar doesn't dig us out by exporting more, it digs us out by importing less (in quantity & quality if not in inflated dollar amounts).
Instead of us importing we substitute domestic production instead - 'cause those are priced in weak dollars. And many of those new substitutions will be 'inferior goods'... economically speaking that is. Buying domestic beer instead of French wine or vacation at Disneyland instead of Greece.
Meanwhile we keep working but for 'less' in terms of wealth and global buying power. The alternative is to keep the dollar strong and see a WHOLE lOT fewer people working as the imbalances adjust (strong dollar driving more and more off-shoring of mfg, research and services).
Either way those imbalances re-balance - they have to. Its the price we pay for decades of deficits (trading paper and promises for real things and real activities).
Misean;
'E's sleepin', 'e is!
Things we will be exporting (net):
Aircraft
Software
Aircraft - we import many of the parts from around the world, really only final assembly in the US.
"These rated securities can ONLY be carried on the books of MANY holders if they are AAA or close. Ratings gone causes sales. Sales = mark to market. Mark to market = level 3 needs to be marked to market."
So your thesis is that there are banks which have huge amount of unmarked to market cdo^2 etc. (tier 3 stuff) on their books which have not been traded by say pension funds who also own them. now the pension funds are going to be forced to sell them, because they are no longer aaa, and the prices realized will cause the banks to mark these assets down and thus cause their bankruptcy.
While all the folks from swf's and other investors that just invested 10's of billions of dollars in these banks neglected to look at these assets.
oh, now i get it.
Sivaram Velauthapillai
I visit Canada regularly (I actually have bank accounts there). The weak US dollar will cause the Bank of Canada to cut again. The traditional rate differential (my guess is 1 USD = 1.05 to 1.10 CAD would be about right) works the best for you, and your bank will try to maintain that rate.
When the devaluation of the USD began, I figured that we were going to try to inflate our way out of our debts - public and private. Canada can't afford to let us do that, and they will follow us down.
Gotta say: Canada is a good neighbor.
Don't count out mfg exports. I was in a hydraulics plant before the Holidaze and was told they export over half of what they make... I was flabbergast. The primary reason is the products are specialized, expensive and involve all kinds of IP you wouldn't realize.
And this was a major MNC - plants all over the world. i was told the US plant was the lowest cost anywhere for this particular mix of products.
With the dollar as weak as it was they were moving related production back from Asia to keep this plant at max capacity.
One more interesting point - it didn't employ a lot of folks (couple hundred)... but the activity associated with that plant required five times as many office workers spread out around the country (world actually)... sales & marketing, accounting & finance, logistics & supply chain, engineering and R&D...
People don't understand the dynamics & synergies of this whole thing. That is both good and bad... good that a few workers generate activity for many others... bad in that if you lay off a few hundred factory workers in Bumfuck there is no reason to employ thousands of office drones somewhere else.
More containment.
Aircraft,
Well, many purchasers require local engine manufacture. Brits want RR engines, Europe..if they buy at all want airbus engines (France & Germany). Others want the config that's the cheapest...doesn't necessarily mean GE engines.
Software..bah!
Vista sucks. China doesn't care about copyright laws, and the Germans, Indians, South American software geeks are pumping out O.S. software that competes well with U.S. closed source firms, especially in EM's.
Cheers,
after reading the comments on this thread, assorted news articles of the day and especially roubini's global monitor"
RGE - Stock Market to the Fed: “It’s Insolvency, not Just Illiquidity, Stupid!”...and the Systemic Financial Meltdown Risk from the Monolines’ Crisis
about"...the Systemic Financial Meltdown Risk from the Monolines Crisis"
it seems clear that, moral hazard aside, we either have a government bailout and or take-over of the monolines or face a significant risk that the financial system is about to come apart.
so many of those at the top are in love with ann rand that the solution may be impossible for them to embrace.
daivid_in_ct,
"While all the folks from swf's and other investors that just invested 10's of billions of dollars in these banks neglected to look at these assets."
You're argument is illogical. SWF's are gov't entities, they act politically. Further, the mark to market HASN'T happened yet..which is my point.
Cheers,
Don't miss this
Free File Hosting Made Simple - MediaFire
Boom!
"You're argument is illogical. SWF's are gov't entities, they act politically. Further, the mark to market HASN'T happened yet..which is my point."
So the billions of dollars invested were done purely as a favor to MER, C, etc, without looking at their books and with the expectation that these assets might be marked down within 3 weeks causing the bankruptcy of the bank and the total write off of their investment.
Let me guess, these guys did this as a favor to george bush because he is their hero and carries such great respect that it was an honor for them to come to his aid.
This is a very deep game they play.
mock turtle,
Nobody at the top is in love with Ayn Rand (not that I am either..blow hard is my word). They love Keynes.
That said, since they ARE pursuing Keynsian policies to fix a Keynsian blow up...we'll see.
Buy the way, if you have any evidence other than in the 60' RETIRED fed chairman Greenslime was a Randian...and all of those at the top CURRENTLY ARE Randian's....I'd like to see it.
Cheers,
it seems clear that, moral hazard aside, we either have a government bailout and or take-over of the monolines or face a significant risk that the financial system is about to come apart.
