Fed's Beige book: "Noted slowing of economic activity"
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CalculatedRisk on Wed, 04/16/2008 - 10:05am (149 comments)
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U.S. stocks show little reaction to Fed's Beige Book
NEW YORK (MarketWatch) -- U.S. stocks showed little immediate reaction to the afternoon release of the Federal Reserve's Beige Book of economic conditions, which found the economy has weakened further since mid-March.
"Commerce was dead; betting took its place."
... few signs of any quickening in the pace of deterioration...
Read that a few times to figure out they're saying that the market is still tanking but hasn't reached a Wile Y. Coyote moment yet.
INO Equities Stocks Indexes - CONTINUOUS COMMODITY INDEX (NYBOT:CI) Price Chart and Quote
The Bernankie bubble is doing quit well on the other hand. That stupid fool.
I--a year+ regular reader of this blog--am still unable to divine the answer
to my question through research; now that the call of 'recession' has
been heard in the inter-ether whispering through the valleys of the
stock-room floor, what will give flow to the market?
I mean, not to demand it, but what tzolk'in must end, what yin will give
us yang, what hedgemon must go for the Juglar? Are we looking at the
short DJI drop of the great depression? housing cycles in the past 50
years? Or how britain did post WWI? Wait, that was a friendly
hand-off... how spain did post 5/30 years war?
I dunno, I have been screaming about this since Feb 2004, but only
recently have I stumbled across 2009 as the year it will get better.
Maybe about Janurary of last year? ...and it was early December that
2010 stared being fashionable. I must admit I have been somewhat
disillusioned by industry self-evaluation for some time (see "nobody
could have predicted", Iraq war length). In that time, I have become
suspicious of statements about the near-term improvments in store for
the patient who partied too hard, and wound up with no credit, under
bright lights, and in a zombie-coma.
Particularly by those employed by him.
Yes Anon,
But as Seb so elequently points out; if you look at that graph carefully, it is now off its peak. That's great news. Party on!
picosec, exactly! I read that twice too. Weird phrasing - and that probably tells us something too.
Best to all.
Recession - are you kidding? I thought we already in one.
`Sluggish' is the new not breathing.
... few signs of any quickening in the pace of deterioration...
Why don't they just SAY acceleration? Sheesh.
What the Fed means is that the derivative of a downward sloping straight line is constant.
And now will unemployment figures finally catch up with this other data? Weird.
CNN says oil tops $115.
Dang... that's some good spin. I love spin.
OMG!
$115! for oil.
My stomach seizes up at the very words! Why this isn't the news of the day in the MSM instead of the whole "bitter" thing and the spat over Rob Lowe's nanny is beyond me.
I gotta go lay down. $115, ugh.
CR- read the Frisco report:
"The volume of gasoline sales was reported to be down significantly compared with 12 months earlier. Sales of new automobiles and light trucks were very slow for both imported and domestic makes, and demand for used vehicles weakened significantly, with one report pointing to a "collapse" in March."
Auto sales collapsing in March?
Gas sales down significantly?
Um, hope everyone has buckled their seatbelts and put the trays in the upright position- its gonna be a hard landing?
Collapse mentioned in the beige book?
Collapse?
I am stunned. I wonder how much fighting behind the scenes it took to include that nugget.
Someday this war's gonna end...
"... few signs of any quickening in the pace of deterioration..."
They sure do have a way with words. It's an art similar to writing a letter of recommendation for someone you don't really recommend. Except here they made it easy, we don't really have to read between the lines, do we?
The Bernankie bubble is doing quit well on the other hand. That stupid fool.
That's strange. It's almost like some event occurred in the middle of March to free up a ton of new capital to chase commodities. Hmm.
Shareholders Score at WaMu
"And perhaps most notable: WaMu reversed a much-criticized decision to leave out the companys mortgage-related losses when calculating profits that determine executive bonuses for the year ahead."
finally some comeuppance!
Shareholders Score at WaMu - BusinessWeek
Pretty interesting summary article on the NYT about retail chain bankruptcies.
Retailing chains caught in a wave of Bankruptcies - NY Times
The effect on CRE is plain, but what was really good was the explanation of how tight credit pushes retail chains into bankruptcy:
"The bankruptcies are putting a spotlight on a little-discussed facet of retailing: heavy debt.
Stores may appear to mint money by paying $2 for a T-shirt and charging $10 for it. But because shopping is based on weather patterns and fashion trends, retailers must pay for merchandise that may sit, unsold, on shelves for long periods.
So chains regularly borrow large sums to cover routine expenses, like wages and electricity bills. When sales are strong, as they typically are during the holiday season, the debts are repaid.
Fortunoff, a jewelry and home furnishing chain in the Northeast, relied on $90 million in loans to help operate its 23 stores, using merchandise as collateral.
But by early 2008, as the housing market struggled, the chain's profits dropped, meaning its collateral was losing value and the amount it could borrow fell.
In better economic times, the banks might have granted Fortunoff a reprieve. But with a recession looming, they refused, forcing it to file for bankruptcy in February. In filings, the chain said it was "facing a liquidity crisis." (Fortunoff was later sold to the owner of Lord & Taylor.)"
