I respect Shiller. I think his dilligent work on a housing futures index is amazing.
It always disturbs me to hear just howmuch phychology goes into this. As a mathematician, economic is fund from the standpoint of coupled systems of differential equations.
To hunker down from my hunkered down position.
the market is taking my ponies and slaughtering them. blood all over the place. here and there are the severed heads of my dead ponies with their empty eyes staring out into the heavens pleadingly.
Ahh that dismal science, economics.
Watching them weave their charts and formulas is like watching Madame ShuGessKa peer into her deck of cards at her corner Palm Reading shop.
It just occured to me, yes, I am slow, that Obama in his speech where he mentioned the worse "financial crisis in a hundred years." That perhaps in his briefings he is seeing data that was not generally made public.
As a Senator he would have gotten the briefing paper for the TARP run through. My guess, if that is true, then we will hear more stories of how bad it really, really is, over the next few months. Prep for nascent programs.
Nice to see an economist admitting there's a lot of art to the "science".
To belabor the analogy:
Economics as a practice is similar to where surgery was a few hundred years ago.
At the time surgeons were rightfully called butchers. That said what they were doing was the beginning of a legitimate scientific practice that ultimately has lead to great benefits.
The critical difference is that these incipient healers were operating on individuals to hone their craft. There was no cultural catastrophe if they killed a few.
Today it's as if economists are in the same situation but they're learning to perform surgery by operating on everyone in the world at the same time.
The cost of failure to perform this economic surgery correctly is cultural disaster.
That argues for not putting yourself in the situation of having to do that.
Of course it may be to late to make that argument.
The cost of failure to perform this economic surgery correctly is cultural disaster.
BTW I think one of the real crimes committed by the Federal Reserve in recent years was to suggest that they were experts at this type of economic surgery so there was no need for the nation to be economically and financially cautious.
Clearly they are no such things or we simply wouldn't be in the situation we're currently in.
I wish they'd stop calling it a subprime housing crisis.
Not that Paulson's original plan of buying up bad assets would have prevented banks from using the proceeds to give themselves bonuses; it just would have taken longer.
As an undergraduate Economics major in 1981, I came to the independent conclusion (by no means the first) that math and statistics are pretty useless in predicting future human economic behavior, although logic is always useful and it was too late to change my major.
I see no reason why a wiseguy like John Stewart or a poet like Maya Angelou wouldn't make every bit as good a Secretary of the Treasury as Henry Paulson.
The Center for Automotive Research, a Michigan think tank, issued a study Wednesday that showed 2.5 million jobs could be lost in the next year if GM, Ford Motor (F, Fortune 500) and Chrysler were forced by the downturn to shutdown half of their U.S. plants.
I know the number is padded and an estimate but even at half that size it would be damaging.
Funny if the Big 3 pull a banker move and get the money and then shut down half their plants anyway. No one buying, no one lending. Inevitable with or without government funds.
VIX (new) November 5, 2008
Value
54.11
Change
6.380
% Change
13.367
High
55.12
Low
46.87
Open
47.73
It's covariance is damn near -1 on the S&P500, so in short everybody's getting pulled along for the ride today. Maybe Kudlow is selling all the many shares he built up through his cunning wisdom because McCain was defeated in an upset last night. It's as good a story as any for now
President Obama - some time soon after his inauguration - ought to set out for the country, with all possible candor, the nature of the financial and economic situation, including a simplified spread-sheet budget, borrowing requirements, employment and business trends, and the amount and tempo of interest payments on the debt. We need an economic situation report, in which he takes the nation into his confidence.
Heard the same comment from O last night re worst in 100 years.
Not certain that it's too much to take as gospel.
Yes, it's bad and we know it. But the history is the Democrats have a history of poormouthing everything, like calling the early 90s recession the worst since the GD. I came of age in the 70s thank you and that sucked enough.
Also, effort to tamp down expectations as he's the anointed one. You probably saw the video of the woman who was certain that there are no more worries about buying gas and paying the mortgage. That was a phenomenally stupid, yet instructive, remark.
I noticed the jabs at Bernanke, but part of Bernanke's job is to project confidence and poise. I read he even hired a speech coach, don't know if that's true or not. Always felt he knew what was coming and tried to hide it in Fed speak. Just my humble opinion.
Wow that Shiller guy is kinda cute, depressing, but cute(I'm a woman).
Anyway, to be slightly more on topic, I was thinking about back in the day when I was getting for my econ degree, there was a lot of emphasis placed on studying the evolution of the Japanese economic system. As I recall, in order to create a middle class, the Japanese used to have a law which mandated that corporate CEO compensation could be no more than 10 times the salary of the lowest paid worker. (Later this was watered down to allow CEO perks to be above the limit, and I am not sure if anything remotely like this law still exists within their system.) I wonder if something like this could work in our economy now to restore the middle class. Any thoughts on this would be appreciated, just please don't throw rotten tomatoes at me for bringing it up.
"I think one of the real crimes committed by the Federal Reserve in recent years was to suggest that they were experts at this type of economic surgery so there was no need for the nation to be economically and financially cautious."
Exactly...the history books will not be kind to Alan Greenspan. Particularly regarding his resistance to reasonable regulation of the derivatives markets.
WHY@ ZIRP,
My initial opinion was that Bernanke knew what was coming as well. However it seems by private accounts, he was a pompous windbag away from the camera which would not be explained by a need to project confidence/stability
Ok, we're back on the credit crisis rail track. Next stop G20 Economic Meltdown meeting. Toot, f'n toot.
Strings being pulled on Canadian Finance Minister to blab at China about their currency. Putin will lean on USA. French guy will look for Napoleonic control.
theme song..."Play Happy Maniacs"
Bush appears cackling madly flanked by the dancing Paulson Bernankes.
ova writes:
It just occured to me, yes, I am slow, that Obama in his speech where he mentioned the worse "financial crisis in a hundred years." That perhaps in his briefings he is seeing data that was not generally made public.
You can safely bet whatever money you have left that Obama was briefed and 'up to speed' on the entire situation. He has had no less than three former Treas Secs and one former Fed head doing it for him.
And he didn't say 'worse', he said 'worst'. Bit of a difference there, but then most of the posters here are limited in that they are products of the public school system.
Start with the dept/gdp chart since 1900. Makes the hairs on the back of your neck standup.
BelieverJeff writes:
Pavel I agree totally. Sort of a new new deal fireside chat. Except this is Powerpoint slides with easy to read charts for J6P.
BelieverJeff | 11.05.08 - 4:09 pm | #
We need an economic situation report...we used to have that. It was called "Economic Indicators". For some stupid reason the Bush administration killed it.
Thanks, I seem to be good at that. No, I am a long term investor of little wealth. My brain is already boggled with other data to try financial forecasting. To do it right you need the mental database of a large scale farmer.
And he didn't say 'worse', he said 'worst'. Bit of a difference there, but then most of the posters here are limited in that they are products of the public school system.
Obama's PPT will include Grandpa Volcker. He knew what he was doing during the recession of the early 80s. (Read 'Secrets of the Temple' if you want the full story.)
Thanks for the commentary. And no, I use due diligence since I recollect that we're all fallible.
It's scary that I'm getting the hang of things and seeing reality in a very different light.
that said, PSGirl, remember that money is only made if you have an exit point as well as an entry point.
The best baseball teams frequently win by lots and lots of singles and doubles. Except the Phillies.
How about; "Free Fifths to the Lower Third Bank?" Worked in the Soviet Union for decades. Besides it will support ethanol and we get all our toasters from China anyway.
Exactly...the history books will not be kind to Alan Greenspan. Particularly regarding his resistance to reasonable regulation of the derivatives markets.
To a much lesser but still significant extent I think Bernanke is guilty of this too.
