WSJ: CMBS Market Shows Fissures
Submitted by
CalculatedRisk on Wed, 11/19/2008 - 5:53am (161 comments)
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zuerst!
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Surprised?
Impressively close to vertical.
CPI falls 1% biggest drop in our lifetime.
"The widely watched Consumer Price Index fell 1 percent, exceeding forecasts by Wall Street analysts for a 0.8 percent decline and the biggest drop since the department began monthly data in 1947. Core prices, which exclude food and energy items, declined 0.1 percent in contrast to the 0.1 percent advance that had been forecast.
The latest sign of rapidly declining prices, including for clothing and transportation as well as energy, implies a weakening economy no longer faces any inflation threat and could see deflation return if consumer demand keeps softening."
Does that bottle rocket have a parachute in the nose so we can watch it float lazily back to Earth?
Herbert Hoover meet George Bush, George Bush meet Herbert Hoover.
Can someone explain this to me?
Some good reading on Across The Curve:
Meltdown
Yes, dan...no one wants to buy debt in this environment. Mostly because they can't.
Nostrovia,
so how do i interpret the graph?
That's because we're a nation of deadbeats.
dan writes:
so how do i interpret the graph?
I will be glad to sell you an ACME Graph Interpreter for $9.99, plus shipping.
Comrade Baron Von Helmut III writes:
CPI falls 1% biggest drop in our lifetime.
I expect 2009 is going to break a lot more records, including this one.
Comrade: That's what the TARP is for, the Treasury or the Fed will loan the big players the money to loan out. At least that's how it's supposed to work....
how much for the shipping...1 Trillion?
CR,
I know you've argued based on the data that CRE while cratering will not resemble RRE, however the proforma 'no doc' type commercial loans, sprinkled with leverage argues that it will in fact resemble RRE.
In fact, I'd argue that leverage on a few bad bets (hotels and casinos) will likely take entire companies down, and because the credit markets themselves are still dysfunctional, reorganization will be challenging (unlikely).
BKs will be spectacular compared to past CRE declines. IMO.
...caveat to earlier remarks however is that I see the world through the lens of a blackhat.
But the real question, asked by real Americans, is "What government program forced the banks to make these bad loans to businesses?" Because, as the Fannie/Freddie/CRA meme tells us, bad loans are made only when the government gets involved. Without them, the banking system functions perfectly.
Jim A, they are competing for cover under the TARP before the SHTF. Uggh, that chart makes we want to pull the covers over my head.
dan writes:
how much for the shipping...1 Trillion?
If you insist
Even worse this morning, the AAA CMBX is bid 660 now (showing 550 on chart). If not familiar with CMBX, it is CDS on a pool of CMBS bond issues. People buying default protection on the underlying CMBS pools, the spread going higher implies higher prob of default.
I love this quote for the Across the Curve blog:
When the government guarantees everything, it guarantees nothing. What a mess.
Herbert Hoover meet George Bush, George Bush meet Herbert Hoover.
That's not really fair to Herbert Hoover.
Bush was responsible for a lot of the excesses that lead to the Great Depression II. Hoover mostly inherited his.
Even before it was clear who was going to be president come 1929, certain people were saying "Woe be to he who is."
Coolidge would never explain why he refused to run for president again. There are only suspicions.
But one of the more interesting ones come from something his daughter purportedly said at the time:
"Daddy says a depression is coming."
It seems that informed people always know the consequences of gross excess ahead of time. That suggests perhaps the key to stopping depressions is prevention, not cure.
RE: "Even worse this morning, the AAA CMBX is bid 660 now (showing 550 on chart). If not familiar with CMBX, it is CDS on a pool of CMBS bond issues. People buying default protection on the underlying CMBS pools, the spread going higher implies higher prob of default."
Thanks...that clarifies it somewhat for me!
C is continuing it's advance to the rear, as it pulls $17B in SIV's onto balance sheet.
Ought to make for +200 day.
Nostrovia,
CPI says we are officially deflated...
Today's Baltic Dry Index is 859 (down 6 from yesterday). It had been rising the last few days.
Comrade Kristina,
Wait until those After Christmas going out of business, everything must go sales hit the CPI.
That's gonna sting.
Nostrovia,
dan - The short answer would be to hold the graph upside down in a mirror. The longer answer is what CR gives -- it shows an interest rate spread.
Today's Baltic Dry Index is 859 (down 6 from yesterday). It had been rising the last few days.
I was running errands yesterday and caught the "Noon Business Hour" on Chicago's CBS affiliate.
They had a five minute discussion of the BDI.
It's gone totally mainstream.
I will be glad to sell you an ACME Graph Interpreter for $9.99, plus shipping.
Thats Ballgame Comrades
Can I charge it?
Great, we need to find a new index to chew over
I must remind you all that this is:
a) contained
b) a nothingburger
c) simply caused by zit-faced hedgies
30-year yield about to limbo under 4%.