I think the definition of 'come apart' is the key. It will come apart one way or another... either the market forces screwing things up blows it all apart or a gov't take-over bailout 'disassembles' it.
Regardless it isn't going to be anything like what it was before.
BTW - the funniest part is the A Rand connection. My wife and I were discussing that last night. If revenge is a dish served cold, how does one serve irony?
Mise - they don't understand Keynes either. If they did they'd have run surpluses in the boom.
These folks - so called conservative and liberals a like - only understand self interest. Keynsian stimulus on the down beat and market forces on the up stroke. The only know how to talk their book.
George Bush never touched an enterprise that didn't go under and leave the shareholders holding the bag (baseball doesn't count - they had dudes following him around making sure he didn't do anything stupid or illegal). Why should the US be any different? He'll be moving to Paraguay when he's done here. Lots of brush in Paraguay.
david_in_ct,
If you're going to discount geo-political politics...your business, be my guest.
I guess you also believe that China's peg to the deteriorating dallar, and Japan's as well is about the ultimate soundness of the U.S. banks. To each his own.
"Let me guess, these guys did this as a favor to george bush because he is their hero and carries such great respect that it was an honor for them to come to his aid."
That's just mindless hyperbole.
Hyperbole - Wikipedia, the free encyclopedia
It's also sophistry and a "Straw Man Argument".
Straw man - Wikipedia, the free encyclopedia
Cheers,
UBS just wrote down another 12 billion?
how does one serve irony?
According to Miss Manners, irony is served in a gravy boat.
dryfly,
"Mise - they don't understand Keynes either. If they did they'd have run surpluses in the boom.
These folks - so called conservative and liberals a like - only understand self interest. Keynsian stimulus on the down beat and market forces on the up stroke. The only know how to talk their book."
I'll give you that. But who saves in an uptrend. "INSERT ASSET HERE" prices only go UP!
Cheers,
Dear Mr. Sivaram Velauthapillai
I refrain your earlier post:
"The question is what is happening now. My GUESS is that the rating agencies have a better handle on things now. "
And you are right, you guessed. The last commercial mortgage-backed deal they rated was: Countrywide 2007-MF1. If I had to come up with a deal with scary risk characteristics in Dec. 2007, I could not have done better than:
- Countrywide-originated loans
- Multifamily, since we know that MF tracks SF
- lots of interest-only (in this case 40+%)
- lots of California (35+%)
- Texas and Florida exposure
OK, I can go on and on, but my point is that rating agencies are only human despite pretending to be otherwise. They are going to make mistakes, and they made huge mistakes in rating deals based on diversity. It's only recently that someone senior at Moodys has come clean and said they fucked up.
My guess is that 99% of the posters here have no skin in the game.
Monoline debt will return a 50% gain in the next 12 months if you have the balls to wait another week or two.
Most posters here seem like a bunch of FAGBF'ers who can't get their head out of their arse.
From what I understand, GE sells its turbine generators to overseas purchasers at cost and then turns a profit on the service contracts.
dryfly,
Oh, and the irony arg. I've been tweaking the Super Colander Tin Foil Hat with that one for a while. Is that what Greenslime was up to all along...some Randian plot?
Cheers,
LeGleceau,
Could be these days, they just stamp 'em with RR and move on. Wouldn't surprise me.
Cheers,
Ducfuc | 01.30.08 - 10:57 pm |
Took my skin out of the game when I knew it would get burned. Found the safest places I could, and I'm hunkering down in my bunker. Unfortunately, I, like every other middle-class American, still have my balls in the fire. This is the economy I have to operate in, after all.
BTW: You sound like you've got a really soft and pretty mouth. Wanna dance?
Misean,
Regarding your comment on Greenspan & Rand: there has been some speculation that Greenspan remained true to the cause and played the role of Francisco D'Anconia: outwardly playing the part of the media-hungry playboy, while fostering the destruction of an unjust system.
You can even remove your tin foil hat for this one: given the way he ran the Fed, no one would have questioned what he was doing. It's not even a conspiracy. (Far-fetched as it may be).
Aircraft - we import many of the parts from around the world, really only final assembly in the US.
The really complicated bits of the new generation of planes (the truly beautiful composite wings) were off-shored to Japan.
We're still pretty good at the avionics.
Oh, and the irony arg. I've been tweaking the Super Colander Tin Foil Hat with that one for a while. Is that what Greenslime was up to all along...some Randian plot?
Mise I actually liked reading Rand - my wife and I decided last night it was time to re-read due to all the crap I'm reading about her.
Understand - I don't go over board on stuff like Rand... I mean I read some Marx too & don't wave red flags.
Point is the funniest thing is I've KNOWN a bunch of hardcore Randians from WAY back (late 70s)... we'd drink & discuss this stuff when done with chem reactor design or quantum. I was called the 'Token Socialist' because I was by far the most 'liberal' of the group.
Fast forward to today... I am the only one of them who has spent most of his life (1) self employed and (2) living in a town even close to a Galt's Gulch... all the rest are corporate wage slaves, bureaucrats or college professors. The irony just rips me up sometimes.
BTW - I didn't plan it this way, it was all an accident. Seriously.
Marcus,
I figured u to b middle class which is great 2 those that hard lend. We can charge 16% now versus 8% 2 years ago. These times are great not good. Wanna buy a house? Just show me 40% equity, fool. LOL.