BTW the whole problem with expecting Greenspan (or anyone for that matter) to regulate the derivatives is that it would have been contrary to the goal the government was trying to achieve: economic growth.
When the economy and debt has grown to the point where any additional growth is excessive and unjustifiable, it's going to take crazy things like derivatives and sub-prime loans to keep the economy growing.
These toxic assets were an essential part of the growth that we were so desperate to generate.
The government did not act to stop their use because their whole objective was to generate economic growth without regard to cost.
Quite simply, the current financial and economic crisis was the cost of that growth.
The two cannot be magically divorced from each other by regulation.
That's why we're seeing the same sort of crisis in countries with regulatory histories that differ from ours.
lol. Come to think of it, maybe 5/3rd would be a better choice, saves on signage- just cross out "Fifth" and write-in "of the United States" on all the stationary!
I just figured Wells since they'll need mega infrastructure. 3rd B of the US will end upe servicing about 20 million mortgages by the time all is short-refi'd and done.
Punched out and kicked out. Going to be some bitter men sitting by the fireplace mumbling about how they were big time once. All that money and no plan b.
Nov. 5 (Bloomberg) -- Lehman Brothers Holdings Inc. Chief Executive Officer Richard Fuld, who received $34.4 million in pay in 2007, will be ``terminated'' by the bankrupt company without any bonus, said a lawyer for Lehma
His replacement, Jim Poterba, who started in June this year completed his Phd at Oxford (hey so did Setser, didn't he?) Krugman wrote a glowing reception for him on Krugblog back in February when it was announced. He's mr. tax expert, which is appropriate, because we're about to get taxed up the wazoo. Not that there's anything wrong with that.
Re/Obama's transition team. Please no Bailout Bob Rubin from the Clinton years. He's a traitor and graduated from Gollum Sachs as all treasonous scalawags do. Rubin and Greenspan were the major players in the repeal of the Glass-Steagall Act.
Frontline: "Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government?"
re: EEV
It's the after-effects of the big swap lines direct to the Fed.
What happened was exporting companies in South Korea, Brazil, etc all took out 'currency hedges' against a falling USD which they priced their goods in.
The dollar run-up sunk a lot of those 'hedges'. If those foreign banks/companies defaulted then many American banks on the other side would have sudden unexpected huge holes in their balance sheets. Backroom negotiations ensued. Foreign CBs promised to guarantee those hedges, about 1 or 2 days later the Fed swap line was announced. That in turn stops the bankruptcy runs on those currencies, and everything else is history
Perp walk them. Let them do time. When they come out let them be broke and shunned. Well, being broke gets a lot of people shunned anyway.
Fuld owned 3.4 million Lehman shares as of Nov. 30, worth about $42 million at the closing price Sept. 12 -- compared with $211 million value as the year began.
Like others who bought real estate during the boom, Fuld is feeling the slump. In 2004, Fuld and his wife bought a 3.3- acre estate on Florida's Jupiter Island for $13.75 million. They also acquired a $21 million, four-bedroom, four-bathroom Park Avenue apartment in 2007, according to property records.
Hawley Smoot - Paul Volcker CAUSED the 1981 recession - possibly the worst since the Great Depression. You can argue whether he was correct to do so (he was trying to bring down runaway inflation and he did it by raising interest rates to ridiculous levels). What he did then has very little - if any relation - to what is happening now. Roby
It's scary that I'm getting the hang of things and seeing reality in a very different light.
I'm getting the hang of things, too. For a long time, I thought the market would crash and was stubbornly short, whatever happened. There were many rough days, thanks to the PPT and so much easy leverage out there.
The stubborn strategy paid off in the end but now I think the market will be different, very volatile on both sides. So, I'm loading up on the shorts as the market rises and loading up on the commodities as it falls. Kind of doing daily or weekly rebalancing between them.
And in the center of it all, I have a ton of silver that I'm just sitting on.
You can play silver many ways. But if you want to roll the dice with maximum leverage from here, well, i know you're tired of hearing it...but SLW. You could make a lot of money just putting in daily buy limit orders 10-15% out of the money on SLW and then putting in limit orders to sell those shares on a 10-15% dip. It's a wild ride! But I'm confident it will go up over time.
Show Me The Pony writes:
... the Japanese used to have a law which mandated that corporate CEO compensation could be no more than 10 times the salary of the lowest paid worker. (...I wonder if something like this could work in our economy now to restore the middle class.
Numbers I saw on this:
In 1980, the average large-corporation CEO was paid 42 times the average factory worker's wage. By 1998 CEOs earned 419 times the average blue collar wage. (Numbers are from Business Week, for what it's worth).
My big problem is that wages at the bottom declined at the same time. Seems stupid to shape the economy so that it's fueled by consumer spending and then only give spending money to 5% of the population. Seems like that would give rise to increased household debt and a willingness to leap at speculative bubbles...
Robyn,
You can't stop recessions, you can only delay them. Time after time it has been shown to take a dose of medicine early and swiftly will have greater gains in the long run.
So no I wouldn't say Volker caused the recession. Triggered is a more appropriate word, the gun was already loaded
Well, the way the Japanese are doing it isn't really the way. It can't be legislated, it has to evolve.
Rise of a middle class goes generally hand in hand with growing political power and willingness to use it to enforce common will.
Actually, that's why I'm long term optimistic on the Chinese. The economic development and openings to the remainder of the world will, I think, give rise to a legitimate middle class and curb on the government.
Kevin Phillips; author of BAD MONEY: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM, spoke with Bill Moyers (Journal) 9/19/08 about Rubin.
Quote:"Bob Rubin as Secretary of the Treasury I mean, if he was a Hindu and he was being reincarnated, he'd come back as a pail because this guy bailed out everything you can imagine. They had the Mexican loan bailout. They had the long-term capital management bailout, the Russian Southeast Asian currency bailouts."
that said, PSGirl, remember that money is only made if you have an exit point as well as an entry point.
The best baseball teams frequently win by lots and lots of singles and doubles. Except the Phillies.
Paper is irrelevant, so don't hang on forever.
homedad43 | Homepage | 11.05.08 - 4:16 pm | #
Thanks very much homedad. I will keep that in mind--no need to be greedy.
Kevin Phillips on Greenspan: "And the upshot is that during Greenspan's tenure from 1987 to 2006, what they call total credit market debt in the United States quadrupled, quadrupled from about $11 trillion up to $44, $45, $46 trillion. And finance got the great bulk of it. And Greenspan would do nothing to disturb finance."
Phillips on the Fed: So I think what we're looking at here is an attempt really like a drunk will feel better and get over his hangover better sometimes just by having more liquor. And I think what we're seeing with the actions of the Federal Reserve Board is the people who are the arsonists, the people who pumped it all up, who blew up the bubble are now racing to show up in firemen's hats and say, "We're gonna solve it. We're gonna take care of all this. Oh, and by the way, we're gonna keep pumping in the gasoline that we pumped in before that made a good flame." But, you know, nobody knows that."
we have an economy that is based on consumption that is no longer forthcoming.
companies borrowed money and banks lent money assuming a demand for products and services that has significantly diminished.
consumer consumption is driven by valuations of current wealth and expectations of future income.
individuals that are consumers are employed in many industries that fell into these false assumptions and which seem on the verge of or in the middle of cutting back on their payrolls.
individuals have lost significant portions of their current wealth in their houses and in their investments.
not solutions:
1) provide liquidity/assets to banks. banks will not lend money out because they have no way to estimate whether any loan would be repaid
2) provide liquidity/assets to non-financial institutions. again useless because these companies will be hesitant to invest in an economy when there is significant risk to demand for any products they may produce
ways out:
1) Increase government programs to put a floor below consumption - unemployment, food stamps, etc..
2) Increase government employment, preferably on temporary projects.
