Actually I am not exactly sure in what way his testimony was prescient... Clearly a number of things went awry in the last few years but program trades and fraudulent self-dealings do not rank high at the top of the list.
Can we talk about fiduciary duty? Those who have the power to make the loan have the ethical and legal obligation to make loans only to those who can repay them. And they have a box full of tools to determine who can and can't.
At this point in the debacle, I'm not having a lot of sympathy for the banks. They made their bed. They should have to sleep in it.
So many (Democrat politicians for instance) are willing to live with the bailout of fat-cat banks, so long as regulation is introduced. Even if they do get their regulation, the financial industry will find a way to rob us blind.
doom,
I don't want to bore you with a great deal of detail, but I can assure you that the middle class is taken for granted with respect to taxes. You pay them, the government extracts a large percentage as a processing fee, then the rest is funneled to whatever...lots of entitlements programs, etc.
The rich pay lots of taxes (it's true), but there isn't that many of them. The poor don't pay much in taxes. So, it's your job to pay taxes and behave yourself.
"So many (Democrat politicians for instance) are willing to live with the bailout of fat-cat banks, so long as regulation is introduced. Even if they do get their regulation, the financial industry will find a way to rob us blind."
I'd put up with it if house was cleaned. But these days I'm not sure that'll happen. Not until the roof falls in, anyway. That's what it took in the '30s.
It had a lot to do with it. Pizzo&al.'s Inside Job surveys the landscape, and is pretty entertaining besides. Then of things Amazon or Powell's can get for you pretty quickly, there are Calavita&al. Big Money Crime and Black The Best Way to Rob a Bank Is to Own One. Any or all of those suggests strongly that fraud was far, far, far from irrelevant. A most under-studied episode, imo.
But, if this bill passes, and it ends badly, as I am certain it will, voters will hold Congress to a much higher standard of accountability than it was in the aftermath of Garn-St Germain. - from Pizzo's testimony
Well, I would say that's the one aspect he had wrong. The American public will be as easily led as usual. Throw them a tax rebate and get the inflation cooker going and they'll go back to more important concerns, like banning gay marriage, putting illegal immigrants in jail, etc.
Guess there was a reason those CD's paid 6% ... and not a good one. You really didn't think we'd make it through another week without a bank failure, didja?
FDIC officers, take yours position, move in for the takeover on command ...
I swear, if I wake up on Monday and find out the Countrywide gets bailed out I better see Mozillo on TV with a black eye and Bernake's right hand in an ace bandage!!!
MBIA lost its AAA rating. Wasn't that the topic of discussion going back a few months ago? Wasn't it going to crash the markets if that would have happened? Isn't that why CNBC stepped in with rumors to stop the bleeding?
So what happened? Where's my "Dow Down, 500 points" Day?
Oh I forgot. The jobs #'s were a complete disaster today. Unemployment up also. Oh, OK. Now I get it. That's why the market didn't tumble today?
I'll bet Bernanke could use some help with this mess,is Neil Bush still around?
Tom Stone
I thought he caught the incurable bull-head clap from one of those Thai hookers that he didn't know was a hooker? Didn't he get a divorce over that? Unless he can show a felony conviction, I don't think he can make it in this administration. Too light.
doom writes:
Is there any one who represents the citizens who lived within their means, worked hard, and are tired of handouts to BOTH corporations AND people?
Do you really want someone to represent you or do you just want a pat on the back and a cookie?
You can have your 'Moral Superiority' and even if you aren't destitute a lot of other people not involved on either side of this will be.
Or you can begrudgingly bail out one or both sides knowing its for your own good and the good of others, not just for them.
A Cat,
I don't need a pat on the back and I worked hard all my life and lived within my means so I can buy my own cookie, thank you.
I don't see why bailing out one side or the other is my American duty?
We ALL make decisions, some good and some not-so-good. From the bad ones we learn. UNLESS, someone bails our asses. Then we DON'T learn. We just do it again.
I'm doing it for the good of the country NO BAILOUT FOR ANYONE!
Learn from your mistakes and you'll be better for it in the future.
What is amazing to those of us who remember those days and witnesses the aftermath of Garn-St Germain is that so many in Congress appear eager to follow this demented pied piper a second time.
The Garn-St Germain Depository Institutions Act of 1982 was a United States federal law enacted in 1982 that deregulated the Savings and Loan industry. This Act turned out to be one of many contributing factors that lead to the Savings and Loan crisis of the late 1980s.
As I said, in the beginning, I have no illusion that my testimony will sway anyone or that I can overcome the money being lavished on this issue, by the pro-deregulation lobbyists. I did not come here with money; I came, instead, armed only with solid common sense from lessons learned. I can only warn Congress that what they are about to do is unwise.
But, if this bill passes, and it ends badly, as I am certain it will, voters will hold Congress to a much higher standard of accountability than it was in the aftermath of Garn-St Germain. Because this time we know how high the stakes are, and we know that once you destroy barriers between Commerce and the vault, subsequent events will tumble out of control; out of control of regulators, and out of control of Congress.
Turns out he was dead wrong, voters don't give a shit and no one is involved in democracy, except lobby groups!
When the next chapter is written, I believe there will be two forms of rampant abuses in small and medium banks.
One will be putting vast amounts of concentrated (by geography, developer, etc.) commercial real estate construction and development loans on the books all at once, in essence just chasing every hot deal that was out there without any risk control. I continue to think Corus Bankshares will be the poster child of this genre.
The other will be concentrating the most risky mortgage-backed derivative garbage, especially CMO squareds and the like, on the books of small banks with modest capital. I posted a link yesterday to a study that identified some of these banks, and I could repeate it if you want.
But I think there may be a third pocket, too.
Small to medium-size life insurance companies that bet the farm on the two areas above and other toxicity, with hugely leveraged capital to asset ratios.
I guess there's one bright side to Countrywide Bank getting the big 'D': other crappy banks will probably have to raise the rates they pay on deposits to attract people.
Then it turns into a nice game of FDIC Chicken. Will my CD mature before the bank fails?
I wonder if the DOW will form another head-and-shoulders or maybe just a double-top, with Jan 22 as the neckline. That could make for a violent sell-off in the weeks that lie ahead. Just a thought to consider.
I worked for an S&L in the early 80s, Home Federal, trying to develop an automated loan underwriting program that could be used in the field to approve loans. The underwriting rules were changing on a daily basis, though, so we could never actually finish the damn thing and get it out to the field.
I figured it would all come to tears soon enough. But I had a kid and got chewed out by my boss one day for coming in late when the kids were sick. The same boss who never noticed I was even pregnant til I was seven months along. He and his good buddy the other programmer typically showed up an hour after I did, and apparently it was no big deal that they had missed the meeting that morning, but since I missed the meeting I was never told about in the first place, I was at fault, so he felt free to yell at me for an hour behind closed doors. I quit that day.
I was so, so happy when Home Fed went under shortly after that. So, so happy that misogynistic bastard lost his job, too, along with his idiot boss and all those stupid HR people that wouldn't stand up for me....
And I have zero sympathy for these idiot home lenders or the investment bankers or whoever else loses their shirts in this mess because they decided to play fast and loose. I am just pissed as hell that we who didn't screw around with our houses and savings are getting screwed now having to bail out this mess. I am pissed that the hard-working people who tried to follow the rules and do their jobs were pressured to make bad loans they knew were wrong. I feel for them. But I will cheer every time one of the bastards who created this mess gets their comeuppance. The federal pens just aren't big enough, nor do they have enough tanning booths and bridge clubs to hold them all.
Liquidity at Countrywide Financial and Countrywide Home Loans worsened substantially in the first quarter amid continued weakness in residential mortgages and recessionary forces in the U.S. economy, Moody's said in a statement.
The liquidity issues could impair Countrywide Bank's franchise, Moody's Vice President Craig Emrick said in a statement.
The downgrade does not reflect Countrywide's planned acquisition by Bank of America, however, Moody's said. The rating was lowered from "C-minus" but is on review for upgrade pending completion of the Bank of America acquisition, Moody's said.
Moody's said it believes Countrywide has the liquidity and capital necessary to operate through the planned closing of the proposed acquisition, which is expected in the third quarter of 2008.
"However, the downgrade of the bank financial strength rating provides insight into the severity of the Countrywide ratings transition that would likely take place if the proposed Bank of America acquisition would be terminated," Moody's said.
If the acquisition is not completed, Countrywide Financial's ratings would likely be cut to a few steps below investment grade, in the low "Ba" or high "B" category, Moody's said. Its senior unsecured rating is currently "Baa3," the lowest investment grade.
The top two executives of beleaguered Countrywide Financial Corp. will pocket $19 million in stock next week, according to a regulatory filing. It's the start of a series of multimillion-dollar payments expected to go to the pair before and after the company's pending takeover by Bank of America Corp.
Moody's cut the credit rating of Countrywide (CFC) to "D" for default, over worries about liquidty.
According to Reuters "The downgrade does not reflect Countrywide's planned acquisition by Bank of America (BAC)." It does raise, once again, the issue of what BAC is getting.
"However, the downgrade of the bank financial strength rating provides insight into the severity of the Countrywide ratings transition that would likely take place if the proposed Bank of America acquisition would be terminated," Moody's said according to the Reuters report.
i don't remember the s&l crisis to be about credit and lending. Wasn't it about borrowing short and lending long?
That's how it started. Then trying to give them a little leeway they loosened up a few regulations and then Saloman Brothers can up with the nifty idea of mortgage tranches (viz. Liar's Poker by Michael Lewis) and then you had the local S&L execs guided by Wall Street and,...the rest is history. Hoocodanode?
Moodys Investors Service said Wednesday that while Countrywide Financial Corp.s recent fourth quarter earnings report was within expectations, a new loss component disclosed by the nations largest lender may portend problems for other large securitizers of HELOCs.
The area of concern: so-called rapid amortization.
Buried in Countrywides $831 million fourth quarter write-down of residual interests, Moodys said, was a $704 million charge related to rapid amortization on home equity line securitizations.
Prime Home Equity Loans are generally pooled into private-label asset-backed
securities. We generally securitize these loans with limited recourse for credit
losses through retention of residual interests and other subordinated interests,
such as transferor's interests. These securities generally contain credit
enhancement in the form of over-collateralization and insurance provided by a
third-party surety. In some cases, the securitizations also contain mortgage
pool insurance or a limited corporate guarantee as a form of credit enhancement.
As the holder of the residual interest we are in the first loss position. We are
also exposed to additional losses in home equity securitization transactions
that involve insurance issued by third party sureties when losses exceed
specified levels or duration. When this condition, known as rapid amortization,
occurs, the reimbursement we receive from the transfer of additional draws on
the home equity loans becomes subordinated to the claims of all other parties to
the securitization, including bondholders and the third party surety. This
subordination has the effect of deferring reimbursement to us of the subsequent
draws for an extended period and subjecting these subsequent draws to absorption
of credit losses.
We estimate our liability for impairment losses related to our future draw
obligations and update our estimate quarterly. Our provision for estimated
losses arising from future draw obligations is recorded as a component of
impairment of retained interests. The accrued liability for impairment related
to future expected funding obligations under a rapid amortization event was
$704.1 million as of December 31, 2007. The available credit lines for the
securitizations subject to or expected to be subject to a future draw obligation
are approximately $2.4 billion at December 31, 2007. However, due to the
borrower's ability to pay down and redraw balances, a maximum obligation cannot
be defined.
Every now and then I find a post (see below) that makes me realize the scale of the numbers we're dealing with. Billions.. Trillions.... And I certainly dont understand the logic of people here who might have supported the Iraq war or continue to do so, but who are now complaining about taxpayer bailouts for either side - the homeowner or the mortgage holder.
Have a great weekend everyone.
This is post on Krugman - Grains gone Wild.
Gee, 12 million children die every year from malnutrition and starvation. Will even more die this year? How much would it cost to stop this? As much as it takes to bail out one bank? Of course, we all know what is more important the bank.
Posted by Ellis
Folks...this is a classic bear market rally. Right out of the textbooks...really. See Japan 1990 and/or US 2001/2. Violent, illogical and dumbfounding at the same time....as it attempts to lure in as much institutional and retail cash as possible along the way.
Can the rally extend and last a bit longer? Absolutely. Plenty of nervous shorts, lots of cash in money market funds (sorry for those trapped in auction rate preferreds - you don't get to play) oversold conditions and lighter supply of new issue paper to gobble up cash...all technically constructive for the market to move higher.
It is right on cue performing the job of a classic bear market rally; to eventually punish as many investors as possible.
When it eventually runs out of gas...it'll take your breath away, IMHO.
Many Las Vegas Nevada RISK takers would confer a lot of currency to be
anywhere I am precise now. In
Las Vegas Nevada a portion of information many people are achievement
immediately that. I wouldnt furnish a nickel (U.S. $0.05) for it all. What is
"fun"? What is "delight" to you? Your reply to these vital questions reveals a
lot as regards you. I am at Caesars Bastion in glittering Las Vegas Nevada
attending a workstation seminar on behalf of my employer. This Las Vegas Nevada
place is pertinently named, for the decadence which led to the reject and
descend of the Roman Empire is openly practiced at Caesars Palace. Caesars is
one of the most glamorous hotel/resort/casinos on the famous "Las Vegas Nevada
strip." Las Vegas Nevada is the gambling capital of America, perchance of the
earth. Millions of making a bet, night club hopping tourists use billions of
dollars in the Las Vegas Nevada unproductive desert. To comprise an all expenses
paid trip to a luxury hotel in the midst of Las Vegas Nevada would be a dream
come accurate for many. It means nothing to me. I came at this point to learn
about computers, not to gamble and revel. This is a statement to you of Las
Vegas Nevada and its popular "pleasures." I will keep asking you the query is
this your brainchild of "fun" and "pleasure".Caesars Palace is a beautiful
place. Water fountains are brilliantly lit up at night. Marble statues of Roman
emperors, naked gods and goddesses ornament this "palace." Long, elevated
escalators called "people movers" conduct visitors into the resort, along with
the recorded voice of quot;Caesar" friendly you to this "bastion of happiness" of the Roman Empire. For $50 you can experience an real Roman feast, a "bacchanal." The casino winds seemingly endlessly for acres. Hundreds of slot tackle, gaming tables for roulette, baccarat, craps, blackjack and poker are jammed by resources of people all day in Las Vegas Nevada and most of the night seven days a week. Keno (a game in which you decide on numbers from 1 from first to last 80) is incredibly admired. One Las Vegas Nevada colossal part is the sports having a bet area, with horse contest data, sports events listed and huge television screens showing several sports events starting around the country. One can bet on roughly any sports episode. Plush Las Vegas Nevada carpets, dim lights, uncontaminated cheek and crystal fixtures allot the casino feeling a luxurious, pleasing texture.In order to create a centre of attention crowds, the casinos on the strips have some of the planets most illustrious and resourceful neon illumination. Meals are advertised at low prices to gain more customers. World famous Las Vegas Nevada entertainers such as List Cosby, Joan Rivers, Tom Jones, etc. are currently singing at night shows. Caesars Stronghold amusement showcase is called the "Show Maximus." Watching people gamble is accurately an education. Casino personnel are trained to be stoic, unemotional professionals. High Las Vegas Nevada stakes are bet on the gaming tables without any sensation. The Las Vegas Nevada gamblers, specially the ones playing the slit gear, seem to be machinery themselves, putting in coin subsequent to coin and pulling the switch of the "one-armed bandit." Are the retired people, or the younger people
here really having lots of fun in Las Vegas Nevada.
