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Just watched BUSHCO after seeing my 30% overnight haircut by government fiat. I feel like throwing up. They should all have been in aviator shades.
He did say that violaters of the (short selling) law will be "persecuted" to the full extent of the law.
Firesign theater now in the White House. God bless the Banana Republic leadership.
Note Setser's post today--- capital flight has begun.
Watching W and listening to his explanation of our current "problem".... the last two years of reading CR came flooding back. Thanks to all who have contributed here and provided a clear understanding of what really happened.
"I look forward to working with Congress to pass necessary legislation to remove these troubled assets from our financial system. When we get through this difficult period, which we will, our next task must be to improve the financial regulatory structure so that these past excesses do not recur."
Neat trick, if this insanity gets bogged down in congress they can hand off the blame to the dems.
I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.
Actually, if you really want to help American families, you can send US the hundreds of billions of dollars. I know that would help me.
In response to my point that there was a genuine economic crisis affecting all of us, someone responded:
"Markets should be free. People who are free to make money, should also br free to lose it."
And I say this is precisely the idiocy that the Wall Street guys and their Republican friends invoked to get us in this appalling situation. Leave them alone to do whatever they want is what they asked and, there you go, the entire US, and maybe world, banking system is on the verge of collapse.
Wake up, dope! It's your money they've been left free to lose. Hope you enjoy it.
"As a result, Americans' personal savings are threatened,"
And the way to protect Americans' savings is to take all this debt on to the US balance sheet, fire up the presses, and lead up to hyper-inflation? This helps our personal savings how?
Paulson's brand of Drano to get your financial pipes unclogged. Hundreds of billions down the drain and all will be well.
Doesn't cost the taxpayers much. A bit of course, but they're used to paying.
He never mentions the profiteers paying anything back, though, does he?
Hunt the shorts, kill them, hang them and then as nazi/ku klux klanners we will go after people that own glod, and then we need to go after wheat farmers!!! Kill the wheat farmers!!!
Well, now. Where've you got your personal savings? A nice, save money market fund -- like the ones that have been closing? Or maybe something a little more risky, like bonds issued by corporations that won't be able to pay on them because they can't roll them over because they can't borrow any more. Or maybe stocks ...
If you recall, before the government did anything the Dow had dropped about 8% and was looking to give up a lot more ...
The American citizen has been economically screwed over since Reagan. What's another ten year or more? We exist in a fascist, communist, kleptocracy or oligarchy
state. Pick your preference and hold on for survival. It's going to be a wild ride with a significant decline in the overall standard of living.
5.56 mm ammo was .10 per round 5 years ago, and i bought ALOT. closer to .30 per round now. I can either sell it, or shoot it. what do you all think??? nice investment for a smelly pants pirate.
As to the cost of doing nothing: True, it would be much worse. Look back and consider, some smarter than all of us put together have predicted this. And many years ago.
Do we take the beating now? Or later? Would it be even worse when the pain is increased exponentially?
Would you rather live free? Or be coddled by a superior master?
Damn straight MS. This is a bigger crisis for the elites than J6P. And since the media is its mouthpiece, they got us all in a tizzy and now they gotta lay a TARP on us. Police state brought to you by the Demlocians and Repubolcrats. Gosh, back to my garden I go.
Hey, Vikas! re: Firesign Theatre.
1st geezer: I went into the Chemical Corn Bank the other day, gave them 3 ears of corn, and they gave me back 3 beakers filled with chemicals!
2nd geezer: That's fair trade!
OT???
In most bankruptcy proceedings, all of a debtor's assets are frozen. The bankrupt company can't even pay a bill without permission of the bankruptcy court once the bankruptcy petition is filed. The point of this rule is to create an orderly distribution of the company's assets to the company's creditors. The creditors, ranging from the company's employees to its coffee service to its landlord to the big investors who own its bonds, all get in line by seniority. The bankruptcy court then doles out the liquidated assets of the bankrupt company until there are no more.
The 2005 exception threw that process out the window for the derivatives that Lehman owns. The counterparties in those deals are free to sell those deals on the market, if anyone wants them. They're free to take the collateral they'd given to Lehman as part of one of these derivative deals. Lehman took out hedges in the derivatives market to protect against a deal going bad or the value of a security (or another derivative) falling. The financial companies that were the counterparties to those hedges can now just rip them up, taking away critical protection for the company's portfolio just when creditors need it most.
And because the derivative market is so lightly regulated, it's likely that no one will even know if an asset walks out the door at Lehman in this way before it could be liquidated and distributed to creditors. In essence, the companies that were parties to derivative deals with Lehman are free to strike the best deals they can without having to clear them with the bankruptcy court or inform other creditors. Creditors' claims against Lehman come to $613 billion, according to bankruptcy court filings.
I am dumb-founded, not by the chain of events but by the 800 visitors online.
Don't quite remember when I see so many visitors online before. there must be many people, like myself, trying to make sense of what is really going on.
Something that help keep my focus is the reminder that nothing on the "economic" front has changed very much. The world is still heading into a global economic recession regardless of the noise in the markets.
So, I choose to keep my short nasdaq 100 and long yen position on. thankfully, still sitting on some profit.
"Congressional leaders said after meeting Thursday evening with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke that as much as $1 trillion could be needed to avoid an imminent meltdown of the U.S. financial system.
Paulson announced plans Friday morning for a "bold approach" that will cost hundreds of billions of dollars. At a news conference at Treasury headquarters, he called for a "temporary asset relief program" to take bad mortgages off the books of the nation's financial institutions. Congressional leaders had left Washington on Friday, but Paulson planned to confer with them over the weekend.
"We're talking hundreds of billions," Paulson told reporters. "This needs to be big enough to make a real difference and get to the heart of the problem."
Markets should be free. People who are free to make money, should also be free to lose it.
Sounds good to me. Unfortunately, Wall Street doesn't want to be free to lose it, and Goldman Sachs has ex-employees (Hank Paulson, and Josh Bolten, Bush's Chief of Staff) in influential positions.
So we are actually agreeing that the US/World financial system is crashing. Even the gov agrees. It is not tinfoil. Think about that for a minute.
The world financial system is crashing.
Think about what that means. Making a profit on SKF? I laugh. Short selling? I scoff. Do you think they sat around the shanty towns of 1930 and talked about short selling? Somehow I doubt it was on their mind.
The decisions or non decisions that are made in the next few months will effect generations. My guess is that at least 20% of the people reading this blog will not be able to in 16 months. They will not be able to afford internet nor will they be able to use their employers connection.
If all of this works the way Paulson says it will, won't that be fine? I just hope that people give this some intense scrutiny and analyze the worst-case scenarios if this gigantic experiment fails.
But I am not optimistic that this kind of analysis will occur in this environment.
It seems that the financial community, press, public and Congress are all scared witless, and most are willing to embrace these sweeping "solutions" without doing much thinking.
Well f**k me. I think it's time for Generation X (and Y, and whatever they call the new kids) to take up pitchforks, cause the boomers are trying to rob us.
These assets aren't "frozen", they're "worthless" (or "worth less than you want"). Kind of like land in the Inland Empire--once it gets discounted to 10c on the $ it gets sold. I guess the unspoken part of the plan is to buy these assets FOR MORE THAN THEY'RE WORTH. This would represent a massive shift of money from taxpayers to who? Shareholders of financial institutions? Which in turn is mostly employees of financial institutions, rich people, and retirement/pension funds = old people?
"We're playing a game of casino capitalism, interfering with the way the market is working,'' Bogle, 79, said in a telephone interview today from Valley Forge, Pennsylvania. ``The government seems punch drunk. It doesn't seem systematic."
- John Bogle, Vanguard
Can't we finance this with a retroactive tax on financial company executive compensation in excess of $5 million? You know, sort of like financing Superfund with a tax on the chemical and petroleum industries that created the toxic waste in the first place???
--Conrade K
Is anyone surprised at the war on savers? Remember how unpatriotic it was a few years ago be part of the savings glut? Don't keep money in your pocket, that's unpatriotic. Put it in my pocket.
Nothing good legislatively will come in an election year with 2 months to go. Legislation of Mass Destruction here we come.
My mom and my aunt were talking last night about how much $$ they had lost in the past year and my aunt said "Well, at least when I die I'll know all my good little republican kids will all be getting exactly what they deserve"
To restore confidence in our markets and our financial institutions, so they can fuel continued growth and prosperity, we must address the underlying problem.
The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy.
The underlying problem is not the state of the financial institutions; that's merely a symptom.
The underlying problem is the lack of discipline and responsibility in the markets, which makes lending unviable.
I don't see how Paulson's plan addresses this.
Spending unprecedented amounts of money while already massively in debt to keep institutions known to be economically destructive in business doesn't sound like the solution to me.
Just so you all know...Only 1% of outstanding mortgages are actually in FORECLOSURE. That measely 1% decimated our financial system. Heaven only knows what would have happened when the commercial RE and biz. loans went the same direction.
Looking for sunshine is hard when your head is up your arse.....
heehee, it sounds to me like they are saying the Asset Relief Program is already Troubled. I bet they come up with a better name. Something that builds confidence, like the Super-SIV, that worked really well.
dryfly writes:
iceman writes:
The truly scary part...
its not going to work.
iceman | 09.19.08 - 11:11 am | #
BS - it will do what it is intended to do - buy time & provide diversion to get the powerful past the next election.
You can't judge an outcome unless you understand the real intent.
dryfly | 09.19.08 - 11:25 am |
Not going to work dryfly. Velocity of information. When these guys were making their bones it would have. Not now. Not with the ability to move money in seconds.
Its not the "coupling" or "decoupling" that is going to rip through all this. It is the velocity of information and money flow. They don't get it.
"K writes:
Can't we finance this with a retroactive tax on financial company executive compensation in excess of $5 million? You know, sort of like financing Superfund with a tax on the chemical and petroleum industries that created the toxic waste in the first place???
--Conrade K"
I think this might well be unconstitutional -- but maybe not, Congress's ability to pass retroactive legislation has some, but not many, limits.
What might be the same would be a small wealth tax on the very well to do. That would recoup some ill gotten gains. And someone had the suggestion of a small, per share, tax on stock transactions, which would have the virtue of raising revenue and damping down rampant speculation.
But everyone will howl, as they do at Joe Biden's suggestions that it wouldn't exactly kill rich people to pay some more in taxes, and ought to be seen by them as a patriotic act.
Last week, when I lectured my teen age grand children on the need to look at life style changes because of our economic probems, they said forget it. The government will provide. I was disappointed that they really believed that, but it seems they are more tuned in than me. The next generation is screwed. Long live the Republic!
"Jerry writes:
If you recall, before the government did anything the Dow had dropped about 8% and was looking to give up a lot more ...
The Dow gave it up. Doesn't mean I did.
Jerry"
Downright patriotic of you, jerry, thinking only of yourself, not of folks with 401k's about to retire. (And if you say that's their fault, you are an absolute asshole -- 'cause its the fault of the free market thinkers who have led us down this path. If you don't blame the victim, of course, you're a fine guy.)
Below is an article on the Swedish banking crisis in the early 90s. Could my more financially astute comrades explain the Swedish example & whether it is a good or bad solution, how it differs from our situation & the gov't's solution?
Sometimes things one's life get to be so wierd, so strange, that one loses the ability to discern between what's real and what isn't. These episodes happen to most people once or twice in their lives, and thankfully they're transient.
But this is now happening to nations ... indeed it's happening on a global scale. And it won't be transient. Can someone tell me which way is up?
Its not the "coupling" or "decoupling" that is going to rip through all this. It is the velocity of information and money flow. They don't get it.
nova | 09.19.08 - 11:29 am | #
We'll see - they only have about six weeks to kill and a few very sensitive battleground states to keep calm - if they can keep the rubes happy in those locations - the election goes as planned.
If not - then it gets interesting.
Even if the information is moving fast most of these battleground rubes won't hear it UNLESS they can't get money from their ATM. Keep that stocked until first week in November and declare 'Mission Accomplished'.
I think they can do that much - after that all bets are off.
K writes:
Can't we finance this with a retroactive tax on financial company executive compensation in excess of $5 million? ...--Conrade K
Hey, I know, seeing how we've already over-burdened future generations with debt, how about a retroactive tax increase on EVERYONE who dies before 2008! It's about time those layabouts pulled their own weight!
Just a heads up market wise: many of you know my take, "volume confirms price"; well just benchmark today's volume on SPY, DIA, IWM, QQQQ, XLF, etc. with yesterday's - there's no volume. Big money isn't buying this. We'll be right back down the other side.
"Trickle-down economy at work. Whatever trickles down get taxed."
Americans have been such suckers. How they fell for the Bush tax cuts, which made the rich much richer, but helped nobody else, I will never know. Something in the Republican kool-aid.
The key to this is the price that TARP will pay for distressed mortgage securities. Buying 06-02 MBS mezzanine securities for par is obviously a handout to whatever bank is currently holding it. But providing more liquidity in the market but buying at reasonable prices could actually make a profit for the taxpayer.
"We'll see - they only have about six weeks to kill and a few very sensitive battleground states to keep calm - if they can keep the rubes happy in those locations - the election goes as planned."
Many of the illiquid assets clogging our system today do not meet the regulatory requirements to be eligible for purchase by the GSEs or by the Treasury program.
I look forward to working with Congress to pass necessary legislation to remove these troubled assets from our financial system.
How exactly are the "troubled assets" removed from the system?
Does anyone here understand the mechanics of this?