13-week yield into single digits at 0.095%
I'd like to know more about the three indexes that are averaged to create the BDI, though. Because the Panamax index, in particular, has made a noticeable drop between this week and last week, which seems to be dragging the BDI down.
I know what Panamax ships are but I don't know why the index would suddenly go into the red.
S And so it begins in Canada... They want to believe that there is no more exposure to risky CDOs and other c**p.. dream on..
Scotiabank hit with heavy charge in quarter
BOYD ERMAN AND TARA PERKINS
From Wednesday's Globe and Mail
November 18, 2008 at 7:51 PM EST
Bank of Nova Scotia's fourth-quarter profit will be cut by a larger-than-forecast $890-million charge caused by slumping markets and the failure of Lehman Brothers Holdings Inc., beginning what analysts expect will be a parade of depressing earnings announcements from the banks.
The charge is equivalent to $595-million after tax, Scotiabank said after markets closed Tuesday. The biggest chunk of the losses came from writedowns on stocks, bonds and derivatives such as collateralized debt obligations (CDOs).
Analysts have been slashing their ratings on Canada's big banks because they continue to grapple with credit market issues at the same time as a plethora of bad economic news makes it evident that their core lending businesses will struggle in future quartersWith markets in a tailspin in the banks' final quarter, which ended Oct. 31, analysts are on the lookout for similar writedowns from other lenders, particularly Bank of Montreal, Royal Bank of Canada and Canadian Imperial Bank of Commerce.
All these banks have exposures to slumping markets for debt instruments like CDOs.
It's going to be across the board we're a little bit nervous about everybody, said National Bank Financial bank analyst Rob Sedran.
The losses add to what is already a dismal total. The banks have been hit with about $13-billion in writedowns since early 2007.
Slightly OT, but on topic of hedgies and redemptions:
There are quite a few $1-10M range individuals, no that much smarter than average who did well over the last 7-10years who were sold on various funds, the kind of funds that only wealthy special people put there money because it is the smart thing to do...
...the point is that they are actually finding out that their wealth can be begin to approach zero very quickly, and that redemptions have contractual periods--and that just because it's your money, it's not money in your hand until such-and-such time...
These people will likely become middle-class agai
Gold and Silver just went vertical!
How low is BAC going to go?
MW,
Since we are in interesting times, I suggest also adding a vector of up or down to vertical.
For example, the economy is also currently vertical in the southerly direction...
How do default rates compare to those in the '80's?
MILAN, Italy - Fiat Group SpA CEO Sergio Marchionne on Wednesday warned that a bailout of the big three carmakers in the U.S. would distort competition across the ailing auto industry.
Marchionne appealed for a fair playing field for the automaking industry as Detroit's Big Three - Ford, General Motors and Chrysler - asked for a U.S. government bailout to survive the global financial slowdown that has slashed demand for new cars.
"We need to avoid interference that would change the industrial equilibrium of the markets. That is something Fiat cannot accept," Marchionne told a gathering of regional industrialists in Turin.
Aid to U.S. automakers "would change the balance in Europe. It is a question we are following with attention," he said.
German Chancellor Angela Merkel, who is considering whether to offer one billion euros (US$1.27 billion) in loan guarantees to the GM subsidiary Opel, voiced similar concerns during a meeting with Premier Silvio Berlusconi Tuesday in the northern city of Trieste.
Marchionne emphasized that Fiat has not asked for any government aid and that the Italian automaker, which is also the nation's largest industrial concern, doesn't need "the same kind of support as the Americans."
Berlusconi said he is not prepared to offer aid to the Italian industry under current conditions.
Blaming Bush is incorrect and misses the big picture. Have you wondered why Obama is surrounding himself with Clinton administration people? Why did Bush keep Clinton administration people? Is there really any difference between the three administrations when it comes to financial management?
No.
Jesse's Café Américain: The Dollar Trap: Michael Hudson's Incisive Characterization of Our Global Economic Dilemma
What?!? They won't loan to build more shopping malls?!? How un-American. We NEED more shopping. Its, like, our economy. Don't you watch the news. When they talk about the US economy they show cash registers ringing! We have to save Christmas!
/snark
Ok. I think its time the news showed the economy as production. They're almost getting the clue with the big 3 BK. But they're not quite there...
And somehow real estate is supposed to do a "V". Oh... we haven't found the bottom of the "L", but we'll be there so long it won't be a worry.
Got Popcorn?
Neil
AC: Coolidge would never explain why he refused to run for president again. There are only suspicions.
That's pretty misleading. Coolidge was never that enthralled with being president and was devastated when his son died in 1924.
After that Coolidge became even more withdrawn. He later said that "when he died, the power and glory of the Presidency went with him." [Wikipedia entry]
Coolidge was an excellent choice for mayor, a reasonable one for governor, and a bad one for president. He was a good guy, but completely lacking imagination.