Zigurrat,
That's crazy. The odds are over 90% of a downgrade.
Aside from all we've covered here ad nauseum about ratings agencies backed into a corner, Charles Gaspaparino is a decent journalist who moved a trillion dollars of capital today. He works for the most bullish network in world history. CNBC would not have let him on the air on a rumor.
His report was a way of letting the air out of the balloon slow. Nobody wanted to broadcast bad news and interrupt the rate cut party. They had to.
And Wilbur Ross was on Bloomberg today saying he didn't want to dance with a bond insurer that wasn't an AAA-rated virgin.
That encore didn't last long.
Hey, perhaps the Fed can figure out a way to securitize the rate cuts!
FT.com / Columnists / Lawrence Summers - Beyond fiscal stimulus, further action is needed
Lawrence Summers stated in an article in the FT London that:
"It is critical that sufficient capital is infused into the bond insurance industry as soon as possible. Their failure or loss of a AAA rating is a potential source of systemic risk."(snip)
"It appears unlikely that repair will take place without some encouragement and involvement by financial authorities." snip (who are they , smirk)
"Though there are many differences and the current problem is more complex, the Long-Term Capital Management work-out is an example of successful public sector involvement."
In 1998 about one dozen companies came forth at the urging... and i assume "support" of the new york fed...they were:
Bankers Trust, Barclays, Chase, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch, J.P.Morgan, Morgan Stanley, Salomon Smith Barney, UBS, Société Générale Lehman Brothers, Paribas:
some of these entities no longer exist in their previous form...an many cant afford to belly up to the bar this time and help out...because many themselves need a hand.
So summers idea that the "authority" is going to help out like they did last time with LTCM is wishful thinking.
maybe this time, it's the printing press or nothing.
The gold market is telling you there's something bad happening tomorrow. It's back down now where it was before rate cut, after spiking. Gold traders are anticipating an unwind and rush for cash.
DucFuc:
A five year old could understand my post. Now, go find yourself a five year old and have him explain it to you.
Marcus Aurelius, you are on fire tonight.
Just came back from the Obama rally. He sounded pretty good. Almost makes you think we could fix some of these problems if we would elect a person who was serious about trying.
Guess I need a bigger gravy boat.
My guess is that 99% of the posters here have no skin in the game.
Monoline debt will return a 50% gain in the next 12 months if you have the balls to wait another week or two.
Most posters here seem like a bunch of FAGBF'ers who can't get their head out of their arse.
Really Ducfuc..the way it sounds to me big mouth, is your head is already up your arse..one can tell by the smell of shit everytime you speak.
"rich writes:
Zigurrat,
That's crazy. The odds are over 90% of a downgrade."
Err...exactly. I meant that I gave the WP deal a 50/50, given the [high] probability of a downgrade. It being the probability of WP not getting cold feet - not the probability of a downgrade.
People....
Don't feed those trolls!
Hey, perhaps the Fed can figure out a way to securitize the rate cuts!
speaking of which... all this money that the Federal Reserve is loaning out by the truckloads...
Helping or hurting the budget deficit ?
DucFuc
Just hold on to your holdings, I'm sure your superior wisdom will win out. In fact, why don't you take some on margin too? Why not try to corner the market?
(Isn't it amazing how these guys show up at every big new leg down?--It's a great indicator!!)
DucFuc, what I mean is that you're a good indicator that the bottom is past.
Continue on, and leave the ducks alone, there is an SPCA, you know.
DTF!
Rich - Can you expand your theory on Gold a little bit? Asia action is relatively impressive, but considering the poor run they've had, its not surprising.
Futures are holding up - S&P is only down 6.50 right now after being down as much as 14 earlier in the evening.
Feeding live trolls=fun.
Oops, I missed/flipped some letters: DFTT!
Dryfly:
"Fast forward to today... I am the only one of them who has spent most of his life (1) self employed and (2) living in a town even close to a Galt's Gulch... all the rest are corporate wage slaves, bureaucrats or college professors. The irony just rips me up sometimes."
yes interesting, and maybe resonates as the rightist version of "liberal guilt"?
Ask your doctor if foreclosure is right for you,
You Walk Away - Foreclosure Protection Plan and Kit, Mortgage Loan Modification, Foreclosure Assistance, Debt Consolidation, Credit Repair from Foreclosures
Read the Ackman letter/tome and this is going to suck.
I have to attend the funeral of a friend's son tomorrow, so I'll miss the one that is apparently going to be on CNBC.
I agree that the exec caste has sold out the Joe6Packs for profit. I used to work for a multinational telecom in the Risk Management/Treasury Group; execs would talk about showing the market how serious they were by cutting back on labor costs. They'd close small ops in rural areas and screw the folks...so no wonder that I took the chance to take care of the kids.
Times are gonna suck. And yet, living in Central PA amidst the Amish/Mennonites, it's interesting to see how folks adapt. Land gets too expensive and they can't subdivide the farms any further, they move into boutique and furniture manufacturing.
FWIW, I still don't see many places in the world where you can still be quite as nimble as here. I hope that this is true...
rich writes:
"The gold market is telling you there's something bad happening tomorrow. It's back down now where it was before rate cut, after spiking. Gold traders are anticipating an unwind and rush for cash."
