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Just wanted to try out the new screen name. 1st.
I have been watching this too, and was wondering when you would comment on it. Thanks.
Second, I was waiting for a round number (like 1.0 on the TED spread). I also saw that article in the WSJ on the LIBOR - Fed Funds spread and I figured that was enough to put up a post. Those with access to the WSJ will see the "Banks Still Spooked" graph - yes, the credit crisis continues.
Best to all.
Any predictions on possible collateral damage from tight short term liquidity of this "fourth wave" CR? There seems to be a lot more banks that qualify as walking wounded these days. In particular, the small and regional banks being hit with the CRE bust.
Hi Calculated Risk.......since the AAA ABX looks to be being bid below 47.5 cents on the dollar can we get another cliff diving post sometime soon?
I guess 'ol Larry Kudlow and the rest of his marry band of Ass-Clowns on CNBS aren't going to be too happy to see (or acknowledge) this...
Who is going to prop up the financials this time? The taxpayers that's who. The price capitulation from banks throwing in the towel on foreclosed properties will crush the market in way not yet seen. Deleveraging is brutal and we haven't seen the panic selling by firms yet, which will really hurt people that can't go raise more capital from SWFs and Bahamian-billionaires. End of the day, it will be the tax payers and that will mean printing money and potentially speculation that the Fed runs out of Tsy bonds which will push interest rates up higher, thus mortgages go higher... Credit extension to consumers has largely stopped its growth and same for businesses. This is going to be '74ish.
I tried to watch Kudlow tonight and it reminded me of the View ( which I don't watch, but just see clips of) I could only handle about five minutes.
No problemo. Another 400 or 500 billion from the Fed should fix it.
Any predictions on possible collateral damage from tight short term liquidity of this "fourth wave" CR? There seems to be a lot more banks that qualify as walking wounded these days. In particular, the small and regional banks being hit with the CRE bust.
--Andrew | 06.26.08 - 12:33 am | #
I think its starting to impact small companies too - I work with a company owned by a PE firm... they told mgmt there would be no more cash injections or loans no matter how bad their cash situation got. No more new money - zip, nadda, nothing - make do with what you got. Cash flow this bitch!
A third of their business is automotive tier two & below and another third is home related consumer products (appliances and lawn & garden). Considering the economy there is a distinct possibility this mfgr might need a little help with cash down the line.
This btw was the company a few years ago I said was flush with 'liquidity' right after the PE acquisition. Then they had money to burn.
The reason no new money now? The banks funding them said 'absolutely no f'ing way we are giving you one more dime'... the banks involved are larger Midwest & Mid-Atlantic regionals you read about almost every day. They are in no position to lend to anyone - especially mfg firms in auto & housing related consumer products.
Its moved beyond 'just banking'.
Go, go, go TED, go!
BOOYAH!
Does this mean we're about to get another sacrifice to the gods of finance - a la BSC ?
Maybe LEH ?
Conjure and I still think it may be time to dabble in a little Realpolitik and find some southern evangelical group that would like some cash for Feldstiefeln and Blutfahnen.
Potentially huge payoff for very little down.
How about some music from TED:
YouTube -
Do we have a macroeconomic term for this? I don't think "stagflation" works anymore.
Inflating prices + deflating monetary supply + recession + dollar debasement
barely | 06.26.08 - 12:52 am |
LEH could certainly be the poster boy.
The market is always perfect yesterday, right today, and absolutley wrong tommorrow.
mp writes:
"No problemo. Another 400 or 500 billion from the Fed should fix it."
Tain't gonna happen. The presses can barely keep us as it is.
As the man says, history don't repeat but rhymes. Yea I know that CR, much wiser than me if not smarter says no depression. But you know, it appears that what we know about the last depression just don't apply to the mess we are in.
I find it interesting that given the fed can always drop rates to prevent a depression; it is in a box now with inflation and what the other central banks will do and must hold if not increase rates just about what the fed did on the eve of the great one.
We may have been the creditor nation in the 1930s, but now the debtor one, kinda like Germany except instead of war unpayable reparations we got mortgage debt that cannot be repaid. Instead of rebuilding the German military machine to conquer the world, we may be rebuilding ours after Iraq to do the same.
just thinking.
4th wave's a charm!
maybe this will work...
Stagfla$$ionabasement
This is probably good news... depending on which stocks you've shorted ... are there any financials that have ticked up enough to short?
Me, I can't wait to see which cockroach gets to the confessional first.
Inflastagration?
Oh wait that's W's term.
Its moved beyond 'just banking'
Your right there Dryfly, I just got my pink slip today. Boss even used credit crunch in his little speech (didn't listen to the rest).