He's a claim to fame of this town, where he got his start. Which is ironic since the area is slightly to the left of France. Another is Jonathan Edwards, kind of the Jim Bakker of his day (sans the crass materialism.)
Because it just has to be said:
This is inflationary, right?
Got Popcorn?
Neil
Can I charge it?
the_economist
LOL!!!!
..............
I suspect that all of this data and rise in delinquencies is from before the labor market started contracting. It takes a while (usually) to close an office and there is usually prepaid rent for tenants. (Most building owners require between 6months to 2 years in rent, 6 months for AAA companies and it goes up from there)
I think this could skyrocket in the next few months as the job market continues to contract and the last three months of layoffs show up here...
"c) simply caused by zit-faced hedgies"
i got my 30 day free trial of Proactive Solution and it's all cleared up now.
armageddon writes:
How low is BAC going to go?
They have to go down the stairs to feed the homicidal hellspawn Countrywide in their basement.
Blaming Bush is incorrect and misses the big picture. Have you wondered why Obama is surrounding himself with Clinton administration people? Why did Bush keep Clinton administration people? Is there really any difference between the three administrations when it comes to financial management?
We had a huge bubble under both Clinton and a different huge bubble under Bush.
Given the devastation that bubbles historically cause I would argue we had a failure of leadership under both presidents.
Dems, Repubs...all cut from the same stone. I prefer Bernie.
blackhat-
No.....it's "downclimb"...get your terms straight
Ciao
MS
A surgeon, an engineer and an economist were discussing which of their professions was the oldest.
The surgeon said his was the oldest, because in first book of The Bible, God had to be a surgeon to take a rib from Adam to create Eve.
The engineer said his profession was even older, because God had to be an engineer to create the heavens and earth out of chaos.
The economist said, "And who do you think created the chaos?"
"AC: Coolidge would never explain why he refused to run for president again. There are only suspicions."
That's pretty misleading. Coolidge was never that enthralled with being president and was devastated when his son died in 1924.
These are just the interpretations from a book I read recently on the subject of the Great Depression. It seemed like it was fairly well researched and written, and not overtly biased.
I guess the interpretation is always a problem with history...
If I were Obama, I think I would have sudden, serious, health issues, and turn it over to Biden...
Agree with ac.
On a larger scale, we contracted R&D for engineering & science since Carter, through Reagan, BushI, clinton, and Bush II.
We have almost 40 years of catch up to do, and nobody in power seems to want to catch up, or realize we are grossly behind.
Not engaging in hair-pulling hyperbole. We have the greatest universities in the world, but the facts on the ground are disturbing if you are in a technical field. Some money here and there, but large projects with productive payoffs are just not on the table.
Gold and silver shorts getting squeezed. Not sure why?
Maybe report that China is buying 4000 tons of gold?
For the first time in weeks, stocks and commodities have delinked today.
[Given the devastation that bubbles historically cause I would argue we had a failure of leadership under both presidents]
Without bubbles (opportunity for the few to rake it in big time) our economy wouldn't look a whole lot different than one under socialism, would it?
AC: I think too many people get caught up with the D or R label. The major culprit in my opinion, has been the Fed and Congress. Both parties have mismanaged our country for years, enriching themselves at our expense.
Our government is a reflection of our generation and our society.
Rich you still in slw..+10% today
SSRI seems to have a little more mojo...
Yen - little change
Gold - strong
Long Bond -strong
Oil - up slight
Signals Mixed Probably upward bias on sp
@mal
Certain size ships are often associated with/ designed to carry specific commodities.
Also size being related to a max. distance means being connected to particular routes and markets.
Therefore the more specific BDI components are more volatile.
dan writes: so how do i interpret the graph?
The vertical is the spread, or difference between two interest rates. In this case the graph compares the effective interest paid by commercial mortgage-backed securities (CMBS) to that of some (presumably) safer security, probably Treasury debt. Someone will now chime in and correct me with the exact security used for comparison, but that's the general idea.
What the graph shows is that the difference in rates on these CMBS is going up, fast. They're paying more than a corresponding Treasury security; over 5.5% more. (And looking like it won't be stopping soon.)
When I was young and naive, that would have sounded great; it means if you buy these securities, you get a much better rate of return than you would for a T-bill. But, sadly, I have since learned a basic principle of finance (one which, curiously, many of our titans of finance either never learned, or entirely ignored during the last decade):
If you're getting a higher rate of return, it's because there's more risk in the investment.
There's a greater chance that the originator of the bond will fail to pay it off, either in whole or in part. That's why people with bad credit have to pay higher interest rates for loans. It's also why banks that are in trouble have to offer higher rates on their accounts and CDs - the bank is borrowing money from you, and has to pay a higher rate.