CR: It was never a real recovery. It was a debt driven bubble.
We are now seeing it again due to the artificially low interest rates.
If the FED show any sign that this is the floor for rate cuts, that there will be the corrective moment.
The real economy (as opposed to a debt-driven one) will take decades to recover.
The G7 statement that they are all supportive of a strong US Dollar doesn't seem to trump Ben's overwhelming desire to drive it into obscurity.
Here's today's tally (so far) for Ben "The Human Wrecking Ball" Bernanke:
Crude ends up 1% at new record high of $114.93 a barrel
10-YR Note 3.700% -25/32
Thank You for Driving.
(paid for by API)
Well, there will be plenty of gas, empty resorts, plenty of motel rooms, and a bunch of back yard bbq parties with hotdogs instead of steak.
This economy is totally crappy here in the west.
I guess that Wall Street has decoupled from the rest of America, and no longer worries about profits from j6p and instead shears all of these golden sheep (er, swfs).
Someday this war's gonna end...
Crude ends up 1% at new record high of $114.93 a barrel
10-YR Note 3.700% -25/32
ac
Examine the price of oil in euros and it does not look all that bad.
Can't imagine RV and boat sales will be up this year.
In, inflation adjusted terms from the oil crisis to now we should be at 93. So now what this will no doubt set new constraints on the broader economic acitivty.
The current price of diesel is bad news for everybody.
Ye gods, the boys over at the Fed must be looking on wall street's party in utter horror.
I bet they have some tough speeches lined up for tomorrow to start talking down Wall Street before they deliver the no interest rate cut message.
Financial markets are outta hand.
No more whiskey!
Someday this war's gonna end...
I remember thinking when oil was ~70/brl that it was CRAZY and that oil was sure to return to 30-40/brl soon.
Thank GOD I'd didn't put my money were my mouth was!
Interesting Times said: "If the FED show any sign that this is the floor for rate cuts, that there will be the corrective moment."
We're looking at that corrective moment in the rear-view mirror, for both the economy and the stock market.
Sebastia
Much has been written that NC is booming but the reality on the coast is that RE is slumping.
In the Wilmington NC area (southern coast) March sales for SFH (new and used) are as follows:
sales:
March 2008 389
March 2007 660
Down 41 percent
Average prices:
March 2008 $235K
March 2007 $261K
Down 9.9 percent
Median Prices:
March 2008 $200K
March 2007 $216K
Down 7.3 percent
The difference between median and average is probably due to the very expensive waterfront and gated community homes common in a retirement and Summer home area.
"The pace of sales declines has accelerated during the past three years" according to the local paper.
Jim
What's really got me scratching my head is emerging mkts running against the current of a massive hit to the dollah. That has been a crusher to EM stocks in the past.
Tough to explain although I've seen a similar story before. Margin calls pushing that market higher?
@AllenM - where did you see the word "collapse" in the Beige Book? Can't find it.
Seb, read the Frisco part of the report.
Remember that district covers over 25% of the us economy.
That report is positively awful, with parts that are just merely bad.
Where you sit might be just fine, but that huge portion of the national economy is definitely looking worse.
Compare with the last beige book for SF and do a side by side.
Someday this war's gonna end...
Most EM markets are still expaning - china 10%, india 8%...can this last?
Under the san francisco report.
Click further into the report- my quote was straight from Frisco.
Someday this war's gonna end...
Thanks, AllenM.
My prediction:
- one more rate cut (any number) will drive oil to $200 by Christmas.
Sales of new automobiles and light trucks were very slow for both imported and domestic makes, and demand for used vehicles weakened significantly, with one report pointing to a "collapse" in March.
12th District
barely said: "Tough to explain although I've seen a similar story before. Margin calls pushing that market higher?"
EEM (emerging markets) is another index ETF I've owned off and on over the years (in addition to ICF, a REIT).
Both have already gone through significant corrections. My view is that investors are playing past the current bearish news and looking ahead to an improving future.
FWIW.
Sebastia
start talking down Wall Street before they deliver the no interest rate cut message.
I agree. There will be no further cuts in the rate(s). Party on until then!
An observation and some questions for the group: Long bond futures took out an uptrend dating all the way back to the start of the credit crunch today. 10-year note yields are up about 9 bps.
On the one hand, this could be a market signal that the worst is behind us ("flight to safety" buying in Treasuries over ... and it has been coupled with a decline in the VIX). On the other hand, can the housing market really handle an increase in interest rates ... on top of everything else? Or stated another way, are rising Treasury (and mortgage) rates simply the SYMPTOM of an improving housing market/economy? Or is this rise the very thing that can pull the rug out from under any nascent recovery? Enquiring minds want to know.
What's really got me scratching my head is emerging mkts running against the current of a massive hit to the dollah. That has been a crusher to EM stocks in the past.
Hot money flows out of the US into emerging economies.
Just like the Yen plunged as markets roared upwards in other countries.
Same thing happening here.