Are there any ways out of this that do not involve major government action?
Hawley Smoot - Paul Volcker CAUSED the 1981 recession - possibly the worst since the Great Depression. You can argue whether he was correct to do so (he was trying to bring down runaway inflation and he did it by raising interest rates to ridiculous levels). What he did then has very little - if any relation - to what is happening now. Robyn
Well I think there is a belief that what he did prevented a "greater evil".
And that by taking steps that caused double digit unemployment he basically threw himself under the bus to avoid a presumably worse outcome.
If so that makes him sort of a heroic figure.
I guess it all hinges on whether the recession of the early 80s was the "better" outcome.
If so then I think a case can be made that somebody who did the right thing despite the fact that it was painful and unpopular deserves unique status and recognition in this society.
"Exactly...the history books will not be kind to Alan Greenspan. Particularly regarding his resistance to reasonable regulation of the derivatives markets."
Zombie Kung Fu Panda
Another thing Greenspan did was to defend the S&Ls via his consultancy in the 1980s. He argued loud and long that they were doing fine and there was no need for government intervention. Of course, he was paid by the S&Ls. Outcome: $150 billion in taxpayer costs. Chicken feed today.
PeakVT,
Got it on and heard the tax credit/below market rate FHA loans plan they are pushing. There is no way the government could afford the spending necessary to effectively execute that. Mortgage payments are already tax deductible and part of the problem, not the solution.
In their case it really is an alcoholic trying to cure their hangover with more liquor drunk twice as fast
"There are seven sharks in the tank with the economy.
The first is financialization.
The second is that you have this huge buildup of debt, absolutely unprecedented anywhere in the world. The third is you've now got home prices collapsing. The fourth is you've got global commodity inflation building up.The fifth is you've got flawed and deceptive government economics statistics. The sixth is that you've got what they call peak oil where the world is, to some extent, running out of oil. So it's not just commodity inflation, it's a shortage of oil. And then the last thing is the collapsing dollar."
Toll and Hovnanian: our business suck in an identical fashion. Bridges aren't our line of business. Government needs to give often and indiscriminately. But we're not talking our book! We're thinking of America. Really.
Anonymous/MS 4:40pm,
I had made a call for a bear market rally for a few weeks now, with a target entry of Monday's lows.
I'm comfortable standing by that.
I think next year will be terrible due to the disintegration of earnings, but there is freedom to dance around things for now.
If I had to try and explain today, it would be a shifting of money amongst equity markets related to the Fed swap lines. That does not materially affect my bear-market rally call.
I look forward to being held to account by all those who remember, at least until I admit error
......"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence (or charity), the money of their constituents."
Robert Shiller admits he's more willing than others to express pessimism. He's not a head of a bank, nor a government official, and thus he feels free to be publicly pessimistic.
Hovainian & Toll were just on CNBC saying thak God Obama got in. They say we should give 22K tax breaks and 2.99% 30yr fixed mtgs. This should be done before infrastructure.
Obama's going to pull a Reagan and an FDR by blaming the proceeding administration and driving the economy so far into the ground that three years later the inevitable upswing will seem like a "miracle of visionary policy" and guarantee re-election.
This last two weeks was it.....reality is now going to be let back into the market. Can't speak to the Fed swaps but I don't think that was the major reason for today. Simple profit taking IMO. You had a 1500 point move up on low volume....letting some of that air out is most likely what is happening now. Today's volume was a bit below avg.
I gather today would not have been allowed to happen if McCain was the winner. That IMO is the real problem in our market today..it's just too managed.
They push/pull it at their whim....
it may get one more whoosh up but after that I have a hard time thinking it's sustainable in any form after that last gasp.
We'll see in due time. I am firmly in the sidelines camp as of yesterday. Cashed out of the last financial calls bought two weeks ago. Still have some core puts but those have time. I'm tired......but much more well off for it....
I think you can still buy this market until sp 1025. This was a low volume sell off. This changes nothing IMO. We already had capitulation selling in oct
Don't Freak writes:
Obama's going to pull a Reagan and an FDR by blaming the proceeding administration and driving the economy so far into the ground that three years later the inevitable upswing will seem like a "miracle of visionary policy" and guarantee re-election.
Don't Freak | 11.05.08 - 4:56 pm | #
You're guaranteed at least the coupon, plus whatever bonus if inflation is positive.
4.7% - 4.2% over the next couple years. Stays above 3% until 2017. There's almost no premium for that inflation protection right now, and unlike Treasuries if Paulson dumps too much debt too fast and causes bond yields to rise, then the dollar drops and you have that inflation adjustment offset
Probably not as safe as shorting the major indices over the next couple years, but maybe you have some tax treatment strategies or other reasons for not going net short
Yeah, I guess it really is too much to expect holders of bad debt to own up to and accept their losses, and to let the more prudent individuals and businesses pick up the wasted capital and put it to more profitable uses.
Time for more heterodox monetary manipulation. Thats the prescription!
Topher writes:
Hovainian & Toll were just on CNBC saying thak God Obama got in. They say we should give 22K tax breaks and 2.99% 30yr fixed mtgs. This should be done before infrastructure.
I've worked on Toll bros. homes, lipstick on pigs, nothing else. Jam packed full of illegals doing half-assed work for have the pay. Death to all these homebuilders.
Or get full text there on the website for the book.
100 years ago.
Ding.
... his plan to make railroad bonds a security for currency issue ... .
I covered in my argument the railroad bonds provision and discussed it thoroughly. I presented facts to show that 75 per cent, of the railroad bonds With its highly organized banking system the entire holdings would be at the command of the big group banks. In the course of my argument I was also able to demonstrate that the legislation would operate to place the money trust in a position to control for their own advantage any issue of emergency currency. When government bonds were made the basis for national bank issues, it was avowedly for the purpose of enhancing their market value. It had that effect. ...
Obama's going to pull a Reagan and an FDR by blaming the proceeding administration and driving the economy so far into the ground that three years later the inevitable upswing will seem like a "miracle of visionary policy" and guarantee re-election.
O doesn't have to --the economy's managing to auger itself deep underground w/out his help quite nicely, thank you.
FDR - inherited mess from 3 prev. laissez-faire R. administrations 3+ years after the stock market already crashed. Depression: well underway by Inauguration Day (despite all the right-leaning revisionist historians who have convinced themselves otherwise).
Reagan - appointed Volcker to strangle inflation, which he did, and which contributed mightily to the early 80's recession. "Miracle of visionary policy"? Perhaps not, but a necessary and very effective action.
Probably not as safe as shorting the major indices over the next couple years, but maybe you have some tax treatment strategies or other reasons for not going net short
Holy moly, shorting the major indices is anything but safe. If the inflation machine gets revved up to even moderate levels you could be wiped out.
I agree TIPS are about as safe as it gets. Generically speaking, however, asset prices are too high and the Fed has enormous discretion on which classes will take the losses by controlling the degree of inflation we get. Nothing, and I mean nothing, is safe.
EvilHenryPaulson - I can accept your concept of "trigger". And I think what Volcker did was right. Took a while (look at the bond charts) - like years - but eventually inflation came down. Which was one of the major causes of the great bull markets in equities and bonds in the 80's and 90's.
What Volcker did also caused a big housing bust in Florida (my second as a Florida resident - the first was in '73-'74). We bought our first condo in '73 (when we were in our 20's) from a speculator who sold at a loss because she couldn't afford to close - and our second in '85 (when we were in our 30's) from a speculator who took a little less than what he had paid for the unit in '79.