Inflating prices + deflating monetary supply + recession + dollar debasement
I have a non technical term "F^*ked up"!
Vader | 06.26.08 - 1:02 am | #
just thinking.
And China is the creditor nation about to go thru a 1929.
That would rhyme.
andy- I have a non technical term "F^*ked up"!
I also like that term. It has a certain ring to it.
mp
it just kinda rolls off the tounge!
How is conjure?
Andy, Conjure is fine. He is in a good humor as his humidor was finished recently and he has commenced stocking it. At the moment, he is puffing away, watching Scrooge McDuck videos.
mp
I can get conjure some Cubans for the humidor, we have a shop here that does a nice line in repackaging Cubans and on selling to the US (The Governator was a customer).
Scrooge videos, sounds like study to me.
andy in nz
You are officially in a depression.
This is starting to remind me of a blog I ended up in 6 years ago called unemployedit with IT folks. Dryfly is an alumnus also. We all got to watch each other get unemployed.
and worst.
Andy:
Condolences.
Screw the governator and smoke 'em if you got 'em.
Vader
I am having a cold beer and officially not giving a sh^t today.
I will be ok, most down here think its all going to be fine in 09. I have a window to the future from everyone here!
So I will prepare, starting tomorrow when the hangover finishes.
Glug, glug..
Cheers.
Andy, thanks, but Conjure is partial to Macanudo Duke of Devon Maduros. I suppose there are "better" smokes out there, but Conjure has been devoted to them for decades now and he is very much a creature of habit.
What are your prospects there? Is there work available?
Tightening credit,
panic in the markets,
panic in the Fed,
crashing house prices,
houses being repossessed,
states suing lenders,
lenders suing lenders,
people tossing the plumbing out of their homes,
SUV sales tanking,
the people turning on their president,
unemployment soaring,
gas prices soaring,
food prices soaring,
new home sales tanking,
retail stores closing,
wages doing nothing.
Yep, sure looks like a full swing credit/housing bust in all its glory.
Somewhere I sense there's an NAR shill denying that there's a problem with the housing market.
stagflatulence?
homedad43, mp
prospects ok here, we have good unemployment benefits.
cheers
Enough of that, back OT!
We have had two listed finance companies having forced moratoriums on redemptions this week! So much for sharemarket oversight!
Lots of cash locked up for 3+ years, bugger..
andy in nz
yea good move
Good luck.
Citigroup May Take Extra $8.9 Billion Writedowns, Goldman Says
Citigroup May Write Down $8.9 Billion, Goldman Says (Update1) - Bloomberg.com
The Stoogization of banks downgrading each other in a continuous slap fight.
The confessional is wide open. Just when I thought I said all I can say...
LEH says MS could lose couple billion.
MS says GS in hole for x billion.
GS says Citi on hook for y billion.
Geez, they sound like a bunch of gossips.
G'night all.
So what's the big bank(no IB) scoreboard?
Citi has hinted and WF should have a bad Q, but is that it?
What's the fubar level in all this?
andy in nz | 06.26.08 - 1:36 am | #
I will be ok, most down here think its all going to be fine in 09. I have a window to the future from everyone here!
Just being prepared is the key. Been ready for the last 2 years (courtesy CR, Salon HTWW).
Just wish I get the chop too. i.e get forced to adapt to the changing world. Scared, even though ready.
I know I have to jump off the cliff, the freight train is approaching. I just want someone to push me.
You get wet in the river, its just different from being on the cliff. The view from the river is different from that from the cliff, but still good.
We are beyond fubar... everyone in power was talking about this all being contained, yadda, yadda... so 80% of America probably believes the credit crunch is over or is related to high gas prices... or is distracted by high gas prices.
My best guess is that people will feel more pinched when their credit limits start to get cut off on their personal credit cards. Maybe this has happened already to many people... also layoffs... but hey, since its not all focussed on any one sector like IB they won't be all that widely reported... just we'll see the unemployment rate creeping up and wonder what was going on and employed people will feel good about themselves and say stuff like, "Heck, its all bankers and realtors..."
Yep, credit cards, the original neg am option arm. The higher gas prices are going to push that reset button a little sooner than people expect.
And um, Andy? If you spend too much time here instead of job seeking I'm going to remind you. Say four months from now? A friend of mind had the construction worker's dilemma: When you have the time, you don't have the money-when you have the money, you don't have the time. Best Wishes.
I think the fubar point would be when the world actively divests out of the USD.
Otherwise i think it'll just he a long, slow and painful ride to recovery.