Thanks for pointing that out rich. Been waiting to get back in.
yes interesting, and maybe resonates as the rightist version of "liberal guilt"?
Kou Jie | 01.30.08 - 11:27 pm | #
Absolutely. It is exactly the same (but opposite) of 'liberal guilt'. I could go on that rant too - have friends who come across as 'diversity freaks' to everyone they meet yet live in the wealthiest & whitest gated enclaves you can imagine.
People - we're all crazy.
marcus:
LOL F LOL
albrt | 01.30.08 - 11:18 pm |
Thanks!
I thought Kucinich would have been a good choice. Too bad he didn't have charisma. Obama is okay with me. Actually, any Dem is okay with me at this point. I just can't understand why anyone still wants the job.
Misean...the present administration makes no secret that they follow in the Reagan mold and see government as the problem not the solution and disdain regulation...in that sense they are Randians.
I read that this crisis is about several factors and one big one is government failure at oversight and regulation.
individual irresponsibility also plays a major part.
Duc..
you said you "guess" that few here have "skin" in the game.
i can't speak for others... but my job and my meager life savings in the lower 6 figures is invested and is at stake.
by the way..about the others...my sense after lurking for a year and posting recently is that the people here are well educated and experienced on topic.
you made a bold forecast here about the monolines. we will see if you are correct...and accolades will follow if you are. otherwise, well, you can take your turn in the confessional.
Land gets too expensive and they can't subdivide the farms any further, they move into boutique and furniture manufacturing.
Or sell the land out east for a gazillion dollars and buy 4-5 times as much in the Midwest... they are all around me too.
dryfly,
"Mise I actually liked reading Rand - my wife and I decided last night it was time to re-read due to all the crap I'm reading about her.
Understand - I don't go over board on stuff like Rand"
I like Rand like I like R.A Heinlein...a good read, fun, and stuff I agree with. I like Heinlein more. TNSTAAFL.
Cheers,
I once saw a 60 minutes interview with the CEO of a major corp (Coke? Xerox?) who had been raised Quaker, but who had decided, at the age of majority, to join the "English." (He wasn't shunned, because he made the decision before joining the Quaker church as a young adult). He said that the quakers were so self-sufficient, prosperity would be their downfall. I'll bet they could teach us a thing or two about capitalism (without the liberal guilt).
Dryfly:
I met a family setting up a "colony" (their language) in Yadkin County,NC. They took the money and ran so that they can once again continue to subdivide amongst the kids as they grow.
Now the kids are probably running small mfg plants.
"Really Ducfuc..the way it sounds to me big mouth, is your head is already up your arse..one can tell by the smell of shit everytime you speak.
borkafatty | 01.30.08 - 11:19 pm
here, here!
But lets not taunt the mutes.
Marcus Aurelius spend a momnet and goog;e Quaker, artificial, pregnancy, family,
dont take rand so literally.
the main point is that hey, people need to do what they need to do and generally speaking, please stay out of their way.
my favorite scene is when the food is rotting while waiting to hop on the rail lines to get to the cities.
its more of a statement about the interdependency of human kind and the need to work together than it is about the individualist at costs mentality the books spawned.
dry- wish my wife had read all of rand like i had. she's an architect, so naturally, she read fountainhead only. the day we sit around an decide to re-read Rand is the day i look around for my two kids and realize they're both upperclassmen at some state school somewhere where they got in state tuition cause i live in DC.
how do you pull off humble, secure, successful, educated and wise without being a total prick?
"This is starting to get ridiculous. So if we are to believe Roubini, it is no longer the economics which matter, it is no longer the cash flows, the countless market transactions which apply, but the blessing or lack there of of a bunch of fools sitting around at S&P or Moody's who are going to decide upon the economic collapse of the western world.
Why don't we just send in the black helicopters and abduct them until the dust blows over.
david_in_ct | 01.30.08 - 10:02 pm | #"
And it's not like people haven't been given plenty of warning. Not to over state market efficiency, but people know this is going to happen, so it should already be reflected into prices.
If we really have a few billion in capital supporting the entire financial system, then lets find out.
Frankly, I think we are well past the denial stage and that MSM has caught up. Last weeks NYT's article where a rough landing was just assumed, the sixty minutes piece, another on npr, all the wsj coverage.
The MSM isn't fully on board, but may, in fact, be closer to right then the uber bears.
mock turtle,
"Misean...the present administration makes no secret that they follow in the Reagan mold and see government as the problem not the solution and disdain regulation...in that sense they are Randians."
I asked for evidence. You use guilt by impliation, and are wrong on that. Please elucidate how Reaganite big gov't regulation is Randian. Or anything else they did.
Remember, to win this arg you have to show TOTAL fed register regulations DECLINED under Reagan.
Otherwise you're blowing smoke.
Cheers,
O/T he first Hippies the Gypsies
This life is looking more and more attractive by the day !!
Version 1: The Bengali Gypsies: Bauls
Baul means wind, so bauls wander without stop, singing and dancing inner joy coming from the heart which is considered the only temple of God.