I guess my experience plays a part in my opposition to bailing out the housing market (unless of course a bank and an owner agree between themselves to renegotiate the terms of a mortgage). These are great buying opportunities for younger people - particularly those who have acted prudently when it comes to financial planning. Roby
"WFC said late Wednesday it will offer $10 billion in common shares via a public offering. J.P. Morgan Securities Inc. is acting as global coordinator for the offering, and Goldman Sachs & Co. Morgan Stanley, UBS Investment Bank and Wachovia Securities are joint bookrunning managers. "
Are these banks in the business of joint running or bookmaking now.
I've worked on Toll bros. homes, lipstick on pigs, nothing else. Jam packed full of illegals doing half-assed work for have the pay. Death to all these homebuilders.
Borrow money from China then buy stuff from low-wage, regulation-free factories there.
Provide cheap money to buy homes. Then build them with low-wage, unregulated workers.
Bundle mortgage loans then trade them for fantastic profits using CDOs to mitigate risk. Then hire low-wage, unregulated workers to cut your lawn.
"... As I had predicted, the railroad bonds provision had been restored to the bill, but buried under an obscure phrase. The bill also contained
an infamous provision which permitted
the use of bonds as security for currency at less_than_par_value.
..."
Why is that? Why shuld the major averages go up if the inflation goes up?
Fair Economist writes:
Holy moly, shorting the major indices is anything but safe. If the inflation machine gets revved up to even moderate levels you could be wiped out.
Eric & MS,
We had worldwide Capitulation IMO. Iceland as a country failed. IMF needs a loan. GM is failing. 10 percent unemployment. All that was known and possibly "knowable" was all over the newswires.
Individual banks and REIT and retail stores probably are not done but being more than Halfway through the home declines (60%) I think the Broad market put in a bottom.
That being said average bear markets last 2 years, at least. We'll see in a year.
I've worked on Toll bros. homes, lipstick on pigs, nothing else. Jam packed full of illegals doing half-assed work for have the pay. Death to all these homebuilders.
Joe the carpenter | 11.05.08 - 5:08 pm | #
I have to agree on the quality issues. The home warranties are also worthless and non actionable except through mediation. You couldn't give me a mass produced home from the last 10 years.
Volcker was heroic. We had wage/price spiral in inflation. He did NOT cause the recession. The recession was there and just being covered up by the massive inflation.
I think if Volcker were in today he would start with insisting on total transparency. No more off-balance sheet crap like SIVs. The CDS would have a clearinghouse (already happening) and he would then enforce that since they operate like insurance that they are regulated like insurance. I think he would move systemically important companis to federal jurisdiction - AIG would no onge be regulated by the Fed. I think he would make Fed business rules for multi-state and/or multinational companies. No more Delaware HQ.
Finally I think Volcker would spell out the rules to be aided by the Fed and then he would allow a good portion of the rest to go bust, or not, on their own.
Me, I have complete confidence that O- will better FDR, and botch things on both the way down and way up.
Actually, the way up will be in the subsequent Libertarian/Fascist administration, as we are in year one of the five year unwind.
No way does O- get reelected with all the 'economic blood' that he will have on his hands. He has the good luck of being President during the decline, just like Hoover.
The reason we can't end the inflation/deflation debate is because either is possible depending on what the fed and gov't decide to do.
To me, it is clear they have no idea what they are doing.
The best outcome imo would be to let the the system deflate. Unpayable debts are a burden on the productive economy. More bad debt will only make the situation worse. At least this approach would preserve a free market and leave a pool of real savings behind.
The move to file for Chapter 11 bankruptcy protection Tuesday came as Agriprocessors faced a hearing today in federal court, where St. Louis-based First Bank was seeking to foreclose on the Postville plant and appoint a third party to oversee Agriprocessors' assets. The company owes First Bank at least $33 million.
Let's just get it over with. Drive the DOW down to 5K, mass foreclose and have 20% homeless, fire lay off millions to get Unemployment up to 15%, riots in the streetss, firebomb some Govt. and Wall St. bldngs and nuke somebody. F#ck it, let's do it tomorrow so we can move o
The Great Depression bottomed almost exactly when FDR took over. There's no significant debate on that, although there is debate on coincidence vs. causations.
Reagan didn't appoint Volcker, Carter did. I think Reagan is a good analogy for Obama - he inherited a pretty messed up economic situation he wasn't responsible for but most of the really bad stuff happened on his watch. Nonetheless, people mostly understood Reagan was fixing pre-existing problems and not responsible for the recessions, so he stayed fairly popular. (Reagan's deficits caused other problems later, but not his recessions.)
Obama IMO will be similar to Reagan in the popular treatment he gets. If he pursues relatively popular policies, blames past administrations, and can portray himself as trying to improve things he'll stay pretty popular.
U.S. consumer bankruptcy filings increased 40 percent nationwide in October from the same period a year ago, according to the American Bankruptcy Institute, relying on data from the National Bankruptcy Research Center.
The overall October consumer filing total of 106,266 also represented a 20 percent increase from September.
New Delhi (PTI): Vijay Mallya-led Kingfisher Airlines on wednesday said that it has got "protection" against repossession of aircraft by GE, the company that has leased four airplanes to the private carrier
the Bangalore-based airline has defaulted on lease payments for four Airbus-320s to GE Commercial Aviation Services
There's no confidence because people know there's too much debt and it won't be paid back.
Ding, Ding, Ding! We have a winner!
This is spot on, but I would add that banks aren't lending because they have to cover their bad debt.
This is why nothing is moving. This just goes to show you what happens when you have an economy made up of 70% consumption, which is driven by mega-trillion dollar debt combined with a 10% manufacturing base and then for fun a 50 Tillion dollar entitlement coming down the track.
What did anyone in their right mind think was going to happen?
That the Money Store with Jim Palmer and Phil Rizzuto was going to just forgive $100 Trillion dollahs and over $1 quadrillion in derivatives?
Lordy!
How did we get collectively this stupid in 25 years.
I am so sick of the whole thing.
Good riddance. Let it all go to rot.
Soup for everyone!
Maybe, just maybe we get our priorities straight with a second chance after GD 2.0!
Thoughts on I-Bonds? I've got a bunch from about 4 years ago at 1% fixed plus inflation. Currently getting 5.9% for the next 6mos, which is not too shabby for my safe money IMO.
i was predicting -400 on the Dow, missed by a little. i love all the explanations, but how about this one: cap gains tax rates are going up, so all else equal, why wouldn't equities be worth less?
add on that a healthy does of income redistribution, reducing incentives to work, and the -486 today is just a start.
Yes - I am Robyn in Florida with munis . And what happened was I spent a couple of weeks getting ready to go to Paris. Was in Paris late September - early October. And - no offense to you guys - there was a lot I wanted to do in Paris other than read this blog . Had a great time - except for watching all the Americans running around with their Blackberrys checking their stock prices every 2 minutes.
We got home late on 10/9 - and then all hell broke loose in the markets on the 10th. So apart from doing all the catch-up which is necessary after a trip - I had a lot of market work to do during the next 2-3 weeks. Like sifting through the wreckage of the muni market (they were throwing them out the windows for a couple of weeks).
I was very busy - and very tired. And I don't much like to talk when I'm doing intense market work. There are a lot of decisions to make. And I don't like to get input from anyone else (except my husband and one very trusted friend who is a professional portfolio manager).
Or to give input to anyone else for that matter. Times of market and financial crises are bad times to develop new financial strategies - or try new investments. So I would have been hard-pressed to tell someone how to buy his or her first municipal bond in October - or which bond to buy.
Note that the muni market has settled down a bit in the last week or so. Yields aren't screaming bargains - but they are still quite good. And I'm not sure the market will improve much in the short term (there are too many sellers like AIG who are periodically dumping huge blocks of bonds on the market). But that is good for patient buyers who are looking for yield - and willing to overlook the day-to-day volatility. And what volatility! At some point in October - I owned high quality 5% GO bonds that had been trading at par or above a month earlier which were trading at 80.