.
The symptoms are clearly there. Recessions dont happen smoothly. They are usually signaled by a discontinuity in the market place, and the data of recent weeks could very well be characterized in that manner, he said.
Specifically, he cited a drop in the Institute for Supply Managements purchasing managers index to 47.7 in December after several months just above 50, the dividing line between expanding and contracting manufacturing activity. While by no means conclusive, [that] is the type of thing, if we were going into recession, wed observe.
Re: Specifically, he cited a drop in the Institute for Supply Managements purchasing managers index to 47.7 in December after several months just above 50, the dividing line between expanding and contracting manufacturing activity. While by no means conclusive, [that] is the type of thing, if we were going into recession, wed observe.
April 3, 2008 : The institute, a trade group of purchasing executives, said its non- manufacturing index registered 49.6 last month, compared with 49.3 in February. A reading below 50 indicates contraction, while a reading above 50 indicates growth. It's the third consecutive month of contraction.
April 3, 2008 Growth of World Service Sector Steadied in March, but Conditions Remained Relatively Subdued Overall. Cost Inflation Rose Sharply to Highest Rate in 2008 So Far.
April 3, 2008 Expansion of Global Economy Remained Relatively Muted in March, as Gains in New Business Were Only Slight. Sharpest Cost Inflation Since October 2004.
April 1, 2008 Growth of Manufacturing Output Slowed Further as New Orders Stagnated. Cost Inflation Rose Sharply to Second-Highest Rate in Survey History.
Here's a part of the Pizzo written statement that's interesting:
"Bankers want a piece of the insurance business as well. This idea was also tried by the S&Ls and proved just another way to loot the system. Many of the old S&L crowd - Gene Phillips, Charles Keating, Jr., Herman Beebe, Mike Milken - also had their hooks in insurance companies that have since failed: Pacific Standard Life, Executive Life, AMI Life, and a daisy chain of Texas insurance companies, to mention a few. An associate of a major S&L defaulter testified in court recently... "Wayne told me -that the S&Ls were tapped out and that we should find a new source for money. He told me we should consider getting into the insurance business.'
Life insurance companies will be front and center in this crisis. I don't think it will happen quite the same way it did before. In the "New School" insurance fraud, greedy owners and sr. managers hire "young gun risk managers" to explain how to align assets and liabilities and "manage risks" with AAA-rated CDO squared instruments leveraged (through the insurance company's policyholder base + derivative leverage) up to 40-50 times. Of course, the insurance company sr. managers will have cozy relationships with Wall Street IB underwriters of CDO squareds.
It won't be the FDIC picking up the risk tab with life insurance companies. It will be the policyholders and and (in some cases) feeble state guaranty funds.
After this ends, I doubt most Americans look at "life insurance company guarantees" the same way again.
Noble writes:
"And I certainly dont understand the logic of people here who might have supported the Iraq war or continue to do so, but who are now complaining about taxpayer bailouts for either side - the homeowner or the mortgage holder."
I quess that would be me. Yes I MISTAKENLY supported the Iraq war. I think it was over 80% of the population that heard the president's bullshit (and based on that bullshit) supported the war.
I don't support it anymore because I LEARNED!!!!!!!
See my point. With mistakes, you learn!!! Let Wall Street AND the people learn that you shouldn't be too greedy. Yes, there are innocents involved. I feel bad for those companies and those people.
But it is not my duty to bail them out. I bet that neither the companies nor the individuals would have shared in their gains with me and my family if everything would have worked out as they had planned.
I don't agree with privatizing the gains and socializing the losses.
We have shown that market crashes are associated with higher than usual volatility, that often precedes a bear market. After market price bottoms there is usually a period of lower than average volatility that is associated with rising market prices.
I don't agree with privatizing the gains and socializing the losses.
doom
Nor do I. I'm all about prison sentences for those who violated their duty of fiduciary care.
No, because you can obviously take care of yourself. Katrina taught me that.
Brian in New Orleans
I was in Gulfport when Katrina blew through. A bigger fiasco I have never seen and I hope I never see another one. At that point, I knew there was no justice here in America.
Better have another glass of wine Donna, because after we get past the few unlucky scumbags who became examples, my guess is the vast majority of S&L crooks are living large on their ill-gotten gains.
This is so very goddamn true. As I've always said..if Americans really understood their banks and the sorry duplicate and expensive Federal and State regulators they would withdraw every last dime of their hard earned money in short order.
great post here, CR. i clicked the link and read the article in full. and yes, it was nice work, Stephen. now, please excuse me while i go vomit, because they didn't listen to you.
I like Krugman, but alas he's an economist, and and I have to assume he suffers the same sort of blindess to things that contradict contradict contemporary orthodoxy.
From his blog post I got the impression that he was a little bit baffled as to the cause.
Food prices are exploding. Not long ago we were worried about falling food prices.
Why?
Did the population suddenly double?
Did agricultural output suddenly collapse?
I hear a lot of superficially convincing arguments about why these parabolic price increases are fundamentally justified.
They're almost as good as the arguments I got as to why the rising prices of houses and dot.com stocks were justified.
I've heard Krugman advocating rate cuts to boost spending recently.
Inflate your way to prosperity.
Everytime we do that we get explosive price bubbles and severe financial and economic damage.
Grains are going wild because excessive credit allows a person or company to buy contracts for obscene amounts of it that they could never use or even afford to buy with their own incomes. Enough people start doing that and prices explode regardless of fundamentals.
It's likely that the ultimate cause of grains going wild are the economists who keep trying to fix every problem that comes along with inflation despite a decade of crises spawned by inflationary fixes.
You don't make an economy better by handing out more and more money. Though for a while it feels better.
The idea that throwing lots of pieces of paper around will make the economy better is a bit hard for me to swallow.
Actually it strikes me as patently absurd. The idea of paper being some kind of solution to deep structural problems in the economy IMO defies common sense in a uniquely obscene way.
A healthy economy is not made out of paper. It is made out of knowledge, hard work, resourcefulness, cooperation, and foresight.
By convincing the nation that an increase in the production of paper is the path to economic success, I think we've undermined the real drivers behind prosperity and allowed them to atrophy.
At this point I wonder if the US is just to large to function properly on any level. Too much money, too much diffusion of responsibility, typical end of the empire stuff I guess.
My husband believes that consciously (or not) the PTB will never let the market crash.
He's probably right as at this point the key is to keep the masses from asking for their money back.
Did the population suddenly double?
Did agricultural output suddenly collapse?
Was just thinking this today after looking at and/or posting charts yesterday for oil, gold, wheat and copper. Maybe it's Peak Everything(tm), or maybe it's something else.
Are we facing real deflation... in aggregate?
dryfly
I don't really know. It's a related-rates problem. The money supply is contracting, both from Fed action and from the collapse of credit (both exogenous and endogenous money supplies going down).
But that says nothing about whether the money supply is contracting at the same pace the economy is contracting. Besides, that likely both impossible and meaningless as the economy is not monolithic. Some parts are doing fine, others are tanking, and a root mean square approach penalizes the one while not covering the debacle of the other.
Did the population suddenly double?
Did agricultural output suddenly collapse?
No. A lot of fuel price inflation has finally worked its way through the system at the same time new uses for grains have arrived at economically significant levels. Also, the dollar continues it's death spiral while grain selling overseas for the same number of dollars is (too) cheap. Ergo, prices must go up.
Me either. We've gone around & around on this here.
Some parts are doing fine, others are tanking, and a root mean square approach penalizes the one while not covering the debacle of the other.
R. Manhammer | 04.04.08 - 11:52 pm | #
But if we experience aggregate deflation then almost ALL sectors will suffer... that's the problem with ignoring it.
Someone posted a couple of days ago about giving away our grain stockpile during some foreign crisis. (Sorry, can't remember exactly). Let's face it, though, grain only lasts a year or two in stockpile. It has been replenished and replaced many times since then. And it will be distributed (in this country) if necessary. A grain bubble is not like a housing bubble - the government would never give away houses if needed, I don't think.
I was in Gulfport when Katrina blew through. A bigger fiasco I have never seen and I hope I never see another one. At that point, I knew there was no justice here in America.
R. Manhammer | 04.04.08 - 11:12 pm | #
There is talk that the banks shouldn't be writing down their mortgage backed securities to zero. My question is if the bank is leveraged 30:1 a 30% decline in home values would make the asset zero. Right or wrong?
A 30% decline in their loan portfolio leveraged 30:1 doesn't make them worth zero... they would be worth a NEGATIVE number. Write down to LESS THAN ZERO.
At 30:1 a 3.333% loss gives them zero (if my tired brain does the math right).
But if we experience aggregate deflation then almost ALL sectors will suffer... that's the problem with ignoring it.
dryfly
Completely true. Which is why we have to suck it up and accept a less than perfect response. However, less than perfect does not imply criminally negligent. Usually.
dryfly, in the spirit of "it's always after 5 pm somewhere", I have faith that trout season doesn't end until December in some out of the way spot if you look hard enough. I plan to be looking instead of wallowing in the spectacle this fall.
Maybe I'll get a bumper sticker that says "My worst day fishing is better than my best day wonking" or something like that...
Can you solve the sins of excess liquidity with more liquidity?
tim
That depends, I think, on whether the excess liquidity was endogenous money created out of whole cloth by fractional asset lending. As that endogenous money goes away through collapse of the lending institution, one can argue that the economy runs risk of deflation and deflation can, in theory, be defeated through running the money printing press overtime. Which is, I'm sure, what Bernanke is on his knees praying about right this moment.
A 30% decline in their loan portfolio leveraged 30:1 doesn't make them worth zero... they would be worth a NEGATIVE number. Write down to LESS THAN ZERO.
At 30:1 a 3.333% loss gives them zero (if my tired brain does the math right).
dryfly
Exactly correct. It's like buying a house with a 3.3% down payment. It only takes a 3.4% drop in the value of your property to put you underwater.
Can you solve the sins of excess liquidity with more liquidity?
tim | 04.05.08 - 12:19 am | #
Yes I think you can... If the first liquidity has gone POOF into a deflationary spiral then the thing to do is refill. Fiat isn't like metal - you can't feel it weigh it touch it... but its there. Its virtual... it can go away fast & forever.
If the money supply crashes then yes the CBs should refill it... they just can't over do it or we will have serious inflationary problems.
And how it gets refilled can be problematic too... the moral hazard thing... who gets it & how.
My gut belief is the world's CBs will over do it. But I've believed we will see inflation from this episode for a long time.
Maybe I'll get a bumper sticker that says "My worst day fishing is better than my best day wonking" or something like that...
MLM | Homepage | 04.05.08 - 12:22 am | #
Follow the links to the written testimony of Pizzo and you find this gem:
Federal Reserve Board chairman Alan Greenspan, who has been leading the charge toward bank deregulation evidently undaunted by his doomed infatuation back in 1985 with S&L deregulation...
Whether it's "fiat" or some luddite precious metal currency, the function of money is simply to facilitate the swapping of goods and services between providers. Without production of those goods and services, there is no need for the money. Oh, and there is no "intrinsic" value to gold, platinum, or martian-ium. It's only use is to make it easier to swap an oil change for a fractional kitchen cabinet installation.
Federal Reserve Board chairman Alan Greenspan, who has been leading the charge toward bank deregulation evidently undaunted by his doomed infatuation back in 1985 with S&L deregulation...
JRip
Greenspan is just another lunatic Friedmanite.
"Free markets" are unregulated markets, which are markets that are utterly dominated by the big players with no penalties for cheating. Stupid.
Oh, and there is no "intrinsic" value to gold, platinum, or martian-ium.
My favorite metal is 'unobtainium'... I was in a meeting this week with a commodity manager who told me its the only material his engineers will specify.
My favorite metal is 'unobtainium'... I was in a meeting this week with a commodity manager who told me its the only material his engineers will specify.
dryfly
Oh, yeah. When I was at Boeing, we were planning on using a lot of that in the Sonic Cruiser.
the function of money is simply to facilitate the swapping of goods and services between providers
You (and our central bank) forgot the part about money being a store of value.
I don't know what went wrong in my childhood, but in spite of 50+ years of evidence to the contrary, I keep expecting Truth, Justice, and the American Way to get a little respect. I guess I learned my lesson at some point, because I protected myself & family pretty well from this shitstorm so far, but it still really pisses me off.
Oh, yeah. When I was at Boeing, we were planning on using a lot of that in the Sonic Cruiser.
R. Manhammer | 04.05.08 - 12:39 am | #
This company was a sub for Boeing... though the buyer wasn't in that SBU. Funniest damn meeting I've been in a long time - the buyer was selling us on why we SHOULDN'T do business with them. He was a good salesman too.
the buyer was selling us on why we SHOULDN'T do business with them
He or she will be the first one to go in the coming layoff. Then everyone else will go in the next one. Proving that the saying "no good deed goes unpunished" may be marginally incorrect.
You (and our central bank) forgot the part about money being a store of value.
Actually I think the way it goes is that money is supposed to be the stable metric you measure the wealth you use to store value. Money itself is a piss poor store of wealth... always has been except for those who have little else. The truly rich & powerful don't want the stuff - they own whole companies, countries, etc. Stuff that produces more stuff... its only us pions that put a little coin in the mattress.
You (and our central bank) forgot the part about money being a store of value.
MLM
Money only functions as a store for value in a functioning economy. No economy, no store of value. Money, regardless of what people say, will only buy current production or currently available assets. When there is no current production, then we all die and the money question is moot. Of course, that's all very high level theory.
In a functioning economy, as ours still is, the use of money for the temporary storage of value is reasonable so long as the amount stored isn't some ridiculously large multiplier of the economy (I don't think we'll ever have this problem). That said, dysfunctions within the system can easily crush savings and turn them into nothing, which sucks for ordinary people. Interestingly, there is an ongoing discussion as to whether that lost value evaporates in some sort of financial entropy, or if it ends up in some uber-rich bastard's Swiss account.
"My favorite metal is 'unobtainium'... I was in a meeting this week with a commodity manager who told me its the only material his engineers will specify."
Used to know a crazy and poor artist made crazy flame-throwing missle-shooting self-propelled robots out of motorcycle and car parts and machine parts and God knows what. He used to say that everything was made out of unobtainium until you wanted it hard enough. Then your desire would magically transmute unobtainium into "obtainium."
As it turned out, he and his pals were going out in the dead of night and breaking into factories, stripping cars and so on. So much for the transmutation process!
He's more or less famous now. Lesson: don't let unobtainium get you down.
Oh, and there is no "intrinsic" value to gold, platinum, or martian-ium
True no more than seashells but it is also useful to think in characteristics at times. If gold turns into unobtanium, game over.
"If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods." AG
Money itself is a piss poor store of wealth... always has been except for those who have little else.
dryfly
I agree with that to a large extent. I also think that saved money should still retain its value over time and I think we as a society are taking it up the butt when we allow wholesale raiding of the public treasury like we've had for the past six years. But, I digress.
Myself, I've lost two small fortunes in the market. Now, I'm simply concentrating on finishing my farm. No debt. Off grid. Grow my own food. Make a little money on the side to supplement my retirement. I'm planning this so that I won't need a million dollars because I'll have current production.