"Sure, dope. That's exactly what Andrew Mellon told Herbert Hoover. And my family suffered greatly from that, everbody unemployed, had to sell what they had for next to nothing, 50% unemployment. My grandma was about my age in 1930, and she lived in unaccustomed and real poverty until social security let her in. That's what we're facing here, a worldwide financial crisis, and you jerks are whining that somebody is going to do something about it. I'm not sure it will work, and it will surely be expensive, but I know about depressions, and you don't seem to .
David in NY | 09.19.08 - 11:20 am | # "
So Right, David. My new agency will totally prevent the Great Depression, just like last time.
"But providing more liquidity in the market but buying at reasonable prices could actually make a profit for the taxpayer."
There is a real liquidity problem a lot of people here are ignoring and that has to be addressed. But I do think there's only a dim prospect of any profit out of it. On the other hand, it might regularize the adjustment of foreclosures in the housing markets, instead of the chaos there now. And that might lead to good things.
sure I'm going to waste time calling the very people this helps out the most.
Do a little research and you'll find that the very people tasked with 'saving america' have VERY large stock positions in the firms that just got a free pass.
Have the sound on for Bubblevision, and Dylan Ratigan is so far over his over head, he is reading questions and bullet points off his computer. His guests are embarassing him with the clarity of their questions. Nothing I didn't know before, but what a super ass today. sound is off now.
It's about as clever as Greenspan's magic. It will give the appearance of working, and may even appear to be brilliant ... but in reality it not only delays the inevitable but makes the inevitable bigger.
Does anybody know when they went into extinction, you know, the species of political leaders capable of "big picture" thinking? Forty years ago? Fifty? I'm losing track.
In three weeks TARP/CRAP won't matter. Events are moving to fast. Nobody here will even mention it. The speed of contraction has begun to snowball. They are not going to be able to stay on top of it.
Plus the powers to be, for the first time perhaps, are powerless to control all events. To many random varibles. To many who do not see where helping the western elite benefit at their expense is a worthy project.
Wallster,
There is no way the feds will take this paper at anything near market value. The market could take care of that. Uncle Sam's going to pay plenty more than these are worth.
I also bet there are no stipulations about partitioning losses or capping executive compensation.
David in NY writes:
"But providing more liquidity in the market but buying at reasonable prices could actually make a profit for the taxpayer."
There is a real liquidity problem a lot of people here are ignoring and that has to be addressed. But I do think there's only a dim prospect of any profit out of it. On the other hand, it might regularize the adjustment of foreclosures in the housing markets, instead of the chaos there now. And that might lead to good things.
David in NY | 09.19.08 - 11:40 am | #
Bullshit.
This is a solvency issue, not a liquidity issue. Price discovery for any asset - in this case real property - is the elephant in the room. TARP does nothing to effectively price properties going into foreclosure. You think that the 'chaos' presently swirling in the private sector will be lessened when a GOVERNMENT AGENCY gets involved?
"The Securities and Exchange Commission has issued new rules temporarily suspending the practice of short selling on the stocks of financial institutions. This is intended to prevent investors from intentionally driving down particular stocks for their own personal gain."
"The Department of the Treasury is acting to restore confidence in a key element of America's financial system -- money market mutual funds. In the past, government insurance was not available for these funds, and the recent stresses on the markets have caused some to question whether these investments are safe and accessible."
"These measures will require us to put a significant amount of taxpayer dollars on the line. This action does entail risk. But we expect that this money will eventually be paid back. The vast majority of assets the government is planning to purchase have good value over time, because the vast majority of homeowners continue to pay their mortgages."
For any bank entering this program, I want no deductability of losses. I want no deductability of management bonuses and stock options for the last five years. I want 10% warrants as of noon EST yesterday. I want this program to be extremely distasteful.
Do NOT blame me Comrades, but me thinks we are FUKED.
"BETHESDA, Md.--(BUSINESS WIRE)--Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values."
eat, drink, and make merry--for today we have been nationalized. We are now merely futurative tax input entities to be exploited to support the "system". Privatize the gains, enslave the masses to bear the losses. "No recourse" nation being made full recourse+p natio
The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values."
"There is a real liquidity problem a lot of people here are ignoring and that has to be addressed. But I do think there's only a dim prospect of any profit out of it. On the other hand, it might regularize the adjustment of foreclosures in the housing markets, instead of the chaos there now. And that might lead to good things."
That's just the thing. Right now there is no liquidity because the only offers are at 20 and the banks don't want to sell for less than 80 (because that's what their cash flow testing indicates the securities are worth). What is TARP going to pay? Pay par or 80, high probabily of losses to taxpayers. Pay 40 or 50, good chance of making money over the long term.
I've not seen any indication of what TARP is going to pay for these securities.
I want to see Bill Gross interviewed RIGHT NOW!! That smirk after the GSE nationalization gain just got wiped out. He is taking the single biggest clobbering ever if he didn't somehow get the nod in advance and somehow hedge that massive book, if it's even possible to do.
I believe many Members of Congress share my conviction. I will spend the weekend working with members of Congress of both parties to examine approaches to alleviate the pressure of these bad loans on our system, so **credit can flow once again ** to American consumers and companies. Our economic health requires that we work together for prompt, bipartisan action.
So -- I heard several say that the solution to excess credit will not be 'more credit.'
I also heard the Stockholm Syndrome mentioned months ago, I think here, that people don't realize that their addiction or reliance on Credit is actually a problem. Credit is the slayer not the saviour. (when used wrong, of course, like it is by millions)
So anyway,
I took away that Paulson is going to keep the credit flowing, so we can all buy more stuff on credit.
And just to show he's with us on this. The entire program is going to be put on the National Credit Card. Charge IT!
WhOOO!!
SKF is obligated by its prospectus to follow a NAV twice the inverse of the Dow Jones Financial Sector - so my guess if it were trading puts it around $105-110 at the moment.
I'm very curious to hear what Ron Paul has to say.
I'm not a Paul supporter and wouldn't vote for him, but his views on economics and the economy have made sense to me.
I wonder if he's ducking questions or has just been consciously 'boycotted' by the media? I figure if I'm wondering what his views are, then at least 10% of the media news producers have had that thought as well.
Who's this "they"?
David in NY | 09.19.08 - 11:37 am | #
Paulsen, Bush, BB - even Pelosi & Reid - are the the 'they'.
This might surprise you - but a lot of S Ohio, rural Penna, Wisconsin, Missouri, Iowa... classic battleground states where BOTH the House/Senate AND WH elections will be determined tend to vote GOP in presidential elections BUT have conservative democratic reps & senators.
Rattle those people and the election is truly up for grabs - all of it. There is huge incentive to not panic these people from both parties. They have too much to lose.
So that is why they could - in theory - get this deal done and fast. Usually grid lock would stall something like this for YEARS - my guess is that logjam was blown apart by the market this week.
This is a solvency issue, not a liquidity issue. Price discovery for any asset - in this case real property - is the elephant in the room. TARP does nothing to effectively price properties going into foreclosure. You think that the 'chaos' presently swirling in the private sector will be lessened when a GOVERNMENT AGENCY gets involved?
Sure. It is a liquidity problem, but you're right about solvency being a problem too. This plan, as I understand it, is taking a shot at that, but at immense cost to the taxpayer. There is a genuine problem here that letting the insolvencies unwind as quickly as they were beginning to will continue the liquidity problem (which will render otherwise viable businesses insolvent because they can't get credit) and we'll have a snowball of the size of 1929.
I don't love this solution. But I know about the Great Depression, and I have no desire to live my retirement during another one, as my grandparents did. Anyone with a better solution to the actual problems, I'd love to hear from. But the problems are real.
Ron Paul was on Beck's show last night. As usual, he was dead on. Interesting, he commented that behind the scenes, many CONgressmen were agreeing with him, but none were willing to go public, and none of the leaders of both parties will admit they are wrong.
How much money did Paulson and BB already waste? Add that hole to this and you're talking 2 trillion--and we all know the works not done yet. Credit card mess is gonna really hurt.
All of this mess is being blamed on Bush. If it gets held up in Congress suddenly it's the Dem's fault right ahead of the election.
I don't give two mouse farts about the fucking Democrats or the Republicans.
This is about OUR COUNTRY.
Thomas Jefferson was right.
He said,"If the American people ever allow private banks
to control the issue of their money,
first by inflation and then by deflation,
the banks and corporations that will
grow up around them (around the banks),
will deprive the people of their property
until their children will wake up homeless
on the continent their fathers conquered."
If there is a PPT, they must be quaking. One of the things that has been holding this market up (more cheaply) has been using rumours to scare the shorts.
My favourite quote about "Trickle Down Economics" comes from the leader of the Liberal Democrats in the UK. Speaking about Tory tax policies he said "I don't want my constituents to be trickled on!"
What a brilliant response. If you have to engage in personal attack as the first element of a comment, please find another blog.
WouldYouLikeCakeWithThatPony? | 09.19.08 - 11:42 am | #
On second thought, why don't you blow it out your ass ....
David in NY | 09.19.08 - 11:48 am | #
So long guys. It wasn't me that said the last sentence of the above. I apologized for the mild epithet "dope" in an earlier comment, but I was apparently correct in that, and understimated the degree of your problem. As anyone can see, except in weak moments, I think people ought to talk real substance here, not macho crap.
Dryfly writes - Rattle those people and the election is truly up for grabs - all of it. There is huge incentive to not panic these people from both parties. They have too much to lose.
I don't think the election figures in their minds. The ability to hold on to their fortunes, which is their life, is all. That, and the power that comes from controlling companies that provide the fortune.
This, to me, is more about survival of a class. They aren't worried now about elections. They know they will always have access to the levers. But if the system crashes all that goes away.
Their hand has been forced. They are making to much noise now for it to go unoticed by the people.
Should we sell index funds such as VTSMX, VGSIX, FUSVX today or keep holding? I understand about selling individual stocks but don't get any answers on index funds.
Actually, solvency is the ONLY issue here, David. The Fed has injected literally hundreds of billions of dollars in liquidity.
Yes, there is a problem here. It's that the market is finally working (was that Rob Dawg's note?) and TPTB recognized that true price discovery means that the balance sheets of financial institutions are laden with more debt than the underlying assets are valued. Which means they are insolvent. Which in turn means that their stock is worth squat. Which in turn means that traders who recognize this before others, and short that stock, make out -
"like bandits"
Only now they ARE bandits, and will be "persecuted".
The solution to the festering body of the financials - a TARP from the government. Beautiful.
I called Hillary Clinton & Chuck Schumer. What was disturbing to me was that I got thru on the line right away to a real person. No busy signal. People in this country have no clue what is going on.
Schumer's office told me that this action does not require congressional authority, that it is solely an executive branch decision.
I dumped the last of my 2x inverse Proshares this morning, who the hell knows how they will play out.
But they never worked that well anyways. You had to catch a straight, short-term bounce. In a market with lots of dramatic bear rallies, they don't work as well as puts.
Say the index and the Proshares etf are both selling at 100. The index falls 30%, the index is now at 70, ETF at 160. Then a rally and the index goes back to 90, a 29% increase. The ETF falls 58%is now 92.8! Duh!
"Obama is just too dumb a nigger to be president
Comrade Baron Von Helmut III"
Dumb he is not. McCain, if you recall, couldn't scramble above fourth from the bottom of his West Point class, and he hasn't learned a thing in 26 years in Washington except how to lie.
MS writes:
Do a little research and you'll find that the very people tasked with 'saving america' have VERY large stock positions in the firms that just got a free pass.
Well sitting on your ass won't do it. Hoover and Mellon pretty much proved that. You want to go their way again?"
Check my name, David. I'm with you, you're with me. I used to run the Reconstruction Finance Corporation so I know something about bailing out all the right people. Jeez. Kids these days! No sense of history!
Let's look at a timeline of some of the decisions I would class as extra-legal or Enron-esque:
The (Selectively Leaked) Discount Rate Cut (August 2008)
Super SIV (October 2007)
Term Auction Facility (December 2007)
Bear Stearns/JP Morgan bailout and subsidy (March 2008)
Primary Dealer Credit Facility (March 2008)
Reverse MBS Swaps (April 2008)
Equity investment and collateral (September 2008)
Administrative Repeal of 23A (September 2008)
AIG nationalisation (September 2008)
Expansion of the Fed Balance Sheet through unprecedented Treasury refinance without appropriation by Congress (September 2008)
Central bank dollar liquidity draws (September 2008)
Resolution Trust Company/Super SIV Redux (next)
And that's just the list of actions we know about. Much may have been orchestrated and influenced behind the scenes in credit markets and traded equities and commodities.
At no stage have any of these significant enhancements to the prerogatives of the Federal Reserve, these derogations of explicit statutory limits, these stark departures from past authority and conduct, been the subject of democratic legislative proposal or review, or even public consultation and comment. In the name of exigency, they have all been sprung as fait accompli on a shocked financial community, and since been treated as unquestionable and unreviewable. Every initiative introduced as a temporary measure has become a permanent fixture.
I don't love this solution. But I know about the Great Depression, and I have no desire to live my retirement during another one, as my grandparents did. Anyone with a better solution to the actual problems, I'd love to hear from. But the problems are real.
David in NY | 09.19.08 - 11:49 am | #
I have a lot better solution - RTC the bad assets AFTER BK. Wipe out the equity positions, sack management re-capitalize the remaining shell via RTC and refloat as new privatized firms in a much better regulated invironment (more enforcement of simpler and less opaque regs).
In short copy the Scandinavian model from the 90s. If anyone has 'socialism right' its the Norskis.
Short term - let them fail then IMMEDIATELY take over to limit cross defaults. But only nationalize AFTER failure - no saftey net for the IBs before BK. Force them fearful to ask for gov't help. Deterrence is a good thing.