BTW - I know a lot less about equities than bonds - and have very little money in equities even when I am fully invested in equities. I bought a little SPY at the open on 10/10 (jet lag buy!). But - as someone mentioned above - you need an exit strategy too (your exits are probably more important than your entries). My equities work is all technical intermediate term trend following trading. Since the SPY I bought on 10/10 wasn't on a "buy" (and still isn't) - I don't have a clue when to sell.
Also note that a good "short" system isn't the inverse of a good "long" system. It has become much easier to "short" these days through things like ETFs - even leveraged ETFs - but that doesn't make trading "short" any easier. Also - based on my experience with some currency ETFs (we hedged the cost of our trip to Paris through ETFs) - unless the ETF is traded VERY actively (like the SPY) - when the markets go nuts - the ETFs can trade more like closed end than open end funds (i.e., they can trade at large premiums or discounts to NAV). Also - many have limited liquidity (large buy/sell spreads).
In other words - unless you're just playing around with some money that is meaningless to you - these are IMO dangerous markets for beginners. On my part - all of my money is meaningful. I'd rather spend $500 on a new purse than lose $500 screwing around with trades or investments I don't understand.
Anyway - hope all has been well with all of you while I've been "gone". Roby
I rather like Shillers remarks about unpredictability. To me, he's not saying human behavior is unpredictable. He's saying when there are big shock waves or shocks, the speed and momentum coming out are unknown vectors. You don't know the direction and you don't quite know how much energy has been released or remains within the system until it is revealed. It is like two colliding stars; how do you predict which direction the plasma is going to spurt or how far it's going to extend in space? Well, actually, I can imagine that there are some physicists who specialize in explosives that might have an approach to modeling shocks.
>
Let's just get it over with. Drive the DOW down to 5K, mass foreclose and have 20% homeless, fire lay off millions to get Unemployment up to 15%, riots in the streetss, firebomb some Govt. and Wall St. bldngs and nuke somebody. F#ck it, let's do it tomorrow so we can move on
>
Keeping a cool head through the crises is vital. The "let's get it over with ASAP" attitude can only land you in trouble. Be patient. Breathe. It's all just a big game/illusion.
Anonymous - I know it's probably pointless to ask, but do you sometimes post as small 'a' anonymous? The reason I ask, is that's who I'm used to getting clarity from, and I'm getting confused.
BTW I think one of the real crimes committed by the Federal Reserve in recent years was to suggest that they were experts at this type of economic surgery so there was no need for the nation to be economically and financially cautious.
ac | 11.05.08 - 3:54 pm | #
Very well stated, ac. Yes, and Wall Street always celebrated after every rate cut or hint of a rate cut, or everytime Greenspan farted. I guess the reality is that there is no Bernanke put afterall.
ew thread ! hooray!
time to plant some potatoes.
wow. I guess the market doesn't like having a redistributer in office.
I respect Shiller. I think his dilligent work on a housing futures index is amazing.
It always disturbs me to hear just howmuch phychology goes into this. As a mathematician, economic is fund from the standpoint of coupled systems of differential equations.
To hunker down from my hunkered down position.
Gary - I'm a man of my word. My wager paid.
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I want to see mass frog marches and public executions. Start with Paulsen, Fuld, I don't care.
"no one really knows what to do"
Well, I hear it's a great time to invest in real estate.
There is nothing "heterodox" about debasing the currency.
It has happened before, it will happen again.
Markets are down 4.5%!
Classic "long" squeeze!
My prediction was a close of -471 today. Sometimes I scare myself.
It always disturbs me to hear just howmuch phychology goes into this.
This too can be modelled given economic contraints to individuals.
see: debt load
FWIW Shiller has been warning about these problems since the mid 1990s.
That's how much advance warning we got (and ignored).
Such is the magnitude of our negligence.
Nice to see an economist admitting there's a lot of art to the "science".
the market is taking my ponies and slaughtering them. blood all over the place. here and there are the severed heads of my dead ponies with their empty eyes staring out into the heavens pleadingly.
Ponyless in NJ writes:
time to plant some potatoes.
Ponyless in NJ | 11.05.08 - 3:40 pm | #
Only if you are in the Southern Hemisphere - if not then you better already HAVE the potatoes.
I'm sticking with my up 100 on the SPX call.
OT: Ponyless, 2008 is the United Nations year of the Potato...
Potato2008
On-topic: That set makes the poor anchor appear to be trapped inside an overpriced vodka bottle.
That's how much advance warning we got (and ignored).
Now it is too late. The boomers are screwed.
wow. djia looks "normal" today. No violent irrational moves. Is this what it looks like sans PPT?
"and then we try some other heterodox monetary policies"
Well, we need to consider also that these are the types of policies that are most likely to fail catastrophically.
That doesn't mean one of them won't work, only that you're really starting to roll the dice and play Russian Roulette with the future.
s_puttnick, lol... Maybe somebody knew something before we did.
Ahh that dismal science, economics.
Watching them weave their charts and formulas is like watching Madame ShuGessKa peer into her deck of cards at her corner Palm Reading shop.
Wholesale change coming, sacks full of change.
Little short covering rally but we're looking for a lower market open.
dryfly, crap. what can i plant in the winter?
Elitist. Apparently Mr. Shiller doesn't fill up his own Elitistmobile. Gas is cheap. The good times are back.
You can sprout in your kitchen!
Yum, dude.
FCC approved Verizon/Alltel and Sprin/Clearwire
sell! sell mortimer! sell! turn those machines back on!
Is dubya finally calling the PPT back to DC from NY, conceding defeat ?
Oh man. Poor Obama walking into this cluster#*#k... Oh wait. He will be fine. I am the one that is....
Shiller is heterodoxical? Does that mean he can no longer marry in California?
Wall Street and the rich are voting again today, looks like the reds have it. Cha-Cing!
And the Dow's off with a slight rally on the open.
It just occured to me, yes, I am slow, that Obama in his speech where he mentioned the worse "financial crisis in a hundred years." That perhaps in his briefings he is seeing data that was not generally made public.
As a Senator he would have gotten the briefing paper for the TARP run through. My guess, if that is true, then we will hear more stories of how bad it really, really is, over the next few months. Prep for nascent programs.
Ah, here comes the PPT.
Ahh that dismal science, economics.
Avl Dao | 11.05.08 - 3:47 pm | #
Unfortunately it might look that way, since all these variables have not yet been factored into models:
... I could go on...
Remember folks, the economy is not reducible to a mathematical model or models. You can't model human action.
We be jammi
Byzantine - Which market are you talking about?? The one just opening
So geeked up: a pony reference in the news (on Yahoo):
"If Republicans are searching Reagan-style for the pony in the pile of manure......."
GOP train wreck could have been worse - Yahoo! News
Someone's been reading CR.
Nice to see an economist admitting there's a lot of art to the "science".
To belabor the analogy:
Economics as a practice is similar to where surgery was a few hundred years ago.
At the time surgeons were rightfully called butchers. That said what they were doing was the beginning of a legitimate scientific practice that ultimately has lead to great benefits.
The critical difference is that these incipient healers were operating on individuals to hone their craft. There was no cultural catastrophe if they killed a few.
Today it's as if economists are in the same situation but they're learning to perform surgery by operating on everyone in the world at the same time.
The cost of failure to perform this economic surgery correctly is cultural disaster.
That argues for not putting yourself in the situation of having to do that.
Of course it may be to late to make that argument.
Markets open in 4 minutes. Get ready.
Interesting thing colors. Yesterday was "black." Today is "red." Buy the appearances, sell the reality?
ok ill tell you what we can do,give this mess to cbs"numb3rs". they will figure it all out in 40 some mins. and we will saved.
Comrade Clueless Dufus writes:
Byzantine - Which market are you talking about?? The one just opening
The last 15 minutes of the Dow. I should pipe down, there's actual substantive discussion today.