Myself, I've lost two small fortunes in the market. Now, I'm simply concentrating on finishing my farm. No debt. Off grid. Grow my own food. Make a little money on the side to supplement my retirement. I'm planning this so that I won't need a million dollars because I'll have current production.
R. Manhammer | 04.05.08 - 1:03 am | #
I can't argue with that strategy - know folks who have successfully and happily done exactly that. Seriously.
When we start having a widespread discussion about whether our currency is or isn't a store of value, or under what circumstances it may or may not be, I suggest that we will be well and truly screwed. That will be about the time we start saying "We're all off grid now...".
From one of Dr. Bernanke reponses: One of the prevailing theories at the time of the Depression was the so-called liquidationist thesis who said basically lets let the system return to normal. Lets liquidate banks; lets liquidate labor. This was Andrew Mellon, the Treasury Secretary. It was partly on the basis of that theory that the Federal Reserve stood by and let a third of the banks in the country fail, which created the money supply to drop sharply, and caused prices to fall rather sharply, and led ultimately to the severity of the financial crisis. I think financial instability, which was not addressed by government or anyone else, was a major contributor, both to the depression in the U.S. and abroad. I believe the difference today is that we will address financial issues and try to maintain the integrity and stability of our financial system. We will not let prices fall at 10% a year. We will act as needed to keep the economy growing and stable. So, I think there are some very significant differences between the thirties and today, and we learned a great deal from that episode. April 2, 2008, before Congresss Joint Economic Committee.
It is analogous to just raising the dam hieght to contain the growing flood from destroying the farm lands it serves.
Only problem everyone misses here is that the dam foundation was built with certain height in plan. When the hieght growns beyond the capacity of the fundation and water level raise, the pressure at the bottom of the dam also raises. Then at one day then dam explodes and water from it destroys everything on its way.
That is the reason why engineers at the dam let excess water on downstream with an announcement to the people who lives nearby.
The engineers here are nothing but FED.
The people lives nearby the dam are people whose economy is supervised by FED
The announced excess water flood open is recession.
The water is money suppy. The water pressure is debt.
Re: "ry to maintain the integrity and stability of our financial system. "
The issue of integrity is where he sounds like a retarded bastard, because if the system had integrity, The Fed would not need to bail out accounting fraud, which is the result of a lack of integrity...moron!
Grains are going wild because excessive credit allows a person or company to buy contracts for obscene amounts of it that they could never use or even afford to buy with their own incomes. Enough people start doing that and prices explode regardless of fundamentals.
Unlike pets.com stock, most commodity contracts are settled with physical delivery.
This means that somebody, at the end of the chain, HAS TO make or take delivery of the actual commodity in real, physical atom-and-meatspace.
The commodity cannot get too far away from the true underlying physical price because otherwise the commercial players (who do this for real) would arbitrage away the difference.
Speculators can make 10-20% maybe, but not 300%.
It is, as if you owned pets.com stock, you were obligated every month to buy 1000 lbs of dog food and pay up cold cash.
If the owners of pets.com stock had to do that, do you think it would have gone to the the moon like it did?
No. Dividend-less equities are fundamentally distinct from primary commodities settled with physical delivery.
dryfly writes:
You don't make an economy better by handing out more and more money.
You do make it better IF the economy is in deflation where money supply is collapsing in aggregate.
Are we facing real deflation... in aggregate?
dryfly | 04.04.08 - 11:46 pm | #
Inflation = Pieces of Paper Becoming Less Valuable
Deflation = Pieces of Paper Becoming More Valuable
Either way we've fallen for the illusion and lost sight of reality.
Depressions are not about inflation or deflation.
Depressions are not about money.
Depressions are about losing faith in the government, your neighbors, and the people you work with.
Arguing about monetary concepts such as inflation and deflation is the same as arguing whether unicorns are better than pink elephants.
A credit bubble is simply a situation where everybody makes promises they can't keep.
The bubble bursts when people finally understand that all these promises were meaningless.
At that point trust breaks down and nobody wants to lend to each other.
Again, modern society requires credit to survive.
We face a dire situation because there's been this massive abuse of trust in the housing and credit markets.
Fundamentally this concept has nothing to do with economics.
Now as a solution economists are advocating inflation -- e.g. implicit default on government debt.
We face a dire situation because there's been this massive abuse of trust in private markets. Now all the mainstream economists are arguing that the solution is a massive abuse of trust by the US government.
There are no shortcuts to prosperity.
If somebody tells you that we can escape the consequences of our failures by concocting some greater failure to hide behind, then I think you're speaking to a con artist.
Maybe deflation is so painful precisely because it forces us to confront our mistakes.
Maybe the most prosperous period in American history followed the worst deflation imaginable precisely because it brought us crashing down to earth and forced us to confront our own failings face to face.
Or maybe WWII bailed us out by forcing us to confront something unimaginably worse...
The commodity cannot get too far away from the true underlying physical price because otherwise the commercial players (who do this for real) would arbitrage away the difference.
Speculators can make 10-20% maybe, but not 300%.
I know one speculator who made 300% on DGL puts in a single day.
I agree about the arbitrageurs though. As long as they have a few empty supertankers and mammoth underground storage facilities, ain't no one going to screw with them.
Unless somebody realizes that actually holding oil and holding contracts for delivery are not quite the same thing.
Still, I remain skeptical.
If hedge funds are pumping hundreds of billions of dollars of leverage into commodity markets, that might motivate a few people.
But I seriously doubt that anybody would bother to build the infrastructure necessary to hoard commodities for such a pittance.
S&L Crisis and Dodd Senate Bank Hearing, See Itchy & Scratchy
Many aspects of The Itchy & Scratchy show are a parody of Walt Disney movies and include shorts such as "Steamboat Itchy", a parody of Steamboat Willie; "Scratchtasia", a parody of Fantasia; and "Pinitchio", a parody of Pinocchio.[11]
Indeed, the relationship between Roger Myers and Chester J. Lampwick closely parallels the real-life relationship between Walt Disney and animator Ub Iwerks. Iwerks did much of the early work on Mickey Mouse, before falling out with Disney in the late 1920s, and the Rich Uncle Skeleton character created by Chester J. Lampwick very closely resembles the antagonist in Iwerk's well-known Flip the Frog cartoon Spooks.
Itchy and Scratchy often play out an exaggerated form of the conflict in the surrounding episode. For example, when the Simpson children are taken into foster care, they watch an Itchy and Scratchy cartoon with a similar theme[12], and when Homer is recruited by NASA, he watches an Itchy and Scratchy cartoon which directly (and gruesomely) parodies the films 2001: A Space Odyssey and Alien.[13]
Itchy and Scratchy have occasionally been used to parody the work of famous directors specifically. One episode, "Reservoir Cats" is supposedly guest-directed by Quentin Tarantino and parodies Tarantino's films Reservoir Dogs and Pulp Fiction. Another cartoon was "guest directed" by Oliver Stone and shows Itchy shooting Scratchy in a manner similar to Jack Ruby's murder of Lee Harvey Oswald, in reference to Stone's film JFK.
In the episode "The Day the Violence Died" there was a clip from a 1970s-era X-rated Itchy & Scratchy cartoon titled "Itchy & Scratchy meet Fritz the Cat". According to Comic Book Guy only bootleg copies are available "because of its frank depiction of sex and narcotic consumption".
The heaviest element known to science was recently discovered by physicists. The element, tentatively named Bureaucratonium, has no protons or electrons and thus has an atomic number of 0. However, it does have
This gives it an atomic mass of 312. The 312 particles are held together by a force that involves the continuous exchange of meson-like particles called morons.
Since it has no electrons, Bureaucratonium is inert. However it can be detected chemically as it impedes every action with which it comes in contact. According to the discoverers, a minute amount of Bureaucratonium caused one reaction to take four days to complete when it would have normally occurred in less than one second.
Bureaucratonium has a normal half-life of approximately three years, at which time it does not actually decay but instead undergoes a reorganization in which assistant neutrons, vice neutrons and assistant vice neutrons exchange places. Some studies have shown that atomic mass actually increases after each reorganization.
"If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods." AG
tg | 04.05.08 - 12:54 am | #
No debt, barter, horde, cash only, no taxable income, grow your own. Corporations don't pay taxes consumers of their products and their worker do, goverment worker are the tax so they don't pay taxes either in reality. Think I'll pass.
Stephen Pizzo is one of my favorite writers- his book on the S&L crisis is certainly worth a read, although I think it might be out of print (if so, it will probably soon be back in print).
The article describes the plight facing small banks since they will not be able to raise enough new capital to avert BK.
A retired banker raised this issue with me last week. He, too, thinks many will go BK.
April 2 - Financial Times (Richard Lapper): Migrant workers are choosing to move to Europe, Australia or Canada instead of the US in order to protect the purchasing power of the money they send home to their families, according to one of the worlds leading experts on remittances. The shift is a result of sharp falls in the value of the US dollar against other international currencies We are seeing workers from Bangladesh, Nepal and especially the Philippines choosing destinations where theyll get paid in stronger currencies, Dilip Ratha, head of the World Banks remittances and migration unit, told the Financial Times. Mr Ratha said the trend was especially notable among skilled workers, such as doctors, nurses and information technology specialists.
Plus they won't get the pleasure of paying for this mess.
Anonymous,
The devaluation of the dollar, for now, is a result of the rest of the world not trusting our national politicians to be fiscally responsible. I don't blame them. We are approaching $10 trillion in national debt. That's about $30k for every person in the US. The cost of that is about $1,200 a year per person. Every penny comes out of the economy.
The devaluation of the dollar, for now, is a result of the rest of the world not trusting our national politicians to be fiscally responsible.
It isn't just the politicians lama - the bigger problem is the decades and decades of CAD. I mean no one put a gun to our heads to load up on Japanese cars, Chinese toys, Malaysian shirts and Indian software - they were there & we bought.
If we ran up huge gov't deficits and 'owed it to ourselves' (didn't sell the debt overseas - or at least exported enough to offset whet we borrowed) it would be like me owing me - not a big problem. The problem is we owe it to a lot of others besides us - that can best be seen in the decades where we (1) consumed our own production and (2) consumed a lot of their production too... then made up the difference between our own production & consumption via debt growth.
That really is the problem with the dollar vis-a-vis what others will pay for it in their currency (in the FX)... is what will it buy in real goods now that everyone and their mother outside the US already has reserves bigger than they need times about four? Answer: a lot less & the dollar exchange reflects that.
I keep expecting Truth, Justice, and the American Way to get a little respect. I guess I learned my lesson at some point, because I protected myself & family pretty well from this shitstorm so far, but it still really pisses me off. [MLM]
Drive across the U.S. sometime. Most of the folks are decent, hardworking, you name it, people. Some have rather provincial attitudes on social issues, but not as many as you might think.
Stay away from banks, corporations, and the media.
Now, whether or not this type of person has any real power in this country to change anything, that's another matter entirely. Perhaps we'll find out in November.
Now, whether or not this type of person has any real power in this country to change anything, that's another matter entirely. Perhaps we'll find out in November.
Do you really think that either political party is the solution? Both are worthless, and November won't change a thing.
For you fisherfolks out there I will track down an old Farside comic that is an old, yellowed treasure in a frame in my parents' house - two guys are in a boat fishing and there is a big mushroom cloud on the horizon and one says to the other, "I'll tell you what this means - forget the size restriction and screw the limit!"
Anyone born after 1970 has no reason to vote for Republicans and Democrats, since both parties have placed unsurmountable burdens on the next generation(s). It's taken me up to this point to realize this.
USD doesn't just buy less commodities than it did a few years ago:
After a divorce in 2000, Ms. Moeller used the proceeds from her settlement to buy and rent out real estate in London, where she had been raising her three children. Then she moved home to the Detroit area.
I knew the pound would be appreciating against the dollar, and it would be easier if I had money in pounds and spent it in dollars, she explained.
Last year, when Ms. Moeller calculated that London real estate, as well as appreciation between the pound and the dollar, had reached historic highs, she sold a home she had bought for the equivalent of $1.6 million. Lets not be greedy, she recalled thinking. The house fetched almost $7.7 million.
Too big to fail? During the early Crusades the Templars were the "global" private banking system, loosely supervised by the Pope. There are plenty of (revisionist) interpretations of what exactly happened, the fact is that one day the king of France decided to "nationalize" their assets.
Everybody wants to think in cycles and wonder how soon the recession will end. But it's clear that there are regions of the U.S. (Michigan, Ohio) and whole industries that are in permanent decline. The recession will accelerate the rot, and they won't come back even if the greater economy rallies.
The community newspaper industry as we know it, employer to hundreds of thousands of people, is going away.
The community newspaper industry's economic impact is far greater than employing reporters. Here's who also will be hurt:
Printers
Paper suppliers
Delivery services
Local businesses and employers who depend on newpapers for local market advertising
The Internet has killed the newspaper star. At the community level, it's over and it's just a matter of time how long any local paper or community chain can hang on. That includes the biggest of them all, such as the Journal Register Company and even Gannett.
Since some newspapers sponsor defined benefit pensions, it's also very bag news for the PBGC.
Government backing of our debt does not substitute for a sound Economic Structure. And it is the current Structure that is incapable of the necessary economic output to satisfy domestic needs and to generate sufficient exports to exchange for our huge appetite for imported goods and energy resources. Todays services-based economy will no longer suffice. Examining todays job data, one sees that 93,000 goods producing jobs were lost in March after dropping 92,000 in February and 69,000 in January. At the same time, Education, Health, Leisure and Hospitality jobs increased 178,000 during the first quarter. Yet it is more obvious than ever that we need to consume less and produce much more.
Back to the liquidationists. It is my view that our economy will require a massive reallocation of resources. We will be forced to create much less non-productive (especially mortgage and asset-based) Credit in the Financial Sphere, while producing huge additional quantities of tradable goods in the Economic Sphere. In our expansive services sector, there will no choice but to liquidate labor and redirect its efforts. Throughout finance, there will be no alternative than to liquidate bad debt, labor and insolvent institutions again in the name of a necessary redirecting of resources. After an unnecessarily protracted boom, there will be scores of enterprises that will prove uneconomic in the new financial and economic backdrop. Liquidation will be unavoidable, policymaker hopes and dreams notwithstanding.
From this evening's vantage point, recent extraordinary government measures to back U.S. finance appear likely to delay the adjustment process what I will be referring to as a depression. This reprieve, however, comes with a cost. It will ensure significantly greater damage to the core of our monetary system, as well as requiring a more onerous real economy liquidation with the inevitable onset of the more serious phase of the unfolding crisis.
Dry,
I'll agree that we keep electing the pols who tell us happy stories. To that extent, it is our fault. Other than that, you have to count on J6P to follow the path of least resistance. If it's easier to spend than save, you get spenders. If it's easier to find fast food than vegetables, you get a nation of fat people.
I would expect however, that a pol with any scruples at all to running up a debt like we have. Unfortunately, there aren't any in Washington.
The budget deficit takes the trade deficit along with it wherever it goes, like a ball and ankle iron.
Anyway, I agree with your additional points. I just don't like politicians. At least in the US we have the ability to point out their failings.
But it's clear that there are regions of the U.S. (Michigan, Ohio) and whole industries that are in permanent decline.
not so sure I agree that those regions will be in PERMANENT decline. although it is true that the rust belt is suffering, I'm not ready to throw in the towel and call them permanently declining.
Michigan/Ohio in particular.