Long term - restructure & enforce better regs. Paulson has that right though the devil is in the details.
But the key is wipe out equity first. That reestablishes moral hazard. The best regulator going forward.
What they are doing now is 1) grasping at straws 2) buying time. No accident that the timing coincided with a national election.
"Actually, solvency is the ONLY issue here, David. The Fed has injected literally hundreds of billions of dollars in liquidity.
Yes, there is a problem here. It's that the market is finally working (was that Rob Dawg's note?) and TPTB recognized that true price discovery means that the balance sheets of financial institutions are laden with more debt than the underlying assets are valued. Which means they are insolvent."
No, there is definitely a liquidity problem. TARP could make a killing if they act as a vulture buyer, picking up undervalued assets from banks for less than economic value, but I suspect TARP will pay much more than economic value for the securities they purchase.
"Wow, that USS Tarp is a deep-draft sucker. We didn't lease any slips that deep; just lay her up on the sand bar there - she won't sink, but we'll never be able to move her either."
This "boomers are trying to rob me" is utter bullshit. I'm 63 years old and the best damn ally any snot-nosed idiot whippersnapper ever had. AND I don't own any stocks, have no health insurance, rent my house, and owe tons to Visa and GMAC.
So GET HIP, kiddies, and stop making up stupid ageist whiny-crap-booshwah-nonsense. I have not stolen your fucking inheritance, someone else has.
"The SEC is also requiring certain investors to disclose their short selling, and has launched rigorous enforcement actions to detect fraud and manipulation in the market. Anyone engaging in illegal financial transactions will be caught and persecuted [sic]." - G.W Bush 09/19/08
He said it, he meant it. Going off script is not the same as going off message.
thank you dryfly. I find your solution scary in the extreme, because I expect really bad short term dislocations, but who knows, it's pretty hard to predict.
And I've seen different estimates on just what difference "moral hazard" makes. Maybe it was Soros I just read (who thinks bubbles, not equilibrium, is normal in markets) who doesn't think "moral hazard" is all its cracked up to be as a regulator.
Govy writes:
For any bank entering this program, I want no deductability of losses. I want no deductability of management bonuses and stock options for the last five years. I want 10% warrants as of noon EST yesterday. I want this program to be extremely distasteful.
... amen. A lot more folk would be willing to play along here if we were hearing that kind of talk from Paulson/Bernanke/Bush.
TARP will probably keep the IB's alive just long enough to insure that the oil speculation that they are part of destroys what is left of the economy. This will buy time and kill any chance of the world getting out of this mess without extreme pain. CR has been right all along about the need for oil to come down to moderate the recession. Saving WS from its own mistakes will guarantee that oil does not come down. Checkmate.
The Baron has disclaimed the racist comment, folks, and I can attest that there's identity borrowing going on here, so I'm inclined to accept his claim he did not post that.
September 18, 2008
WTP Brings Federal Lawsuit to Stop AIG Bailout
U.S. Lacks Constitutional Authority for Loan
On the day following the 221st anniversary of the signing of the U.S. Constitution, WTP Chairman and constitutional activist Robert Schulz today filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of American International Group, Inc. (AIG) by the United States Government and the Federal Reserve.
The lawsuit asserts that the commitment of public funds and credit for the direct benefit of privately owned AIG is an ultra vires action by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. The lawsuit asks for a "show cause" hearing demanding that the Government produce evidence of its legal authority to commit public funds for such a purpose, as well as emergency and permanent injunctions halting the bailout transaction.
Beyond the Constitutional deficiencies, the bailout establishes a dangerous precedent enabling the Fed and/or Government to nationalize virtually any business or property within the United States without legal authority or congressional approval.
The defendants include the Federal Reserve System, Fed Chairman Ben Bernanke, the U.S. Treasury, Treasury Secretary Hank Paulson Jr. and the United States Government.
The WTP Foundation today issued a press release citing Schulz:
"Beyond the moral hazard and dangerous precedent established by this action, it is of vital importance that the American people recognize that the present financial crisis is a direct and predictable result of decades of constitutional violations by the Federal Government. Through a long-standing policy of disinformation and collusion with the Federal Reserve and Wall Street financial elite, the United States Federal Government has denied public access to information about the secretive operations of the privately owned and operated Federal Reserve and its monopoly control of America's money system.
"This monopoly control of our currency by a private banking cartel has resulted in increasing distortion, volatility and cyclical (boom and bust) economic conditions in the U.S. and abroad. America's fiat currency (produced from thin air) is manipulated by the Federal Reserve for the benefit of its owners, major Wall Street financial institutions and the Federal Government and is not unaccountable to the taxpayers. These abuses of the Constitution have taken our financial system to edge of the abyss. The chickens have come home to roost."
(I wouldn't touch this stock now with a ten foot pole. Remember.... today only, options market makers have ana exemption. Starting Monday, they do not).
ProShares Announcement
BETHESDA, Md.--(BUSINESS WIRE)--September 19, 2008 Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.
Comrade Geoff writes:
Who sent all the new idiots here today?
Comrade Geoff | 09.19.08 - 11:58 am | # Comrades Paulson, Bernanke, Cocks, Bair, and Bush.
Yesterday someone posted a copy & paste job from an article concerning the UK's outright ban on short selling during the Depression; I've been unable to find it again. Does anybody know the specific year that occurred? I'd like to dig up some more on that.
The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.
So just hold and watch the XLF - do a cross-hairs on the SKF chart. That's where the NAV will be when the ban is lifted.
Lost of talk about making the banks go BK before taking on the assets. I think that is the wrong approach here.
What does everyone think of this? The fund buys up the mortgages at whatever cost the banks need to stay solvent (80 cents on the dollar?). The trick is that they also include some sort of underhanded provision that forces these banks to pay the difference between the payout and book value back to the RTC over time, until the net payout to the banks is actually the book value.
Imagine an RTC buying the 100k mortgage for 80k. The real value is just 20k though. so the bank gets 80k, but over the next 5-10-30 years they have to pay the 60k difference back to the fed over time plus interest.
The idea here is that you make the banks whole and keep them in business for now, but basically make sure that over the next 20 years they pay us back with their future earnings.
We are about to reload for the next bubble. Come along don't be late. The US, in transitional state between ground breaking innovations, must rely on bubble economy to sustain its way of life. Asset deflation is an absolute no no. Asset price discovery is an absolute no no. So what is the next asset to drive up price?
.
If AIG , FNM , FRE bailouts are a precedent, I hope the Govt will extract a heavy price from these institutions in exchange for buying that excessive risk.
Buy assets at fire sale prices, make them eat their losses.
Then recapitalize them with equity infusions by taking 79.9% stake in them.
Replace all the top management who took on this risk.
AND NO GOLDEN PARACHUTES FOR THE DEPARTEES!!
Don't know how this can be good for the share holders, financial stocks are rallying for sure 2day.
I don't think they are worried as much about the share holders, as they are about getting the financial markets to function normally(?) again.
The housing correction is far from over. Nationally the correction has been 20% per case shiller.
I think correction will be at least 50% from the peak.
If they think this is the end of mortgages going bad, they are gravely mistaken.
Homes is Fort Myers/Cape Coral are going for as much as 60% to 65% off of peak.
Two to three years from now, most of housing markets can be expected to be there.
Welcome to the United States of Socialist America!!!
.
Two interesting things jump out to me from the transcript:
The plumbing metaphor -- illiquid assets are choking off the flow of credit, clogging our financial system. Who can argue with unclogging the pipes? I'm not saying I agree with the metaphor, but it's a deft use of language and rhetoric.
The adjectives are standard fare for this type of appeal: "substantive" discussion, "comprehensive" approach, "decisive" action. My standard approach to these things is to strip out the adjectives and then evaluate the argument. How does it stack up then?
So, who is going to come up with a counter-metaphor to Hank's plumbing image?
CR's tarp is a start.
But who has a big enough megaphone to counter Hank's appeal?
It looks like Pelosi, Reid and Barney Frank are on board, which is puzzling in at least one way because they have some political incentive to see this thing blow up in Bush and Republicans face. (You could argue that they're acting as good Americans who don't want the US financial system to blow up, which may be true.)
Will it be Shelby from Alabama and other fiscal conservative Republicans? Doubt it, but who knows?
Ok here is my take, just posted to the Zacks.com blog:
Today the SEC followed the lead of their British counterparts and banned short selling in almost 800 Financial sector stocks. In addition it looks like we will have something that is being described as a second Resolution Trust Company (RTC2) to buy up all the toxic sludge that is floating around Wall St . In the short term this is fantastic news for the embattled Financial Services sector stocks. In the medium to long term it is very bad news. If your trading horizon is a month or so, load up on the investment bankers, very weak banks etc. For example, even the walking dead like Washington Mutual (WM), National City (NCC) should do very well today and probably for the next week or so. The greater the current short interest in the name, the bigger the pop you will see. However, keep a very close eye on them. This should only be a short term trade, although it could be an extremely profitable one. Longer term look to firms who will still have customers regardless of the economic conditions and which have very strong balance sheets. Names like Proctor & Gamble (PG) and Coca Cola (KO) spring to mind.
By and large the short sellers have been right about the underlying fundamentals of the sector. The sector made a ton of loans to people without checking to see if they had the ability to repay those loans, and then leveraged themselves up to extremely imprudent levels. As long as real estate prices were going up, there were very few defaults or foreclosures. If someone couldnt repay the mortgage, he could just sell the house. As soon as housing prices started to fall, the whole thing was bound to unravel. Thus as the cycle was still going up, these bankers could book massive, but largely illusory profits, and pay themselves massive bonuses. As thinks started to fall apart, everything possible was done to hide the true condition of their balance sheets from the investing public. Most notably by reporting a large part of the paper as level three assets. Short sellers play a very important role in price discovery, making the capital markets much more efficient. They also provide a lot of liquidity, since they are guaranteed buyers at some point as they cover their positions, that usually happens when nobody else wants to step in and buy. Are there abuses by short sellers, of course, just as there are abuses on the long side. Enforcement of the ban on naked short selling makes sense. In other words you do actually have to find shares to borrow before you can borrow them and sell them short. Bringing back the uptick rule, which was implemented after the crash of 29 and only eliminated last year would make a lot of sense. That would be sensible regulation.
Banning short selling in 799 stocks until October 2, which is extendable for 30 days thereafter (anybody look at the calendar to see what occurs 33 days after Oct 2) and doing it on the day when all the options and futures expire, smacks of market manipulation on a scale that would make Jessie Livermore blush. One effect of this will be to effectively shut down the Options market. People who write (i.e. sell) puts hedge their positions by shorting the underlying stock. Now, with short selling eliminated, people wanting to bet against these companies will migrate to the options market. However, the other side of the trade will be severely compromised. Write a put and you have nearly unlimited losses (there are infinite potential losses on writing calls, but with puts a stock can not go below zero so that caps it) yet only a set premium. If you can short the stock then you can hedge the position. Unless the premium you get for writing the put is extremely high it is just plain a stupid bet. You could then see a situation where the at the money call is trading for $2 and the at the money put is selling for $10.
There are very real differences between the original RTC, which disposed of assets the Govt already had by virtue of paying off depositors and shutting down insolvent S&Ls and the current proposal. In the first one, the shareholders, both common and preferred we already wiped out, and many of the unsecured creditors (not depositors under $100,000) took a hair cut. The assets were by and large real assets, say an empty strip mall in Texas . In this situation we are talking about buying up lots and lots of toxic paper at a substantial discount. Well the question is substantial discount to what? Par? What it is currently trading for? If this toxic paper is currently trading for $0.25 and the Govt buys it up at $0.25, then it has solved nothing other than it has forced price discovery of the assets and made the holders recognize their losses and thus take a hit to their capital. If instead the Govt (a.k.a. taxpayers) buys it at say $0.75 on the dollar, then this is nothing but a massive bailout and transfer of wealth to Wall St . How big a transfer of wealth is hard to say at this point, it depends on what price is paid and how that price is arrived at. And no, mathematical models of the value of this paper will not due. Those models have been proved to be extraordinarily wrong. Mark to myth and all that. But in all probability the transfer of wealth from the taxpayer to Wall St will be measured in the hundreds of billions. Welfare for the rich indeed.
Yal said: "I have a simpler plan for Paulson and Co:"
I had an idea even more basic. Which ever company is in trouble and needs bailing-out, simply merge it with its counterparties. The transactions zero-out, problem solved.
Well, thanks heavens (or heck) for the TARP, under which the skeletons shall be laid!
Good thing, too. For a moment there, I was afraid that Goldman Sucks wouldn't be the only bank left in this banana republic, and that our Elite wouldn't get a big bonuses this year.
WouldYouLikeCakeWithThatPony? writes:
David in NY writes:
"On second thought, ....."
You are a true man of letters!!!
WouldYouLikeCakeWithThatPony?
I did not say that (though I am a man of letters!). Somebody's playing games here (and I apologized for a mild bit of intemperateness, perhaps to you, above). You can look back at the thread.
At its heart, many here have a severe distrust of the motivations and adgendas of those in charge. Therefore, the working assumption is that plans introduced by those in charge are designed to benefit those in charge. One confirming indicator supporting this distrust is that all these plans don't seem to cause the primary benefitiaries of the most recent 7 years much if any pain while many of those who chose not to play the various games will now pay perhaps significant amounts of money.
Therefore, propose whatever plans you want, but if they don't start with clawing back money from the recent winners, then count me as a refusnik critic.