In this case, the rate is not fixed. This is the magic of securitization, which converts pools of loans into CMBS that can be traded in a market. The market sets the price of the securities, just as in the stock market. If people think the security is likely to pay off, they will buy them, and the price of the security goes up, and vice-versa.
These securities are bond-like, meaning that they pay fixed amounts at fixed intervals. So the effective rate of the security, as graphed here, goes down when the price goes up, and vice-versa. As the chart clearly shows, the market has decided that these securities are less valuable; people are selling them.
Why are they making this judgment? Well, presumably they have information that indicates that some of the loans underlying the security will not be paid off, and thus the security itself will not pay in the way it was originally structured - or maybe not at all. So they sell, and the collective judgment that the risk has increased causes the rate to increase, in line with the above basic principle of finance.
Hey there!
Just got back from sailing for a couple months...
Did I miss anything?
I am up to my eyeballs in slw.
It's my rich get quick scheme.
C'mon silver squeeze!
Bunker Hunt!!
Kohn: Extraordinary monetary response required.
Get ready for helicoptors. I would not be surprised if the Government starts mailing monthly $1,000 checks to everyone in the U.S.
Comrade swan-the good thing is you missed that pirate movie currently playing...
safe_as_apartments writes:
Kohn: Extraordinary monetary response required.
Get ready for helicoptors. I would not be surprised if the Government starts mailing monthly $1,000 checks to everyone in the U.S.
Yes, but under this scenario, stamps will cost $2,000 per check.
Is the reason Paulsen doesn't want to use the second $350B because it is possible he'd have to go to Congress to raise the debt limit again?
We have almost 40 years of catch up to do, and nobody in power seems to want to catch up, or realize we are grossly behind.
We have outsourced a big chunk of our education needs over the last generation, as well. Around 1980, it was obvious the current system wasn't working and you saw massive tax cuts and outsourcing begin. The beginning of large scale financial speculation. All as a way to boost sagging corporate profits. Tax cuts go hand in hand with a fatally wounded public education system.
OT-market seems to be holding its breath...waiting on crude inventory?
it will be catalyst for move up or down on opex week
A nation such as ours has limited options at this point for sustaining wealth:
1) Sell things to other countries for profit.
2) Take things of value from other countries.
I suspect piracy is being reviewed as a viable economic option.
Rich
"Hunt silver" to this day is one of the best trades I ever made. Had to wait for 2 years for the payoff tho.
Kohn in Bloomberg: Kohn has been a long-time skeptic of using changes in the federal funds rate to deflate asset bubbles, and has endorsed the view of former Fed Chairman Alan Greenspan that central banks should instead ``mitigate the fallout'' after bubbles burst. He restated his defense of the Fed's position today.
Yep, that's certainly proven to be a good idea. Might be moot now though, ya think?
The major culprit has been the Wall Street crooks and their Republican allies in the White House since Raygun.
Sure Clinton did a few bad things, but nothing on the scale of the damage down by Raygun and the 2 Bushes.
"...the facts on the ground are disturbing if you are in a technical field. Some money here and there, but large projects with productive payoffs are just not on the table."
blackhat |
The nature of R&D has changed. Even in the universities, it's mostly D and very little R. I can't think of much other publicly funded R. The good news is that some grad students are coming out of school able to function in the work force.
Which is great if you're just applying existing tech to get products to market. Not so good once you have exhausted the existing R in applications.
But there is some good private R going on in a few big companies. Not really fundamental stuff, but at least pushing the physics of materials a bit.
With the recession, a lot of private R will no doubt be cut. Congress will not be in a mood to pay public R while the automakers are begging for handouts - in fact, I doubt that the discussion can be had for a long time.
OK, now I'm depressed...
Meanwhile, the hedge funds are busily re-arranging deck chairs.
For all you catastrophists, some signs of the end:
The End - a set on Flickr
RIch, the Hunt Bros. nealy caused me to go broke in the 70's. Just had enought left to open a stock margin account.
mp,
do you think they dont know how f'ed they are or just arent telling anyone yet?
(of course no one might know how f'ed we are)
....
sm_landlord,
reminds me of the super-collider. Killed by congress in 1993. Keep in mind, Clinton to his credit in this instance attempted to save the project...background however was that Bush era S&L had soaked too much money out of the system to fund both the collider and Nasa's programs at the time...side note: technically, the super-collider would have achieved much higher energies the one turned on in europe...
Part of the rationale by congress at the time was that they could more profitably spend the same amount of money on many smaller research projects verses one large one...of course the argument has merit, but that money wasn't really spent anyway...
"....piracy is being reviewed as a viable economic option."
In the USA its not called piracy but rather "manifest destiny".
Need...bigger...chart...
squeezed writes:
"....piracy is being reviewed as a viable economic option."
In the USA its not called piracy but rather "manifest destiny".