Michigan has one of the best universities in the nation, as well as hard core business capabilities. so you have educated, trained, and desperate people.
if I were a business in California I would strongly consider leaving and heading to the Rust belt.
you'd get those educated and trained desperate people as employees, plus possibly low overhead and also significant tax breaks.
I would expect however, that a pol with any scruples at all to running up a debt like we have. Unfortunately, there aren't any in Washington.
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our
children a legacy of bankruptcy. We have defrauded our country to get ourselves elected."
Prepare yourselves, I'm going to say something nice about perma-bears.
People like Doug Noland, David Tice, et al, have always gotten it. Good perma-bear research is typically of high quality.
But even the best of them can't time the impact of their conclusions on the economy or the stock market with enough precision to be of practical use.
We're seeing an example of that in microcosm right here. At the beginning of 2007, CR made a forecast of 400k-600k in residential construction job losses by Summer, 2007.
Also (and I'll certainly apologize if this is an unfair characterization) he's been pretty much expecting a recession since about the same time (along with many others here), and was even so confident recently as to add "probable beginning of recession" bars to some of his charts.
Yet it's only been recently that the loss of residential construction jobs has approached the lower end of his forecast, while recession continues to dance just out of reach.
Meanwhile, the massive, economy-killing losses from the real-estate/mortgage derivative "bust" continue to be underwhelming. SP500 earnings losses from financials are largely being made-up by higher earnings from other sectors. Losses in financials may wind-up running into the multi-hundred billions of dollars, but net-net the impact so far is under -$150 billion (2007 earnings vs. 2006 earnings).
And get this comment from the blogger: "I would prefer to stop publishing the model, as I believe it failed to adequately predict the current recession in a relatively low interest rate environment: the 2007 reading should have reached as high as 80%. Some readers, however, have indicated that they still find the chart useful; so I continue to include it for their benefit."
(asterisks mine)
That's a slippery slope which often gets people into trouble. In retrospect, after making a bad call, they always say (if they're self-aware enough) "Yeah, I second-guessed my own rules/indicators."
OK Anonymous, There's one who may have had a conscience years ago. Maybe he doesn't appear as badly in comparison to Dodd or Schumer. The cream of the crap.
OT anecdote 1: I'm a consultant and on the road alot. I got some laughs years ago when Congress tried to enact legislation to the effect:
"All frequent flyer/incentive programs are taxable to all US citizens except for members of Congress."
OT anecdote 2: I worked on 3rd Ave in NY in the same building as Schumer's HQ's. A collection agent was there one morning trying to find one of Schumer's aids who owed on his car loan. The apple doesn't fall far from the tree.
It appears as though CR was right big-time on housing, wrong big-time on oil prices, right on the trade deficit, wrong on the economy, wrong on Fed timing (although in fairness he did say that it would be slow to respond), and wrong on 10-year rates.
x, Carlin is great.
A friend from Europe was visiting. We were at a mall on a weekend filled with people. He remarked "good thing these people are all at the mall. Imagine them all reading books." He went on to opine that it's a good thing for those in power that the minions had a couple of bucks to spend. Interesting.
[Meanwhile, the massive, economy-killing losses from the real-estate/mortgage derivative "bust" continue to be underwhelming]
Brought to you courtesy of the proud owner of NEW stock certificates.
Think BSC = NEW. How many others? The Fed has its limits. Next time shareholders will be wiped out over the weekend and assets trasferred to a marginally more solvent institution. There's a limit there too.
Once the CDS system gets tested we'll find out. Credit contraction is only just getting started and spreading to the REAL economy with job losses.
A LONG way to go. How long is anyone's guess and timing the impact to individual company shares is impossible. Direction for equities should be pretty obvious by now, even to you.
Where in Europe is your friend from? If it's a spot where people spend at least a part of their weekends reading books, I may want to consider the expat experience. Seriously.
Burnside, He's from Greece. Can you believe he mostly does Sarbanes-Oxley work in Eastern Europe (Subsidiaries of US companies)?
I think there's people everywhere who read. I spend too much time reading contracts and technical accounting stuff. We have one 19 inch TV my wife bought on Craigslist. I have another friend who turns his TV against the wall. If he wants to watch it, he has to turn it around. He seldom makes the effort.
So, if we had the time, we could find another couple of CR's predictions. Does that inform anyone? And why do you insist that everyone on this site has the same opinions with your blanket insults? Without knowing it you are simply screaming for attention from strangers.
lama
I am reporting you to the Best Buy 5ft falt screen tv for only 350 payments police. What you are doing is Unamerican. shame shame shame. And, I suppose you will also get your rebate check and put it in a cd. The horor of it all.
Naturally, people do read everywhere as you say. I think what I'm looking for is somewhere where there's much less anti-cultural bias, which seems to me very strong in the USA. Our strong suit is a sort of can-do go-ahead quality. We are very busy.
lama said: "So, if we had the time, we could find another couple of CR's predictions. Does that inform anyone?"
(Some of my predictions, too. NEW, of course, and I was surprised that the broad market corrected as far as it did between October and March.)
If viewed from the shallow, ego-based standpoint of "Was he right or was he wrong?", no, no one is informed.
If viewed from the more productive standpoint "That didn't turn out like he thought, what does that tell us?", that's extremely informative.
There should only be a stigma attached to "wrong" forecasts if one maintains the forecast without re-evaluating to see if anything new is to be learned. Unfortunately, that doesn't seem to be what CR is doing.
The housing indicators he's using seem to be working very well in timing the housing market, and even housing and mortgage/financial-related stocks. But not the economy, the broad stock market or interest rates.
He rationalized his incorrect forecast of 400k-600k in residential construction job-losses by Summer, 2007 as being caused by errors in the data or the way the data was collected or how jobs were defined...but not by the fact that things weren't unwinding on the timetable he expected.
His recession expectation remains, it just gets pushed-out further, and posters here are incorrectly assuming that this is the right way to go about forecasting recessions.
CR, Tanta, and others here routinely post forecasts from the villain-de-jour that subsequently turned out to be wrong, even ridiculously so, mostly for sport, rarely for illumination.
I'm just trying to do the same thing, but for the illumination. If it illuminates something you'd prefer not to see, that's not my look-out.
"Yet it's only been recently that the loss of residential construction jobs has approached the lower end of his forecast, while recession continues to dance just out of reach."
Folks, we won't know we're officially in recession until the thing is over - unless it's really, really, really bad.
I see Sebastien dropped his mantra of peaking unemployment, which was based on his interpretation of a .1% non-statistically significant downtick in the unemployment rate. That theory got annhilated in the latest household report.(Plus the unemployment claims data are hardly benign.)
Anyway, you can't compare real-time data of the current recession versus historical data. A lot of jobs are going to be revised out of existence (i.e., the birth/death model plug ins get thrown out as the real data arrive).
On the GDP side, we only have 2007Q4 data - quarterly. Which may not be negative if the recession starts in December (1/3 of the quarter). In any event, the GDP data will be revised all to heck in the coming years, and is affected by some strange GDP accounting effects. E.g., oil import price rise -> falling GDP deflator (since imports enter GDP with a negative sign) -> higher real growth for the same nominal growth.
Admittedly, equities have not been completely crushed, and so Sebastien has thus not been completely wrong. That said, the massive rally we've seen in the Treasury market is not indicative of a strong economy. (I believe Sebastien was proud of saying he looks at "levels of yields" and not just the slope, which tells me he's either dishonest or a bit thick.)
Hey pd130 (not that you'll see this, this far downthread).
There was an incident that started in August of 1990 that took the focus off the S&L debacle: Gulf War - Wikipedia, the free encyclopedia
bond guy said: "(I believe Sebastien was proud of saying he looks at "levels of yields" and not just the slope, which tells me he's either dishonest or a bit thick.)"
Right. When I re-finance my mortgage and they offer me a 5.5% fixed-rate, I'm going to ask for 10.5% and have them adjust it down by 1% a year until it reaches 5.5%.
That's what you mean, right? That slope is the key and the level doesn't matter?
bond guy,
I also predicted equities would not get crushed as I personally know lots of European investors are bottom fishing on our cheap dollar for equities and extrapolated that.
No Seb, you look at both levels and slopes. You know that's what he meant.
Do you think writing "Respectfully" at the end of a exonerates you from being a troll? It just makes you the Stepford Troll.
jo6pac writes:
Old book but well written Inside Job.
jo6pac | 04.04.08 - 7:49 pm | #
I still have the book and have loaned it to my colleagues. The amount of corruption was astounding, and this current crises will be magnitudes worse. If the S&L was a 5.0 quake, the mortgatge/IB disaster is an 8.0.
There is a transcript in the book of McCain and the other 5 senators meeting with regulators. What is amazing is Mac's surprise that auditors would give an unqualified audit knowing that the S&L was not solvent. The regulator had to explain to Mac who pays the auditor and why they were compromised.
Since some newspapers sponsor defined benefit pensions, it's also very bag news for the PBGC.
rich
The PBGC will only be concerned if those same newspapers did not fully fund their pension funds as they are legally obligated to do.
Of course, I believe it is standard corporate practice here in the USA to underfund the pension in order to pay obscenely large bonuses to top management, the same guys whose decisions have driven the company under.
Robber barons? Why, yes. Yes, they are. Read Mancur Olson.
"Neuter" we dawgs shrink at the mere mention.
As has often been noted, "History may not repeat itself, but it does rhyme a lot" (Mark Twain)
Ah, Socialism is a wonderful thing. It's really long past time we acknowledged that Lenin was right.
Honk if you want McCain to help SIFMA destroy America!
Honk!!
I might be able to pick up some brimstone and fire tips; thanks!
Ok, not really Lenin. Mostly Marx and Engels.
Actually I am not exactly sure in what way his testimony was prescient... Clearly a number of things went awry in the last few years but program trades and fraudulent self-dealings do not rank high at the top of the list.
Socialism? Propping up huge corporations with public money isn't socialism. It's corporatism run amok.
Old book but well written Inside Job.
So the Republicans want to bail out the corporations who were stupid enough to lend money to the dead beat borrowers.
And the Democrats want to bail out the dead beat borrowers who were stupid enough to take the loans from the corporations.
Is there any one who represents the citizens who lived within their means, worked hard, and are tired of handouts to BOTH corporations AND people?
Can we talk about fiduciary duty? Those who have the power to make the loan have the ethical and legal obligation to make loans only to those who can repay them. And they have a box full of tools to determine who can and can't.
At this point in the debacle, I'm not having a lot of sympathy for the banks. They made their bed. They should have to sleep in it.
I am so with Doom - that sounds wierd.
i don't remember the s&l crisis to be about credit and lending. Wasn't it about borrowing short and lending long?
there was some outrageous corruption that came to light when cleaning up the mess...but i don't remember them being the cause of it.
was it?
This testimony shows we're doomed.
So many (Democrat politicians for instance) are willing to live with the bailout of fat-cat banks, so long as regulation is introduced. Even if they do get their regulation, the financial industry will find a way to rob us blind.
doom,
I don't want to bore you with a great deal of detail, but I can assure you that the middle class is taken for granted with respect to taxes. You pay them, the government extracts a large percentage as a processing fee, then the rest is funneled to whatever...lots of entitlements programs, etc.
The rich pay lots of taxes (it's true), but there isn't that many of them. The poor don't pay much in taxes. So, it's your job to pay taxes and behave yourself.
"So many (Democrat politicians for instance) are willing to live with the bailout of fat-cat banks, so long as regulation is introduced. Even if they do get their regulation, the financial industry will find a way to rob us blind."
I'd put up with it if house was cleaned. But these days I'm not sure that'll happen. Not until the roof falls in, anyway. That's what it took in the '30s.
"Is there any one who represents the citizens who lived within their means, worked hard, and are tired of handouts to BOTH corporations AND people?"
Look in the mirror. Then call, mail and fax your gubbermint reps.
Otherwise, STFU.
was it?
It had a lot to do with it. Pizzo&al.'s Inside Job surveys the landscape, and is pretty entertaining besides. Then of things Amazon or Powell's can get for you pretty quickly, there are Calavita&al. Big Money Crime and Black The Best Way to Rob a Bank Is to Own One. Any or all of those suggests strongly that fraud was far, far, far from irrelevant. A most under-studied episode, imo.
But, if this bill passes, and it ends badly, as I am certain it will, voters will hold Congress to a much higher standard of accountability than it was in the aftermath of Garn-St Germain. - from Pizzo's testimony
Well, I would say that's the one aspect he had wrong. The American public will be as easily led as usual. Throw them a tax rebate and get the inflation cooker going and they'll go back to more important concerns, like banning gay marriage, putting illegal immigrants in jail, etc.
Moody's downgrades Countrywide bank to "D" (as in Default)
<a href="http://losangeles.bizjournals.com/losangeles/stories/2008/03/31/daily40.html?ana=yfcpc>Goodbye
Guess there was a reason those CD's paid 6% ... and not a good one. You really didn't think we'd make it through another week without a bank failure, didja?
FDIC officers, take yours position, move in for the takeover on command ...
Moody's downgrades CountryWide bank to 'D' rating:
Moody's downgrades Countrywide Bank - Los Angeles Business from bizjournals:
great minds think alike ... now can we get Mozilo perp walked, please?
I swear, if I wake up on Monday and find out the Countrywide gets bailed out I better see Mozillo on TV with a black eye and Bernake's right hand in an ace bandage!!!
MBIA lost its AAA rating. Wasn't that the topic of discussion going back a few months ago? Wasn't it going to crash the markets if that would have happened? Isn't that why CNBC stepped in with rumors to stop the bleeding?
So what happened? Where's my "Dow Down, 500 points" Day?
Oh I forgot. The jobs #'s were a complete disaster today. Unemployment up also. Oh, OK. Now I get it. That's why the market didn't tumble today?
I'll bet Bernanke could use some help with this mess,is Neil Bush still around?
So what happened? Where's my "Dow Down, 500 points" Day?
Oh I forgot. The jobs #'s were a complete disaster today. Unemployment up also. Oh, OK. Now I get it. That's why the market didn't tumble today?
doom
Best question I've seen today. What's keeping the market up? Hovercraft?
I'll bet Bernanke could use some help with this mess,is Neil Bush still around?
Tom Stone
I thought he caught the incurable bull-head clap from one of those Thai hookers that he didn't know was a hooker? Didn't he get a divorce over that? Unless he can show a felony conviction, I don't think he can make it in this administration. Too light.
doom writes:
Is there any one who represents the citizens who lived within their means, worked hard, and are tired of handouts to BOTH corporations AND people?
Do you really want someone to represent you or do you just want a pat on the back and a cookie?
You can have your 'Moral Superiority' and even if you aren't destitute a lot of other people not involved on either side of this will be.
Or you can begrudgingly bail out one or both sides knowing its for your own good and the good of others, not just for them.
Anyone else notice that O-Joe and Sebastian disappear anytime things in the credit crisis dept start to heat up?
Of course they come back like a bad fungus whenever we get a 400 pt jam-job on the Dow.
They remind me of a playground bully who only has the courage to pick on you when his buddies are around.
A Cat,
I don't need a pat on the back and I worked hard all my life and lived within my means so I can buy my own cookie, thank you.
I don't see why bailing out one side or the other is my American duty?
We ALL make decisions, some good and some not-so-good. From the bad ones we learn. UNLESS, someone bails our asses. Then we DON'T learn. We just do it again.
I'm doing it for the good of the country
NO BAILOUT FOR ANYONE!