The cost of failure to perform this economic surgery correctly is cultural disaster.
BTW I think one of the real crimes committed by the Federal Reserve in recent years was to suggest that they were experts at this type of economic surgery so there was no need for the nation to be economically and financially cautious.
Clearly they are no such things or we simply wouldn't be in the situation we're currently in.
I wish they'd stop calling it a subprime housing crisis.
Not that Paulson's original plan of buying up bad assets would have prevented banks from using the proceeds to give themselves bonuses; it just would have taken longer.
Re: Andrew Lo and predictions.
As an undergraduate Economics major in 1981, I came to the independent conclusion (by no means the first) that math and statistics are pretty useless in predicting future human economic behavior, although logic is always useful and it was too late to change my major.
I see no reason why a wiseguy like John Stewart or a poet like Maya Angelou wouldn't make every bit as good a Secretary of the Treasury as Henry Paulson.
ding ding ding ding
opening bell brought to you by Painc and Fear
Rupert, you can model human action relatively well most of the time. its those inflection points that are tricky.
The Center for Automotive Research, a Michigan think tank, issued a study Wednesday that showed 2.5 million jobs could be lost in the next year if GM, Ford Motor (F, Fortune 500) and Chrysler were forced by the downturn to shutdown half of their U.S. plants.
Obama will find it hard to create jobs - Nov. 5, 2008
I know the number is padded and an estimate but even at half that size it would be damaging.
Funny if the Big 3 pull a banker move and get the money and then shut down half their plants anyway. No one buying, no one lending. Inevitable with or without government funds.
A housing crisis is not enough housing, too much homelessness. Not our problem yet.
There are still 9 minutes left. NY markets can still end up. See everyone, I am more hopeful today that Obama is now the prez. elect.
CR's clock is off..
Seems the inflexibility of the Fed rate already at 1% is starting to sink in.
The big 2.5 automakers will not be reconizable in 3 years. Either will a lot of retail.
Private nonfarm employment fell by a larger-than-expected 157,000 in October, according to ADP
Now they start telling the truth.
I wish they'd stop calling it a subprime housing crisis.
Shiller was issuing his original warnings before there was a housing crisis - it was a developing bubble primarily in stocks.
We're dealing with a more general and far reaching phenomenon.
VIX (new) November 5, 2008
Value
54.11
Change
6.380
% Change
13.367
High
55.12
Low
46.87
Open
47.73
It's covariance is damn near -1 on the S&P500, so in short everybody's getting pulled along for the ride today. Maybe Kudlow is selling all the many shares he built up through his cunning wisdom because McCain was defeated in an upset last night. It's as good a story as any for now
Message from the President-Elect to Mr. Market
Despite today's wide price destruction, that USD/YEN open gap @ 97.50 isn't even filled. More destruction should follow.
We're dealing with a more general and far reaching phenomenon.
ac | 11.05.08 - 4:00 pm | #
Universal insolvency?
oh cripes! time to vacuum the house, agai
[heavy sigh]
What difference does it make that we have magneto problems when the whole jalopy is falling apart.
We're dealing with a more general and far reaching phenomenon.
ac | 11.05.08 - 4:00 pm |
A mania? As in tulips and such? Irrational?
Now it is too late. The boomers are screwed.
Angry Saver
Its just back work owed to the public for the sixties and seventies....
There's 2 minutes left. We can make it back to green.
12th pct - what are you talking about? Elitist?
Did I somehow miss the part where Bobby went carping about the rising cost of arugula?
"Nobody knows what to do to get banks lending again".
Wrong, Bobby. We just need to stop pussy-footing around with nationalizing our banking system. If we're going to do that, let's at least do it right:
A mania? As in tulips and such? Irrational?
Forced mispricing of risk.
And this DOWager notes the passing of -500.
So for those who watched the video...
Am I the only one who enjoyed the few jabs at Bernanke?
that was a short honeymoo
Zoom
Universal insolvency. Good enough for me
bagholder/citizen energyecon,
Nice call on that NAZ island reversal. (If he shows up later please relay this message, thx)
This market move will make Kudlow happy.
Indeed he was - and creating all kinds of indices and financial instruments to hedge/speculate on the real estate bubble
We're dealing with a more general and far reaching phenomenon.
ac | 11.05.08 - 4:00 pm |
A mania? As in tulips and such? Irrational?
Sure.
Remember the original "Irrational Exuberance" warning from Greenspan came in 1996.
We knew then.
3. $590Bln to go. Lend away!
Shnaps | Homepage | 11.05.08 - 4:02 pm | #
American borrower:
"But...but... I don't NEED anymore debt, I'm already fully loaded."
Holy crap, up 20% on EEV--just bought yesterday. Why didn't I buy more?
Where is safe as Apartments????
ac,
Market going up on bad news didn't last long =)
Screams from Bernanke and Paulson from the corner; to no avail.
Frazier lies, a bloody pulp, on the floor.
President Obama - some time soon after his inauguration - ought to set out for the country, with all possible candor, the nature of the financial and economic situation, including a simplified spread-sheet budget, borrowing requirements, employment and business trends, and the amount and tempo of interest payments on the debt. We need an economic situation report, in which he takes the nation into his confidence.
ova with call of day.
hope you banked on it!
I still believe that the print will register plus 100 on the SPX after all late trades have been cleared.
I'm sticking with my call.
He's an honest man. We need more of those.
Liz and Nova:
Heard the same comment from O last night re worst in 100 years.
Not certain that it's too much to take as gospel.
Yes, it's bad and we know it. But the history is the Democrats have a history of poormouthing everything, like calling the early 90s recession the worst since the GD. I came of age in the 70s thank you and that sucked enough.
Also, effort to tamp down expectations as he's the anointed one. You probably saw the video of the woman who was certain that there are no more worries about buying gas and paying the mortgage. That was a phenomenally stupid, yet instructive, remark.
All in all, kind of a nothingburger.
Maybe.
EEV is making me happy today.
o.k. props for nova whose call I piggy-backed on. nice -500
/one hand clapping
/other hand bourbon
/gulp
EHP,
I noticed the jabs at Bernanke, but part of Bernanke's job is to project confidence and poise. I read he even hired a speech coach, don't know if that's true or not. Always felt he knew what was coming and tried to hide it in Fed speak. Just my humble opinion.
Next stop Asia....
We need an economic situation report, in which he takes the nation into his confidence.
Pavel Chichikov | 11.05.08 - 4:07 pm |
And published on the web where the gov updates it.
Wow that Shiller guy is kinda cute, depressing, but cute(I'm a woman).
Anyway, to be slightly more on topic, I was thinking about back in the day when I was getting for my econ degree, there was a lot of emphasis placed on studying the evolution of the Japanese economic system. As I recall, in order to create a middle class, the Japanese used to have a law which mandated that corporate CEO compensation could be no more than 10 times the salary of the lowest paid worker. (Later this was watered down to allow CEO perks to be above the limit, and I am not sure if anything remotely like this law still exists within their system.) I wonder if something like this could work in our economy now to restore the middle class. Any thoughts on this would be appreciated, just please don't throw rotten tomatoes at me for bringing it up.
A mania? As in tulips and such? Irrational?
Forced mispricing of risk.
I would agree.
This forced mis-pricing of risk turned natural excesses in the market into super-excesses.
When the excesses began to subside they were forcibly re-introduced into the market by an external agent.
We've seen this same pattern before in history.
Nothing new or unprecedented here.
12th pct - what are you talking about? Elitist?
I was just playing along and following the rules. In this great country if you are a fan of math and science and can think, you are deemed elitist.
I'm in the Shiller Camp.
Pavel I agree totally. Sort of a new new deal fireside chat. Except this is Powerpoint slides with easy to read charts for J6P.