Brody: We need a bigger Destiny.
Professional Women Golfers might be working at Hooter's soon.
Yahoo! Sports - Sports News, Scores, Rumors, Fantasy Games, and more
The mind of Congress (Senator Brown):
Mr. President, when I think about the debate over extending unemployment insurance, some questions come to mind. Does anyone in Congress want more American families to lose their homes? Does anyone in Congress want more American children to go to bed hungry? Does anyone in the House or Senate want more American families to stop paying their heating bills, to delay their credit card payments, to skip out on their health care bills? Does anybody in the House or Senate want consumer spending to slow even further, dragging our economy from recession to something even worse? Assuming the answer to any of these questions is no, then voting to extend unemployment insurance for current job seekers should not be a fight, it should be a formality.
Something else funny from Collins (Maine):
Our economy has struggled with a credit crisis spawned by mortgage defaults in the subprime mortgage market and their ripple effects throughout markets for mortgage-backed securities. Complex financial instruments that were poorly understood, not transparent, and, in many cases, not regulated have exacerbated the crisis.
What was once thought of as America's mortgage crisis has metastasized into a nightmare of converging forces that could lead to a deep and global recession. As we have so painfully learned, financial markets are truly global, and the hopes and fears that affect these markets move with the speed of light through electronic communications and electronic trading.
The consequences in our country have been dire: falling home prices, rising foreclosure rates, plunging consumer sales, increased unemployment, a tremendous erosion of retirement savings, and billions of dollars for emergency stabilization programs. We are even looking at a Federal deficit that could reach the extraordinary figure of $1 trillion.
The Maine lobster industry, the paradigm of hardy, small town entrepreneurship, has also felt the blows of the crisis in high finance and a terrible economy. It is not only that consumers have reacted by reducing their purchases of lobsters--although that is one factor--it is also that the lobster industry is an innocent victim of the global financial crisis. It is extraordinary that the global financial crisis is putting the very existence of Maine's centuries-old lobster industry in jeopardy. Here is what happened. In addition to plunging demand, many lobstermen in Maine send their lobsters to Canadian processors. Well, it turns out that those Canadian processors are, in turn, financed largely by financial institutions in Iceland--in Iceland. When the Iceland financial system collapsed, credit was terminated to the Canadian processors, which, in turn, stopped processing Maine lobster.
Who would have guessed that the failures of banks in Iceland would claim as victims the lobstermen in the State of Maine? But that shows how integrated our financial system is worldwide.
In short our Government says:
1) We think we can spend our way out of this recession.
2) We are under-estimating completely the true deficit of what we are spending.
Remember the Maine (lobstermen)!
Brooks belabors the obvious and thinks he's being profound...
In this recession, maybe even more than other ones, the last ones to join the middle class will be the first ones out. And it wont only be material deprivations that bites. It will be the loss of a social identity, the loss of social networks, the loss of the little status symbols that suggest an elevated place in the social order. These reversals are bound to produce alienation and a political response. If you want to know where the next big social movements will come from, Id say the formerly middle class.
OP-ED COLUMNIST; The Formerly Middle Class - NY Times
Well as my former middle-class mother used to say, "No shit, Dick Tracy, where'd you park your squad car?"
[R&D woes] OK, now I'm depressed...
sm_landlord
It's worse than that. Independent innovation has been crushed by a combination of failure to protect intellectual property and a legal system by lawyers for lawyers. Private R&D stays private and thus dissemination of general knowledge is thwarted.
Take for instance if I invented a ceramic coating that reduced friction and wear in engines. Announcing or filing a patent app has reverse engineers in industry working on their "similar" processes within hours. In the meantime the IP lawyers go to work at the big corps searching for anything "similar" that they can use as leverage in poaching or even claiming your process infringes them.
Don't even get me started on software where Vista is 200,000 lines of code and 1.4m lines of protection and workarounds for other people's proprietary techniques.
introduction
www.world-markets-now.com
World markets now
World-markets-now
Folks, BDI is not about LOC. We have brick wall. This is Austrian Theory at work. Capital goods to zero. Commodities down.
"...do you think they dont know how f'ed they are or just arent telling anyone yet?"
They're playing beta games now. They know.
"I suspect piracy is being reviewed as a viable economic option."
You didn't listen to the Paulson hearings, I take it? This has already been approved by Congress.
Is this sucker goin' down ?
So Rob Dawg, do you have some solution to balance incentivizing private innovation and feeding the public domain? Obviously it's a much discussed topic, but I think you're kidding yourself if you believe it's an easy fix.
great article:
The total outstanding balance on all of the U.S. mortgages that have been incorporated into mortgage-backed securities, the financial instruments at the heart of the financial crisis, is $6.6 trillion, according to the Federal Reserve a sum that dwarfs the $700 billion originally requested by the Treasury Department for the bailout.