Watching banks downgrade one another is truly comical. Why can't they apply analysis to themselves? But you have to want to change...
"Worst to Come as Credit Crisis Chokes Growth, Nucor CEO Says"
Worst of Credit Crisis Yet to Come, Nucor Chief Says (Update2) - Bloomberg.com
Yay...
Anonymous wrote:
Do we have a macroeconomic term for this? I don't think "stagflation" works anymore.
how bout this
"the mark of the beast $$$"
sdtfs
lucky we are in different time zones..
Anonymous wrote:
Do we have a macroeconomic term for this? I don't think "stagflation" works anymore.
How about Badflation!
When you think about it, the so-called New World Order was set up way back in 1913 when Congress established a private entity, the Federal Reserve, to run(or ruin) our economy. This allowed a private stranglehold unaccountable to the public to run our monetary and credit system. While the world would soon fight communism and socialism back then, we allowed central banking to take over the world economy, Congress established central banking or socialism for the ultra-rich to run the world economy.
And here we are in bubble/bust land...Land of the Fed and Home of the homeless.
Everyday, i find myself leaning closer to the RBS forecast.
I have a question for anyone who would venture an opinion or answer: given the large investments SWFs have made and are making in big banks, etc. (C, UBS, RBS, BCS, MER, etc., etc.) I would have to presume these institutions will not go under simply because the SWF would not accept kissing their investments goodbye. They might go down somewhat from now, but these investments are pretty much a guarantee that the worst is behind them, not in front of them. Right? Wrong? Whatever?
lucky we are in different time zones..
Yeah, and I'm up all hours,...so I'll know if you're here all the time
Actually what I started thinking was with you around, CR would be 24/7! Then I realized it might not be so healthy for you.
I've always been lucky enough to find employment before I was ready to go back to work. Hope it works that way for you.
Is there any internet site where all the "infusions" of money into big financial institutions to date is given...all in one place where it is possible to see the totals to date, etc., etc.?
I would have to presume these institutions will not go under simply because the SWF would not accept kissing their investments goodbye.
It's going to be a case-by-case scenario. For example, there's no way Citi's going down, not with Alaweed's holdings + ADIA stake. On the other hand, do you think China's SWF ($300B) gonna indefinitely prop a $3B (10%) stake Blackstone, when they've lost much more just in dollar debasement?
Chris writes:
They might go down somewhat from now, but these investments are pretty much a guarantee that the worst is behind them, not in front of them.
The SWF have actually not invested in that broad a range of financials only the household names and have not been that large in reality. And they more than likely invest for the long term, in excess of 10 years.
(I would be worried if they sold, and do note that at least one SWF did not take up the additional allocation it was allowed to when the prices dropped further)
They do this to get a foothold i believe and to have some sort of presence which would have been way too expensive before the crisis.
You oughta look at how much the FED is pumping in and the bailouts that are in the process of happening to see if the crisis is behind us or not. These are much more massive. 10 or 20 billion from a SWF is nothing in comparison.
Long term will the SWF want back office and trading desks moved to Mid East (Dubai needs to lease office space stat), or if the IB's fall over they get first dibs at the carcasses?
All I can see with SWF is that it is a negative to mainstreet USA. Nothing comes for free. They will exact a price for the cash injections.
Chris:
check swfradar.com; for the most part, in the US, there hasn't been much SWF investment. The attitude according to some of the managers is that "they don't want to go where they're not welcome." Or as Andy points out, they want more than just an equity stake; they want back office management.
On the other hand, university endowments and pension funds are the most ass-backwards hypocritical entities in the world. They have no qualms investing when and wherever. I guess when you're not collecting the pension, then vote Democrat. When you're collecting, screw populism and vote GOP.
Damn Japanese:
"The yen fell to a record low against the euro as the European Central Bank prepares to raise interest rates and Japanese workers look to use their summer bonuses to buy overseas assets offering higher yields."
Yes, we Americans also use our summer bonuses to buy overseas assets offering higher yields. Nah, usually it's a fancy gas grill or spinning rims.
The Fed doesn't have the room to work that it had with the 3 previous crises. If things get hairy, this time could be much more interesting without a perceived government savior.
Goldman downgrade of Citicorp put US Markets back on Crash Alert : Major Support @ 11,750.
Run...don't walk, imo.
Ralph Soone writes:
Goldman downgrade of Citicorp put US Markets back on Crash Alert : Major Support @ 11,750.
That support has been breached, am looking for it to fall this week.
S&P on the other hand is more resilient for now.