The dollar is becoming a carry currency like the Yen due to the low interest rates.
looking ahead to an improving future
Wow Seb, the only way I can get this out of my softare is if my future is somewhere in 2010, with current earnings taken into account and sane multiples. I'm going to make a prediction for you: earnings are going to royally suck from here on in. And most banks aren't even close to showing us their knickers. They're only yet barely to the knee.
So, which of the three remaining presidential candidates is going to denounce Bernanke? Which of them will say, "I pledge, if elected, to fire this nutty professor."
Gotta throw summore ammo at the shorties. Squeeze 'em 'til they puke, and then another allowed leg down can ensue.
So, which of the three remaining presidential candidates is going to denounce Bernanke?
You're kidding right? You're sucking your own exhaust (as those in start-upville say). Was there a credit event? He's a hero if there is no further credit issue and only a mild/moderate recession.
The bottom for financials has been in more times over the last 6 months than I can remember. If anyone can remember the nasdaq bust, there were plenty of bottoms the whole way from 5000 to 1000, over two years worth! That is alot of bottoms!
Hey, maybe Ben is trying to re-ignite the dotcom bubble. If interest rates get low enough and dotcoms can go directly to the window with pets.com stocks as collateral, the sky's the limit!
AllenM, I think the "collapse" is just referring to automobiles, and specifically used cars.
Sales of new automobiles and light trucks were very slow for both imported and domestic makes, and demand for used vehicles weakened significantly, with one report pointing to a "collapse" in March.
The YoY decline in gasoline is important - prices in California are close to $4 per gallon, and at some point people will drive less.
Best Wishes.
"CNN says oil tops $115."
When we get back to growth that will look like a bargain, The Bernankie bubble has a lot of life left.
one will denounce Bernanke cause he is doing the work of the top 1%, the true "leaders" or the elite if one prefers that term.
how so.
leadership has decided that USA must consume less...but everybody wants to tout how it is morning in America...the new American century...blue skies etc.
so the weak dollar...the dollar crisis forces decreased consumption.
this isn't an accident...this was...is...the plan.
and the top bracket tax cut emphasis, and the fat cat parachutes and the off shoring etc was the last Mardis Gras before the fast.
"You're sucking your own exhaust (as those in start-upville say)."
Please translate.
In all seriousness the PUT/CALL ratio on the SPY reversed today.
Now, coup de gras will be a swan dive tomorrow so the house can collect all the remaining chips on the table, so there's nothing left.
pace of deterioration didn't quicken. wow. that is like a doctor saying "his condition won't worsen" when speaking about a dead person.
it's hilarious because deterioration not accelerating does not mean deterioration isn't worsening.
do they think we forgot about second derivatives, or do they think we are bitter about lost jobs and we cling to guns, religion, and fear of people not like us? (heh)
El Cliffo, it means believing your own press clippings...here, i'm saying that you are only reading things germane to your side of the argument and believing it, when you should read all sides and contrast because the other POV may have merit.
For example, I've noticed that people don't actually process what Sebastian says. Some of it has merit. That should not be brushed under the rug but acknowledged.
barely is there a volume number associated with the put call ratio...i'm ignorant.
is this number a multi sigma event?
Barely,
Those emerging economies are often involved in selling commodities, which is a big help right now, and in selling manufactured goods, while we import manufactured goods like mad. That may be providing a buffer against the usual impact of a weakening dollar and increased risk avoidance. Another thing to keep in mind when considering historical differences is that many, many of these economies are near current account balance, or are in surplus. In the past, a little credit difficulty in the US has meant no credit in emerging markets. (Think of Mexico's trouble with Tesobonos.) Now, these guys have their own surplus savings from which to borrow, in many cases. There is a reasonable chance that being in the right markets and having a reserve of savings will help them through this, but there is a reasonable chance it won't.
By the way, I would recommend reading the entire summary before drawing any strong conclusions about "few signs of any quickening in the pace of deterioration." Not a felicitous use of the language, to be sure, but the overall impression from the Beige Book is that things got worse since late February, after getting worse from December to late February. The simple distillation from the two Beige Books, taken together, is "things are getting worse and worse." When you tell everybody in the first paragraph that 9 of the 12 Regional Banks said things got worse, and the other three could only manage to say things didn't get worse, you are pretty close to shouting "recession" in a crowded theater. With all the icky stuff in this Beige Book, it is hard to imagine the very bad way in which "not getting worse any faster" was said was an attempt to hide bad news. It was an attempt to sound like the Beige Book always sounds. It's nearly always terribly written.
ipodius said: "Wow Seb, the only way I can get this out of my software is if my future is somewhere in 2010, with current earnings taken into account and sane multiples."
It's not the software, it's the user.
Seriously, though, this is why economists have such a poor reputation: They look at current conditions, good or bad, and project them into the future. If we behave the same way, we'll get the same results.
Sebastia
mt - I just like to watch the ratio as the exiry date approaches. A rally and the puts get reeled in to close to nothing and then a quick plunge gets the calls bought back... until there's no obligations left for the option sellers. It's a pretty good gauge of which way the market will head into expiry.