The outstanding balances on these securitized mortgages accounts for 59 percent of all money now owed by Americans on home mortgages, which is $11.2 trillion, according to the Fed.
CNSNews.com - $6.6 Trillion in Mortgages Were Wrapped into Mortgage-Backed Securities at Heart of Financial Crisis
Hedges have nothing to fear but hedges itself.
I expect implosion, chain reaction, explosion, and lots of financial radioactivity.
"Is this sucker goin' down ?"
With today's CPI report, 8000 on the Dow should soon be a memory.
kinda dwarfs my estimate of 3 trillion which many said was too high....
CR what was your estimate again?
she's in freefall now bearly.
Arrr there's piratin' to be done...Arrr!
Hard to beat the pros at Microshit though. Those are pirates par excellance. Too bad they don't spend more time writing better code though.
Nostrovia,
Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.
CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved.
Try $4.28 trillion dollars. That's $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources*.
Have all the inflationistas curled into a defensive ball? My fearless forecast is that we will be seeing cheap "official" prices for a lot of goods which will only be available through unofficial channels at much higher prices.
Yellowcake from Niger. Mobile chemical and biological weapons manufacturies. Weapons of mass destruction, intent, and clear and present danger.
We must have TARP without legislative oversight and unlimited funding to stem and stabilize financial chaos. Monetary, fiscal, and deficit spending policy will heal the economic turmoil.
The auto industry will collapse and its intellectual property will be lost forever without a bailout.
I love the Truth, it is so truthy.
sanity clause,
It's a very easy fix. The government engages itself as an interested party in innovation and funds it. Private industry didn't put people on the moon. The government stated a goal, ponied the money, and poked private industry until the result was achieved.
I advocate a healthy mix of private innovation, private industry, and big f-ing projects with huge returns that cannot easily be achieved by profit driven publicly traded companies.
Had nice long drive yesterday and listened to congressional hearings on auto industry. It was depressing to hear the captains of industry grovel before tfhe Senators for a few crumbs from the kings table. Have they no pride? Take bankruptcy and let the chips fall etc. Don't kiss ass for the handout!
SPX 850 - Butter, meet hot knife.
"IS this sucker goin' down?"
It should....it needs to....but it probably won't.
Ciao
MS
Prof, Ben will happily sell you some overpriced assets like mortgage backed securities.
He's got lots of those.
Shark tooth formation on the DOW today.
That's likely not a good thing.
We need a bigger TARP.
Nostrovia,
My slight upward bias doesn't look too good right now.
O.T. but interesting:
Saadoun al-Jaberi
Azzaman, November 18, 2008
Iraqs oil exports are decreasing by nearly 100,000 barrels a day every month, said former Oil Minister Ibrahim Bahar al-Uloom.
Uloom said the drastic decline started last May and has slashed exports to 1.65 million barrels a day from about 2 million.
Iraqi (oil) exports have nosedived 25 per cent since the beginning of 2008, Uloom said in an interview.
This represents a big challenge to the government, he said.
He said he could not see how the government would be able to meet budgetary expenses for 2009.
2009 budget has been based on the assumption of exporting two million barrels a day and an estimated price of not less than $80 for a barrel, he said
Financial Crisis Balance Sheet
Government Entity Sum in Billions of Dollars
Federal Reserve
(TAF) Term Auction Facility 900
Discount Window Lending
Commercial Banks 99.2
Investment Banks 56.7
Loans to buy ABCP 76.5
AIG 112.5
Bear Stearns 29.5
(TSLF) Term Securities Lending Facility 225
Swap Lines 613
(MMIFF) Money Market Investor Funding Facility 540
Commercial Paper Funding Facility 257
(TARP) Treasury Asset Relief Program 700
Other:
Automakers 25
(FHA) Federal Housing Administration 300
Fannie Mae/Freddie Mac 350
Total 4284.5
Note: Figures as of Nov. 13, 2008
They're playing beta games now.
Beta games? Would you mind explaining? Thx.
Misean, I was thinking more of a MLK formation..."I've been to the mountaintop" type of thing...
why did us$ just dive more than a percent in 10 minutes?
Kansas City Gas Prices - Find Cheap Gas Prices in Missouri
Gasoline in Kansas City is 1.43!
Now that's a fissure. I want to buy 1000 gallons when it hits $1.
So Rob Dawg, do you have some solution to balance incentivizing private innovation and feeding the public domain? Obviously it's a much discussed topic, but I think you're kidding yourself if you believe it's an easy fix.
sanity clause
Most correct, there are no easy fixes. As a simple first step I'd prohibit lawyers from serving in elected legislative positions.
Comrade Kristina,
LOL
@PkVt
Beta. The computers are working overtime now.
Beta (finance) - Wikipedia, the free encyclopedia
Still short S&P via SDS. Added to position on open today.