I don't love this solution. But I know about the Great Depression, and I have no desire to live my retirement during another one, as my grandparents did. Anyone with a better solution to the actual problems, I'd love to hear from. But the problems are real.
I thought this was about you caring about other people, David, not yourself.
I can see your frustration regarding how naive some seem to be about the effect of government inaction. There seems to be a communications gap on both sides. You should realize that not everybody on this blog thinks it would be fun. Still, they're prepared to deal with it, no matter how bad it gets, because they believe that in the long run, if not for themselves, but for their children and grandchildren, we will be better off for it.
iTulip says "Green Energy Tech" - sounds as likely as any. I met one of those windmill blades on the freeway other day. If we start trucking them in volume there's another new industry in escorting them until we can rebuild the road system or get some uber-helicopters or airships, the list is endless if you think about it. All it requires is belief in the "Global War on Carbon".
Re: "These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. "
These assets are clogging up option grants for CEOs that want $80 million a year in compensation, and if this problem gets worse, these friends of mine will have hardships!
Found that bit about short-selling, posted yesterday by Yalt:
Back in September 1931, the world economy was spiraling downward into the depths of the Great Depression. U.S. stocks had fallen about 70% (!) from their 1929 peak, and short sellers were blamed. Many people called for an outright ban on shorting. When Great Britain abandoned the gold standard on Sunday, September 21, 1931, the NYSE capitulated and issued an emergency order prohibiting all short selling. The gold standard news shouldve led to a sharp decline, but stocks advanced, mostly because specialists and other market-makers had no ability to provide liquidity on one side of the market. It became clear that the rise in prices was completely artificial, and after two days the NYSE repealed the ban.
So if eliminating short-selling inflates stock values, that would suggest that come Oct. 2, all of the beneficiaries of the ban are going to get absolutely hammered. Are they just going to keep renewing it until November?
Cap'n Midwest Product writes:
Where is the Minister of Cannabis? We have anger issues that Department is in charge of controlling.
I was defusing the tension with stupid acronym jokes in the previous thread - oblivious that it was already dead. I'm like the FEMA of financial tension.
Re: "The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy."
Friends Of Angelo, i.e, my buddies, need cash flow to help drive up their compensation possibilities ASAP, like today, because XMAS is coming!
This puts him in the 99.9999 Percentile when it comes to academic accomplishment. You might want to check out some of the other people who accomplished that feat.
McCain only got into the Academy because daddy was an Admiral. He was fourth to last in his class cause he ain't that bright.
I'm going long pitchforks and muskets.
P.S. Still prefer "Congressional Relief for Assets Program"
Can't wait for the Bush transcript. That one was full of howlers.
tarp and feather them
This is nothing but a Goldman Sachs rescue program, and the bill is to be footed by the taxpayer.
i'm not paying taxes anymore.
Just watched BUSHCO after seeing my 30% overnight haircut by government fiat. I feel like throwing up. They should all have been in aviator shades.
He did say that violaters of the (short selling) law will be "persecuted" to the full extent of the law.
Firesign theater now in the White House. God bless the Banana Republic leadership.
Note Setser's post today--- capital flight has begun.
I'm with Nemo on this one. Either that, or I'm going to find an empty stool at Lefty's and never get up.
How much is that per US household?
Put the dead body under the TARP. Move along, nothing to see here.
i'm not paying taxes anymore.
LOL...but how will wall street get its bonuses?
Watching W and listening to his explanation of our current "problem".... the last two years of reading CR came flooding back. Thanks to all who have contributed here and provided a clear understanding of what really happened.
"I look forward to working with Congress to pass necessary legislation to remove these troubled assets from our financial system. When we get through this difficult period, which we will, our next task must be to improve the financial regulatory structure so that these past excesses do not recur."
Neat trick, if this insanity gets bogged down in congress they can hand off the blame to the dems.
Privatize the Profits and Socialize the loss the USSA way
Was this cooked up by graduates of Sam Houston Institute of Technology?
I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.
Actually, if you really want to help American families, you can send US the hundreds of billions of dollars. I know that would help me.
I feel really bad for the folks who are clueless and just buy hook line and sinker the simple little explanations that bushwhacker just gave.
This is economic warfare.
Saved by the TRAP! Hooray!
Oh...wait...
We are all Big Shitpile now ...
In response to my point that there was a genuine economic crisis affecting all of us, someone responded:
"Markets should be free. People who are free to make money, should also br free to lose it."
And I say this is precisely the idiocy that the Wall Street guys and their Republican friends invoked to get us in this appalling situation. Leave them alone to do whatever they want is what they asked and, there you go, the entire US, and maybe world, banking system is on the verge of collapse.
Wake up, dope! It's your money they've been left free to lose. Hope you enjoy it.
CRAP/TARP will address home mortgages. OK, what about commerical loans? Bad credit card debt? Car loans?
This will create jobs how?
Bravo Zulu again lads!
I am sorry I should have asked "how mucha month" for the bailout?
But Comrade Biden told us we need to be "patriotic" and pay more taxes.
BWAHAHAHAHAHAHA
In this election year, this passes 99-1 in the Senate.
I'm I crazy, or doesn't this pretty much BK the federal govt, for all intents and purposes?
The truly scary part...
its not going to work.
Pakin will set us free, so thank God almighty for this multiple step plan designed with wisdom and grace ... amen and awomen!
"As a result, Americans' personal savings are threatened,"
And the way to protect Americans' savings is to take all this debt on to the US balance sheet, fire up the presses, and lead up to hyper-inflation? This helps our personal savings how?
TARP?
Like as in tent? Well throw that sumbitch up and let's call it a circus!
The dollar is falling hard, but gold ain't going up that much.
Boo, boo!! Does anyone have any rotten egg or tomato futures?
Putin for President
I hear a lot of grouching about how much this will cost, but not much about the costs of doing nothing?
Sen Shelby on Bloomberg poo pooing the TARP. Apparantley, he didn't get the Kool Aid this morning with breakfast.
iceman writes:
The truly scary part...
its not going to work.
iceman | 09.19.08 - 11:11 am
Yeah, I kinda get that feeling. But it should work for awhile. Then what?
Kilgore Trout writes:
Putin for President
So it goes....
My preferred names
Big Equity Asset Rescue
or
Safe Haven Of Rescued Tranches
yeah, i bought more SRS at 67. A lot.
"I'm going long pitchforks and muskets."
I'm thinking tumbrels and guillotines.
I hear a lot of grouching about how much this will cost, but not much about the costs of doing nothing?
David in NY | 09.19.08 - 11:12 am | #
Let the firms go bankrupt, let the assets be priced to market and liquidated, and start a new financial system.
Paulson's brand of Drano to get your financial pipes unclogged. Hundreds of billions down the drain and all will be well.
Doesn't cost the taxpayers much. A bit of course, but they're used to paying.
He never mentions the profiteers paying anything back, though, does he?
Does SKF get a bailout?
We are all bulls now.
"america, families, homeowners, jobs, growth, retirement,"
What did I miss......
"I believe many Members of Congress share my conviction"
Convicted is more like it.
How many member's of congress were loaded in AIG, MS, GS shares?
The answer is all too obvious.
Ciao
MS
Buy! Sell! Buy! Sell! (Youtube link)
Hunt the shorts, kill them, hang them and then as nazi/ku klux klanners we will go after people that own glod, and then we need to go after wheat farmers!!! Kill the wheat farmers!!!
"This helps our personal savings how?"
Well, now. Where've you got your personal savings? A nice, save money market fund -- like the ones that have been closing? Or maybe something a little more risky, like bonds issued by corporations that won't be able to pay on them because they can't roll them over because they can't borrow any more. Or maybe stocks ...
If you recall, before the government did anything the Dow had dropped about 8% and was looking to give up a lot more ...
The American citizen has been economically screwed over since Reagan. What's another ten year or more? We exist in a fascist, communist, kleptocracy or oligarchy
state. Pick your preference and hold on for survival. It's going to be a wild ride with a significant decline in the overall standard of living.
I would rather just be paying my taxes directly to Goldman Sachs partners. I mean, would have saved me the transaction costs.
5.56 mm ammo was .10 per round 5 years ago, and i bought ALOT. closer to .30 per round now. I can either sell it, or shoot it. what do you all think??? nice investment for a smelly pants pirate.
I hear a lot of grouching about how much this will cost, but not much about the costs of doing nothing?
David in NY | 09.19.08 - 11:12 am | #
Life would go on without the bad banks David. It would be painful but neccesary.
MS beat me to it.
I think more convictions are in order.
I believe many Members of Congress share my conviction.
Nice summary in the latest issue of the economist about CDS/Interest rate swaps:
Premium content | Economist.com
Interesting that the Dow Jones Real Estate Index ^DJR is down 2% and change today. Will there soon be a ban on shorting REITs?
As to the cost of doing nothing: True, it would be much worse. Look back and consider, some smarter than all of us put together have predicted this. And many years ago.
Do we take the beating now? Or later? Would it be even worse when the pain is increased exponentially?
Would you rather live free? Or be coddled by a superior master?
Is your superior interested in you? Yours?
Google 'crack up boom' in quotes. Here's the first hit:
The Worldwide Crack Up Boom, According to Ludwig Von Mises
Cowboy Communism
I'm I crazy, or doesn't this pretty much BK the federal govt, for all intents and purposes?
Comrade Doofus |
When you're nine trillion in debt or whatever, how do you define going bankrupt exactly?
Damn straight MS. This is a bigger crisis for the elites than J6P. And since the media is its mouthpiece, they got us all in a tizzy and now they gotta lay a TARP on us. Police state brought to you by the Demlocians and Repubolcrats. Gosh, back to my garden I go.
Hey, Vikas! re: Firesign Theatre.
1st geezer: I went into the Chemical Corn Bank the other day, gave them 3 ears of corn, and they gave me back 3 beakers filled with chemicals!
2nd geezer: That's fair trade!
OT???
Let's be clear. Government stepped in because the markets were finally starting to work not because they were failing.
We need to frigg'n privatize Social Security today and get this done before midnight! Wall Street needs more liquidity tonight!
From today's Jubak column:
In most bankruptcy proceedings, all of a debtor's assets are frozen. The bankrupt company can't even pay a bill without permission of the bankruptcy court once the bankruptcy petition is filed. The point of this rule is to create an orderly distribution of the company's assets to the company's creditors. The creditors, ranging from the company's employees to its coffee service to its landlord to the big investors who own its bonds, all get in line by seniority. The bankruptcy court then doles out the liquidated assets of the bankrupt company until there are no more.
The 2005 exception threw that process out the window for the derivatives that Lehman owns. The counterparties in those deals are free to sell those deals on the market, if anyone wants them. They're free to take the collateral they'd given to Lehman as part of one of these derivative deals. Lehman took out hedges in the derivatives market to protect against a deal going bad or the value of a security (or another derivative) falling. The financial companies that were the counterparties to those hedges can now just rip them up, taking away critical protection for the company's portfolio just when creditors need it most.
And because the derivative market is so lightly regulated, it's likely that no one will even know if an asset walks out the door at Lehman in this way before it could be liquidated and distributed to creditors. In essence, the companies that were parties to derivative deals with Lehman are free to strike the best deals they can without having to clear them with the bankruptcy court or inform other creditors. Creditors' claims against Lehman come to $613 billion, according to bankruptcy court filings.
So, is GS the winner in this one also?
"Actually, if you really want to help American families, you can send US the hundreds of billions of dollars. I know that would help me."
No, the bailout is not for people who are having problems. It is for banks who are having problems. You, my friend, can rot.
---your pal, Hank
Tax-funded communal garbage dump!
I am dumb-founded, not by the chain of events but by the 800 visitors online.
Don't quite remember when I see so many visitors online before. there must be many people, like myself, trying to make sense of what is really going on.
Something that help keep my focus is the reminder that nothing on the "economic" front has changed very much. The world is still heading into a global economic recession regardless of the noise in the markets.
So, I choose to keep my short nasdaq 100 and long yen position on. thankfully, still sitting on some profit.
Still trying to make sense of everything......
Paulson plan could cost $1 trillion - Mike Allen - POLITICO.com
"Congressional leaders said after meeting Thursday evening with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke that as much as $1 trillion could be needed to avoid an imminent meltdown of the U.S. financial system.
Paulson announced plans Friday morning for a "bold approach" that will cost hundreds of billions of dollars. At a news conference at Treasury headquarters, he called for a "temporary asset relief program" to take bad mortgages off the books of the nation's financial institutions. Congressional leaders had left Washington on Friday, but Paulson planned to confer with them over the weekend.
"We're talking hundreds of billions," Paulson told reporters. "This needs to be big enough to make a real difference and get to the heart of the problem."
Markets should be free. People who are free to make money, should also be free to lose it.
Sounds good to me. Unfortunately, Wall Street doesn't want to be free to lose it, and Goldman Sachs has ex-employees (Hank Paulson, and Josh Bolten, Bush's Chief of Staff) in influential positions.
The rich get richer... the poor get taxed to pay the tab.
So we are actually agreeing that the US/World financial system is crashing. Even the gov agrees. It is not tinfoil. Think about that for a minute.
The world financial system is crashing.
Think about what that means. Making a profit on SKF? I laugh. Short selling? I scoff. Do you think they sat around the shanty towns of 1930 and talked about short selling? Somehow I doubt it was on their mind.
The decisions or non decisions that are made in the next few months will effect generations. My guess is that at least 20% of the people reading this blog will not be able to in 16 months. They will not be able to afford internet nor will they be able to use their employers connection.
Senate House Investment Trust--SHIT for short(s)
Rob Dawg...
BINGO!