/one hand clapping
/other hand bourbon
/gulp
blackhat
bh i hope your on the right side of the country.... if not, you hiring? LOL!
ac,
"I think one of the real crimes committed by the Federal Reserve in recent years was to suggest that they were experts at this type of economic surgery so there was no need for the nation to be economically and financially cautious."
Exactly...the history books will not be kind to Alan Greenspan. Particularly regarding his resistance to reasonable regulation of the derivatives markets.
WHY@ ZIRP,
My initial opinion was that Bernanke knew what was coming as well. However it seems by private accounts, he was a pompous windbag away from the camera which would not be explained by a need to project confidence/stability
Ok, we're back on the credit crisis rail track. Next stop G20 Economic Meltdown meeting. Toot, f'n toot.
Strings being pulled on Canadian Finance Minister to blab at China about their currency. Putin will lean on USA. French guy will look for Napoleonic control.
theme song..."Play Happy Maniacs"
Bush appears cackling madly flanked by the dancing Paulson Bernankes.
We need an economic situation report, in which he takes the nation into his confidence.
How about:
"We're all going to die but it's going to be a lot of fun."
That would be both honest and reassuring at the same time.
And we need honest women like Meredith Whitney. She was good today on CNBC, acting like a doctor bearing very bad news.
ova writes:
It just occured to me, yes, I am slow, that Obama in his speech where he mentioned the worse "financial crisis in a hundred years." That perhaps in his briefings he is seeing data that was not generally made public.
You can safely bet whatever money you have left that Obama was briefed and 'up to speed' on the entire situation. He has had no less than three former Treas Secs and one former Fed head doing it for him.
And he didn't say 'worse', he said 'worst'. Bit of a difference there, but then most of the posters here are limited in that they are products of the public school system.
Is it really that difficult to forecast?
I read that macroeconomic data and crunched the numbers, and:
Unlike O-, I am not The Messiah.
This is not rocket science, seeing the long-term direction of our economy. Just look at household debt to GDP over '22-'29-'39, and '81-present.
The long-term direction of GDP (down) and debt (down) is very, very clear.
Start with the dept/gdp chart since 1900. Makes the hairs on the back of your neck standup.
BelieverJeff writes:
Pavel I agree totally. Sort of a new new deal fireside chat. Except this is Powerpoint slides with easy to read charts for J6P.
BelieverJeff | 11.05.08 - 4:09 pm | #
ades,
EST has been good to me.
/gulp
Need some new contracts and then yes, I'll be hiring.
How about, Second Fifth Third Bank of the United States.
Keep em guessing.
that was a very weak effort by our PPT today. I mean, what do we pay those clowns for if this is all they can manage. I hope Obamas PPT does better.
We need an economic situation report...we used to have that. It was called "Economic Indicators". For some stupid reason the Bush administration killed it.
punditry | 11.05.08 - 4:07 pm
Thanks, I seem to be good at that. No, I am a long term investor of little wealth. My brain is already boggled with other data to try financial forecasting. To do it right you need the mental database of a large scale farmer.
And he didn't say 'worse', he said 'worst'. Bit of a difference there, but then most of the posters here are limited in that they are products of the public school system.
One of those advisers is Volcker.
I trust Volcker, most of the time.
/gulp
Transition team up and running: Daily Kos: Obama campaign names transition team
I trust Volcker to bring the economy to a standstill. oh. too late.
wurst?
blackhat: yes the former Fed head, like I said
Ponyless in NJ writes:
I trust Volcker to bring the economy to a standstill. oh. too late.
I don't know where to begin...wait.
/gulp
Obama's PPT will include Grandpa Volcker. He knew what he was doing during the recession of the early 80s. (Read 'Secrets of the Temple' if you want the full story.)
bratwurst for me, thanks (with brown mustard, grilled on french roll)
Rich:
Thanks for the commentary. And no, I use due diligence since I recollect that we're all fallible.
It's scary that I'm getting the hang of things and seeing reality in a very different light.
that said, PSGirl, remember that money is only made if you have an exit point as well as an entry point.
The best baseball teams frequently win by lots and lots of singles and doubles. Except the Phillies.
Paper is irrelevant, so don't hang on forever.
How about; "Free Fifths to the Lower Third Bank?" Worked in the Soviet Union for decades. Besides it will support ethanol and we get all our toasters from China anyway.
Schiller: "We've learned a lot from the (last Depression).."
....coulda fooled me.......
Wells Fargo doing a $10bn common stock offering
WFC capital raise of 10 billio
Exactly...the history books will not be kind to Alan Greenspan. Particularly regarding his resistance to reasonable regulation of the derivatives markets.
To a much lesser but still significant extent I think Bernanke is guilty of this too.
BTW the whole problem with expecting Greenspan (or anyone for that matter) to regulate the derivatives is that it would have been contrary to the goal the government was trying to achieve: economic growth.
When the economy and debt has grown to the point where any additional growth is excessive and unjustifiable, it's going to take crazy things like derivatives and sub-prime loans to keep the economy growing.
These toxic assets were an essential part of the growth that we were so desperate to generate.
The government did not act to stop their use because their whole objective was to generate economic growth without regard to cost.
Quite simply, the current financial and economic crisis was the cost of that growth.
The two cannot be magically divorced from each other by regulation.
That's why we're seeing the same sort of crisis in countries with regulatory histories that differ from ours.
PeakVT writes:
"Transition team up and running: 404 Not Found 654737"
Team's general counsel is "Cassandra Butts", I kid you not.
Am I the only one who finds this incredibly apt? Imagine all the connotations.
Wells Fargo - 10B stock offering
(let me check for coinage under the chair)
Second Fifth Third Bank of the United States.
lol. Come to think of it, maybe 5/3rd would be a better choice, saves on signage- just cross out "Fifth" and write-in "of the United States" on all the stationary!
I just figured Wells since they'll need mega infrastructure. 3rd B of the US will end upe servicing about 20 million mortgages by the time all is short-refi'd and done.
Cassandra Butts...the wurst is behind them
Damn, my EEV turned from a debacle into a profit in just one day.
Don't you just love EEV?
We don't even need Vegas any more.
Punched out and kicked out. Going to be some bitter men sitting by the fireplace mumbling about how they were big time once. All that money and no plan b.
Nov. 5 (Bloomberg) -- Lehman Brothers Holdings Inc. Chief Executive Officer Richard Fuld, who received $34.4 million in pay in 2007, will be ``terminated'' by the bankrupt company without any bonus, said a lawyer for Lehma
"depends on how the new government, how the new president, what he does"
not when your dog rolls in it.
Ponygirl: I think it's a great idea. We need floors and ceilings desperately.
Interesting back-reading: Martin Feldstein farewell to NBER letter
NBER Reporter Online
His replacement, Jim Poterba, who started in June this year completed his Phd at Oxford (hey so did Setser, didn't he?) Krugman wrote a glowing reception for him on Krugblog back in February when it was announced. He's mr. tax expert, which is appropriate, because we're about to get taxed up the wazoo. Not that there's anything wrong with that.
Re/Obama's transition team. Please no Bailout Bob Rubin from the Clinton years. He's a traitor and graduated from Gollum Sachs as all treasonous scalawags do. Rubin and Greenspan were the major players in the repeal of the Glass-Steagall Act.
Frontline: "Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government?"
re: EEV
It's the after-effects of the big swap lines direct to the Fed.
What happened was exporting companies in South Korea, Brazil, etc all took out 'currency hedges' against a falling USD which they priced their goods in.
The dollar run-up sunk a lot of those 'hedges'. If those foreign banks/companies defaulted then many American banks on the other side would have sudden unexpected huge holes in their balance sheets. Backroom negotiations ensued. Foreign CBs promised to guarantee those hedges, about 1 or 2 days later the Fed swap line was announced. That in turn stops the bankruptcy runs on those currencies, and everything else is history
Perp walk them. Let them do time. When they come out let them be broke and shunned. Well, being broke gets a lot of people shunned anyway.