1979 (raw music at it best, my all time favorite)
Vagabunden Karawane". One of many great performances included in the documentation of the band's journey from Germany to India via bus caravan. Embryo's Christian Burchard narrates the following: "The Baul musicians live outside the caste system which governs Indian culture. Like the Saddus, the Bauls reject possessions on religious grounds. They travel throughout India on foot carrying only their musical instrument. The Bauls create their songs spontaneously in front of their audience. They want to transport their public into another world."
Sandhay Das Baul
Paban das Baul (He is supposed to be young guy in the 1979 clip)
Barley:
Okay, I did. Didn't see anything that jumped out at me. What's up?
ct wrote
Regarding your comment on Greenspan & Rand: there has been some speculation that Greenspan remained true to the cause and played the role of Francisco D'Anconia: outwardly playing the part of the media-hungry playboy, while fostering the destruction of an unjust system.
It's tough for me to believe that, though this exchange shortly after retiring (Oct 2007) is interesting. You've probably heard it already.
"Fox News: "So why do we need a central bank?"
Greenspan: "Well the question is a very interesting one. We have at this particular stage a fiat money which is essentially money printed by a government and it's usually the central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or currency board or something of that nature because unless you do that, all of history suggests that inflation will take hold with very deleterious effects on economic activity. ... There are numbers of us, myself included, who strongly believe that we did very well in the 1870-1914 period with an international gold standard".
Fox News: "We did well without the Federal Reserve. People forget that."
dryfly, Misean,
i did not mean to disrespect Ann Rand, ..i have read 2 of her great works.
i am not an ideologue. there is a time to follow Rand and a time to follow Chomsky.
I try to find solution that best fits the problem and I'm ok with mix and match when it come to politics and economics.
my fear is that the people at the top are very ideologically straight-jacketed.
Greenspan says that he is a Libertarian on the off days when he says he will vote Republican. But, and this matters more, Greenspan's entire career has been as a federal government gadfly. When there is an opinion needed, he got hired to deliver it.
Contrast Greenspan and Roubini, Roubini has an academic career, and he has a private firm hiring people, seeking clients, trying to deliver value by giving advice. Greenspan is in a money grubber phase of his career, the tin plated expert getting hired for a $1 million per pop.
Err...exactly. I meant that I gave the WP deal a 50/50, given the [high] probability of a downgrade.
Zig,
I got it. You're talking about the other part of the WP deal. I agree, that's very iffy now. Sorry.
mock-
i read once that atlas shrugged was the number 2 book read by members of congress after the bible.
what the FFFFFF does that tell ya?
and i'm a self proclaimed theoretical libertarian!
What we've seen several times, especially in the downdraft last Feb., was a big sudden unwind in gold to generate liquidity and cover losses. For gold dealers, the dip is a buying opportunity so maybe they are lightening up ahead of it.
What's interesting is that silver has been holding up a little better than gold lately. Silver is more of a commodity, less of a hard currency of last resort. If gold does unwind 40-50 bucks, I would buy some.
Ayn Rand's special appeal was to the little guy who thought he too would become the captain of industry. That same little guy likes tax cuts for the rich because one day, that little guy might be rich himself even though the odds are well stacked against him.
The same logic bought McMansions, 60" plasmas, and crew cab trucks that haul nothing more than groceries.
A spending spree on riches that will never exist.
dc1000,
Not being critical...but could you link that info?
Cheers,
dc1000:
where'd you hear about the reading of congressmen? Mine can't seem to get past "The Hardy Boys"
"The same logic bought McMansions, 60" plasmas, and crew cab trucks that haul nothing more than groceries."
Wow this statement is true testament to the dumbifying of this blog!
FT Woods please purge the CR URL from your memory immediately; thanks.
At this point, a $50 swing in gold wouldn't be unusual. If it goes to $900, I'll buy (coin only).
misean...
but i accept your challenge to find evidence that this administration loosened oversight and regulation in the banking and investment arenas, and will own up to what i find.
but the larger issue is the trend which has taken place from Carter thru Reagan and Bush x 2 and Clinton...one of deregulation. I hope you would agree that most if not all of the Glass-Steagll like regulation is gone AND this administration is less likely than any since Reagan to impose on business...
but i will look for the "evidence"
darn guys you're gonna make me ask my assistant to google this tomorrow?
i SWEAR i read it
its was like, in the washington post or something
rich,
"What we've seen several times, especially in the downdraft last Feb., was a big sudden unwind in gold to generate liquidity and cover losses. For gold dealers, the dip is a buying opportunity so maybe they are lightening up ahead of it.
What's interesting is that silver has been holding up a little better than gold lately. Silver is more of a commodity, less of a hard currency of last resort. If gold does unwind 40-50 bucks, I would buy some."
I'm thinking something similar as the Gold charts Shot up with the dollar downdraft and stock market updraft today.
I think some of the 10yr up interest caused the Gold spike today. Spots still ~923:
24-hour Spot Chart - Gold
and holding a new trend.
I am buying silver now...until I see a solid underpinning at 900-910 gold.
Cheers,
anoninCA | 01.30.08 - 11:56 pm |
I don't get your post.
mock -
am i wrong but wasnt glass steagal a product of the depression?
how deep into the gravy boat is the irony if its very repeal led us back to the horror-land?
Marcus Aurelius its all about gene pool.
sorry about starting every sentence with but...i guess i've gotten even stupidder
With all due respect to Roubbini, if the entire financial world as we know it rests on the $12 billion sliver of capital held by mbi and abk, then it deserves to blow up.