Andy in NZ
I am a kiwi resident in europe. I have just been waking up this last week to NZ situation. Been following Bernard Hickey over at Interest rates in New Zealand
I am hoping to persuade the pregnant girlfriend to bail out here and enable us to come back until things normalise.
Good luck yourself mate!
Andrew
Citigroup, Merrill Losses May Widen: Goldman Sachs
Citigroup, Merrill Losses May Widen: Goldman Sachs - CNBC
Good, some more capitulation needed.
The banks are now turning on each other, looking forward to more M&As.
andy in nz writes:
"I just got my pink slip today. Boss even used credit crunch in his little speech (didn't listen to the rest)."
Sorry to hear of your bad luck cuzy bro.
What was your trade?
There is always working on a dairy farm for those who want to live on the job with 5AM starts.
Products and Services Overview
So the FED bought at ~70, and now AAA is less than 55. --CR, help me with the theory of evaporation.
Note that commodity currencies are at very high levels versus the yen. If there is a credit crunch coming, shouldn't the carry trade be getting squeezed?
Or is this a dollar-only crunch?
dryfly,
good post. As to where small public companies can get capital these days, see here from NY Times a few weeks ago.
As Banks Shun Loans, Hedge Funds Move in
As Banks Shun Loans, Hedge Funds Move In - NY Times
"Companies traditionally get loans from banks, but with so many lenders stretched and with credit so tight these days, businesses are turning to what might seem like an unlikely source for cash: hedge funds.
As banks retrench, hedge funds increasingly are offering loans to companies, usually at interest rates that are far higher than those that banks charge. More than 100 funds specialize in lending, and several big ones, like Fortress Investment Group and Citadel Investment Group, are starting to follow suit.
While some funds have been offering loans for a few years, more are moving in because the credit squeeze has hobbled many banks and left hard-pressed companies hungry for cash."
What do these hedge fund loans cost? When you add in the warrants and equity kickers on top of interest, a typical hedge fund loan probably costs 14-18% per year.
Why are small public companies paying loan-shark rates for access to capital?
They have to.
Under DCF valuation, a small-cap company with a weighted average cost of capital of 14% or so probably is not worth about a PE of 10-15.
Currently, Russell 2000 is at a TTM PE of 76. A long way to fall.
Isn't there a lame cartoon strip called The 4th Wave? Anyways, I hope the NAZ and RUT really get hammered today - it would both confirm an H&S top projecting to their '08 lows and fly in the face of some former-Bear-now-Bull people I want to see eat a sh!t sandwich.
rich,
I didn't see you on yesterday's thread, but I wanted to know if you'd seen the (slanted) H&S top in the Russel 2K formed over the last 6 weeks. A break of the neck (where it is now) projects a decline to this year's lows.
Even better, if you put the RUT back at least 3 years, if this decline stated above occurs, there's a monster complex Head & Shoulders projecting down some 35% from this year's lows!
rich,
Aren't factors pretty much always available, albeit busier now than in boom times?
Oi! Who's selling the dollar?
Hmmm...my calculations and analysis said that the dow should have been trading at 11.200 a while ago. Looks like it may be headed for where it should have been. interest rate held at 2, dollar holding mostly steady. Glod under 1000, and the oil market widly gyrating and unstable.
I'm ready to spark up a nice macanudo with conjure and watch the rest of this play out. next act will be the reaction of oil when demand takes a nasty drop, when a certain IB mounts the steps to have it's heart cut out, when certain banks stop their dividends and one or two that are on deck for failure are married off.
But when everyone gets burned in the oil plunge...it's going to be like slim pickens riding the bomb down!
Hey but Q1 GDP is positive, all stations go!
Interesting times.
BB, shallow and long!1% revised upwards!
So far kids, Sebastian seems to be right about the "official" recession call.
The tech sector (QQQQ) is trading pre-market open -1.9%. Looks like the four horsemen are finally set to take the broad market down, while the financials take a breather (they're not going up, but they'll decline less quickly).
All,
If Sebastian ever bothered to show us his portfolio YOY change, we'd see a big drop in his house equity and an ongoing decline in his stocks. I doubt he owns commodities.
This guy lives in a dream world.
Even better, if you put the RUT back at least 3 years, if this decline stated above occurs, there's a monster complex Head & Shoulders projecting down some 35% from this year's lows!
This is sweet news for a TWM holder like myself.
Earlier in the thread somebody mentioned we're going to see "more capitulation" in the near future. More? I don't think we've seen any capitulation yet. I'm betting we got a lot of skiing left to do before we hit the lift.
ipodius writes:
So far kids, Sebastian seems to be right about the "official" recession call.
We'll never have another recession again it seems. Something to do with the numbers.