If all of this works the way Paulson says it will, won't that be fine? I just hope that people give this some intense scrutiny and analyze the worst-case scenarios if this gigantic experiment fails.
But I am not optimistic that this kind of analysis will occur in this environment.
It seems that the financial community, press, public and Congress are all scared witless, and most are willing to embrace these sweeping "solutions" without doing much thinking.
Well f**k me. I think it's time for Generation X (and Y, and whatever they call the new kids) to take up pitchforks, cause the boomers are trying to rob us.
These assets aren't "frozen", they're "worthless" (or "worth less than you want"). Kind of like land in the Inland Empire--once it gets discounted to 10c on the $ it gets sold. I guess the unspoken part of the plan is to buy these assets FOR MORE THAN THEY'RE WORTH. This would represent a massive shift of money from taxpayers to who? Shareholders of financial institutions? Which in turn is mostly employees of financial institutions, rich people, and retirement/pension funds = old people?
I would rather just be paying my taxes directly to Goldman Sachs partners. I mean, would have saved me the transaction costs.
I'd pay a lot to hear a reporter bring that up during the press conference. Either that or ask Hank & Ben when they became Socialists.
This is totally going to work.
"Let's be clear. Government stepped in because the markets were finally starting to work not because they were failing.
Amen Rob Dawg
Naked Kings,
Hah, I'd almost forgotten about that.
Yeah just image how much better everything would be right now if they'd put SS into the stock market.
"We're playing a game of casino capitalism, interfering with the way the market is working,'' Bogle, 79, said in a telephone interview today from Valley Forge, Pennsylvania. ``The government seems punch drunk. It doesn't seem systematic."
- John Bogle, Vanguard
John Bogle Says U.S. Government Seems `Punch Drunk' (Update3) - Bloomberg.com
Did I hear that right or was that a Freudian slip by Bush.""illegal" short sellers are going to be "persecuted"".
Can't we finance this with a retroactive tax on financial company executive compensation in excess of $5 million? You know, sort of like financing Superfund with a tax on the chemical and petroleum industries that created the toxic waste in the first place???
--Conrade K
Is anyone surprised at the war on savers? Remember how unpatriotic it was a few years ago be part of the savings glut? Don't keep money in your pocket, that's unpatriotic. Put it in my pocket.
Nothing good legislatively will come in an election year with 2 months to go. Legislation of Mass Destruction here we come.
Why the fuck are short sellers the Frankesteinian monster of the day again?
My mom and my aunt were talking last night about how much $$ they had lost in the past year and my aunt said "Well, at least when I die I'll know all my good little republican kids will all be getting exactly what they deserve"
I lol'd. There's always a bright side.
Gah! What a bunch of horseshit.
Avast ye, our country is Sold American(youtube)!! Yarrgh!!
Well, casino switched to a marked deck this morning. Wonder if heavy call volumes yesterday will get investigated...
On the other hand, wish I knew more about John Bogle's reasoning.
BBG TV just put up a graphic claiming $800bn to purchase mortage assets and $400bn to insura MM funds. $1.2 TRILLION DOLLARS!!!
I think we can now go back and re-visit the "Terminator" series. Find "John Conner" replace with "Henry Paulsen"
Hold still, dammit, while we put this saddle on you and tighten the stirrups.
[comrade poor savings account writes:
i'm not paying taxes anymore.]
I'll have to check but I don't think I'll have to, after this debacle.
Windowdog writes:
Why the fuck are short sellers the Frankesteinian monster of the day again?
Same reason Jingle Mailers "caused" this whole housing mess.
This is really funny!!!
The SEC order has nearly destroyed the options market!!!
Spreads are absolutely huge!
I found myself essentially the option market in several of my thinly traded positions.
Anybody wanna buy some corus puts- I have 30 in the october range!
Get 'em fast- without the ability to short shares, there are no options makers!
Someday this war's gonna end...
The final cost = the initial estimate X at least 10
Let's call it Paulson Principle.
iceman writes:
The truly scary part...
its not going to work.
iceman | 09.19.08 - 11:11 am | #
BS - it will do what it is intended to do - buy time & provide diversion to get the powerful past the next election.
You can't judge an outcome unless you understand the real intent.
David you are a true American.
Do anything to avoid pain in the present even if it guarentees more pain in the future.
To restore confidence in our markets and our financial institutions, so they can fuel continued growth and prosperity, we must address the underlying problem.
The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy.
The underlying problem is not the state of the financial institutions; that's merely a symptom.
The underlying problem is the lack of discipline and responsibility in the markets, which makes lending unviable.
I don't see how Paulson's plan addresses this.
Spending unprecedented amounts of money while already massively in debt to keep institutions known to be economically destructive in business doesn't sound like the solution to me.
It sounds like the problem.
Thanks for posting this garbage; I'm sure we all enjoyed reading it. I certainly did.
Question: Could Paulson possibly be as dumb as he comes off?
All hail the Treasury Unsecured-debt Relief Device (TURD)!
Just so you all know...Only 1% of outstanding mortgages are actually in FORECLOSURE. That measely 1% decimated our financial system. Heaven only knows what would have happened when the commercial RE and biz. loans went the same direction.
Looking for sunshine is hard when your head is up your arse.....
My 10 year old car is valued by the market at$6000. I don't want to accept this market value . Please let me know how to get$50,000 for it.
"You're gonna need a bigger tarp."
heehee, it sounds to me like they are saying the Asset Relief Program is already Troubled. I bet they come up with a better name. Something that builds confidence, like the Super-SIV, that worked really well.
If you recall, before the government did anything the Dow had dropped about 8% and was looking to give up a lot more ...
The Dow gave it up. Doesn't mean I did.
There's no tarp big enough to cover an exploding whale.
KRISHNAN:
Your problem is you only have 1 worthless car. Spend the next 2 years buying 1 million worthless cars on credit and then we will talk.
Hope it works better than the blue tarps in South florida did....
dryfly writes:
iceman writes:
The truly scary part...
its not going to work.
iceman | 09.19.08 - 11:11 am | #
BS - it will do what it is intended to do - buy time & provide diversion to get the powerful past the next election.
You can't judge an outcome unless you understand the real intent.
dryfly | 09.19.08 - 11:25 am |
Not going to work dryfly. Velocity of information. When these guys were making their bones it would have. Not now. Not with the ability to move money in seconds.
Its not the "coupling" or "decoupling" that is going to rip through all this. It is the velocity of information and money flow. They don't get it.
"K writes:
Can't we finance this with a retroactive tax on financial company executive compensation in excess of $5 million? You know, sort of like financing Superfund with a tax on the chemical and petroleum industries that created the toxic waste in the first place???
--Conrade K"
I think this might well be unconstitutional -- but maybe not, Congress's ability to pass retroactive legislation has some, but not many, limits.
What might be the same would be a small wealth tax on the very well to do. That would recoup some ill gotten gains. And someone had the suggestion of a small, per share, tax on stock transactions, which would have the virtue of raising revenue and damping down rampant speculation.
But everyone will howl, as they do at Joe Biden's suggestions that it wouldn't exactly kill rich people to pay some more in taxes, and ought to be seen by them as a patriotic act.
The new "Legislating Wealth & Prosperity Initiative"
Ask someone on bubblevision "Will it work?"
Last week, when I lectured my teen age grand children on the need to look at life style changes because of our economic probems, they said forget it. The government will provide. I was disappointed that they really believed that, but it seems they are more tuned in than me. The next generation is screwed. Long live the Republic!
I'm still trying to get my head around this. Shorting of some 800 stocks the government chooses are now illegal.
ILLEGAL
As in last year,last month, last week, yesterday they were legal. Now they are illegal.
UN FRIKKIN REAL.
"My 10 year old car is valued by the market at $6000. I don't want to accept this market value."
Your first mistake is calling it a "car." You should call it a "Special Investment Vehicle."
Kids today are so trusting of authority, it is unreal.
Have you all called your congresspersons yet?
Put down the doritos, and pick up a fucking phone.
This bailout requires CONGRESSIONAL APPROVAL.
Contact Elected Officials: USA.gov
Toles gets my vote.
http://www.washingtonpost.com/wp-srv/opinion/ssi/images/Toles/c_09182008_520.gif
I called my congresspeople to try to stop an illegal war. That is going to cost us a few trillion. They didn't listen.
This is small change.
Make sure to call collect.
"Jerry writes:
If you recall, before the government did anything the Dow had dropped about 8% and was looking to give up a lot more ...
The Dow gave it up. Doesn't mean I did.
Jerry"
Downright patriotic of you, jerry, thinking only of yourself, not of folks with 401k's about to retire. (And if you say that's their fault, you are an absolute asshole -- 'cause its the fault of the free market thinkers who have led us down this path. If you don't blame the victim, of course, you're a fine guy.)
Below is an article on the Swedish banking crisis in the early 90s. Could my more financially astute comrades explain the Swedish example & whether it is a good or bad solution, how it differs from our situation & the gov't's solution?
Could an economic lesson from Sweden work in the U.S.? - USATODAY.com
Will the bailout work? Inquiring minds should read "The Paradox of Deleveraging," an essay by Paul McCulley of PIMCO written in late July.
PIMCO - Global Central Bank Focus - July 2008 "The Paradox of Deleveraging"
Sometimes things one's life get to be so wierd, so strange, that one loses the ability to discern between what's real and what isn't. These episodes happen to most people once or twice in their lives, and thankfully they're transient.
But this is now happening to nations ... indeed it's happening on a global scale. And it won't be transient. Can someone tell me which way is up?
Trickle-down economy at work. Whatever trickles down get taxed.
Its not the "coupling" or "decoupling" that is going to rip through all this. It is the velocity of information and money flow. They don't get it.
nova | 09.19.08 - 11:29 am | #
We'll see - they only have about six weeks to kill and a few very sensitive battleground states to keep calm - if they can keep the rubes happy in those locations - the election goes as planned.
If not - then it gets interesting.
Even if the information is moving fast most of these battleground rubes won't hear it UNLESS they can't get money from their ATM. Keep that stocked until first week in November and declare 'Mission Accomplished'.
I think they can do that much - after that all bets are off.
K writes:
Can't we finance this with a retroactive tax on financial company executive compensation in excess of $5 million? ...--Conrade K
Hey, I know, seeing how we've already over-burdened future generations with debt, how about a retroactive tax increase on EVERYONE who dies before 2008! It's about time those layabouts pulled their own weight!
Cheer up everyone.
Today is Bank Failure Friday afterall...
just got a call from the broker.
SKF indicated at 65
Just a heads up market wise: many of you know my take, "volume confirms price"; well just benchmark today's volume on SPY, DIA, IWM, QQQQ, XLF, etc. with yesterday's - there's no volume. Big money isn't buying this. We'll be right back down the other side.
My favorite part was when Paulson said "hundreds of billions". Yeah, like 20 hundred billions. Or two trillion.
This fact will come out about 2 weeks before the election. Just watch...
"Trickle-down economy at work. Whatever trickles down get taxed."
Americans have been such suckers. How they fell for the Bush tax cuts, which made the rich much richer, but helped nobody else, I will never know. Something in the Republican kool-aid.
Proshares no longer accepting orders until further notice
This is small change.
USG is on the hook for about $1T so far. I'm still saying the War on Wall Street Greed will cost more than the Iraq War.
ova wrote: "It is the velocity of information and money flow."
Another aspect predicted by Mises, the crack up boom will happen at a velocity not seen before or imagined.
I don't know why, but I think Nancy Pelosi looked surprised last night.
Money Man,
1% may be in foreclosure, but how many are more than two months behind on payments? And how many short sales have gone through?
Focusing on one metric misses the larger picture.
Justin writes:
Proshares no longer accepting orders until further notice
SKF is like the upside-down airplane stamps - they'r not making anymore, and when they trade them again it's going up 3 fold!
The key to this is the price that TARP will pay for distressed mortgage securities. Buying 06-02 MBS mezzanine securities for par is obviously a handout to whatever bank is currently holding it. But providing more liquidity in the market but buying at reasonable prices could actually make a profit for the taxpayer.
"We'll see - they only have about six weeks to kill and a few very sensitive battleground states to keep calm - if they can keep the rubes happy in those locations - the election goes as planned."
Who's this "they"?
12th Percentile writes:
I called my congresspeople to try to stop an illegal war. That is going to cost us a few trillion. They didn't listen.
So it's over?
Over? Did you say "over"? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no!
And it ain't over now. 'Cause when the goin' gets tough...the tough get goin'! Who's with me? Let's go!
Bush transcript:
404 Page Not Found | The White House
Many of the illiquid assets clogging our system today do not meet the regulatory requirements to be eligible for purchase by the GSEs or by the Treasury program.
I look forward to working with Congress to pass necessary legislation to remove these troubled assets from our financial system.
How exactly are the "troubled assets" removed from the system?
Does anyone here understand the mechanics of this?
El Scorcho,
All of this mess is being blamed on Bush. If it gets held up in Congress suddenly it's the Dem's fault right ahead of the election.
Ain't gunna happen.
Well, anyone here going to argue with Jas Jain now?
Dryfly, am I correct in interpreting your view as,
Follow the money...
If so, I concur.
Also, I wonder if we'll hear from Ron Paul today. Any MSM going to put a microphone in his face?
Oh, right...
SKF is like the upside-down airplane stamps - they'r not making anymore, and when they trade them again it's going up 3 fold!
No one is ever going to redeem those shares.
Windowdog writes:
Money Man,
1% may be in foreclosure, but how many are more than two months behind on payments?
Don't forget the resets coming in the next few quarters.