We shouldn't have long to wait.
I'm sure it's bad luck quoting the decider, but bring em on.
The gravy boat of irony is deep and wide. if you leave it sitting out long enough, it'll get a skin on it.
dc1000
yes G-S act stemmed from the great depression and was in force until Carter / Regan era. it was systematically gutted over 4 administrations with executive orders and finally the Clinton-Rubin people put a fork in it.
big mistake in my opinion.
misean:
question re gold v silver. My understanding is that while gold is a universally recognized store of value, silver also has industrial uses. This also then plays a part in its attraction. If we're looking a global downturn - esp including industrial - then wouldn't there be a significant downside to silver at present?
"Though there are many differences and the current problem is more complex, the Long-Term Capital Management work-out is an example of successful public sector involvement."
If by success he means turning the US economy into Bubble Hell, the yes, by all means, absolutely.
Barley:
I had also heard that about the Quakers in southern Maryland.
On the other hand, I was only talking about capitalism and frugality - comparative mating habits of religious sects are, and will remain, outside my area of experience (as far as I can tell).
dc1000:
Glass-Stegall was created by two senators at behest of FDR after the bank runs of the early 1930s.
If GS were still around, one of the local banks here wouldn't have a coffee bar. They'd just do banking.
Seriously.
And their lattes suck.
Since it's late and books came up, books that make you dumb....
http://a4.vox.com/6a00c2251e70a18e1d00e398d630cc0003-pi
Booksthatmakeyoudumb
snarky..but all in good fun.
totally. i get it. and smoot hawley sucked.
just saying the irony is rich and deep at our expense.
i mean hell, hoocuddnowd that having the same institution sell, underwrite, analyze, market, and broker the same products would be bad for the consumers?
You know, when the number of comment entries in a thread is larger than the number of billions reported lost or marked down in the original main article (in this case its '265')... it's probably time to go to bed. My look at the comment count says we're gettin' close.
so like, i can't find the source, two-buck chuck killing my momentum given the bong water is stale, so here are some sites that quote the 1991 library of congress survey stating that atlas shrugged is the most influential book on americans besides the bible. i know it aint specific to congress....but whocouldaknowed?
http://muse.jhu.edu/login?uri=/journals/hypatia/v018/18.3cohen.pdf
Scandals lead execs to 'Atlas Shrugged' and an introduction to Ayn Rand
Regarding the Ackman letter, which can be downloaded from
YouSendIt: Online File Sharing and collaboration with FTP Replacement - Send Large Files and Email Attachments with Managed File Transfer Solution
he makes his usual points about the losses that Ambac and MBIA are sitting on. The really new thing here is that, if you download the "Open Source Model" you will see all the details behind his assertions. This is remarkable, in part, because now any interested party can get a realistic look at how the effect of the underlying securities adds up to the disaster at hand.
dry, dont be a 'whatever'
PS the self-employed rollercoaster took eighteen more turns today and looks like all is well. for now that is.
how fun is it explaining future prospects to a wife based on eat what you kill projections?
mock turtle,
Are you arguing Federal Reserve Deregulation of the the Gov't cartel, or are you arguing deregulation of a guy like me?
Cuz if you're arguing dereg of the cartels...well what's your bloody point? The Gov't created them. Did it also remove the cartelization regs? No! Didn't think so. So please spare me the Glass Seagal crap. A cartelzed industry must be reg'd because it has special privileges.
That BOTH PARTIES agreed to dereg is a problem, but not one of the market.
IF your arg is one of Financial system dereg...well you did not make that clear in your original argument.
So essentially you're arguing that the Fed controlled (i.e. regulated) cartel, was allowed to run wild...well OK.. no argument here...it's just that people on this board ten to associeate that with some sort of wierd free market. It is nothing of the sort. It is a protected, cartelized, crony market.
Cheers,
Silver is industrial, but also has a long history as a monetary metal. Lately, silver has decoupled from gold somewhat (probably more due to gold's price volatility as opposed to silver's inherent stability.
Gold is weird. Many good arguments can be made as to why it should be worthless. On the other hand, if I offer 1/8 oz. of gold to anyone anywhere in the world (pretty much), they'll take it and they'll keep it. Why is it that jewelry is made of gold in any culture that has gold? Because gold is valuable. Inherent value. Weird.
Fractional reserves? More like fictional reserves.
its shiny dude.
like diamonds.
chicks get woozey for shiny stuff
dudes like chicks
especially when woozey.
nuff said
gold's value is about pro creation and the continued existence of the species (see misean? species)
Thanks gents.
Now I'm going to put the good silver in the safety deposit box as well.
dc1000- apologies for not being able to explain my lame joke yesterday (daughter woke up). It was a feeble attempt at humor since I get the impression that a lot of the commenters around Ventura are gold hoarders.
Now I realize I shouldn't exacerbate their paranoia.
Anyway, just trying to lighten the mood.
how fun is it explaining future prospects to a wife based on eat what you kill projections?
dc1000 | 01.31.08 - 12:15 am | #
That's why my wife went out and got a job as soon as the kids went to school - my kill is some times 'less filling'.