So, Ipodius, you think Bernanke should get a medal? Will it be bestowed by all the grateful Americans who can't afford to drive any more, or by third world people who can't afford to eat?
FWIW.
Sebastian
Heh.
Cheers,
prat
I personally do not care for a view of the knickers you're talking about, ipodius. We're looking at some pretty ugly knees & ankles.
Maybe people think stocks are a hedge against inflation despite weak earnings?
My partners and I own industrial buildings in the suburbs of Washington DC.There has been a noticable increase in late pay and tennant defaults so far in 2008.Sub contracters,suppliers,and retailers are all experiencing difficulty.
There needs to be 2 FED meetings with ZERO cuts before this market can believe it's done.
If they cut this meeting, then then next 2 meetings must have zero cuts, and so on.
The market is betting on another cut... this. is. not. good.
Headline inflation +0.3%
Where do they collect their data? In the eurozone?
Seb, data time:
The trend in FRB San Francisco statements:
First Paragraph:
7/25/07: The Twelfth District economy expanded at a moderate pace during the survey period of early June through mid-July.
9/5/07: The Twelfth District economy expanded during the survey period of late July through late August, but the reports suggest that the momentum has slowed a bit.
10/17/07: The Twelfth District economy continued to expand during the survey period of September through early October, but it showed signs of further deceleration relative to the previous survey period of July and August.
11/28/07: The Twelfth District economy expanded during the survey period of October through mid-November, but the pace of growth showed signs of further deceleration relative to recent survey periods.
1/16/08: Economic activity in the Twelfth District grew modestly during the survey period of December through the beginning of January.
3/5/08: Economic activity in the Twelfth District appears to have grown modestly during the survey period of early January through late February.
4/16/08: Economic activity in the Twelfth District appears to have been largely flat on net during the survey period of March through the beginning of April.
Follow the trend!
Someday this war's gonna end...
I am with Barely - if the option sellers are in control we will see a mirror image day tomorrow. No indication of any big offsides, and they have a nice broad target of 133-135 for the SPY on Friday. If they can wind everything up a day early by scaring people out of calls tomorrow, all the better.
Will it be bestowed by all the grateful Americans who can't afford to drive any more, or by third world people who can't afford to eat?
Imagine if the entire financial system collapsed. Everyone can argue about the possiblity that would have happened all they want, but it was a real possibility. And when it comes to analyzing actions he has risen to be the head of the Fed and, ummm, you haven't. So far my position is that all the alternatives I've read on this blog would have caused even bigger disasters. Don't blame BB for the mess, it started LONG before him. He's just left with a bucket and a mop.
Jim,
Here in the SF Bay area my apartment complex (I live in a high end complex of approx 500 units) has had a big increase in late payments and has started putting bills on everybody's doors with reminders that their rent is due on the first and that they will be charged a penalty if they don't pay on time. I've also seen a number of apartments with 3 day notices to pay or quit on them, indicating that a lot of residents here are on the edge financially.
It's not the software, it's the user.
Ha! Touche! What I mean is, if I take likely earnings for a sampling of these companies that have reporting good earnings and adjust for currency arbitration, likely decline in sales this quarter, higher transportation costs, and in the instance of financials more write-offs, I don't see where the valuations make sense. For some sure. For most, no way.
Again, my modling shows the DOW declining to around 11200 this year. Maybe I'm wrong. But I'm not so sure.
Time to triple-down on my short index funds. This market is irrational. It is down only about 10% from its high despite economic news/conditions that are as bad or worse than the most bearish statements on this blog a year ago. Despite careful attention to the few bulls on this and other blogs and in the media, I have not seen a single credible statement about what conditions would improve the situation in the next year or two (other than delaying effects of government bailouts that will simply cause other problems through inflation).
The car prices sentence has morphed over the last couple of months into something quite bad (source: SF beige book)
7/25/07: High gas prices also reportedly held back new vehicle sales, which were little changed from the previous survey period. By contrast, sales of used vehicles were strong and their sale prices firmed, partly as a response to a reduced supply of used cars from car rental agencies.
9/5/07: Sales of new vehicles reportedly weakened further, especially for domestic makes. By contrast, demand for used vehicles remained strong and sales grew accordingly, despite a reduced supply of used vehicles from rental car companies.
10/17/07: Sales of new automobiles were reported to be sluggish, especially for domestic makes, although demand for used vehicles remained strong.
11/28/07: Sales of new automobiles remained sluggish, especially for domestic makes, and the earlier strength in demand for used vehicles softened a bit.
1/16/08: Sales of new automobiles remained sluggish, especially for domestic makes, and demand for used vehicles continued to fall from the high levels reached earlier in 2007.
3/5/08: Sales of new automobiles were very weak for domestic and imported makes alike, with double-digit declines reported relative to year-earlier levels in some areas. (Didnt mention used cars!!)
4/16/08: Sales of new automobiles and light trucks were very slow for both imported and domestic makes, and demand for used vehicles weakened significantly, with one report pointing to a "collapse" in March.
Double digit declines for new cars in March, collapse in used cars in April, this just keeps getting worse and worse.