"Sure, dope. That's exactly what Andrew Mellon told Herbert Hoover. And my family suffered greatly from that, everbody unemployed, had to sell what they had for next to nothing, 50% unemployment. My grandma was about my age in 1930, and she lived in unaccustomed and real poverty until social security let her in. That's what we're facing here, a worldwide financial crisis, and you jerks are whining that somebody is going to do something about it. I'm not sure it will work, and it will surely be expensive, but I know about depressions, and you don't seem to .
David in NY | 09.19.08 - 11:20 am | # "
So Right, David. My new agency will totally prevent the Great Depression, just like last time.
When is the OMB going to come out with its next deficit estimate? That's going to be a doozy.
"But providing more liquidity in the market but buying at reasonable prices could actually make a profit for the taxpayer."
There is a real liquidity problem a lot of people here are ignoring and that has to be addressed. But I do think there's only a dim prospect of any profit out of it. On the other hand, it might regularize the adjustment of foreclosures in the housing markets, instead of the chaos there now. And that might lead to good things.
cnbc-
"short treasuries and the dollar"
ok, head exploding now.
aaarrh, lefty me harty, pass the bottle of rum!
scorcho-
sure I'm going to waste time calling the very people this helps out the most.
Do a little research and you'll find that the very people tasked with 'saving america' have VERY large stock positions in the firms that just got a free pass.
dipshit.
Ciao
MS
WHen do we get a rule that we can't sell or sell short T-BILLs. I am now nervous to put on those bets.
This is a total joke - Banana Republic of America
Have the sound on for Bubblevision, and Dylan Ratigan is so far over his over head, he is reading questions and bullet points off his computer. His guests are embarassing him with the clarity of their questions. Nothing I didn't know before, but what a super ass today. sound is off now.
Will the bailout work?
It's about as clever as Greenspan's magic. It will give the appearance of working, and may even appear to be brilliant ... but in reality it not only delays the inevitable but makes the inevitable bigger.
Does anybody know when they went into extinction, you know, the species of political leaders capable of "big picture" thinking? Forty years ago? Fifty? I'm losing track.
"So Right, David. My new agency will totally prevent the Great Depression, just like last time.
Herr Atlee Pomerene"
Well sitting on your ass won't do it. Hoover and Mellon pretty much proved that. You want to go their way again?
Anyone see Comrade Paulson walking up and down K Street with a kitchen sink? Oh wait, he's already thrown that.
In three weeks TARP/CRAP won't matter. Events are moving to fast. Nobody here will even mention it. The speed of contraction has begun to snowball. They are not going to be able to stay on top of it.
Plus the powers to be, for the first time perhaps, are powerless to control all events. To many random varibles. To many who do not see where helping the western elite benefit at their expense is a worthy project.
The last two justin's, wittering on about SKF, were not me.
basically if I post anything dumb, it isn't me.
there's no volume. Big money isn't buying this. We'll be right back down the other side.
i don't have access to volume, but this doesn't feel like it's going to work. If it doesn't, look out below. There's nothing but air.
David in NY writes:
"Sure, dope."
What a brilliant response. If you have to engage in personal attack as the first element of a comment, please find another blog.
wisely selected over "Troubled Asset Relief Division," or "TARDs" as they're more commonly known.
That was a dumb post, justin.
Wallster,
There is no way the feds will take this paper at anything near market value. The market could take care of that. Uncle Sam's going to pay plenty more than these are worth.
I also bet there are no stipulations about partitioning losses or capping executive compensation.
Short T-bills. yes
Short Dollar. no
David in NY writes:
"But providing more liquidity in the market but buying at reasonable prices could actually make a profit for the taxpayer."
There is a real liquidity problem a lot of people here are ignoring and that has to be addressed. But I do think there's only a dim prospect of any profit out of it. On the other hand, it might regularize the adjustment of foreclosures in the housing markets, instead of the chaos there now. And that might lead to good things.
David in NY | 09.19.08 - 11:40 am | #
Bullshit.
This is a solvency issue, not a liquidity issue. Price discovery for any asset - in this case real property - is the elephant in the room. TARP does nothing to effectively price properties going into foreclosure. You think that the 'chaos' presently swirling in the private sector will be lessened when a GOVERNMENT AGENCY gets involved?
High (low) lights:
"The Securities and Exchange Commission has issued new rules temporarily suspending the practice of short selling on the stocks of financial institutions. This is intended to prevent investors from intentionally driving down particular stocks for their own personal gain."
"The Department of the Treasury is acting to restore confidence in a key element of America's financial system -- money market mutual funds. In the past, government insurance was not available for these funds, and the recent stresses on the markets have caused some to question whether these investments are safe and accessible."
"These measures will require us to put a significant amount of taxpayer dollars on the line. This action does entail risk. But we expect that this money will eventually be paid back. The vast majority of assets the government is planning to purchase have good value over time, because the vast majority of homeowners continue to pay their mortgages."
Heh.
For any bank entering this program, I want no deductability of losses. I want no deductability of management bonuses and stock options for the last five years. I want 10% warrants as of noon EST yesterday. I want this program to be extremely distasteful.
"What a brilliant response. If you have to engage in personal attack as the first element of a comment, please find another blog."
Sorry, I take it back. How about you respond to my substance, which I provided?
Exit wrote: "This is a solvency issue, not a liquidity issue."
Correct!
And thank me for sparing the bullshit.
Well sitting on your ass won't do it. Hoover and Mellon pretty much proved that. You want to go their way again?
You do know that the last time shorting was forbidden was 1931, right? What point were you trying to prove?
Isn't today "talk like a commie pirate day"?
Avast ye comrades, abandon all hope of glasnost and embrace ye Paulson perestroika!. Argh, tell the capitalist pigs nyet! Nyet, matey! Nyet!
David in NY, go cry me a river. We got plenty of money to raid from the rich. So why bail 'em out?
Go cry somewhere else, comrade.
Do NOT blame me Comrades, but me thinks we are FUKED.
"BETHESDA, Md.--(BUSINESS WIRE)--Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values."
eat, drink, and make merry--for today we have been nationalized. We are now merely futurative tax input entities to be exploited to support the "system". Privatize the gains, enslave the masses to bear the losses. "No recourse" nation being made full recourse+p natio
The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values."
That means they're worthless?
"There is a real liquidity problem a lot of people here are ignoring and that has to be addressed. But I do think there's only a dim prospect of any profit out of it. On the other hand, it might regularize the adjustment of foreclosures in the housing markets, instead of the chaos there now. And that might lead to good things."
That's just the thing. Right now there is no liquidity because the only offers are at 20 and the banks don't want to sell for less than 80 (because that's what their cash flow testing indicates the securities are worth). What is TARP going to pay? Pay par or 80, high probabily of losses to taxpayers. Pay 40 or 50, good chance of making money over the long term.
I've not seen any indication of what TARP is going to pay for these securities.
That means they're worthless?
It means the supply is now fixed.
I want to see Bill Gross interviewed RIGHT NOW!! That smirk after the GSE nationalization gain just got wiped out. He is taking the single biggest clobbering ever if he didn't somehow get the nod in advance and somehow hedge that massive book, if it's even possible to do.
I believe many Members of Congress share my conviction. I will spend the weekend working with members of Congress of both parties to examine approaches to alleviate the pressure of these bad loans on our system, so **credit can flow once again ** to American consumers and companies. Our economic health requires that we work together for prompt, bipartisan action.
So -- I heard several say that the solution to excess credit will not be 'more credit.'
I also heard the Stockholm Syndrome mentioned months ago, I think here, that people don't realize that their addiction or reliance on Credit is actually a problem. Credit is the slayer not the saviour. (when used wrong, of course, like it is by millions)
So anyway,
I took away that Paulson is going to keep the credit flowing, so we can all buy more stuff on credit.
And just to show he's with us on this. The entire program is going to be put on the National Credit Card. Charge IT!
WhOOO!!
(I'm so pissed off)
CC
SKF is obligated by its prospectus to follow a NAV twice the inverse of the Dow Jones Financial Sector - so my guess if it were trading puts it around $105-110 at the moment.
I'm very curious to hear what Ron Paul has to say.
I'm not a Paul supporter and wouldn't vote for him, but his views on economics and the economy have made sense to me.
I wonder if he's ducking questions or has just been consciously 'boycotted' by the media? I figure if I'm wondering what his views are, then at least 10% of the media news producers have had that thought as well.
Who's this "they"?
David in NY | 09.19.08 - 11:37 am | #
Paulsen, Bush, BB - even Pelosi & Reid - are the the 'they'.
This might surprise you - but a lot of S Ohio, rural Penna, Wisconsin, Missouri, Iowa... classic battleground states where BOTH the House/Senate AND WH elections will be determined tend to vote GOP in presidential elections BUT have conservative democratic reps & senators.
Rattle those people and the election is truly up for grabs - all of it. There is huge incentive to not panic these people from both parties. They have too much to lose.
So that is why they could - in theory - get this deal done and fast. Usually grid lock would stall something like this for YEARS - my guess is that logjam was blown apart by the market this week.
What would have happened if the shorts had not been as active in the past two weeks. The same thing, only slower.
Regarding the US going BK - they still have not explored the depths of their tax base.
Correct me if I'm wrong, but did the secretary just say that "we're all subprime now?"
I don't know what took them so long...
Obama calls for homeowner, auto industry aid
This is a solvency issue, not a liquidity issue. Price discovery for any asset - in this case real property - is the elephant in the room. TARP does nothing to effectively price properties going into foreclosure. You think that the 'chaos' presently swirling in the private sector will be lessened when a GOVERNMENT AGENCY gets involved?
Sure. It is a liquidity problem, but you're right about solvency being a problem too. This plan, as I understand it, is taking a shot at that, but at immense cost to the taxpayer. There is a genuine problem here that letting the insolvencies unwind as quickly as they were beginning to will continue the liquidity problem (which will render otherwise viable businesses insolvent because they can't get credit) and we'll have a snowball of the size of 1929.
I don't love this solution. But I know about the Great Depression, and I have no desire to live my retirement during another one, as my grandparents did. Anyone with a better solution to the actual problems, I'd love to hear from. But the problems are real.
Mouse: You forgot a word if I remember right -- "attempt".
There are no guarentees.
So now no shares can be created, and it's the last way to short financials.
Supply = fixed. Demand = variable.
Holy shit.
Ron Paul was on Beck's show last night. As usual, he was dead on. Interesting, he commented that behind the scenes, many CONgressmen were agreeing with him, but none were willing to go public, and none of the leaders of both parties will admit they are wrong.
How much money did Paulson and BB already waste? Add that hole to this and you're talking 2 trillion--and we all know the works not done yet. Credit card mess is gonna really hurt.
Paulson -- "But we expect that this money will eventually be paid back."
By who Hank? By who?????
The taxpayer is now the lender and buyer of last resort.
The same thing, only slower.
I disagree. Reduced liquidity makes for more volatile markets (think of housing), so I would guess that it would go faster.
Of course, we'll never know...
All of this mess is being blamed on Bush. If it gets held up in Congress suddenly it's the Dem's fault right ahead of the election.
I don't give two mouse farts about the fucking Democrats or the Republicans.
This is about OUR COUNTRY.
Thomas Jefferson was right.
He said,"If the American people ever allow private banks
to control the issue of their money,
first by inflation and then by deflation,
the banks and corporations that will
grow up around them (around the banks),
will deprive the people of their property
until their children will wake up homeless
on the continent their fathers conquered."
If there is a PPT, they must be quaking. One of the things that has been holding this market up (more cheaply) has been using rumours to scare the shorts.
no more shorts, the rumours won't work.
OBAMA said WHAT? What you talkin' bout Willus?
until their children will wake up homeless
on the continent their fathers conquered."
Kinda like the American Indians, eh? What goes around, comes around.
My favourite quote about "Trickle Down Economics" comes from the leader of the Liberal Democrats in the UK. Speaking about Tory tax policies he said "I don't want my constituents to be trickled on!"
SKF is trading again @95.30
What a brilliant response. If you have to engage in personal attack as the first element of a comment, please find another blog.
WouldYouLikeCakeWithThatPony? | 09.19.08 - 11:42 am | #
On second thought, why don't you blow it out your ass ....
David in NY | 09.19.08 - 11:48 am | #
So long guys. It wasn't me that said the last sentence of the above. I apologized for the mild epithet "dope" in an earlier comment, but I was apparently correct in that, and understimated the degree of your problem. As anyone can see, except in weak moments, I think people ought to talk real substance here, not macho crap.
banned ... by CR.
Darn it.
Edited By Siteowner
Dryfly writes - Rattle those people and the election is truly up for grabs - all of it. There is huge incentive to not panic these people from both parties. They have too much to lose.
I don't think the election figures in their minds. The ability to hold on to their fortunes, which is their life, is all. That, and the power that comes from controlling companies that provide the fortune.
This, to me, is more about survival of a class. They aren't worried now about elections. They know they will always have access to the levers. But if the system crashes all that goes away.
Their hand has been forced. They are making to much noise now for it to go unoticed by the people.
"Hundreds of billions".
Right, so this thing should cost us at least 25 hundred billion.
Should we sell index funds such as VTSMX, VGSIX, FUSVX today or keep holding? I understand about selling individual stocks but don't get any answers on index funds.
Baron von Helmut needs to be deleted and banned.
Comrade Baron, you are no comrade of mine.
CR, would you immediately ban this David in NY character? Here's a sample comment of his, from earlier in this thread.
Actually, solvency is the ONLY issue here, David. The Fed has injected literally hundreds of billions of dollars in liquidity.