I've actually thought about getting a real job just to do one for a while - talked to headhunters from time to time. They say I've been inde so long I'm totally unemployable. They'd consider me a safer hire if I'd spent all that time in prison (prisoners after all know how to follow rules).
Oh well...
MBI Earnings
Expired
OT, but heres an REO haircut.
Thanks Pat, I'd been trying to find that. Anyone have an opinion on copper?
homedad43,
"question re gold v silver. My understanding is that while gold is a universally recognized store of value, silver also has industrial uses. This also then plays a part in its attraction. If we're looking a global downturn - esp including industrial - then wouldn't there be a significant downside to silver at present?"
You could be VERY correct. And I have been following silver for years. Second, never take investment advise from ANYONE. Do your own due diligence. However, I ONLY do physical in metals, never margin. Gold at this price is hard to play.
Silver for 1000's of years has hovered around 20:1 silver:gold. That means silver COULD go back to that value. Which puts silver at $50 approximately.
I bought 80% of my silver at ~$4.50.
It's the only metal play I have left without smashing my cash savings. I gotta run with what has been good to me in the past and what I see in the markets.
At these prices, I would not suggest you get in, unless you got some reserves, but a serious run up is quite possible...especially if gold keeps popping up.
Take care. Do due dilligence.
Cheers,
dry - lol.
the same headhunter types told me that i'm right on the cusp. 6 years. track record of success with the slight chance of re-programability
another year or two more and i'm totally committed/screwed to be indie forevah
then again, when i was selling duplicate copies of michael jackson's thriller with my dad's early adopter purchase of the dual cassette deck - i shoulda seen it coming
whoooooooooooooooookuddaaaanoad?
I'm working on a theory of why silver may be doing better than gold. Gold has had a big bullion price run-up the last year, while recently gold jewelry sales have plunged.
I posted earlier about a chain called Findlay that runs fine jewelry stores in big department stores. They owe GE Capital more than $400 million and they could go bankrupt. But they also own a lot of gold jewelry in inventory.
Say they bought a gold bracelet at wholesale a year ago for $200 and it had $150 worth of bullion. Now, the bullion alone is worth $200. So, they could get back their cost, generate cash and pay back GE by melting down the jewelry and selling it. Maybe they could even avoid BK. Multiply this across the whole jewelry industry and it could put a lot of gold supply back on the market.
Silver is different because bullion is a smaller part of the wholesale jewelry value. So, silver might have better supply/demand.
"dc1000 writes:
totally. i get it. and smoot hawley sucked.
just saying the irony is rich and deep at our expense.
i mean hell, hoocuddnowd that having the same institution sell, underwrite, analyze, market, and broker the same products would be bad for the consumers?"
dc1000......i coodanode.....the same way the abandonment of regulation in the derivatives field is going to send us into another depression once we hit the cascading cross defaults.
The old rules, only permit a borrower to borrow 2-3x income for a house and keeping IB's separate from banks existed because they worked and kept us out of a depression for 80 something years.
LOL canadaman. at last you find me.
this will be an honorable battle.
(bow)
Is silver as industrial as it was when we took pictures with film? Just aski
dryfly,
Christmas gift...white gold with diamonds...
Yeah I get it...
Cheers,
Look at this idiotic quote from MarketWatch:
Economists believe that the lower rates engineered by the Fed will help offset such risks. "A 3% federal funds rate may be just what the doctor ordered to start reviving home prices, home sales and refinancing," said Ed Yardeni, president of Yardeni Associates."
Reviving home prices? They're still too high. How out of touch are these people? What a dunce. No wonder Wall Street messed up the economy so much.
"sdtfs writes:
Damn dc1000- Tell you what. While some people are out in the desert, what say you fly into LAX and we'll go gold mining in Ventura. I heard there's a lot of gold in them thar hills.
sdtfs | 01.30.08 - 12:10 am | #"
thanks for the apology but i still have ZIRP clue what this means
"Gold is weird. Many good arguments can be made as to why it should be worthless. On the other hand, if I offer 1/8 oz. of gold to anyone anywhere in the world (pretty much), they'll take it and they'll keep it. Why is it that jewelry is made of gold in any culture that has gold? Because gold is valuable. Inherent value. Weird."
The meme that gold has value is thousands of years old, and it's got tons of support in the culture, the literature, history, and so on. There are reasons that it won't die.
But aside from all that, there is to me at least something about it that appeals. Something about the look and heft of a gold eagle in the palm that's oddly impressive. That's one reason I don't keep any of it around the house: the Gollum factor. "My precious..."
Misean
re your post: | 01.31.08 - 12:15 am | #
yeah, i'm not talking about all kinds of reg and not talking about regulating private individuals.
i agree with your last sentence...talking about sec and banking regulation and the likes.
so maybe we agree more than not.
but hey, it is a good exercise t see if i can document my perception.
good night...getting up early to read the tape...and move the last of the IRA money out of harms way.
ps i like silver and gold...and for different reasons.
yes silver is an industrial metal as well as a precious metal...but also you can..and may have to spend your silver dollars in place of green backs, in a worst case scenario...the gold i hold is more (though not exclusively) for trading.
I have an 'interest" in palladium as it is the only element or compound that can filter hydrogen (hummm alternative energy)
Thanks for the information. I also have limited amounts of cash and don't want to get further into gold.