Learn from your mistakes and you'll be better for it in the future.
From the links:
What is amazing to those of us who remember those days and witnesses the aftermath of Garn-St Germain is that so many in Congress appear eager to follow this demented pied piper a second time.
The Garn-St Germain Depository Institutions Act of 1982 was a United States federal law enacted in 1982 that deregulated the Savings and Loan industry. This Act turned out to be one of many contributing factors that lead to the Savings and Loan crisis of the late 1980s.
As I said, in the beginning, I have no illusion that my testimony will sway anyone or that I can overcome the money being lavished on this issue, by the pro-deregulation lobbyists. I did not come here with money; I came, instead, armed only with solid common sense from lessons learned. I can only warn Congress that what they are about to do is unwise.
But, if this bill passes, and it ends badly, as I am certain it will, voters will hold Congress to a much higher standard of accountability than it was in the aftermath of Garn-St Germain. Because this time we know how high the stakes are, and we know that once you destroy barriers between Commerce and the vault, subsequent events will tumble out of control; out of control of regulators, and out of control of Congress.
Turns out he was dead wrong, voters don't give a shit and no one is involved in democracy, except lobby groups!
Okay, I will hazard a guess.
When the next chapter is written, I believe there will be two forms of rampant abuses in small and medium banks.
One will be putting vast amounts of concentrated (by geography, developer, etc.) commercial real estate construction and development loans on the books all at once, in essence just chasing every hot deal that was out there without any risk control. I continue to think Corus Bankshares will be the poster child of this genre.
The other will be concentrating the most risky mortgage-backed derivative garbage, especially CMO squareds and the like, on the books of small banks with modest capital. I posted a link yesterday to a study that identified some of these banks, and I could repeate it if you want.
But I think there may be a third pocket, too.
Small to medium-size life insurance companies that bet the farm on the two areas above and other toxicity, with hugely leveraged capital to asset ratios.
Re: Anyone else notice that O-Joe and Sebastian disappear anytime things in the credit crisis dept start to heat up?
Anyone who would bring up their name is suspect, but I agree anyway, they are a pain!
I guess there's one bright side to Countrywide Bank getting the big 'D': other crappy banks will probably have to raise the rates they pay on deposits to attract people.
Then it turns into a nice game of FDIC Chicken. Will my CD mature before the bank fails?
Why doesn't anybody listen? Why?
I wonder if the DOW will form another head-and-shoulders or maybe just a double-top, with Jan 22 as the neckline. That could make for a violent sell-off in the weeks that lie ahead. Just a thought to consider.
I worked for an S&L in the early 80s, Home Federal, trying to develop an automated loan underwriting program that could be used in the field to approve loans. The underwriting rules were changing on a daily basis, though, so we could never actually finish the damn thing and get it out to the field.
I figured it would all come to tears soon enough. But I had a kid and got chewed out by my boss one day for coming in late when the kids were sick. The same boss who never noticed I was even pregnant til I was seven months along. He and his good buddy the other programmer typically showed up an hour after I did, and apparently it was no big deal that they had missed the meeting that morning, but since I missed the meeting I was never told about in the first place, I was at fault, so he felt free to yell at me for an hour behind closed doors. I quit that day.
I was so, so happy when Home Fed went under shortly after that. So, so happy that misogynistic bastard lost his job, too, along with his idiot boss and all those stupid HR people that wouldn't stand up for me....
And I have zero sympathy for these idiot home lenders or the investment bankers or whoever else loses their shirts in this mess because they decided to play fast and loose. I am just pissed as hell that we who didn't screw around with our houses and savings are getting screwed now having to bail out this mess. I am pissed that the hard-working people who tried to follow the rules and do their jobs were pressured to make bad loans they knew were wrong. I feel for them. But I will cheer every time one of the bastards who created this mess gets their comeuppance. The federal pens just aren't big enough, nor do they have enough tanning booths and bridge clubs to hold them all.
Moody's cuts Countrywide Bank rating to "D"
Moody's cuts Countrywide Bank rating to D
| Reuters
Liquidity at Countrywide Financial and Countrywide Home Loans worsened substantially in the first quarter amid continued weakness in residential mortgages and recessionary forces in the U.S. economy, Moody's said in a statement.
The liquidity issues could impair Countrywide Bank's franchise, Moody's Vice President Craig Emrick said in a statement.
The downgrade does not reflect Countrywide's planned acquisition by Bank of America, however, Moody's said. The rating was lowered from "C-minus" but is on review for upgrade pending completion of the Bank of America acquisition, Moody's said.
Moody's said it believes Countrywide has the liquidity and capital necessary to operate through the planned closing of the proposed acquisition, which is expected in the third quarter of 2008.
"However, the downgrade of the bank financial strength rating provides insight into the severity of the Countrywide ratings transition that would likely take place if the proposed Bank of America acquisition would be terminated," Moody's said.
If the acquisition is not completed, Countrywide Financial's ratings would likely be cut to a few steps below investment grade, in the low "Ba" or high "B" category, Moody's said. Its senior unsecured rating is currently "Baa3," the lowest investment grade.
The top two executives of beleaguered Countrywide Financial Corp. will pocket $19 million in stock next week, according to a regulatory filing. It's the start of a series of multimillion-dollar payments expected to go to the pair before and after the company's pending takeover by Bank of America Corp.
Moody's cut the credit rating of Countrywide (CFC) to "D" for default, over worries about liquidty.
According to Reuters "The downgrade does not reflect Countrywide's planned acquisition by Bank of America (BAC)." It does raise, once again, the issue of what BAC is getting.
"However, the downgrade of the bank financial strength rating provides insight into the severity of the Countrywide ratings transition that would likely take place if the proposed Bank of America acquisition would be terminated," Moody's said according to the Reuters report.
The B52s were also from Ahens, GA. I know musicians. Athens, GA must have some awesome ganja.
i don't remember the s&l crisis to be about credit and lending. Wasn't it about borrowing short and lending long?
That's how it started. Then trying to give them a little leeway they loosened up a few regulations and then Saloman Brothers can up with the nifty idea of mortgage tranches (viz. Liar's Poker by Michael Lewis) and then you had the local S&L execs guided by Wall Street and,...the rest is history. Hoocodanode?
Moodys: Rapid Amortization on HELOCs a Concern
Moody’s: Rapid Amortization on HELOCs a Concern : HousingWire || financial news for the mortgage market
Moodys Investors Service said Wednesday that while Countrywide Financial Corp.s recent fourth quarter earnings report was within expectations, a new loss component disclosed by the nations largest lender may portend problems for other large securitizers of HELOCs.
The area of concern: so-called rapid amortization.
Buried in Countrywides $831 million fourth quarter write-down of residual interests, Moodys said, was a $704 million charge related to rapid amortization on home equity line securitizations.
Oops! Posted that last comment int the wrong window! If you want to know what the hell it was in response to, visit The Big Picture.
Sometimes, I crack myself up.
Marcus- I'm guessing top American bands.
Marcus Aurelius,
Is it Friday yet?
April newsletter is OUT! Yeah ... good bedtime reading CR and Tanta. Mucho gracias.
sdtfs | 04.04.08 - 9:41 pm
BR's post is on REM. They happen to be from Athens, GA.
There you go.
Go figure, I was just listening to Life's Rich Pageant on the train earlier. It holds up pretty well.
Lifes Rich Pageant and Reckoning are the two that still have a place on my iPod
The following is an excerpt from a 10-K SEC Filing, filed by COUNTRYWIDE FINANCIAL CORP on 2/29/2008.
http://sec.edgar-online.com/2008/02/29/0001047469-08-002104/Section16.asp
Prime Home Equity Loans are generally pooled into private-label asset-backed
securities. We generally securitize these loans with limited recourse for credit
losses through retention of residual interests and other subordinated interests,
such as transferor's interests. These securities generally contain credit
enhancement in the form of over-collateralization and insurance provided by a
third-party surety. In some cases, the securitizations also contain mortgage
pool insurance or a limited corporate guarantee as a form of credit enhancement.
As the holder of the residual interest we are in the first loss position. We are
also exposed to additional losses in home equity securitization transactions
that involve insurance issued by third party sureties when losses exceed
specified levels or duration. When this condition, known as rapid amortization,
occurs, the reimbursement we receive from the transfer of additional draws on
the home equity loans becomes subordinated to the claims of all other parties to
the securitization, including bondholders and the third party surety. This
subordination has the effect of deferring reimbursement to us of the subsequent
draws for an extended period and subjecting these subsequent draws to absorption
of credit losses.
We estimate our liability for impairment losses related to our future draw
obligations and update our estimate quarterly. Our provision for estimated
losses arising from future draw obligations is recorded as a component of
impairment of retained interests. The accrued liability for impairment related
to future expected funding obligations under a rapid amortization event was
$704.1 million as of December 31, 2007. The available credit lines for the
securitizations subject to or expected to be subject to a future draw obligation
are approximately $2.4 billion at December 31, 2007. However, due to the
borrower's ability to pay down and redraw balances, a maximum obligation cannot
be defined.
Mock Turtle,
Thanks for the Greenberger/NPR link. It is a real eye opener for one who thought he understood the housing mess.
Pizzo's book "Inside Job" about the S&L fiasco is very powerful. I highly recommend it.
Every now and then I find a post (see below) that makes me realize the scale of the numbers we're dealing with. Billions.. Trillions.... And I certainly dont understand the logic of people here who might have supported the Iraq war or continue to do so, but who are now complaining about taxpayer bailouts for either side - the homeowner or the mortgage holder.
Have a great weekend everyone.
This is post on Krugman - Grains gone Wild.
Gee, 12 million children die every year from malnutrition and starvation. Will even more die this year? How much would it cost to stop this? As much as it takes to bail out one bank? Of course, we all know what is more important the bank.
Posted by Ellis
OT: a whole line-up of personal recession stories.
America's Money: In their own words - Jeff Morin: Enjoying quality time (1) - CNNMoney.com
Why is the market up?
Folks...this is a classic bear market rally. Right out of the textbooks...really. See Japan 1990 and/or US 2001/2. Violent, illogical and dumbfounding at the same time....as it attempts to lure in as much institutional and retail cash as possible along the way.
Can the rally extend and last a bit longer? Absolutely. Plenty of nervous shorts, lots of cash in money market funds (sorry for those trapped in auction rate preferreds - you don't get to play) oversold conditions and lighter supply of new issue paper to gobble up cash...all technically constructive for the market to move higher.
It is right on cue performing the job of a classic bear market rally; to eventually punish as many investors as possible.
When it eventually runs out of gas...it'll take your breath away, IMHO.
Do your own due diligence
Good luck to all
RS
Many Las Vegas Nevada RISK takers would confer a lot of currency to be
anywhere I am precise now. In
Las Vegas Nevada a portion of information many people are achievement
immediately that. I wouldnt furnish a nickel (U.S. $0.05) for it all. What is
"fun"? What is "delight" to you? Your reply to these vital questions reveals a
lot as regards you. I am at Caesars Bastion in glittering Las Vegas Nevada
attending a workstation seminar on behalf of my employer. This Las Vegas Nevada
place is pertinently named, for the decadence which led to the reject and
descend of the Roman Empire is openly practiced at Caesars Palace. Caesars is
one of the most glamorous hotel/resort/casinos on the famous "Las Vegas Nevada
strip." Las Vegas Nevada is the gambling capital of America, perchance of the
earth. Millions of making a bet, night club hopping tourists use billions of
dollars in the Las Vegas Nevada unproductive desert. To comprise an all expenses
paid trip to a luxury hotel in the midst of Las Vegas Nevada would be a dream
come accurate for many. It means nothing to me. I came at this point to learn
about computers, not to gamble and revel. This is a statement to you of Las
Vegas Nevada and its popular "pleasures." I will keep asking you the query is
this your brainchild of "fun" and "pleasure".Caesars Palace is a beautiful
place. Water fountains are brilliantly lit up at night. Marble statues of Roman
emperors, naked gods and goddesses ornament this "palace." Long, elevated
escalators called "people movers" conduct visitors into the resort, along with
the recorded voice of quot;Caesar" friendly you to this "bastion of happiness" of the Roman Empire. For $50 you can experience an real Roman feast, a "bacchanal." The casino winds seemingly endlessly for acres. Hundreds of slot tackle, gaming tables for roulette, baccarat, craps, blackjack and poker are jammed by resources of people all day in Las Vegas Nevada and most of the night seven days a week. Keno (a game in which you decide on numbers from 1 from first to last 80) is incredibly admired. One Las Vegas Nevada colossal part is the sports having a bet area, with horse contest data, sports events listed and huge television screens showing several sports events starting around the country. One can bet on roughly any sports episode. Plush Las Vegas Nevada carpets, dim lights, uncontaminated cheek and crystal fixtures allot the casino feeling a luxurious, pleasing texture.In order to create a centre of attention crowds, the casinos on the strips have some of the planets most illustrious and resourceful neon illumination. Meals are advertised at low prices to gain more customers. World famous Las Vegas Nevada entertainers such as List Cosby, Joan Rivers, Tom Jones, etc. are currently singing at night shows. Caesars Stronghold amusement showcase is called the "Show Maximus." Watching people gamble is accurately an education. Casino personnel are trained to be stoic, unemotional professionals. High Las Vegas Nevada stakes are bet on the gaming tables without any sensation. The Las Vegas Nevada gamblers, specially the ones playing the slit gear, seem to be machinery themselves, putting in coin subsequent to coin and pulling the switch of the "one-armed bandit." Are the retired people, or the younger people
here really having lots of fun in Las Vegas Nevada.
.
It should be noted this was written in 1991, right?
"Best question I've seen today. What's keeping the market up? Hovercraft?"
Nope
It's Hope
A strong dope.
Rich, can you post that link again regarding the banks with lots of CMO exposure? Thanks.
The symptoms are clearly there. Recessions dont happen smoothly. They are usually signaled by a discontinuity in the market place, and the data of recent weeks could very well be characterized in that manner, he said.
Specifically, he cited a drop in the Institute for Supply Managements purchasing managers index to 47.7 in December after several months just above 50, the dividing line between expanding and contracting manufacturing activity. While by no means conclusive, [that] is the type of thing, if we were going into recession, wed observe.
Article: Man Who Enabled Bubble, Admits Recession « chrisco.us
Article: Man Who Enabled Bubble, Admits Recessio
Re: Specifically, he cited a drop in the Institute for Supply Managements purchasing managers index to 47.7 in December after several months just above 50, the dividing line between expanding and contracting manufacturing activity. While by no means conclusive, [that] is the type of thing, if we were going into recession, wed observe.
Donna,
Have a glass of wine and chill. Its Friday night. Don't blow a gasket, it ain't worth it.
OT - My broker DOES NOT report stock option sales on the 1099B they share with the IRS. They don't even show gross proceeds.
Anyone else have a broker that operates like that?
Here's a part of the Pizzo written statement that's interesting:
"Bankers want a piece of the insurance business as well. This idea was also tried by the S&Ls and proved just another way to loot the system. Many of the old S&L crowd - Gene Phillips, Charles Keating, Jr., Herman Beebe, Mike Milken - also had their hooks in insurance companies that have since failed: Pacific Standard Life, Executive Life, AMI Life, and a daisy chain of Texas insurance companies, to mention a few. An associate of a major S&L defaulter testified in court recently... "Wayne told me -that the S&Ls were tapped out and that we should find a new source for money. He told me we should consider getting into the insurance business.'