Yes, there is a problem here. It's that the market is finally working (was that Rob Dawg's note?) and TPTB recognized that true price discovery means that the balance sheets of financial institutions are laden with more debt than the underlying assets are valued. Which means they are insolvent. Which in turn means that their stock is worth squat. Which in turn means that traders who recognize this before others, and short that stock, make out -
"like bandits"
Only now they ARE bandits, and will be "persecuted".
The solution to the festering body of the financials - a TARP from the government. Beautiful.
I called Hillary Clinton & Chuck Schumer. What was disturbing to me was that I got thru on the line right away to a real person. No busy signal. People in this country have no clue what is going on.
Schumer's office told me that this action does not require congressional authority, that it is solely an executive branch decision.
I dumped the last of my 2x inverse Proshares this morning, who the hell knows how they will play out.
But they never worked that well anyways. You had to catch a straight, short-term bounce. In a market with lots of dramatic bear rallies, they don't work as well as puts.
Say the index and the Proshares etf are both selling at 100. The index falls 30%, the index is now at 70, ETF at 160. Then a rally and the index goes back to 90, a 29% increase. The ETF falls 58%is now 92.8! Duh!
I can't believe I kept playing with those things.
It doesn't matter. Call your senator and congressman anyway.
skf will keep trading but not issue new shares for now -on bloomberg tv--i guess this will affect intraday volatility in the stock
Put a tarp over it. It's still a steaming stinking turd pile. Our banking system is insolvent. Look away.
The racist Baron needs to be removed
"Obama is just too dumb a nigger to be president
Comrade Baron Von Helmut III"
Dumb he is not. McCain, if you recall, couldn't scramble above fourth from the bottom of his West Point class, and he hasn't learned a thing in 26 years in Washington except how to lie.
Comrade Baron Von Helmut III writes:
I have to say it:
Obama is just too dumb a nigger to be president
Comrade Baron Von Helmut III | 09.19.08 - 11:53 am | #
Allright, have the kiddies had enough fun yet? I did not post that racist remark. They must have installed a computer in the KKK office.
Hank Paulson said: "This crisis demonstrates in vivid terms that our financial regulatory structure is sub-optimal, duplicative and outdated."
You meant to say "duplicitous" not duplicative, right?
That last couple of paragraphs from Hank was straight out of the 9/11 playbook. Come on!
xanadu writes:
Schumer's office told me that this action does not require congressional authority, that it is solely an executive branch decision.
Ah! Sounds as if the Roman governor has washed his hands of this.
Baron, I didn't think you really posted that.
MS writes:
Do a little research and you'll find that the very people tasked with 'saving america' have VERY large stock positions in the firms that just got a free pass.
dipshit.
Hey MS, fuck off.
Your attitude would make the French people proud.
MS = Me Surrender
Baron von Helmut needs to be deleted and banned.
agreed
CR - please ban Comrade Baron!!!!
Bob, Im surprised you learned so late. We've talked about that issue many times. You CANNOT hold them long term. You have to trade them.
"David in NY writes:
Well sitting on your ass won't do it. Hoover and Mellon pretty much proved that. You want to go their way again?"
Check my name, David. I'm with you, you're with me. I used to run the Reconstruction Finance Corporation so I know something about bailing out all the right people. Jeez. Kids these days! No sense of history!
Comrade Bond Girl writes:
Regarding the US going BK - they still have not explored the depths of their tax base.
~~~~~~~~~~~~
I think it is still a AAA rating status issue, like any other country.
The US consumer has negative savings on average, which should apply to the rating consideration, like it did with Japan and Argentina.
IMF, where are you?! aarrh, nyet.
Sorry, Baron, the "kiddies" tried to have their fun with me earlier in the same manner. Impolite of them.
Who sent all the new idiots here today?
So quick to judge. I accept your aplogies in advance.
I raised three children. None of them ever 'did it' either.
Federal Loans - United States Holdings
FLUSH
Let's look at a timeline of some of the decisions I would class as extra-legal or Enron-esque:
The (Selectively Leaked) Discount Rate Cut (August 2008)
Super SIV (October 2007)
Term Auction Facility (December 2007)
Bear Stearns/JP Morgan bailout and subsidy (March 2008)
Primary Dealer Credit Facility (March 2008)
Reverse MBS Swaps (April 2008)
Equity investment and collateral (September 2008)
Administrative Repeal of 23A (September 2008)
AIG nationalisation (September 2008)
Expansion of the Fed Balance Sheet through unprecedented Treasury refinance without appropriation by Congress (September 2008)
Central bank dollar liquidity draws (September 2008)
Resolution Trust Company/Super SIV Redux (next)
And that's just the list of actions we know about. Much may have been orchestrated and influenced behind the scenes in credit markets and traded equities and commodities.
At no stage have any of these significant enhancements to the prerogatives of the Federal Reserve, these derogations of explicit statutory limits, these stark departures from past authority and conduct, been the subject of democratic legislative proposal or review, or even public consultation and comment. In the name of exigency, they have all been sprung as fait accompli on a shocked financial community, and since been treated as unquestionable and unreviewable. Every initiative introduced as a temporary measure has become a permanent fixture.
London Banker
If your long and not selling everyting into this sucker rally your a fool.
Calm down guys...yeah we are all pissed, but lets not fight each other
Just ban their IPs, and it's a done deal. I don't care who they are.
skf will keep trading but not issue new shares for now -on bloomberg tv--i guess this will affect intraday volatility in the stock
Yes! And since the shares can't be created: When their is a desire to short the market, it is the last way to short.
I was wondering why XLF/SKF didn't push SKF to 70 this morning. IT's because THEY COULDN'T CREATE THE SHARES AND THERE WAS TOO MUCH DEMAND!
My WTF meter is exploding. I have data, but I don't dare write the conclusions I'm coming to.
I agree. CR please ban the responsible parties. You have their IP's.
Now back to our regularly scheduled bashing of Comrade Paulson.
Only one word needed to pay for the bailout, mateys!!
Disgorgement
yarrgh!! Howbout another one??
keelhaul
I don't love this solution. But I know about the Great Depression, and I have no desire to live my retirement during another one, as my grandparents did. Anyone with a better solution to the actual problems, I'd love to hear from. But the problems are real.
David in NY | 09.19.08 - 11:49 am | #
I have a lot better solution - RTC the bad assets AFTER BK. Wipe out the equity positions, sack management re-capitalize the remaining shell via RTC and refloat as new privatized firms in a much better regulated invironment (more enforcement of simpler and less opaque regs).
In short copy the Scandinavian model from the 90s. If anyone has 'socialism right' its the Norskis.
Short term - let them fail then IMMEDIATELY take over to limit cross defaults. But only nationalize AFTER failure - no saftey net for the IBs before BK. Force them fearful to ask for gov't help. Deterrence is a good thing.
Long term - restructure & enforce better regs. Paulson has that right though the devil is in the details.
But the key is wipe out equity first. That reestablishes moral hazard. The best regulator going forward.
What they are doing now is 1) grasping at straws 2) buying time. No accident that the timing coincided with a national election.
"Actually, solvency is the ONLY issue here, David. The Fed has injected literally hundreds of billions of dollars in liquidity.
Yes, there is a problem here. It's that the market is finally working (was that Rob Dawg's note?) and TPTB recognized that true price discovery means that the balance sheets of financial institutions are laden with more debt than the underlying assets are valued. Which means they are insolvent."
No, there is definitely a liquidity problem. TARP could make a killing if they act as a vulture buyer, picking up undervalued assets from banks for less than economic value, but I suspect TARP will pay much more than economic value for the securities they purchase.
Herr Atlee Pomerene
Sorry, I've gotta get out of here. Can't tell who's really saying what. Just keeping my fingers crossed as I totter toward retirement.
Just the echoes on this thread of Mellon's "Liquidate, liquidate, liquidate," sort of got me worried about the lack of historical understanding here.
This is like mothballing the WWII fleet:
"Wow, that USS Tarp is a deep-draft sucker. We didn't lease any slips that deep; just lay her up on the sand bar there - she won't sink, but we'll never be able to move her either."
SKF should be $15 higher NAV-wise, at a minimum. Glad to see a mark-to-market, though.
This "boomers are trying to rob me" is utter bullshit. I'm 63 years old and the best damn ally any snot-nosed idiot whippersnapper ever had. AND I don't own any stocks, have no health insurance, rent my house, and owe tons to Visa and GMAC.
So GET HIP, kiddies, and stop making up stupid ageist whiny-crap-booshwah-nonsense. I have not stolen your fucking inheritance, someone else has.
"Who sent all the new idiots here today?"
The PPT
So, are there any guesses as to what happens on Oct. 2? Do you think they'll allow the short selling ban to expire?
From the official transcript:
"The SEC is also requiring certain investors to disclose their short selling, and has launched rigorous enforcement actions to detect fraud and manipulation in the market. Anyone engaging in illegal financial transactions will be caught and persecuted [sic]." - G.W Bush 09/19/08
He said it, he meant it. Going off script is not the same as going off message.
Volker the Viking writes:
Baron von Helmut needs to be deleted and banned.
Volker the Viking | 09.19.08 - 11:54 am | #
For sure--he is revolting.
Does Haloscan support accounts with a login?
It could clear out the name stealers and trolls.
"Baron von Wingnut"
Ther. Fixed that for you.
You ignorant f'ing sap, after all this, you'll still vote GOP. That is why we're in this mess.
Cap'n Midwest Product writes:
So, are there any guesses as to what happens on Oct. 2? Do you think they'll allow the short selling ban to expire?
Cap'n Midwest Product | 09.19.08 - 12:02 pm | #
That's why they put 799 names on it. Otherwise it's a hit list.
USSA- wrong
UFSA- right
Merging of government and corporate power is THE definition of fascism. The problem is on the right, not the left...
For those interested, Ron Paul has a video statement up on his website
Congressman Ron Paul
"The end of this comes when people reject the dollar."
Tough day for long-term shorts like me!
I hope that I do not have a call from Mr. Margin today!
Where is the Minister of Cannabis? We have anger issues that Department is in charge of controlling.
TARP is MOAB
thank you dryfly. I find your solution scary in the extreme, because I expect really bad short term dislocations, but who knows, it's pretty hard to predict.
And I've seen different estimates on just what difference "moral hazard" makes. Maybe it was Soros I just read (who thinks bubbles, not equilibrium, is normal in markets) who doesn't think "moral hazard" is all its cracked up to be as a regulator.
Govy writes:
For any bank entering this program, I want no deductability of losses. I want no deductability of management bonuses and stock options for the last five years. I want 10% warrants as of noon EST yesterday. I want this program to be extremely distasteful.
... amen. A lot more folk would be willing to play along here if we were hearing that kind of talk from Paulson/Bernanke/Bush.
TARP will probably keep the IB's alive just long enough to insure that the oil speculation that they are part of destroys what is left of the economy. This will buy time and kill any chance of the world getting out of this mess without extreme pain. CR has been right all along about the need for oil to come down to moderate the recession. Saving WS from its own mistakes will guarantee that oil does not come down. Checkmate.
Govy - I'll sign my name to that petition.
I'm surprised how level the mkt has been since its early 380 odd point jump. If that's all we get today, look out Monday for sure.
All we need to make this really unbearable is another attempt at prohibition.
The Baron has disclaimed the racist comment, folks, and I can attest that there's identity borrowing going on here, so I'm inclined to accept his claim he did not post that.
Been waiting for this:
September 18, 2008
WTP Brings Federal Lawsuit to Stop AIG Bailout
U.S. Lacks Constitutional Authority for Loan
On the day following the 221st anniversary of the signing of the U.S. Constitution, WTP Chairman and constitutional activist Robert Schulz today filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of American International Group, Inc. (AIG) by the United States Government and the Federal Reserve.
The lawsuit asserts that the commitment of public funds and credit for the direct benefit of privately owned AIG is an ultra vires action by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. The lawsuit asks for a "show cause" hearing demanding that the Government produce evidence of its legal authority to commit public funds for such a purpose, as well as emergency and permanent injunctions halting the bailout transaction.
Beyond the Constitutional deficiencies, the bailout establishes a dangerous precedent enabling the Fed and/or Government to nationalize virtually any business or property within the United States without legal authority or congressional approval.
The defendants include the Federal Reserve System, Fed Chairman Ben Bernanke, the U.S. Treasury, Treasury Secretary Hank Paulson Jr. and the United States Government.
The WTP Foundation today issued a press release citing Schulz:
"Beyond the moral hazard and dangerous precedent established by this action, it is of vital importance that the American people recognize that the present financial crisis is a direct and predictable result of decades of constitutional violations by the Federal Government. Through a long-standing policy of disinformation and collusion with the Federal Reserve and Wall Street financial elite, the United States Federal Government has denied public access to information about the secretive operations of the privately owned and operated Federal Reserve and its monopoly control of America's money system.
"This monopoly control of our currency by a private banking cartel has resulted in increasing distortion, volatility and cyclical (boom and bust) economic conditions in the U.S. and abroad. America's fiat currency (produced from thin air) is manipulated by the Federal Reserve for the benefit of its owners, major Wall Street financial institutions and the Federal Government and is not unaccountable to the taxpayers. These abuses of the Constitution have taken our financial system to edge of the abyss. The chickens have come home to roost."
Statement on SKF from ProShares:
(I wouldn't touch this stock now with a ten foot pole. Remember.... today only, options market makers have ana exemption. Starting Monday, they do not).
ProShares Announcement
BETHESDA, Md.--(BUSINESS WIRE)--September 19, 2008 Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.
Yeah, if you guys wanna fight, we have'em around two in the morning Friday nite. You pay for the furniture though.