Someday this war's gonna end...
JJL writes:
The bottom for financials has been in more times over the last 6 months than I can remember. If anyone can remember the nasdaq bust, there were plenty of bottoms the whole way from 5000 to 1000, over two years worth! That is alot of bottoms!
JJL | Homepage | 04.16.08 - 3:36 pm |
My thoughts exactly. The financial stocks in this bubble are analgous to the dot coms in 2000. Lots of explosive rallies, as 'buy' recommendations were issued, but ultimately they kept finding new 'support' at lower levels. Dead money for 8 years now.
barely,
thanks, yes put / call ratio explained...ok i'm learnin.
i just find it hard to wrap my mind around a significant fall in the stock market at this time beacause i am, yes, a believer in the PPT.
(you may remember my arguments a long time ago with Banker...hope he's ok in the Bankerdome...)
i've come to believe the fix is in again and again. the big ...really big... boys and girls are not done retrenching their positions, so they are using the fed to shore things up, maybe eveen till Bush is out... if they can kick the can down the road that long...big if
i believe the Federal Reserve has "SPENT" money in a back door way, to bail out the market and the IBs.
the fed "creates" liquidity with the conversion of M3 money to M2 and even MZM, by taking mark to model, (dubious assets) on to the Feds balance sheet and in turn giving the Investment banks, "flight to safety" securities which then can be used for expanded market activities.
the Fed IS injecting money into the system, by the cleverest of ways that allows them to say "Hey these are sterilized open market actions.
the TAF and TSLF and loan of 30 billion a day to Primary Dealers not only prevents the financial crisis but buoys stocks a bit and commodities a lot.
the distortions are horrendous.
Pilgrim,
The same experts that didn't see this recession coming are now saying we're out of it, or it will be short and shallow - a V recovery. Why they have any credibility left is beyond me. Just like the hawks prior to the Iraq War are still given credibility, while those who were correct are left out of the discussion.
"Don't blame BB for the mess, it started LONG before him. He's just left with a bucket and a mop."
The problem is he's seemingly going about it no different then the average boob would: be caught off-balance and then throw everything plus the kitchen sink at the problem. Housing problem: why didn't he see it coming? Bear Stearns: why was it necessary to save Bear Stern's bondholders when its customers were never at risk?
(404 Not Found
mockturtle.....
agreed
i believe the Federal Reserve has "SPENT" money in a back door way, to bail out the market and the IBs.
mock, how? these are sterilized operations and there is nothing created or destroyed (sort of like in physics) by them. here's an analogy...you have a house that you say is worth 200k. it's illiquid in this market and you need cash and you can't wait for the sale. you own it outright. so you go to the fed window and you hand them the deed and they give you 180,000 because that's the risk factor they're using. You go away and use the money.
You come back in 80 days with your buyer and give them the cash, and they give you the deed back and you walk away with 20k and the buyer has the deed now. How was any liquidity created in this exercise? The Fed took 180,000 onto it's books, and you took the cash. The Fed removed 180,000 from it's books and someone else put it on theirs and you have the 20k cash. The entire transaction is net zero.
The problem is he's seemingly going about it no different then the average boob would
this garbage is really tedious. let me point out again, he's risen to be the head of the Fed and, um, you haven't. So if he's a boob...
ipodius,
i'm not a "tin foil hat" type but something is rotten in stinkville.
"if it doesn't fit, you must acquit"
Saying that Bernanke must be right because he rose to be Fed chairman (with 21.5 months left in his term) is like saying Bush must be right because he rose to be President (with 8 months left in his term).
In my view, a "collapse of the financial system" simply means the collapse of the investments of the wealthiest classes, plus assorted Yuppies.
ipodius,
True enough, but we haven't reached the point where the cash has gone back to the fed yet.
i wonder if BB is one of those people who are genius in academia but horrible in real life applications
I'm not saying he's right El Cliffo, I'm saying that he's in a better position than I am to know where things are given the absolute mass of data, and the best data i might add. so at some level i've got to believe that, based on what he and the others see, they are doing what they think is best.
My point is that it is too soon to be calling the man a "boob" or anything else. it's like telling me who's going to win the game 5 minutes into the first quarter.
I didn't call him a "boob," Ipodius. But it's refreshing to note that, while I'm not Fed chairman (as you cogently pointed out) you're not Fed chairman either!
"The Fed removed 180,000 from it's books and someone else put it on theirs and you have the 20k cash."
This is sterile only if you believe the FED is going to be payed back for all of the crap its taken.
I don't.
This is the IB version of "walking away".
Squeezed,
Oh they'll be paid back, even if they have to print the money they get paid back with, they'll get paid back
You don't have to parse the beige book.
Anybody who thinks the U.S. economy can escape the downturn in housing, CRE and MEW (and all the ripple effects), with mortgage and small business credit drying up by the day and with oil at $115 a barrel is completely out of their mind.
I believe in the PPT too.
Pilgrim-Be careful..
This market is not rationale...
Shorting is not working right now for me or other shorts. The data says short, ppt says long..They have made thier stand and will not let housing and the market fall together..
use extreme caution.