Life insurance companies will be front and center in this crisis. I don't think it will happen quite the same way it did before. In the "New School" insurance fraud, greedy owners and sr. managers hire "young gun risk managers" to explain how to align assets and liabilities and "manage risks" with AAA-rated CDO squared instruments leveraged (through the insurance company's policyholder base + derivative leverage) up to 40-50 times. Of course, the insurance company sr. managers will have cozy relationships with Wall Street IB underwriters of CDO squareds.
It won't be the FDIC picking up the risk tab with life insurance companies. It will be the policyholders and and (in some cases) feeble state guaranty funds.
After this ends, I doubt most Americans look at "life insurance company guarantees" the same way again.
Noble writes:
"And I certainly dont understand the logic of people here who might have supported the Iraq war or continue to do so, but who are now complaining about taxpayer bailouts for either side - the homeowner or the mortgage holder."
I quess that would be me. Yes I MISTAKENLY supported the Iraq war. I think it was over 80% of the population that heard the president's bullshit (and based on that bullshit) supported the war.
I don't support it anymore because I LEARNED!!!!!!!
See my point. With mistakes, you learn!!! Let Wall Street AND the people learn that you shouldn't be too greedy. Yes, there are innocents involved. I feel bad for those companies and those people.
But it is not my duty to bail them out. I bet that neither the companies nor the individuals would have shared in their gains with me and my family if everything would have worked out as they had planned.
I don't agree with privatizing the gains and socializing the losses.
We have shown that market crashes are associated with higher than usual volatility, that often precedes a bear market. After market price bottoms there is usually a period of lower than average volatility that is associated with rising market prices.
Crash
"Is there any one who represents the citizens who lived within their means, worked hard, and are tired of handouts to BOTH corporations AND people?"
No, because you can obviously take care of yourself. Katrina taught me that.
"Is there any one who represents the citizens who lived within their means, worked hard, and are tired of handouts to BOTH corporations AND people?"
No, because you can obviously take care of yourself. Katrina taught me that.
NPR audio interview referenced above. Really good!
Our Confusing Economy, Explained : NPR
I don't agree with privatizing the gains and socializing the losses.
doom
Nor do I. I'm all about prison sentences for those who violated their duty of fiduciary care.
No, because you can obviously take care of yourself. Katrina taught me that.
Brian in New Orleans
I was in Gulfport when Katrina blew through. A bigger fiasco I have never seen and I hope I never see another one. At that point, I knew there was no justice here in America.
The federal pens just aren't big enough
Better have another glass of wine Donna, because after we get past the few unlucky scumbags who became examples, my guess is the vast majority of S&L crooks are living large on their ill-gotten gains.
My only question is what use are ratings agencies when they decide to downgrade companies only after they have defaulted and/or declared bankruptcy?
A bunch of 6 year olds could tell you that investing in a company that cant pay its bills is a BAD idea.
I heard Moody's is finally gonna get around to downgrading Enron. Thats just a rumor though.
This is so very goddamn true. As I've always said..if Americans really understood their banks and the sorry duplicate and expensive Federal and State regulators they would withdraw every last dime of their hard earned money in short order.
great post here, CR. i clicked the link and read the article in full. and yes, it was nice work, Stephen. now, please excuse me while i go vomit, because they didn't listen to you.
This is post on Krugman - Grains gone Wild.
I like Krugman, but alas he's an economist, and and I have to assume he suffers the same sort of blindess to things that contradict contradict contemporary orthodoxy.
From his blog post I got the impression that he was a little bit baffled as to the cause.
Food prices are exploding. Not long ago we were worried about falling food prices.
Why?
Did the population suddenly double?
Did agricultural output suddenly collapse?
I hear a lot of superficially convincing arguments about why these parabolic price increases are fundamentally justified.
They're almost as good as the arguments I got as to why the rising prices of houses and dot.com stocks were justified.
I've heard Krugman advocating rate cuts to boost spending recently.
Inflate your way to prosperity.
Everytime we do that we get explosive price bubbles and severe financial and economic damage.
Grains are going wild because excessive credit allows a person or company to buy contracts for obscene amounts of it that they could never use or even afford to buy with their own incomes. Enough people start doing that and prices explode regardless of fundamentals.
It's likely that the ultimate cause of grains going wild are the economists who keep trying to fix every problem that comes along with inflation despite a decade of crises spawned by inflationary fixes.
You don't make an economy better by handing out more and more money. Though for a while it feels better.
The idea that throwing lots of pieces of paper around will make the economy better is a bit hard for me to swallow.
Actually it strikes me as patently absurd. The idea of paper being some kind of solution to deep structural problems in the economy IMO defies common sense in a uniquely obscene way.
A healthy economy is not made out of paper. It is made out of knowledge, hard work, resourcefulness, cooperation, and foresight.
By convincing the nation that an increase in the production of paper is the path to economic success, I think we've undermined the real drivers behind prosperity and allowed them to atrophy.
Why work? Why think? Why learn? Why collaborate? Why think about consequences?
All we need is a lot of paper and everything is taken care of for us.
The Fed, our paper wielding hero, is always at our side.
Update: National City Corp. Shopping For A Buyer
National City Corporation Shopping for a Buyer -- Seeking Alpha
Major Victory for MAXXAM in On-Going Lawsuit Against FDIC
Page Cannot Be Found
Did the population suddenly double?
Did agricultural output suddenly collapse?
ac,
Yes, you know the true fundamentals.
The rest of this is bullshit. Pardon my language.
You don't make an economy better by handing out more and more money.
You do make it better IF the economy is in deflation where money supply is collapsing in aggregate.
Are we facing real deflation... in aggregate?
At this point I wonder if the US is just to large to function properly on any level. Too much money, too much diffusion of responsibility, typical end of the empire stuff I guess.
My husband believes that consciously (or not) the PTB will never let the market crash.
He's probably right as at this point the key is to keep the masses from asking for their money back.
Did the population suddenly double?
Did agricultural output suddenly collapse?
Was just thinking this today after looking at and/or posting charts yesterday for oil, gold, wheat and copper. Maybe it's Peak Everything(tm), or maybe it's something else.
Are we facing real deflation... in aggregate?
dryfly
I don't really know. It's a related-rates problem. The money supply is contracting, both from Fed action and from the collapse of credit (both exogenous and endogenous money supplies going down).
But that says nothing about whether the money supply is contracting at the same pace the economy is contracting. Besides, that likely both impossible and meaningless as the economy is not monolithic. Some parts are doing fine, others are tanking, and a root mean square approach penalizes the one while not covering the debacle of the other.
Did the population suddenly double?
Did agricultural output suddenly collapse?
No. A lot of fuel price inflation has finally worked its way through the system at the same time new uses for grains have arrived at economically significant levels. Also, the dollar continues it's death spiral while grain selling overseas for the same number of dollars is (too) cheap. Ergo, prices must go up.
I got your credit collapse right here, as the saying goes:
http://thumbsnap.com/v/UUg3tLeJ.gif
Some parts are doing fine, others are tanking
Exactly. The parts that are doing fine certainly include commodities.
The FDIC is boosting their staff for to get prepared for bank closures. They are adding 60% to their division that handles bank foreclosures.
I don't really know.
Me either. We've gone around & around on this here.
Some parts are doing fine, others are tanking, and a root mean square approach penalizes the one while not covering the debacle of the other.
R. Manhammer | 04.04.08 - 11:52 pm | #
But if we experience aggregate deflation then almost ALL sectors will suffer... that's the problem with ignoring it.
Someone posted a couple of days ago about giving away our grain stockpile during some foreign crisis. (Sorry, can't remember exactly). Let's face it, though, grain only lasts a year or two in stockpile. It has been replenished and replaced many times since then. And it will be distributed (in this country) if necessary. A grain bubble is not like a housing bubble - the government would never give away houses if needed, I don't think.
the government would never give away houses if needed, I don't think.
You had to say it...
Redirect Notice
I was in Gulfport when Katrina blew through. A bigger fiasco I have never seen and I hope I never see another one. At that point, I knew there was no justice here in America.
R. Manhammer | 04.04.08 - 11:12 pm | #
But how about the fishing?
My husband believes that consciously (or not) the PTB will never let the market crash.
Yeah, and some people believed they'd never let housing crash either.
There is talk that the banks shouldn't be writing down their mortgage backed securities to zero. My question is if the bank is leveraged 30:1 a 30% decline in home values would make the asset zero. Right or wrong?
Yeah, and some people believed they'd never let housing crash either.
tj & the bear | 04.05.08 - 12:08 am | #
Of course the game isn't over yet... I'm dying to hear the rhetoric from our 'statesmen' this fall.
I'm dying to hear the rhetoric from our 'statesmen' this fall.
Please report back. I'll be spending that time fishing.
Right or wrong?
Wrong...
A 30% decline in their loan portfolio leveraged 30:1 doesn't make them worth zero... they would be worth a NEGATIVE number. Write down to LESS THAN ZERO.
At 30:1 a 3.333% loss gives them zero (if my tired brain does the math right).
Assw6pe games system, takes out heloc so he can buy it back for peanuts. The bank will never get their money back.
Sorry, wrong assw6pe, here you go.
Please report back. I'll be spending that time fishing.
MLM | Homepage | 04.05.08 - 12:14 am | #
Trout season ends Oct 1 so they'll have my attention for almost a month... until college hockey season starts.
If I hear something in that window I'll let ya know.
Can you solve the sins of excess liquidity with more liquidity?
But if we experience aggregate deflation then almost ALL sectors will suffer... that's the problem with ignoring it.
dryfly
Completely true. Which is why we have to suck it up and accept a less than perfect response. However, less than perfect does not imply criminally negligent. Usually.
dryfly, in the spirit of "it's always after 5 pm somewhere", I have faith that trout season doesn't end until December in some out of the way spot if you look hard enough. I plan to be looking instead of wallowing in the spectacle this fall.
Maybe I'll get a bumper sticker that says "My worst day fishing is better than my best day wonking" or something like that...
Can you solve the sins of excess liquidity with more liquidity?
tim
That depends, I think, on whether the excess liquidity was endogenous money created out of whole cloth by fractional asset lending. As that endogenous money goes away through collapse of the lending institution, one can argue that the economy runs risk of deflation and deflation can, in theory, be defeated through running the money printing press overtime. Which is, I'm sure, what Bernanke is on his knees praying about right this moment.
A 30% decline in their loan portfolio leveraged 30:1 doesn't make them worth zero... they would be worth a NEGATIVE number. Write down to LESS THAN ZERO.
At 30:1 a 3.333% loss gives them zero (if my tired brain does the math right).
dryfly
Exactly correct. It's like buying a house with a 3.3% down payment. It only takes a 3.4% drop in the value of your property to put you underwater.
It only takes a 3.4% drop in the value of your property to put you (and the bank) underwater.
Can you solve the sins of excess liquidity with more liquidity?
tim | 04.05.08 - 12:19 am | #
Yes I think you can... If the first liquidity has gone POOF into a deflationary spiral then the thing to do is refill. Fiat isn't like metal - you can't feel it weigh it touch it... but its there. Its virtual... it can go away fast & forever.
If the money supply crashes then yes the CBs should refill it... they just can't over do it or we will have serious inflationary problems.
And how it gets refilled can be problematic too... the moral hazard thing... who gets it & how.
My gut belief is the world's CBs will over do it. But I've believed we will see inflation from this episode for a long time.
Others here disagree.
Maybe I'll get a bumper sticker that says "My worst day fishing is better than my best day wonking" or something like that...
MLM | Homepage | 04.05.08 - 12:22 am | #
Send me one.
Follow the links to the written testimony of Pizzo and you find this gem:
Federal Reserve Board chairman Alan Greenspan, who has been leading the charge toward bank deregulation evidently undaunted by his doomed infatuation back in 1985 with S&L deregulation...
Either you're not wonking right, or I'm not fishing right!
Whether it's "fiat" or some luddite precious metal currency, the function of money is simply to facilitate the swapping of goods and services between providers. Without production of those goods and services, there is no need for the money. Oh, and there is no "intrinsic" value to gold, platinum, or martian-ium. It's only use is to make it easier to swap an oil change for a fractional kitchen cabinet installation.
Federal Reserve Board chairman Alan Greenspan, who has been leading the charge toward bank deregulation evidently undaunted by his doomed infatuation back in 1985 with S&L deregulation...
JRip
Greenspan is just another lunatic Friedmanite.
"Free markets" are unregulated markets, which are markets that are utterly dominated by the big players with no penalties for cheating. Stupid.
Oh, and there is no "intrinsic" value to gold, platinum, or martian-ium.
My favorite metal is 'unobtainium'... I was in a meeting this week with a commodity manager who told me its the only material his engineers will specify.
My favorite metal is 'unobtainium'... I was in a meeting this week with a commodity manager who told me its the only material his engineers will specify.
dryfly
Oh, yeah. When I was at Boeing, we were planning on using a lot of that in the Sonic Cruiser.
the function of money is simply to facilitate the swapping of goods and services between providers
You (and our central bank) forgot the part about money being a store of value.
I don't know what went wrong in my childhood, but in spite of 50+ years of evidence to the contrary, I keep expecting Truth, Justice, and the American Way to get a little respect. I guess I learned my lesson at some point, because I protected myself & family pretty well from this shitstorm so far, but it still really pisses me off.
Oh, yeah. When I was at Boeing, we were planning on using a lot of that in the Sonic Cruiser.
R. Manhammer | 04.05.08 - 12:39 am | #
This company was a sub for Boeing... though the buyer wasn't in that SBU. Funniest damn meeting I've been in a long time - the buyer was selling us on why we SHOULDN'T do business with them. He was a good salesman too.
the buyer was selling us on why we SHOULDN'T do business with them
He or she will be the first one to go in the coming layoff. Then everyone else will go in the next one. Proving that the saying "no good deed goes unpunished" may be marginally incorrect.
FT - The financial fairytale of Goldilocks and the credit bears
FT.com / UK - The financial fairytale of Goldilocks and the credit bears
You (and our central bank) forgot the part about money being a store of value.
Actually I think the way it goes is that money is supposed to be the stable metric you measure the wealth you use to store value. Money itself is a piss poor store of wealth... always has been except for those who have little else. The truly rich & powerful don't want the stuff - they own whole companies, countries, etc. Stuff that produces more stuff... its only us pions that put a little coin in the mattress.
You (and our central bank) forgot the part about money being a store of value.
MLM
Money only functions as a store for value in a functioning economy. No economy, no store of value. Money, regardless of what people say, will only buy current production or currently available assets. When there is no current production, then we all die and the money question is moot. Of course, that's all very high level theory.
In a functioning economy, as ours still is, the use of money for the temporary storage of value is reasonable so long as the amount stored isn't some ridiculously large multiplier of the economy (I don't think we'll ever have this problem). That said, dysfunctions within the system can easily crush savings and turn them into nothing, which sucks for ordinary people. Interestingly, there is an ongoing discussion as to whether that lost value evaporates in some sort of financial entropy, or if it ends up in some uber-rich bastard's Swiss account.
"My favorite metal is 'unobtainium'... I was in a meeting this week with a commodity manager who told me its the only material his engineers will specify."
Used to know a crazy and poor artist made crazy flame-throwing missle-shooting self-propelled robots out of motorcycle and car parts and machine parts and God knows what. He used to say that everything was made out of unobtainium until you wanted it hard enough. Then your desire would magically transmute unobtainium into "obtainium."