I've just been struck by the disconnect between gold/silver. When gold made it's run in early 80s, silver ran up too, although that was a fair amount due to the Hunts.
Appreciate the insight. I've got to get up earlier than I would like.
g'night
Incredible! Now the Feds are aiding and abetting bank fraud and cover-up of bank losses.
Excerpts from Jan 30 Bloomberg article by Jonathan Weil.
"Just when it seemed as if the mortgage mess had hit a new low, now comes this: The Securities and Exchange Commission's staff has granted the subprime-lending industry a huge exemption from the normal rules for off-balance- sheet accounting.
In effect, the move will let home lenders keep their balance sheets looking much smaller and less leveraged, even while the off-the-books loans they made get a makeover."
Subprime Lenders Get Big Accounting Break at SEC: Jonathan Weil - Bloomberg.com
This is a must read article, but please, lay down and take your blood pressure medication before reading the article. Your blood will boil.
mock,
GL with paladium. Made money with that and platinum trading it in early 2000.
Not buying the alt energy crap yet. but to each his own.
Cheers,
Bob Dobbs,
"Something about the look and heft of a gold eagle in the palm that's oddly impressive."
I have a lot of Kangaroo's. But yes it is quite the feeling, holding something that small with all that heft. Kinda like bullets, only prettier.
Cheers,
tom a taxpayer,
Read it several hours ago. Good repost...but you might not get much response.
I have one thought:
YouTube -
Cheers,
My new theory on inflation (since its clearly not interest rate related - otherwise, Ben wouldn't cut 1.25% in one week), is that somwhere, sometime in the future, time travel was discovered.
Once that occurred, the lucky thousands with access to the time machine traveled back in time, and made a killing in the stock market, since they knew what was going to happen the next day/week/month/year.
Now that the future has imploded due to runaway inflation from 9000% returns made in the stock market, time travelers are bringing their substantial cash back to the current present, from the future.
money supply is thus increasing.
look out for these time travlers, they may also be bringing weapons and diseases from the future.
the only question is whether their existence now in the present precludes their ability to live in the future, which would mean they could never have traveled back in the first place.
inflation can be a bitch.
John Stark:
I don't think so. Film and prints were responsible for hugh industrial demand. Years ago when silver was $40/oz., there was some talk of dredging the river downstream from the Kodak plant in Rochester. At that price, silver recovery would have been profitable. Not so much at $16.80.
Hey I recommend downloading Bill Ackman's letter, and the openSource model definitions and the xls itself.
Talk about infoporn - enough to keep me occupied for weeks I expect and come out with a hell of an understanding of modeling CDOs...
Of course with CDOs going to the investment products graveyard fat lot of use that will be - like so many other skills that are now obsolete. Still it will be fun.
-K
The Fed's actions and Congress's stim pack while continually misunderstood by CNBC, et.al., as hope for the markets, should be recognized for what it is: fear-induced credit creating panic.
They. Cannot. Let. Velocity. Fall.
It'll take 30+ years to dig out from under this global solvency blunder... during which we'll witness the evaporation of multiple trillions of apparently ephemeral financialized asset prices.
dunham,
Honestly, I wish I was seeing inflation. I've only lived through inflation.
My Grandparents didn't. My mom's mother was a great story teller. She told stories that made the the Great Depression funny. Kinda like the Three Stooges, Marx Brothers, and The Little Rascals.
Id oubt it was as funny as she and they portrayed.
Cheers,
puravidavid,
Yep.
sk,
did...made my bowels uppity.
Rest, night all. 'Twas a fun evening of great jousting.
Cheers,
OF the 265 B losses that S&P predicts, here's 2.3B of them:
Jan. 31 (Bloomberg) -- MBIA Inc., the world's largest bond insurer, posted its biggest-ever quarterly loss and said it is considering new ways to raise capital after a slump in the value of subprime-mortgage securities the company guaranteed.
The fourth-quarter net loss was $2.3 billion, or $18.61 a share, raising concern the Armonk, New York-based company will lose its Aaa rating at Moody's Investors Service. The loss came a day after FGIC Corp.'s insurance unit became the third company to be stripped of its AAA credit rating.
...
Excluding writedowns and some other items, the loss was $3.30 a share, MBIA said today in a statement distributed by Business Wire. The average analyst estimate from a Bloomberg survey was for a loss of $2.98.
MBIA Posts Biggest Loss, Considers New Capital Plans (Update8) - Bloomberg.com
_K
Misean,
Consider reading Studs Terkel's "Hard Times" an oral history of the GD. It's refreshing in the ice-cold shower meaning of the word. Robert McElvaine's "The Great Depression" is another chilling, sobering and wisened recounting of the causes of the panic, crash and economic collapse, and the hardships, starvation, misery, death and the breeding ground for extremism and global war, that followed.
I regret to say the past is often preview.
``In the absence of a credible bailout plan, I think investors and issuers need to assume that MBIA, along with all of the other companies, will face continuing, worsening downgrade pressure all year,''
ahh, jeez,it aint even friday yet!
So far so good, friends
The barrel is over the falls
But rocks loom closer
There's nothing we can do about it now. If we all go together when we go, we'll understand better the strength in numbers. Sleep well.