Starting to see some volume on the downside, but I am 50/50 as to whether we close up or down.
You'll know the bottom when you see a Goldman Sacs former VP gaunt and threadbare, plowing a field with new horses and bad teeth. Both the horses and the man.
Peak,
I think he was talking about defensive low risk asset allocation. Just trying to make it thru...
......
blackhat, that's fine and I agree that public spending on some large scale innovation like energy would be make sense, but that doesn't fix the problems with patent law to which rob dawg was referring. Patent law is necessarily a balance between rewarding private innovation to support its costs and making those innovations more widely available so that others can build off them. Regardless of what changes you make, you'll never be able to please everybody and established entities with access to expensive lawyers will have advantages. Listing problems is easy. Coming up with solutions isn't.
The difference between mens and womens golf. On the day of 9-11 the men were in St. Louis for the Amex Challenge. They stayed there that night, and all left the next morning, slammin their trunks, and driving their rental cars home. Tiger actually did some driving. Their private jets were grounded. They didn't wait for the official announcement. The women dithered until Thursday of that week, then cancelled their event. Nobody cared. Hence, why men are smarter than women.
What's up with glod?
24 Hour Gold Chart - Last 3 Days
Now this is indeed irrational. No. More. Sense.
Wow, that is a ROCKET!
When the dollar trapped dollar reserve cartel cracks, well we're all downstream slumbering in our beds.
Ah, thanks.
Meanwhile, Roubini goes to 11: Bloomberg News
As a simple first step I'd prohibit lawyers from serving in elected legislative positions.
...the original Thirteenth Amendment.
Swedish truck and bus maker Scania announced on Wednesday that it has signed an agreement with the government of Iraq to open an assembly plant in the country in 2009:
Scania to open production facility in Iraq - The Local
This says it all about foreign sentiment about the value of CDO's
YouTube - Max Keiser - Paulson Criminal - Counterfeiter - REVOLUTION!!
Uhh, what just happened?
Down goes Frazier
Down goes Frazier
Isn't it about time for the system to trot out santa claus....as in "we'll be saved by the santa claus rally"
I recall last year at this time it's ALL they talked about. But it's not a new thing...happens every year. Just seemed it was way over-hyped last year.
Been really quiet on that front lately..
Ciao
MS
Top of this chart is the S&P 500, bottom is investor sentiment:
Investors Intelligence - Minyanville Index Breadth
Back in mid/late Sep./early Oct., sentiment moved up strongly, then came down, plateaued, then fell. With that fall, the S&P 500 fell from ~1150 to ~900.
To me, looking at the Nov. graph of sentiment, it appears that we have had our strong run up, have had our come down, and have had our plateau.
Next is the fall.
Last time, the fall happened over Oct. 2-9. We should begin our fall today. The fall may happen faster and be steeper because people are more nervous now. Or, it may be interrupted as folks go on Thanksgiving vacation next week, and the PPT has free reign to prop the market up on light volume trading days. If the fall gets delayed due to Thanksgiving vacation, the two weeks thereafter are filled with important economic news, all of which will be bad and which will further dampen spirits.
The big selloff will happen over these next one to four weeks, it seems to me.
Since the Chinese and Japanese are bid failing Treasuries, maybe we can bully the Iraqis and Afghanis to support our spending.
America #1...in feet propping.
Matt writes:
What's up with glod?
Matt | 11.19.08 - 11:03 am
I vote short squeeze.
As for the more important question, does the market price for "glod" really matter if you want to truly buy the physical stuff?
Answer: Nope.
My wife shared an interesting story regarding the success of my father-in-law during the Asian financial crises. His company produced foam board, and had given out last paychecks and notice to employees. One of his friends went to a trade show in Spain and was using fil's boxes. On the last day of the show another vender noticed the boxes and inquired where he got the foam board from. My f-i-l got the referral, and a large order was placed the following day. He immediately flew to Spain and secured an exclusive account. Apparently at this time the only sources for foam board were expensive American ones. From this springboard he was able to sell his product in 30 other countries. He must've benefitted from the cheap won a lot.
Sad part of story, a business partner ended up screwing him over and taking over the company. Of course it's Korea so I've heard this thing isn't too uncommon. I think he was in a situation where he loaned money or got a loan and signed over his partnership with the trust that he could get it back. His company is still around.
Happy part of story: without this deal my wife would've been sent home from her American college and I would probably be a floundering bachelor, instead of an evolving father.
Just wanted to share that there are silver lining's to recessionary clouds.
MP, I second the question on beta games.
The CMBX BBBs are the equivalent of subprime mortgages and we all know the problems were contained to subprime.
The CMBX parabolas are serious pucker factor material. This isn't contained. The next thing to go is going to be T-bills and T-bonds. Long bonds selling 30¢ on the dollar? Sounds crazy? These are crazy times. A California muni bond yesterday was offered at a taxable equivalent of 12.1%.