As it turned out, he and his pals were going out in the dead of night and breaking into factories, stripping cars and so on. So much for the transmutation process!
He's more or less famous now. Lesson: don't let unobtainium get you down.
its only us pions that put a little coin in the mattress.
I'm working my way to be a baryon. If I'm not stopped by a super collider first.
Oh, and there is no "intrinsic" value to gold, platinum, or martian-ium
True no more than seashells but it is also useful to think in characteristics at times. If gold turns into unobtanium, game over.
"If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods." AG
I'm working my way to be a baryon. If I'm not stopped by a super collider first.
sdtfs | 04.05.08 - 12:52 am | #
LOL. I don't know if I should blame the spell check that let that pass or the maroon that typed it.
If I'm not stopped by a super collider first.
Unless you're extremely energetic, you're likely to be stopped by a mere collander around here...
its only us pions that put a little coin in the mattress.
dryfly
I'm hoping to find a good meson to do a concrete block wall for me later this year.
tim writes:
Can you solve the sins of excess liquidity with more liquidity?
We could all guess or just wait a year and we will all know for certain the answer to that question.
We could all guess or just wait a year and we will all know for certain the answer to that question.
dougie944 | 04.05.08 - 12:58 am | #
Gonna know in a year? You're an optimistic one, dougie.
Money itself is a piss poor store of wealth... always has been except for those who have little else.
dryfly
I agree with that to a large extent. I also think that saved money should still retain its value over time and I think we as a society are taking it up the butt when we allow wholesale raiding of the public treasury like we've had for the past six years. But, I digress.
Myself, I've lost two small fortunes in the market. Now, I'm simply concentrating on finishing my farm. No debt. Off grid. Grow my own food. Make a little money on the side to supplement my retirement. I'm planning this so that I won't need a million dollars because I'll have current production.
Myself, I've lost two small fortunes in the market. Now, I'm simply concentrating on finishing my farm. No debt. Off grid. Grow my own food. Make a little money on the side to supplement my retirement. I'm planning this so that I won't need a million dollars because I'll have current production.
R. Manhammer | 04.05.08 - 1:03 am | #
I can't argue with that strategy - know folks who have successfully and happily done exactly that. Seriously.
When we start having a widespread discussion about whether our currency is or isn't a store of value, or under what circumstances it may or may not be, I suggest that we will be well and truly screwed. That will be about the time we start saying "We're all off grid now...".
Good night & best wishes.
From one of Dr. Bernanke reponses: One of the prevailing theories at the time of the Depression was the so-called liquidationist thesis who said basically lets let the system return to normal. Lets liquidate banks; lets liquidate labor. This was Andrew Mellon, the Treasury Secretary. It was partly on the basis of that theory that the Federal Reserve stood by and let a third of the banks in the country fail, which created the money supply to drop sharply, and caused prices to fall rather sharply, and led ultimately to the severity of the financial crisis. I think financial instability, which was not addressed by government or anyone else, was a major contributor, both to the depression in the U.S. and abroad. I believe the difference today is that we will address financial issues and try to maintain the integrity and stability of our financial system. We will not let prices fall at 10% a year. We will act as needed to keep the economy growing and stable. So, I think there are some very significant differences between the thirties and today, and we learned a great deal from that episode. April 2, 2008, before Congresss Joint Economic Committee.
The Anonymous@1:34am is me.
It is analogous to just raising the dam hieght to contain the growing flood from destroying the farm lands it serves.
Only problem everyone misses here is that the dam foundation was built with certain height in plan. When the hieght growns beyond the capacity of the fundation and water level raise, the pressure at the bottom of the dam also raises. Then at one day then dam explodes and water from it destroys everything on its way.
That is the reason why engineers at the dam let excess water on downstream with an announcement to the people who lives nearby.
The engineers here are nothing but FED.
The people lives nearby the dam are people whose economy is supervised by FED
The announced excess water flood open is recession.
The water is money suppy. The water pressure is debt.
Re: "ry to maintain the integrity and stability of our financial system. "
The issue of integrity is where he sounds like a retarded bastard, because if the system had integrity, The Fed would not need to bail out accounting fraud, which is the result of a lack of integrity...moron!
Grains are going wild because excessive credit allows a person or company to buy contracts for obscene amounts of it that they could never use or even afford to buy with their own incomes. Enough people start doing that and prices explode regardless of fundamentals.
Unlike pets.com stock, most commodity contracts are settled with physical delivery.
This means that somebody, at the end of the chain, HAS TO make or take delivery of the actual commodity in real, physical atom-and-meatspace.
The commodity cannot get too far away from the true underlying physical price because otherwise the commercial players (who do this for real) would arbitrage away the difference.
Speculators can make 10-20% maybe, but not 300%.
It is, as if you owned pets.com stock, you were obligated every month to buy 1000 lbs of dog food and pay up cold cash.
If the owners of pets.com stock had to do that, do you think it would have gone to the the moon like it did?
No. Dividend-less equities are fundamentally distinct from primary commodities settled with physical delivery.
dryfly writes:
You don't make an economy better by handing out more and more money.
You do make it better IF the economy is in deflation where money supply is collapsing in aggregate.
Are we facing real deflation... in aggregate?
dryfly | 04.04.08 - 11:46 pm | #
Inflation = Pieces of Paper Becoming Less Valuable
Deflation = Pieces of Paper Becoming More Valuable
Either way we've fallen for the illusion and lost sight of reality.
Depressions are not about inflation or deflation.
Depressions are not about money.
Depressions are about losing faith in the government, your neighbors, and the people you work with.
Arguing about monetary concepts such as inflation and deflation is the same as arguing whether unicorns are better than pink elephants.
A credit bubble is simply a situation where everybody makes promises they can't keep.
The bubble bursts when people finally understand that all these promises were meaningless.
At that point trust breaks down and nobody wants to lend to each other.
Again, modern society requires credit to survive.
We face a dire situation because there's been this massive abuse of trust in the housing and credit markets.
Fundamentally this concept has nothing to do with economics.
Now as a solution economists are advocating inflation -- e.g. implicit default on government debt.
We face a dire situation because there's been this massive abuse of trust in private markets. Now all the mainstream economists are arguing that the solution is a massive abuse of trust by the US government.
There are no shortcuts to prosperity.
If somebody tells you that we can escape the consequences of our failures by concocting some greater failure to hide behind, then I think you're speaking to a con artist.
Maybe deflation is so painful precisely because it forces us to confront our mistakes.
Maybe the most prosperous period in American history followed the worst deflation imaginable precisely because it brought us crashing down to earth and forced us to confront our own failings face to face.
Or maybe WWII bailed us out by forcing us to confront something unimaginably worse...
That was a depressing read (written statements).
The commodity cannot get too far away from the true underlying physical price because otherwise the commercial players (who do this for real) would arbitrage away the difference.
Speculators can make 10-20% maybe, but not 300%.
I know one speculator who made 300% on DGL puts in a single day.
I agree about the arbitrageurs though. As long as they have a few empty supertankers and mammoth underground storage facilities, ain't no one going to screw with them.
Unless somebody realizes that actually holding oil and holding contracts for delivery are not quite the same thing.
Still, I remain skeptical.
If hedge funds are pumping hundreds of billions of dollars of leverage into commodity markets, that might motivate a few people.
But I seriously doubt that anybody would bother to build the infrastructure necessary to hoard commodities for such a pittance.
No criminal filth involved in this market.
My only note-written quote from BB during the senate hearing was that same line: "We will not let prices fall at 10% per year."
It is just buying time. -9%, -9%, and
how many more?
That's the expected outcome. And that's the only strategy.
S&L Crisis and Dodd Senate Bank Hearing, See Itchy & Scratchy
Many aspects of The Itchy & Scratchy show are a parody of Walt Disney movies and include shorts such as "Steamboat Itchy", a parody of Steamboat Willie; "Scratchtasia", a parody of Fantasia; and "Pinitchio", a parody of Pinocchio.[11]
Indeed, the relationship between Roger Myers and Chester J. Lampwick closely parallels the real-life relationship between Walt Disney and animator Ub Iwerks. Iwerks did much of the early work on Mickey Mouse, before falling out with Disney in the late 1920s, and the Rich Uncle Skeleton character created by Chester J. Lampwick very closely resembles the antagonist in Iwerk's well-known Flip the Frog cartoon Spooks.
Itchy and Scratchy often play out an exaggerated form of the conflict in the surrounding episode. For example, when the Simpson children are taken into foster care, they watch an Itchy and Scratchy cartoon with a similar theme[12], and when Homer is recruited by NASA, he watches an Itchy and Scratchy cartoon which directly (and gruesomely) parodies the films 2001: A Space Odyssey and Alien.[13]
Itchy and Scratchy have occasionally been used to parody the work of famous directors specifically. One episode, "Reservoir Cats" is supposedly guest-directed by Quentin Tarantino and parodies Tarantino's films Reservoir Dogs and Pulp Fiction. Another cartoon was "guest directed" by Oliver Stone and shows Itchy shooting Scratchy in a manner similar to Jack Ruby's murder of Lee Harvey Oswald, in reference to Stone's film JFK.
In the episode "The Day the Violence Died" there was a clip from a 1970s-era X-rated Itchy & Scratchy cartoon titled "Itchy & Scratchy meet Fritz the Cat". According to Comic Book Guy only bootleg copies are available "because of its frank depiction of sex and narcotic consumption".
And it Looks to be Happening Again ...
Just look at the Board Members for The Clearing House LLC ... The banks that own 97% of all derivatives held by banks.
The Clearing House LLC: Board of Directors - BusinessWeek
New Element Discovered
The heaviest element known to science was recently discovered by physicists. The element, tentatively named Bureaucratonium, has no protons or electrons and thus has an atomic number of 0. However, it does have
1 neutron
25 assistant neutrons
75 vice neutrons
111 assistant vice neutrons
This gives it an atomic mass of 312. The 312 particles are held together by a force that involves the continuous exchange of meson-like particles called morons.
Since it has no electrons, Bureaucratonium is inert. However it can be detected chemically as it impedes every action with which it comes in contact. According to the discoverers, a minute amount of Bureaucratonium caused one reaction to take four days to complete when it would have normally occurred in less than one second.
Bureaucratonium has a normal half-life of approximately three years, at which time it does not actually decay but instead undergoes a reorganization in which assistant neutrons, vice neutrons and assistant vice neutrons exchange places. Some studies have shown that atomic mass actually increases after each reorganization.
"If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods." AG
tg | 04.05.08 - 12:54 am | #
Thanks, tg, for the quote from AG.
Methinks that's EXACTLY where we're headed.
"We're all off grid now...".
No debt, barter, horde, cash only, no taxable income, grow your own. Corporations don't pay taxes consumers of their products and their worker do, goverment worker are the tax so they don't pay taxes either in reality. Think I'll pass.
Stephen Pizzo is one of my favorite writers- his book on the S&L crisis is certainly worth a read, although I think it might be out of print (if so, it will probably soon be back in print).
He also has a blog:
News For Real
FFDIC writes:
FT - The financial fairytale of Goldilocks and the credit bears.
Here's a link to the entire article:
InfoViewer: Insight: The fairytale of Goldilocks and the credit bears
The article describes the plight facing small banks since they will not be able to raise enough new capital to avert BK.
A retired banker raised this issue with me last week. He, too, thinks many will go BK.
April 2 - Financial Times (Richard Lapper): Migrant workers are choosing to move to Europe, Australia or Canada instead of the US in order to protect the purchasing power of the money they send home to their families, according to one of the worlds leading experts on remittances. The shift is a result of sharp falls in the value of the US dollar against other international currencies We are seeing workers from Bangladesh, Nepal and especially the Philippines choosing destinations where theyll get paid in stronger currencies, Dilip Ratha, head of the World Banks remittances and migration unit, told the Financial Times. Mr Ratha said the trend was especially notable among skilled workers, such as doctors, nurses and information technology specialists.
Plus they won't get the pleasure of paying for this mess.
Debt to the Penny (Daily History Search Application)
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Tic-Tok-tic-tok.........
lama and other CPA's
what do u think of the repeal of the QSPE concept? a big deal or a nothingburger?
FEI Financial Reporting Blog
Anonymous,
The devaluation of the dollar, for now, is a result of the rest of the world not trusting our national politicians to be fiscally responsible. I don't blame them. We are approaching $10 trillion in national debt. That's about $30k for every person in the US. The cost of that is about $1,200 a year per person. Every penny comes out of the economy.
lama
would repeal of QSPE result in repeal of SIV's?
Kudlow alert: he actually admitted recession on his radio show. is that good or bad?
The devaluation of the dollar, for now, is a result of the rest of the world not trusting our national politicians to be fiscally responsible.
It isn't just the politicians lama - the bigger problem is the decades and decades of CAD. I mean no one put a gun to our heads to load up on Japanese cars, Chinese toys, Malaysian shirts and Indian software - they were there & we bought.
If we ran up huge gov't deficits and 'owed it to ourselves' (didn't sell the debt overseas - or at least exported enough to offset whet we borrowed) it would be like me owing me - not a big problem. The problem is we owe it to a lot of others besides us - that can best be seen in the decades where we (1) consumed our own production and (2) consumed a lot of their production too... then made up the difference between our own production & consumption via debt growth.
That really is the problem with the dollar vis-a-vis what others will pay for it in their currency (in the FX)... is what will it buy in real goods now that everyone and their mother outside the US already has reserves bigger than they need times about four? Answer: a lot less & the dollar exchange reflects that.
We are all born and bred dopes.
wait....WTF?
I keep expecting Truth, Justice, and the American Way to get a little respect. I guess I learned my lesson at some point, because I protected myself & family pretty well from this shitstorm so far, but it still really pisses me off. [MLM]
Drive across the U.S. sometime. Most of the folks are decent, hardworking, you name it, people. Some have rather provincial attitudes on social issues, but not as many as you might think.
Stay away from banks, corporations, and the media.
Now, whether or not this type of person has any real power in this country to change anything, that's another matter entirely. Perhaps we'll find out in November.
19 Visitors Online @ 9:34 AM (must be Saturday)
Now, whether or not this type of person has any real power in this country to change anything, that's another matter entirely. Perhaps we'll find out in November.
Do you really think that either political party is the solution? Both are worthless, and November won't change a thing.
For you fisherfolks out there I will track down an old Farside comic that is an old, yellowed treasure in a frame in my parents' house - two guys are in a boat fishing and there is a big mushroom cloud on the horizon and one says to the other, "I'll tell you what this means - forget the size restriction and screw the limit!"
energyecon - know the comic well. We used to joke about that as we'd leave on week long hiking & fishing trips in the mountains of Wyoming.
Anyone born after 1970 has no reason to vote for Republicans and Democrats, since both parties have placed unsurmountable burdens on the next generation(s). It's taken me up to this point to realize this.
(OT) Excellent salary and relative cost-of-living resource. Many charts and comparisons, broken down by state, type of job, city, etc. Free.
PayScale - United States Country Salary, Average Salaries
S.
YOUR MONEY; Feeling The Urge To Flee The Dollar - NY Times
USD doesn't just buy less commodities than it did a few years ago:
After a divorce in 2000, Ms. Moeller used the proceeds from her settlement to buy and rent out real estate in London, where she had been raising her three children. Then she moved home to the Detroit area.