I'm not Fed chairman (as you cogently pointed out) you're not Fed chairman either!
Exactly, which is why i'm refraining from being critical now.
So when do we start hearing the "Inflation is contained" comments from MSM and the Fed ?
ipodius
You analogy assumes a finite time horizon and accurate valuations on entry. Both are flawed.
The better analogy is you are bankrupt and need to pay your rent. So you get you friendly bank teller to forge a bank statement that adds a zero or two to the balance. Then you get a collateralized loan pay your renbt and take the rest to vegas and double down (on the hot stuff - read commodity etc.). By the grace of someone when the term loan expires, go back to step 1.
"IBM's profit jumped 26% on strength in its services and software units. Revenue rose 11%, helped by currency gains. CEO Palmisano said the tech giant "feels good about the rest of the year." Full article coming shortly."
To the moon, Alice!
With all the bad news out this morning, I joked to a friend (and I quote):
dollar hits record low . . . worst housing starts in 17 years . . . 500 point gain today?
Damn it all, I was almost right. This market has gone well beyond parody, to an obscene and frightening place.
ps - I haven't been reading the threads but I'm sure I should be scolding jg for something.
1375 has been a great trade around number.
Were at 1371 on overnight. Cause for some concern for the bear case.
ipodius
Can we all agree that Greenspan is a boob?
Someone mentioned Ben with a mop and a bucket . . . I picture Fantasia, with Greenspan in place of Mickey Mouse, and as all hell is breaking loose he hands the sorceror's cap to Ben and leaves for to go party.
and you have the 20k cash. The entire transaction is net zero.
ipodius | 04.16.08 - 4:28 pm
What if you dont come up with the 20K? Better yet, what if it is worth the carrying charges to keep rolling it over and over and over?
Truckers, many of whom own their own rigs and thus are self-employed, are letting the banks take their trucks back. Can any independent truckers afford to keep going?
And then you have the entire construction industry, including realtors, mostly self-employeds, now doing who knows what, but it ain't working.
And Congress' solution is to extend unemployment benefits? Who, exactly, is that gonna help?
Once again, I'm confused.
ot having read the full thread, but if not being fed chair means one can't be critical of him, does it not also mean one can't praise him either? So we're left with "shut up, they know what what's best for us?" Am I in romper room, a technocracy, or a democracy? I'm a little confused. Granted, we don't have all the data but if we can't be trusted to express our opinions, how can we be expected to vote for the guys' boss?
Knickers?
What about Bare Sterns?
And Congress' solution is to extend unemployment benefits? Who, exactly, is that gonna help?
Maybe unemployment benefits should come in the form of gasoline, instead of useless devalued currency.
Just start asking congressmen for those kind of unemployment payments and see what they say!
El Cliffo
At the risk of being tedious, what in your learned opinion should BB have done over that "bailout weekend"
Should he have just stepped aside??
Just what does your crystal balls tell you would have happened without Fed intervention in the world economy?
I may not like BB rate cuts but I sure as heck respect what was done that night.
BTW everybody worked on it. Paulson was close as were relevant House and Senate members
Outsider writes "Truckers, many of whom own their own rigs and thus are self-employed, are letting the banks take their trucks back."
Your source??
Wow - so, we're going into a recession! The market must rally some more on this news!
Am I the only one seeing DOW 16,000 and soup lines at the same time? And the Powers That Be will trumpet this as a "good thing for Amerika." Can we invest food stamps in stocks? Unreal...
I expect we will one day read a detailed story of the PPT and learn that it was a massive scheme by central bankers (especially in the U.S. and Japan) to make cheap margin loans available to investors who agreed to buy stock index futures and ETFs on cue.
But it's a desperate, temporary strategy that's running out of gas. The higher you build that debt mountain on speculative assets, the wobblier it ges.
These margin loans are just diluting the value of paper money all over the world and driving up commodity prices to levels that will destabilize nations and destroy economic growth.
In the end, you can't eat stocks or burn them for fuel.
In the end, stocks will be valued conservatively based on discounted forward earnings at a reasonable weighted average cost of capital. That cost just keeps rising, especially for small or weak companies, which means real company values just keep falling.
There was a time, not long ago, when the Fed took seriously its job to regulate stock purchases on margin through Reg T. Remember those old days?
Now, the Fed has gone through a nearly criminal period of fueling multi-layered leveraged loans to buy stocks, and the jig is just about up.
richard russell says market heading higher now because foreclosure mess almost clear and home prices will start to move up again.
Isn't there a bit of disconnect there? Who is going to buy these expensive houses? The ubiquitous wealthy foreigner? Hank Paulson and Jamie dimons?
The benefit of being unemployed is you can rob your neighbor's house while he is at work. Other gov't benefits seem excessive.
i agree w/ CD..market will not fall here for sometime//
market is exhibiting great strength, so the tarde should be long till it fails..
shorting is not working..SRS longs have been extinguished..
I have no crystal ball.