The crush at the exits when people start to realize their bond principal is at risk won't be allowed. What's that? Suspension of redemptions is unthinakable? Welcome to the new world of restricted capital flows.
Nardelli...executioner sans black hood.
sanity clause,
That was a nuanced response.
So pragmatically PTO has to be beefed up with personnel and funding. Those inside that I know have had 5-year case load, although I understand that 2 years is average now. The practical effect of litigation however is to crush the little guy by lawsuit. This is like rail-road barons back in the 1800s. I don't have a problem with intellectual property if it's applied in a greater good fashion. That underlying standard however does not exist. I agree that the issue is not simplistic, but my own concerns in this environment are not just for individual innovator's protections, but large-scale viable projects with huge future payoffs.
I appreciate the civility of your response.
@Pilgrim, PeakVT
As said, hedge funds now know they're in survival mode.
For all practical purposes, the computers will make the decisions in an effort to minimize risk.
It would suck to be hedgie right now. They're screwed.
Conjure says, "BWAHAHAHA!"
Being that the Big 3's major liability is health care, I've never understood why they are not big advocates of univeral health care.
Elvis writes:
Professional Women Golfers might be working at Hooter's soon.
From the link:
Purses will be around $55 million, about $5 million down from 2008.
This is inflationary, right?
Got Popcorn?
Neil
mp - where you think the hedgies are putting their money? Treasuries seem to be the only place, as commodities and stocks are down along with corporate bonds.
Rob Dawg,
this question is from a bond dope...I have about 80k in I-bonds, a would-be downpayment that I dumped there years ago when I decided not to buy.
Many of those bonds now paying 5 or 6%...would you move out of ibonds into what, a treasury mm or cds for safety?
"Purses will be around $55 million, about $5 million down from 2008."
Conjure says, "Yet more anecdotal data."
It would suck to be hedgie right now. They're screwed.
Naaa... Lock out redemptions, declare the value of the fund doubled, take the bonus and flee.
It would suck to be invested in a hedgie right now.
Got Popcorn?
Neil
"...where you think the hedgies are putting their money?"
Your guess is as good as mine. Had I been a successful manager, I would have rolled up my fund last November.
But, as everyone knows, I'm crazy.
I've never understood why they are not big advocates of univeral health care.
Ideology. Also, the Det 3 will totally unload retiree healthcare by 2010 into a VEBA. After that, employee costs will be roughly comparable to the transplants.
New thread.
OnTheRun writes:
Being that the Big 3's major liability is health care, I've never understood why they are not big advocates of univeral health care.
OnTheRun | 11.19.08 - 11:15 am | #
From what I've heard, they have amazing coverage. Universal health care would suck for them.
fried writes:
Rob Dawg,
this question is from a bond dope...I have about 80k in I-bonds, a would-be downpayment that I dumped there years ago when I decided not to buy.
Many of those bonds now paying 5 or 6%...would you move out of ibonds into what, a treasury mm or cds for safety?
I'm a bond dope too. Depends on the maturity. Run some "what ifs" and see what your risk tolerance versus ability to sit tight may be. 5 years to face value paying 5% isn't very risky IMO even if inflation explodes you are partly protected and 5 years isn't that long. My concern voiced was with the long term regular bonds paying criminally low rates.
currency crosses looking freaking buggy... check EUR/USD
Foreign Exchange Live Charts
I don't think hedgies are in Treasuries any more than they have to be. Treasuries are obviously overvalued at present, probably due to the wild flight of central banks to them that Brian Setzer observed
. Money that will be redeemeed will probably be in cash, which might include treasuries. Otherwise, almost any other high-grade bond, including TIPS, Agencies, and corp bonds, is preferable to treasuries at these spreads. Certainly every hedgie algorithm in existence must be screaming "out of Treasuries!"
Rob dawg,
many thanks. My thought about this money was just to leave it...my downpayment fund might buy a small house in upstate NY for cash in a couple of years.
Thanks, I just spooked on the idea of ibonds just collapsing.
citizen energyecon(Unrated) writes:
currency crosses looking freaking buggy... check EUR/USD
citizen energyecon | Homepage | 11.19.08 - 11:31 am
Now that is some movement within a 24 hour period! I've never been a big FX guy, but I'm almost wanting to take a snapshot of it so I can just stare at it when I wonder how the world is currently doing...
Rob Dawg writes
"Most correct, there are no easy fixes. As a simple first step I'd prohibit lawyers from serving in elected legislative positions."
You have my vote. Which office do you want?
All Fall Down writes:
Rob Dawg writes
"Most correct, there are no easy fixes. As a simple first step I'd prohibit lawyers from serving in elected legislative positions."
You have my vote. Which office do you want?
B@st@rd! You really hate me that much?
thank you for you blog
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