I knew the pound would be appreciating against the dollar, and it would be easier if I had money in pounds and spent it in dollars, she explained.
Last year, when Ms. Moeller calculated that London real estate, as well as appreciation between the pound and the dollar, had reached historic highs, she sold a home she had bought for the equivalent of $1.6 million. Lets not be greedy, she recalled thinking. The house fetched almost $7.7 million.
Too big to fail? During the early Crusades the Templars were the "global" private banking system, loosely supervised by the Pope. There are plenty of (revisionist) interpretations of what exactly happened, the fact is that one day the king of France decided to "nationalize" their assets.
Everybody wants to think in cycles and wonder how soon the recession will end. But it's clear that there are regions of the U.S. (Michigan, Ohio) and whole industries that are in permanent decline. The recession will accelerate the rot, and they won't come back even if the greater economy rallies.
For example...
A Newspaper Chain Is in Financial Crisis - NY Times
The community newspaper industry as we know it, employer to hundreds of thousands of people, is going away.
The community newspaper industry's economic impact is far greater than employing reporters. Here's who also will be hurt:
Printers
Paper suppliers
Delivery services
Local businesses and employers who depend on newpapers for local market advertising
The Internet has killed the newspaper star. At the community level, it's over and it's just a matter of time how long any local paper or community chain can hang on. That includes the biggest of them all, such as the Journal Register Company and even Gannett.
Since some newspapers sponsor defined benefit pensions, it's also very bag news for the PBGC.
George Soros on the credit crisis. 6 weeks to three months left.
Video - CNBC.com
central_scrutinizer said: "Anyone else notice that O-Joe and Sebastian disappear anytime things in the credit crisis dept start to heat up?"
Just because you think a development is important enough to comment on (or defend/attack) doesn't mean I do.
Never mind that it was Friday night, I have a life, and the markets are closed for two days.
S.
Government backing of our debt does not substitute for a sound Economic Structure. And it is the current Structure that is incapable of the necessary economic output to satisfy domestic needs and to generate sufficient exports to exchange for our huge appetite for imported goods and energy resources. Todays services-based economy will no longer suffice. Examining todays job data, one sees that 93,000 goods producing jobs were lost in March after dropping 92,000 in February and 69,000 in January. At the same time, Education, Health, Leisure and Hospitality jobs increased 178,000 during the first quarter. Yet it is more obvious than ever that we need to consume less and produce much more.
Back to the liquidationists. It is my view that our economy will require a massive reallocation of resources. We will be forced to create much less non-productive (especially mortgage and asset-based) Credit in the Financial Sphere, while producing huge additional quantities of tradable goods in the Economic Sphere. In our expansive services sector, there will no choice but to liquidate labor and redirect its efforts. Throughout finance, there will be no alternative than to liquidate bad debt, labor and insolvent institutions again in the name of a necessary redirecting of resources. After an unnecessarily protracted boom, there will be scores of enterprises that will prove uneconomic in the new financial and economic backdrop. Liquidation will be unavoidable, policymaker hopes and dreams notwithstanding.
From this evening's vantage point, recent extraordinary government measures to back U.S. finance appear likely to delay the adjustment process what I will be referring to as a depression. This reprieve, however, comes with a cost. It will ensure significantly greater damage to the core of our monetary system, as well as requiring a more onerous real economy liquidation with the inevitable onset of the more serious phase of the unfolding crisis.
404 - Error: 404
Doug Noland gets it.
Dry,
I'll agree that we keep electing the pols who tell us happy stories. To that extent, it is our fault. Other than that, you have to count on J6P to follow the path of least resistance. If it's easier to spend than save, you get spenders. If it's easier to find fast food than vegetables, you get a nation of fat people.
I would expect however, that a pol with any scruples at all to running up a debt like we have. Unfortunately, there aren't any in Washington.
The budget deficit takes the trade deficit along with it wherever it goes, like a ball and ankle iron.
Anyway, I agree with your additional points. I just don't like politicians. At least in the US we have the ability to point out their failings.
But it's clear that there are regions of the U.S. (Michigan, Ohio) and whole industries that are in permanent decline.
not so sure I agree that those regions will be in PERMANENT decline. although it is true that the rust belt is suffering, I'm not ready to throw in the towel and call them permanently declining.
Michigan/Ohio in particular.
Michigan has one of the best universities in the nation, as well as hard core business capabilities. so you have educated, trained, and desperate people.
if I were a business in California I would strongly consider leaving and heading to the Rust belt.
you'd get those educated and trained desperate people as employees, plus possibly low overhead and also significant tax breaks.
*** I voted for Bush and I'm enjoying this show and hate to see it end!
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Bush: 4 more years!!
We need to keep changing The constitution; do it now!
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I'm reposting from an earlier thread:
Very bad tax policy included in the foreclosure act:
Steven Pearlstein - Max and Chuck Show, Cont. - washingtonpost.com
Call or write your senators this weekend to urge them to vote against this disaster.
I would expect however, that a pol with any scruples at all to running up a debt like we have. Unfortunately, there aren't any in Washington.
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our
children a legacy of bankruptcy. We have defrauded our country to get ourselves elected."
-- John Danforth (R-Mo)
Anonymous said: "...Doug Noland gets it."
Prepare yourselves, I'm going to say something nice about perma-bears.
People like Doug Noland, David Tice, et al, have always gotten it. Good perma-bear research is typically of high quality.
But even the best of them can't time the impact of their conclusions on the economy or the stock market with enough precision to be of practical use.
We're seeing an example of that in microcosm right here. At the beginning of 2007, CR made a forecast of 400k-600k in residential construction job losses by Summer, 2007.
Also (and I'll certainly apologize if this is an unfair characterization) he's been pretty much expecting a recession since about the same time (along with many others here), and was even so confident recently as to add "probable beginning of recession" bars to some of his charts.
Yet it's only been recently that the loss of residential construction jobs has approached the lower end of his forecast, while recession continues to dance just out of reach.
Meanwhile, the massive, economy-killing losses from the real-estate/mortgage derivative "bust" continue to be underwhelming. SP500 earnings losses from financials are largely being made-up by higher earnings from other sectors. Losses in financials may wind-up running into the multi-hundred billions of dollars, but net-net the impact so far is under -$150 billion (2007 earnings vs. 2006 earnings).
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
S.
OT (Another serendipitous Internet find.)
A chart of the Wright Model "B" yield-curve, scroll down to the last chart on the page. (The vertical gold lines signify recessions.)
Incredible Charts: Stock Trading Diary
And get this comment from the blogger: "I would prefer to stop publishing the model, as I believe it failed to adequately predict the current recession in a relatively low interest rate environment: the 2007 reading should have reached as high as 80%. Some readers, however, have indicated that they still find the chart useful; so I continue to include it for their benefit."
(asterisks mine)
That's a slippery slope which often gets people into trouble. In retrospect, after making a bad call, they always say (if they're self-aware enough) "Yeah, I second-guessed my own rules/indicators."
Sebastia
YouTube -
funny but true
hey there is already a w on here!
OK Anonymous, There's one who may have had a conscience years ago. Maybe he doesn't appear as badly in comparison to Dodd or Schumer. The cream of the crap.
OT anecdote 1: I'm a consultant and on the road alot. I got some laughs years ago when Congress tried to enact legislation to the effect:
"All frequent flyer/incentive programs are taxable to all US citizens except for members of Congress."
OT anecdote 2: I worked on 3rd Ave in NY in the same building as Schumer's HQ's. A collection agent was there one morning trying to find one of Schumer's aids who owed on his car loan. The apple doesn't fall far from the tree.
"Also (and I'll certainly apologize if this is an unfair characterization) he's been pretty much expecting a recession since about the same time"
You can apologize to CR now Sebastian. His analysis at the end of 2006 was 50/50 chance of recession in 2007.
sorry w.
YouTube -
lama said: "You can apologize to CR now Sebastian."
Respectfully, maybe it's up to CR to say what his own expectations were?
Sebastia
x - Just want to avoid confusion. Thanks.
Funny video by the way. The guest keeps nervously genuflecting and the host keeps leaning over to try and face him.
Yes Sebastian. That is up to CR. That's why he published his expectation in a 2006 year-end article on this blog. I'm just pointing out your error.
w
did you see the carlin video. I dont know wheteher to laugh or cry.
Here's what I found of CR's 2007 forecasts. (Gentleman that he is, he did say he didn't mind being wrong, and accurate forecasting is double-tough.)
'07 predictions
It appears as though CR was right big-time on housing, wrong big-time on oil prices, right on the trade deficit, wrong on the economy, wrong on Fed timing (although in fairness he did say that it would be slow to respond), and wrong on 10-year rates.
Sebastia
x, Carlin is great.
A friend from Europe was visiting. We were at a mall on a weekend filled with people. He remarked "good thing these people are all at the mall. Imagine them all reading books." He went on to opine that it's a good thing for those in power that the minions had a couple of bucks to spend. Interesting.
[Meanwhile, the massive, economy-killing losses from the real-estate/mortgage derivative "bust" continue to be underwhelming]
Brought to you courtesy of the proud owner of NEW stock certificates.
Think BSC = NEW. How many others? The Fed has its limits. Next time shareholders will be wiped out over the weekend and assets trasferred to a marginally more solvent institution. There's a limit there too.
Once the CDS system gets tested we'll find out. Credit contraction is only just getting started and spreading to the REAL economy with job losses.
A LONG way to go. How long is anyone's guess and timing the impact to individual company shares is impossible. Direction for equities should be pretty obvious by now, even to you.
lama,
Where in Europe is your friend from? If it's a spot where people spend at least a part of their weekends reading books, I may want to consider the expat experience. Seriously.
well said donna !
Burnside, He's from Greece. Can you believe he mostly does Sarbanes-Oxley work in Eastern Europe (Subsidiaries of US companies)?
I think there's people everywhere who read. I spend too much time reading contracts and technical accounting stuff. We have one 19 inch TV my wife bought on Craigslist. I have another friend who turns his TV against the wall. If he wants to watch it, he has to turn it around. He seldom makes the effort.
Yes Sebastian, CR made different projections on different posts.
Here's another: Calculated Risk: Recession Predictions
So, if we had the time, we could find another couple of CR's predictions. Does that inform anyone? And why do you insist that everyone on this site has the same opinions with your blanket insults? Without knowing it you are simply screaming for attention from strangers.
lama
I am reporting you to the Best Buy 5ft falt screen tv for only 350 payments police. What you are doing is Unamerican. shame shame shame. And, I suppose you will also get your rebate check and put it in a cd. The horor of it all.
lama,
Naturally, people do read everywhere as you say. I think what I'm looking for is somewhere where there's much less anti-cultural bias, which seems to me very strong in the USA. Our strong suit is a sort of can-do go-ahead quality. We are very busy.
barely,
Nice rebuttal. But S can't hear you.
lama said: "So, if we had the time, we could find another couple of CR's predictions. Does that inform anyone?"
(Some of my predictions, too. NEW, of course, and I was surprised that the broad market corrected as far as it did between October and March.)
If viewed from the shallow, ego-based standpoint of "Was he right or was he wrong?", no, no one is informed.
If viewed from the more productive standpoint "That didn't turn out like he thought, what does that tell us?", that's extremely informative.
There should only be a stigma attached to "wrong" forecasts if one maintains the forecast without re-evaluating to see if anything new is to be learned. Unfortunately, that doesn't seem to be what CR is doing.
The housing indicators he's using seem to be working very well in timing the housing market, and even housing and mortgage/financial-related stocks. But not the economy, the broad stock market or interest rates.
He rationalized his incorrect forecast of 400k-600k in residential construction job-losses by Summer, 2007 as being caused by errors in the data or the way the data was collected or how jobs were defined...but not by the fact that things weren't unwinding on the timetable he expected.
His recession expectation remains, it just gets pushed-out further, and posters here are incorrectly assuming that this is the right way to go about forecasting recessions.
CR, Tanta, and others here routinely post forecasts from the villain-de-jour that subsequently turned out to be wrong, even ridiculously so, mostly for sport, rarely for illumination.
I'm just trying to do the same thing, but for the illumination. If it illuminates something you'd prefer not to see, that's not my look-out.
Respectfully.
Sebastia
Sebastien wrote:
"Yet it's only been recently that the loss of residential construction jobs has approached the lower end of his forecast, while recession continues to dance just out of reach."
Folks, we won't know we're officially in recession until the thing is over - unless it's really, really, really bad.
I see Sebastien dropped his mantra of peaking unemployment, which was based on his interpretation of a .1% non-statistically significant downtick in the unemployment rate. That theory got annhilated in the latest household report.(Plus the unemployment claims data are hardly benign.)
Anyway, you can't compare real-time data of the current recession versus historical data. A lot of jobs are going to be revised out of existence (i.e., the birth/death model plug ins get thrown out as the real data arrive).
On the GDP side, we only have 2007Q4 data - quarterly. Which may not be negative if the recession starts in December (1/3 of the quarter). In any event, the GDP data will be revised all to heck in the coming years, and is affected by some strange GDP accounting effects. E.g., oil import price rise -> falling GDP deflator (since imports enter GDP with a negative sign) -> higher real growth for the same nominal growth.
Admittedly, equities have not been completely crushed, and so Sebastien has thus not been completely wrong. That said, the massive rally we've seen in the Treasury market is not indicative of a strong economy. (I believe Sebastien was proud of saying he looks at "levels of yields" and not just the slope, which tells me he's either dishonest or a bit thick.)
Hey pd130 (not that you'll see this, this far downthread).
There was an incident that started in August of 1990 that took the focus off the S&L debacle: Gulf War - Wikipedia, the free encyclopedia
bond guy said: "(I believe Sebastien was proud of saying he looks at "levels of yields" and not just the slope, which tells me he's either dishonest or a bit thick.)"
Right.
When I re-finance my mortgage and they offer me a 5.5% fixed-rate, I'm going to ask for 10.5% and have them adjust it down by 1% a year until it reaches 5.5%.
That's what you mean, right? That slope is the key and the level doesn't matter?
Sebastia
bond guy,
I also predicted equities would not get crushed as I personally know lots of European investors are bottom fishing on our cheap dollar for equities and extrapolated that.
continued,
The difference is that I have never brought it up again because...who cares? Do I get a pony for being correct??
No Seb, you look at both levels and slopes. You know that's what he meant.
Do you think writing "Respectfully" at the end of a exonerates you from being a troll? It just makes you the Stepford Troll.
jo6pac writes:
Old book but well written Inside Job.
jo6pac | 04.04.08 - 7:49 pm | #
I still have the book and have loaned it to my colleagues. The amount of corruption was astounding, and this current crises will be magnitudes worse. If the S&L was a 5.0 quake, the mortgatge/IB disaster is an 8.0.
There is a transcript in the book of McCain and the other 5 senators meeting with regulators. What is amazing is Mac's surprise that auditors would give an unqualified audit knowing that the S&L was not solvent. The regulator had to explain to Mac who pays the auditor and why they were compromised.
Since some newspapers sponsor defined benefit pensions, it's also very bag news for the PBGC.
rich
The PBGC will only be concerned if those same newspapers did not fully fund their pension funds as they are legally obligated to do.
Of course, I believe it is standard corporate practice here in the USA to underfund the pension in order to pay obscenely large bonuses to top management, the same guys whose decisions have driven the company under.
Robber barons? Why, yes. Yes, they are. Read Mancur Olson.