The question, I think, that should be asked is, Cui bono? I did note that the chief executive officer of JP Morgan Chase, Jamie Dimon, is also on the board of directors of the Federal Resrve Bank of New York. Now, isn't that sitting on both sides of the negotiating table?
The way I read it, investment advisor John Hussman appears to think that the Bear bailout wasn't quite legal and even unconstitutional. [See paragraph 8].
Everybody worked on it, you say? Well, a camel is a horse designed by committee.
Taking a beating here and the tee for tomorrow is set up with a clear shot down the fairway all the way to the green. Ultrashorts are getting pasted.
Oh
And Naked Capitalism Credit Default Swaps and Bank Leverage « naked capitalism
suggests(if I understand correctly) that it was so interlinked with BSC that JPM acted to save itself. Several things make sense from this point of view.
"Well, a camel is a horse designed by committee."
No. "Camels are even-toed ungulates within the genus Camelus. The dromedary, one-humped or Arabian camel has a single hump, and the Bactrian camel has two humps. They are native to the dry desert areas of western Asia, and central and east Asia, respectively.
The life expectancy of a camel is sixty to eighty years. The term camel is also used more broadly to describe any of the six camel-like creatures in the family Camelidae: the two true camels, and the four South American camelids, the llama, alpaca, guanaco, and vicuña.
A fully-grown adult camel stands 1.85 m (6 ft 1 in) at the shoulder and 2.15 m (7 ft 1 in) at the hump. The hump rises about thirty inches out of its body. Camels can run up to 65 km/h (40 mph) in short bursts and sustain speeds of up to 40 km/h (25 mph)."
shorting is not working..SRS longs have been extinguished..
This market is almost a worst case scenario for UltraShort funds.
Note SRS (Real Estate UltraShort) up 10% YoY while URE (Real Estate Ultra) down 42% YoY.
They're supposed to both be based on 2x IYR just in different directions.
By the time Big Bone Ben gets threw cutting trees down to supply the printing presses the US will look like Easter Island. Buy timber.
Those CALLs writers better hope for a miracle to bail them out. Maybe unemployment claims 500K?
Often I wonder if the Patriot Act was such a good thing...
You folks should quit worrying. Thing are going to turn around. From CNBC.com:
A majority of Americans think now is a good time to buy a home, although few believe the U.S. economy can escape a recession, according to a Reuters/Zogby poll released Wednesday.
Americans See Buying Opportunity in Housing: Poll - CNBC
Obvioulsy, they didn't ask readers of CR.
Funny, I just read the opposite last week. Those crazy pollsters are always keeping us guessing...
Slightly off-topic, but there is an interesting post/map on US bankruptcy rates compared to two years ago.
Check out this.
AllenM - to Seb, it is the bottom is ALWAYS in. Ignore the trend, and repeat the mantra. The guy is a buffoon, but he can't stop making the same ludicrous calls, and then telling us months later about his stock buys and what a genius he is. If I had the patience, Id out him for the fraud he is, but it would be an utter waste of my time. Id just have to show you over and over since last fall how we are first, not going down, then its just a slight dip, then it's a 1 month correction, then it's a short recession (maybe) then it's already pricing in the upside. He belongs on the WSJ op-ed page. Complete horse manure from our resident cheerleader.
"Complete horse manure from our resident cheerleader."
Are you sure it isn't camel manure? And, also, they give scholarships for cheerleading, so cheerleading can have it advantages. Plus, you get to go out with the jocks.
NAHB now see Recession in 2008:
Eye on the Economy - 04/16/2008
"A majority of Americans think now is a good time to buy a home, although few believe the U.S. economy can escape a recession, according to a Reuters/Zogby poll released Wednesday." I think last weeks was a better question do you plan to buy?
"In a vivid sketch of how the sputtering real estate market is causing distress throughout the country, the Associated Press-AOL Money & Finance poll found that more than a quarter of homeowners worry their home will lose value over the next two years. Fully one in seven mortgage holders fear they won't be able to make their monthly payments on time over the next six months.
Sixty percent said they definitely won't buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006. At the same time, just 11 percent are certain or very likely to buy soon, down from 15 percent two years ago."
But 50% think it is a good time to buy HMMMM....
"NAHB now see Recession in 2008:"
And in 2009, they see the final HBs going BK.
What happens to an organization when it no longer has members to support? Will somebody please call the NAHB and let us know?
"andiron writes:
...SRS longs have been extinguished.."
I got burned on my 2nd or 3rd trip on SRS (and am currently getting burned on 2nd or 3rd trip with EEV--can't remember how often I get into these), but with these 2x ultrashorts, I get in, try to make some money (10%-15%-30%), then get out.
The only one I like to play now is SKF. If it falls to 100, I'm in. Once it hits 115, I'm out (like 2 days ago). Don't burn me SKF...you're my only ultrashort to show consistent 15% luv!!
Outsider writes "Truckers, many of whom own their own rigs and thus are self-employed, are letting the banks take their trucks back."
Your source??
http://www.fremonttribune.com/articles/2008/04/13/news/local/doc480054b5e931c199958880.txt
"With the high price of fuel, he said owner operator truckers are either selling their trucks or letting the banks take them back because they cant afford the high cost of fuel."