Anyone seen the exposures on Page 24
http://www.occ.treas.gov/ftp/release/2007-120a.pdf.
JP Morgan at $79 TRILLION in Derivatives Contracts against $1.252 trillion in assets??
The U.S. government should ease regulations on private equity investments in financial services companies to make more money available to the business and help stabilize the economy, two executives at the Carlyle Group wrote in The Wall Street Journal on Thursday.
Carlyle wants U.S. to ease bank investment rules
| Reuters
I'll bet they do and stabalizing the economy is probably about 10th down on the list of the reasons why.
wait wait wait, back up there. Did someone mention some sort of summer bonuses we were supposed to be getting there - to spend on high value foreign assets like wire rims? I need to go talk to my boss....
Stagflasturbatio
You know who to blame for this right?
Goldman, with that obnoxious forecast!
We'll never have another recession again it seems. Something to do with the numbers.
That's why those quotes drip with sarcasm.
what are the 4 horseman this year. seems to change annually..
Thomas writes:
Stagflasturbation
Stagflasturbation by the manipuspectors!
I hope I'm wrong, but a disturbing analogy has started wandering through my head.
Previous posters have claimed that Weimar inflation was deliberate to evade war reparation claims.
Are we following the same plan to deal with our big foreign debt?
"So far kids, Sebastian seems to be right about the "official" recession call."
ipodius | 06.26.08 - 8:47 am | #
Our freight volumes are flat year over year. I can live with that. We also have had no problem pushing through increased costs...
Chris
Billy Hill, there is no inflation. Look around you...declining house prices, massively contracting credit, wide-spread capital destruction, equity evaporation. Does any of that look like inflation?
There is no inflating out of this one. The best that can happen is that the "official" rate runs slightly overheated so that asset prices don't fall that fall in nominal terms. Once oil starts its descent, you'll see how there isn't inflation, just price reaction.
askin,
It's a return to the classics don't you know - War, Famine, Pestilence and Death.
mp writes:
"No problemo. Another 400 or 500 billion from the Fed should fix it."
Do you mean "fixed" like the vet "fixed" our dog?
son of zinger writes:
Do you mean "fixed" like the vet "fixed" our dog?
Ouch.
Thanks for pointing this out. It seems like everyone woke up from their daydream and pulled off their rose colored glasses. I just saw CNBC and could have sworn that everything international was green and up 1%. I log in 30 minutes later and look at Bloomberg where everything is now down 1%. Strange. Also, the short term bonds all jumped in price. I think that the FED did not help everyone yesterday with their announcement. I expect the markets to roll down through August due to the FED's weak response to inflation.
university endowments and pension funds are the most ass-backwards hypocritical entities in the world...
I can't speak to hypocritical, but I can to stupid. I followed some "entrepreneurial" investments made by some University endowments (U. of Chicago, etc., etc.) back around 1999. Every single one of them has gone bust. Appears they just said "eeny, meeny, miney, mo" (last should have been "no" and they would have been okay) and plunked down the cash. And then watched it disappear.
how ironic would it be if this time it was the hedge funds that blow up the banks!
I can't speak to hypocritical, but I can to stupid. I followed some "entrepreneurial" investments made by some University endowments (U. of Chicago, etc., etc.) back around 1999. Every single one of them has gone bust.
Not any more. The top university endowments have been starting to hire top guns to invest. The kicker? It's all tax free.
Bloomberg.com:
News
Yesterday I realized that I had accidentally used a 3rd "credit card check" and would go over my limit by $1600. No big deal, I thought. I called Capital One, told them I needed a small line increase to cover it. I went through 3 levels of support, all of them perplexed that their computers would not allow a little more, for a 13 year customer with an 800 FICO. Nope. No dice!
OK, fine. I'll pay the overdraft fee, pay off the card, and close it in disgust. But it shows how hard the lenders are now trying to contain credit.
Nope. All credit lines including Capitol One are bing pulled in. For a better example, I call my GE credit line to pull some money to pay off some other credit lines (my last few that I was paying off) and consolidate everything together. After I was transferred to another level, I was basically walked through the credit line application again and then denied a transfer. Now, this is an account that I just paid off to $0, has never been late, and has a rather high credit line. I was informed that my debt was high (yes but it is at 4% or less and I earn more money than my capital cost) and that I need to get my debt down before transfer was granted. It blew my wife's mind not mine as I expect all credit lines to be limited on new transactions. In addition, I fully expect that my credit lines will be reduced as my debt is paid. Crazy way to treat your customer when the good ones are paying down their debt. In the past year, my debt has gone down 20% and my assets have gone up 25%.