Comrade Geoff writes:
Who sent all the new idiots here today?
Comrade Geoff | 09.19.08 - 11:58 am | # Comrades Paulson, Bernanke, Cocks, Bair, and Bush.
Duh!
To many who do not see where helping the western elite benefit at their expense is a worthy project.
Wish I had a vote on that.
Here is all that I've seen regarding Obama's bailout of the autos.
"Obama has backed up to $50 billion in loans for automakers"
Anyone have details?
We are doomed.
http://2.bp.blogspot.com/_H2DePAZe2gA/SNO03yc9TzI/AAAAAAAAEXU/BY4okSIiYsg/s400/bankers-rule-the-world.jpg
"CathyG writes:
All we need to make this really unbearable is another attempt at prohibition.
CathyG "
I love historical perspective! And the feminine view is always welcome! I must go, but I say CathyG wins the thread.
Yesterday someone posted a copy & paste job from an article concerning the UK's outright ban on short selling during the Depression; I've been unable to find it again. Does anybody know the specific year that occurred? I'd like to dig up some more on that.
Once again:
Please do not feed the trolls.
TY David. My best advice is to not feed the trolls. I'm sure CR is on top of this.
America starts it's own Sovereign Wealth Fund.
The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values.
So just hold and watch the XLF - do a cross-hairs on the SKF chart. That's where the NAV will be when the ban is lifted.
I have a simpler plan for Paulson and Co:
Take the zillow back from 1/1/2007 and decalre by law that all homes must be sold or bought only at that value . Preston: Problem solved.
Tanta - do you agree that this is the simple way out ?
Hey, Screw Prohibition.
Lost of talk about making the banks go BK before taking on the assets. I think that is the wrong approach here.
What does everyone think of this? The fund buys up the mortgages at whatever cost the banks need to stay solvent (80 cents on the dollar?). The trick is that they also include some sort of underhanded provision that forces these banks to pay the difference between the payout and book value back to the RTC over time, until the net payout to the banks is actually the book value.
Imagine an RTC buying the 100k mortgage for 80k. The real value is just 20k though. so the bank gets 80k, but over the next 5-10-30 years they have to pay the 60k difference back to the fed over time plus interest.
The idea here is that you make the banks whole and keep them in business for now, but basically make sure that over the next 20 years they pay us back with their future earnings.
We are about to reload for the next bubble. Come along don't be late. The US, in transitional state between ground breaking innovations, must rely on bubble economy to sustain its way of life. Asset deflation is an absolute no no. Asset price discovery is an absolute no no. So what is the next asset to drive up price?
David in NY writes:
"On second thought, why don't you blow it out your ass, cunt."
You are a true man of letters!!!
gah, I didn't mean book value there. I meant what they are really worth.
.
If AIG , FNM , FRE bailouts are a precedent, I hope the Govt will extract a heavy price from these institutions in exchange for buying that excessive risk.
Buy assets at fire sale prices, make them eat their losses.
Then recapitalize them with equity infusions by taking 79.9% stake in them.
Replace all the top management who took on this risk.
AND NO GOLDEN PARACHUTES FOR THE DEPARTEES!!
Don't know how this can be good for the share holders, financial stocks are rallying for sure 2day.
I don't think they are worried as much about the share holders, as they are about getting the financial markets to function normally(?) again.
The housing correction is far from over. Nationally the correction has been 20% per case shiller.
I think correction will be at least 50% from the peak.
If they think this is the end of mortgages going bad, they are gravely mistaken.
Homes is Fort Myers/Cape Coral are going for as much as 60% to 65% off of peak.
Two to three years from now, most of housing markets can be expected to be there.
Welcome to the United States of Socialist America!!!
.
Two interesting things jump out to me from the transcript:
So, who is going to come up with a counter-metaphor to Hank's plumbing image?
CR's tarp is a start.
But who has a big enough megaphone to counter Hank's appeal?
It looks like Pelosi, Reid and Barney Frank are on board, which is puzzling in at least one way because they have some political incentive to see this thing blow up in Bush and Republicans face. (You could argue that they're acting as good Americans who don't want the US financial system to blow up, which may be true.)
Will it be Shelby from Alabama and other fiscal conservative Republicans? Doubt it, but who knows?
"Hey MS, fuck off.
Your attitude would make the French people proud."
Spoken like a true republican....
But I see how wasting time with fruitless endeavors makes you feel better.
Ciao
MS=More Sane (than you)
You my beloved masses, with Your great sacrifice will save the Golman Sachs er Fatherland ~!!!!!
Ok here is my take, just posted to the Zacks.com blog:
Today the SEC followed the lead of their British counterparts and banned short selling in almost 800 Financial sector stocks. In addition it looks like we will have something that is being described as a second Resolution Trust Company (RTC2) to buy up all the toxic sludge that is floating around Wall St . In the short term this is fantastic news for the embattled Financial Services sector stocks. In the medium to long term it is very bad news. If your trading horizon is a month or so, load up on the investment bankers, very weak banks etc. For example, even the walking dead like Washington Mutual (WM), National City (NCC) should do very well today and probably for the next week or so. The greater the current short interest in the name, the bigger the pop you will see. However, keep a very close eye on them. This should only be a short term trade, although it could be an extremely profitable one. Longer term look to firms who will still have customers regardless of the economic conditions and which have very strong balance sheets. Names like Proctor & Gamble (PG) and Coca Cola (KO) spring to mind.
By and large the short sellers have been right about the underlying fundamentals of the sector. The sector made a ton of loans to people without checking to see if they had the ability to repay those loans, and then leveraged themselves up to extremely imprudent levels. As long as real estate prices were going up, there were very few defaults or foreclosures. If someone couldnt repay the mortgage, he could just sell the house. As soon as housing prices started to fall, the whole thing was bound to unravel. Thus as the cycle was still going up, these bankers could book massive, but largely illusory profits, and pay themselves massive bonuses. As thinks started to fall apart, everything possible was done to hide the true condition of their balance sheets from the investing public. Most notably by reporting a large part of the paper as level three assets. Short sellers play a very important role in price discovery, making the capital markets much more efficient. They also provide a lot of liquidity, since they are guaranteed buyers at some point as they cover their positions, that usually happens when nobody else wants to step in and buy. Are there abuses by short sellers, of course, just as there are abuses on the long side. Enforcement of the ban on naked short selling makes sense. In other words you do actually have to find shares to borrow before you can borrow them and sell them short. Bringing back the uptick rule, which was implemented after the crash of 29 and only eliminated last year would make a lot of sense. That would be sensible regulation.
Banning short selling in 799 stocks until October 2, which is extendable for 30 days thereafter (anybody look at the calendar to see what occurs 33 days after Oct 2) and doing it on the day when all the options and futures expire, smacks of market manipulation on a scale that would make Jessie Livermore blush. One effect of this will be to effectively shut down the Options market. People who write (i.e. sell) puts hedge their positions by shorting the underlying stock. Now, with short selling eliminated, people wanting to bet against these companies will migrate to the options market. However, the other side of the trade will be severely compromised. Write a put and you have nearly unlimited losses (there are infinite potential losses on writing calls, but with puts a stock can not go below zero so that caps it) yet only a set premium. If you can short the stock then you can hedge the position. Unless the premium you get for writing the put is extremely high it is just plain a stupid bet. You could then see a situation where the at the money call is trading for $2 and the at the money put is selling for $10.
There are very real differences between the original RTC, which disposed of assets the Govt already had by virtue of paying off depositors and shutting down insolvent S&Ls and the current proposal. In the first one, the shareholders, both common and preferred we already wiped out, and many of the unsecured creditors (not depositors under $100,000) took a hair cut. The assets were by and large real assets, say an empty strip mall in Texas . In this situation we are talking about buying up lots and lots of toxic paper at a substantial discount. Well the question is substantial discount to what? Par? What it is currently trading for? If this toxic paper is currently trading for $0.25 and the Govt buys it up at $0.25, then it has solved nothing other than it has forced price discovery of the assets and made the holders recognize their losses and thus take a hit to their capital. If instead the Govt (a.k.a. taxpayers) buys it at say $0.75 on the dollar, then this is nothing but a massive bailout and transfer of wealth to Wall St . How big a transfer of wealth is hard to say at this point, it depends on what price is paid and how that price is arrived at. And no, mathematical models of the value of this paper will not due. Those models have been proved to be extraordinarily wrong. Mark to myth and all that. But in all probability the transfer of wealth from the taxpayer to Wall St will be measured in the hundreds of billions. Welfare for the rich indeed.
Dirk van Dijk, CFA
Director of Research
Zacks Investment Research
Yal said: "I have a simpler plan for Paulson and Co:"
I had an idea even more basic. Which ever company is in trouble and needs bailing-out, simply merge it with its counterparties. The transactions zero-out, problem solved.
S.
Well, thanks heavens (or heck) for the TARP, under which the skeletons shall be laid!
Good thing, too. For a moment there, I was afraid that Goldman Sucks wouldn't be the only bank left in this banana republic, and that our Elite wouldn't get a big bonuses this year.
Any assets left to seize from taxpayers? Yeesh...
Monday morning is going to be interesting. I think I am going to wake up late.
WouldYouLikeCakeWithThatPony? writes:
David in NY writes:
"On second thought, ....."
You are a true man of letters!!!
WouldYouLikeCakeWithThatPony?
I did not say that (though I am a man of letters!). Somebody's playing games here (and I apologized for a mild bit of intemperateness, perhaps to you, above). You can look back at the thread.
SKF Trading again? Showing bads and Ask now :
SKF \t92.3501
At its heart, many here have a severe distrust of the motivations and adgendas of those in charge. Therefore, the working assumption is that plans introduced by those in charge are designed to benefit those in charge. One confirming indicator supporting this distrust is that all these plans don't seem to cause the primary benefitiaries of the most recent 7 years much if any pain while many of those who chose not to play the various games will now pay perhaps significant amounts of money.
Therefore, propose whatever plans you want, but if they don't start with clawing back money from the recent winners, then count me as a refusnik critic.
but I know about depressions, and you don't seem to .
Unless you are 120 years old, you have the same second- and third-hand knowledge as eveyone else.
I don't love this solution. But I know about the Great Depression, and I have no desire to live my retirement during another one, as my grandparents did. Anyone with a better solution to the actual problems, I'd love to hear from. But the problems are real.
I thought this was about you caring about other people, David, not yourself.
I can see your frustration regarding how naive some seem to be about the effect of government inaction. There seems to be a communications gap on both sides. You should realize that not everybody on this blog thinks it would be fun. Still, they're prepared to deal with it, no matter how bad it gets, because they believe that in the long run, if not for themselves, but for their children and grandchildren, we will be better off for it.
"So what is the next asset to drive up price?"
iTulip says "Green Energy Tech" - sounds as likely as any. I met one of those windmill blades on the freeway other day. If we start trucking them in volume there's another new industry in escorting them until we can rebuild the road system or get some uber-helicopters or airships, the list is endless if you think about it. All it requires is belief in the "Global War on Carbon".
Re: "These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. "
These assets are clogging up option grants for CEOs that want $80 million a year in compensation, and if this problem gets worse, these friends of mine will have hardships!
Day's like today bring out the truly misinformed.......
Get used to it.
Did you get your flag pins on yet??
Ciao
MS
Hey Gone Fishing,
Do you have a link for that (WTP lawsuit), or a case number, so that those of us inclined to do so can follow this case?
Found that bit about short-selling, posted yesterday by Yalt:
Back in September 1931, the world economy was spiraling downward into the depths of the Great Depression. U.S. stocks had fallen about 70% (!) from their 1929 peak, and short sellers were blamed. Many people called for an outright ban on shorting. When Great Britain abandoned the gold standard on Sunday, September 21, 1931, the NYSE capitulated and issued an emergency order prohibiting all short selling. The gold standard news shouldve led to a sharp decline, but stocks advanced, mostly because specialists and other market-makers had no ability to provide liquidity on one side of the market. It became clear that the rise in prices was completely artificial, and after two days the NYSE repealed the ban.
http://seekingalpha.com/article/...e-clock-to- 1931
So if eliminating short-selling inflates stock values, that would suggest that come Oct. 2, all of the beneficiaries of the ban are going to get absolutely hammered. Are they just going to keep renewing it until November?
Cap'n Midwest Product writes:
Where is the Minister of Cannabis? We have anger issues that Department is in charge of controlling.
I was defusing the tension with stupid acronym jokes in the previous thread - oblivious that it was already dead. I'm like the FEMA of financial tension.
Any one seeing the huge increases being reported in state unemployment rates from NC to CA, NY to FL?
Unemployment is the next shoe to drop in devastating the credit markets.
Personally, I prefer PONY-
Payments for Organs with Negative Yield.
so proshares trust -ddg-is taking a bath down 7% due to skf and other issues---- what is the worst that could happen to holders of skf after today?
Re: "The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy."
I have to say it:
Obama was editor of the Harvard Law Review
This puts him in the 99.9999 Percentile when it comes to academic accomplishment. You might want to check out some of the other people who accomplished that feat.
McCain only got into the Academy because daddy was an Admiral. He was fourth to last in his class cause he ain't that bright.
As Colbert says, the truth has a liberal bias.
Oh dear. Last post, don't want to become a troll-
Vega- 'Welcome to the United States of Socialist America!!!'
Please consider some history. If we're becoming 'Socialist' it's only because we've circled so far right that we've reached left.
Fiddling your tipple:
'United States of Fascist America'
Without proper diagnosis, there can be no cure...
Sorry for the boredom... sigh
Not only is it "Talk Like a Pirate Day",it's also "Act Like a Pirate Day"!