I actually have been hearing about it on the Maine news, but this article, quickly gotten from google, is from Nebraska.
If you don't use leverage, you shouldn't be panicked about the volatility in your ETF short plays. The model is broken, and, things will eventually go down. Buy it and forget about it for awhile. Otherwise, you are likely to go insane and lose a bunch of money on fees alone trading back and forth. I've seen the not-too-distant future and the it doesn't like real estate at all. Oh, yes, also, in the not-too-distant future, Tiger Woods is bald like Michael Jordan and Oompa Loompa's win a class action suit for back wages against that demonic Willy Wonka.
Slightly OT again -- Did you know that Willy Wonka actually dyed the Oompa Loompas orange, because he was a Syracuse football fan. Just when you thought you know somebody, you find out how evil they are.
I love CR. So many awesome people post here in the comments ++
For you, Elvis --
YouTube -
I love the options-expiry-day emergency cuts and all but... After the way commodities and the dollar reacted today by going vertical, I would think it might be time for Ben to call his IB buddies and give them a heads up he's going to do an EMERGENCY RATE HIKE to keep the US public from imminent povery.
"I would think it might be time for Ben to call his IB buddies and give them a heads up he's going to do an EMERGENCY RATE HIKE to keep the US public from imminent povery."
That ain't gonna happen. Bank on it.
This is bad news for banks that loan money against these rigs as collateral.
You know why? Who you gonna sell it to?
Some guy on Wall Street?
The only buyer for a used 18 wheeler is an independent trucker with cash, skill and determination.
When 18 wheelers go off the road, collateral goes to the graveyard and the economy stops rolling down the road.
There's not a huge amount of young people out there pining to become truckers either. But in 5-10 years, a good place for Wall Streeters to get retrained.
I'll tell you something I learned from independent truckers. The skill you need isn't just staying awake and between the white lines at 4 a.m.
A lot of the skills are economic, like how to fix mechanical breakdowns on the cheap and how to cheat weight stations. There's more skill to it than most people think.
Hey now, investment bankers need to make a govennment-subsidized living too. They just have bigger subsidies than the rest of us, because they're so very valuable.
Nemo,
Thanks. And sorry that I saw on E! that you entered rehab with Dorie. Once you make it, the temptations of stardom can be hard to turn down. I can only hope that you lean on your dad, Marlin, when you have the urge to relapse.
Those who are puzzled by the stock market rising today should note that an options expiration day is upon us. Stocks almost always rise into the expiration.
Note that the Shanghai Composite just keeps on slip-sliding away down the slope.
000001.SS: Basic Chart for SSE Composite Index - Yahoo! Finance
I wonder how long before the speculators there all charge together for the exit.
"to keep the US public from imminent poverty"
I guess you did not get the memo.
The "war against poverty" was replaced with "war and poverty".
I thought the war was on drugs. That is why we are in Iraq, isn't it?
Elvis,
Thanks for the reminder on shorts, just took off my stops. Fundamentals and the story hasn't changed. That's why I'm there. Just hard to watch the backdown on bad news..Someone else mentioned the taf fed swaps going right back into the market/comdties to play the short crowd. It's like playing a round with Tiger and your betting your gonna beat him...
Gary, yes I agree Greenspan was the boob. We get to say that now that we got to see his policies play out. I don't care what he says, keeping those rates too low for too long and not hiking them quicker fed the housing beast, full stop.
And Elvis, props on your responses. A great antidote to some on here
camels sound bad ass
Bernanke was Greenspan's top deputy, so I don't cut him much slack.
There's more skill to it than most people think.
rich | 04.16.08 - 7:31 pm | #
They are managing a quarter million dollar piece of machinery - everything from finance to operations. Its a rolling small business.
Hearkening back to the Beige Book, the phrase, "few signs of any quickening in the pace of deterioration" reminded me of a parrot... a Norwegian Blue in fact.
He's Pining for Fijords...
'E's not pinin'! 'E's passed on! This expansion is no more! It has ceased to be! 'E's expired and gone to meet 'is maker! 'E's a stiff! Bereft of life, 'e
rests in peace! If you hadn't created negative real interest rates 'e'd be pushing up the daisies! 'is consumer spendin' is now 'istory! 'E's off the twig! 'E's kicked the
bucket, 'e's shuffled off 'is mortal coil, run down the curtain and joined the bleedin' choir invisibile!! THIS IS AN EX-Economy!!
why are trading volumes so low? (besides today)..
Just unloaded a $770k piece of automated welding equipment off of a new rig yeaterday. talking to the trucker was VERY sobering. Maintainence and upkeep (tires, brakes, oil changes, etc...) on top of fuel prices ($4.00/gal diesel) is literlly killing him. He said he hasn't been home to Minnesota since the second week of February, always out chasing the next load.
Up post someone said how you have to be smart to be a trucker, evading scales, repairs on the cheap, and such. Look, that ain't smart, thats crooked, and possibly deadly! But par for the course for you Wall St types I guess.