Fuld owned 3.4 million Lehman shares as of Nov. 30, worth about $42 million at the closing price Sept. 12 -- compared with $211 million value as the year began.
Like others who bought real estate during the boom, Fuld is feeling the slump. In 2004, Fuld and his wife bought a 3.3- acre estate on Florida's Jupiter Island for $13.75 million. They also acquired a $21 million, four-bedroom, four-bathroom Park Avenue apartment in 2007, according to property records.
Hawley Smoot - Paul Volcker CAUSED the 1981 recession - possibly the worst since the Great Depression. You can argue whether he was correct to do so (he was trying to bring down runaway inflation and he did it by raising interest rates to ridiculous levels). What he did then has very little - if any relation - to what is happening now. Roby
I'm getting the hang of things, too. For a long time, I thought the market would crash and was stubbornly short, whatever happened. There were many rough days, thanks to the PPT and so much easy leverage out there.
The stubborn strategy paid off in the end but now I think the market will be different, very volatile on both sides. So, I'm loading up on the shorts as the market rises and loading up on the commodities as it falls. Kind of doing daily or weekly rebalancing between them.
And in the center of it all, I have a ton of silver that I'm just sitting on.
You can play silver many ways. But if you want to roll the dice with maximum leverage from here, well, i know you're tired of hearing it...but SLW. You could make a lot of money just putting in daily buy limit orders 10-15% out of the money on SLW and then putting in limit orders to sell those shares on a 10-15% dip. It's a wild ride! But I'm confident it will go up over time.
Show Me The Pony writes:
... the Japanese used to have a law which mandated that corporate CEO compensation could be no more than 10 times the salary of the lowest paid worker. (...I wonder if something like this could work in our economy now to restore the middle class.
Numbers I saw on this:
In 1980, the average large-corporation CEO was paid 42 times the average factory worker's wage. By 1998 CEOs earned 419 times the average blue collar wage. (Numbers are from Business Week, for what it's worth).
My big problem is that wages at the bottom declined at the same time. Seems stupid to shape the economy so that it's fueled by consumer spending and then only give spending money to 5% of the population. Seems like that would give rise to increased household debt and a willingness to leap at speculative bubbles...
"no one really knows what to do", "we are getting into Ben's nightmare scenario"
Sounds to me like Mr. Shiller is advocating abolishing the Fed and making the market more free. No?
Robyn,
You can't stop recessions, you can only delay them. Time after time it has been shown to take a dose of medicine early and swiftly will have greater gains in the long run.
So no I wouldn't say Volker caused the recession. Triggered is a more appropriate word, the gun was already loaded
CSCO disappoints.
How do you (re)make a middle class?
Well, the way the Japanese are doing it isn't really the way. It can't be legislated, it has to evolve.
Rise of a middle class goes generally hand in hand with growing political power and willingness to use it to enforce common will.
Actually, that's why I'm long term optimistic on the Chinese. The economic development and openings to the remainder of the world will, I think, give rise to a legitimate middle class and curb on the government.
If we and they survive that long.
Just for reference, tulip bulbs never have returned to their 1637 prices.
Kevin Phillips; author of BAD MONEY: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM, spoke with Bill Moyers (Journal) 9/19/08 about Rubin.
Quote:"Bob Rubin as Secretary of the Treasury I mean, if he was a Hindu and he was being reincarnated, he'd come back as a pail because this guy bailed out everything you can imagine. They had the Mexican loan bailout. They had the long-term capital management bailout, the Russian Southeast Asian currency bailouts."
Robyn - where have you been? Nice to see you back.
Now if only Rowdy Roddy Piper would get paroled...
that said, PSGirl, remember that money is only made if you have an exit point as well as an entry point.
The best baseball teams frequently win by lots and lots of singles and doubles. Except the Phillies.
Paper is irrelevant, so don't hang on forever.
homedad43 | Homepage | 11.05.08 - 4:16 pm | #
Thanks very much homedad. I will keep that in mind--no need to be greedy.
Robyn, is that you? As in Fla Robyn who played in the muni sandbox?
Vie geits?
And I got to run kids, so later.
Rich--not sure if you saw it on the previous thread, but thanks re: EEV.
Kevin Phillips on Greenspan: "And the upshot is that during Greenspan's tenure from 1987 to 2006, what they call total credit market debt in the United States quadrupled, quadrupled from about $11 trillion up to $44, $45, $46 trillion. And finance got the great bulk of it. And Greenspan would do nothing to disturb finance."
Phillips on the Fed: So I think what we're looking at here is an attempt really like a drunk will feel better and get over his hangover better sometimes just by having more liquor. And I think what we're seeing with the actions of the Federal Reserve Board is the people who are the arsonists, the people who pumped it all up, who blew up the bubble are now racing to show up in firemen's hats and say, "We're gonna solve it. We're gonna take care of all this. Oh, and by the way, we're gonna keep pumping in the gasoline that we pumped in before that made a good flame." But, you know, nobody knows that."
ok. so lets work through this.
we have an economy that is based on consumption that is no longer forthcoming.
companies borrowed money and banks lent money assuming a demand for products and services that has significantly diminished.
consumer consumption is driven by valuations of current wealth and expectations of future income.
individuals that are consumers are employed in many industries that fell into these false assumptions and which seem on the verge of or in the middle of cutting back on their payrolls.
individuals have lost significant portions of their current wealth in their houses and in their investments.
not solutions:
1) provide liquidity/assets to banks. banks will not lend money out because they have no way to estimate whether any loan would be repaid
2) provide liquidity/assets to non-financial institutions. again useless because these companies will be hesitant to invest in an economy when there is significant risk to demand for any products they may produce
ways out:
1) Increase government programs to put a floor below consumption - unemployment, food stamps, etc..
2) Increase government employment, preferably on temporary projects.
Are there any ways out of this that do not involve major government action?
Hey A-mouse,
Just the broken clock here - a lucky speculative call that - exits looked a bit crowded at the close, no?
If you're looking for a new SecTreas, you should talk to my Mom. When I was a kid, she fed a family of six on five dollars a week.
Any thoughts on what Obama might do with the GSEs?
Toll and Hovnanian on CNBC now.
Let the mocking commence.
Hawley Smoot - Paul Volcker CAUSED the 1981 recession - possibly the worst since the Great Depression. You can argue whether he was correct to do so (he was trying to bring down runaway inflation and he did it by raising interest rates to ridiculous levels). What he did then has very little - if any relation - to what is happening now. Robyn
Well I think there is a belief that what he did prevented a "greater evil".
And that by taking steps that caused double digit unemployment he basically threw himself under the bus to avoid a presumably worse outcome.
If so that makes him sort of a heroic figure.
I guess it all hinges on whether the recession of the early 80s was the "better" outcome.
If so then I think a case can be made that somebody who did the right thing despite the fact that it was painful and unpopular deserves unique status and recognition in this society.
"Exactly...the history books will not be kind to Alan Greenspan. Particularly regarding his resistance to reasonable regulation of the derivatives markets."
Zombie Kung Fu Panda
Another thing Greenspan did was to defend the S&Ls via his consultancy in the 1980s. He argued loud and long that they were doing fine and there was no need for government intervention. Of course, he was paid by the S&Ls. Outcome: $150 billion in taxpayer costs. Chicken feed today.
Just for reference, tulip bulbs never have returned to their 1637 prices.
Kansas farmland is STILL down 90% (in real terms) from its peak in the 1880s.
Only in 2005 did Florida coastal real estate reach the price levels of the 1920s (in real terms).
Even gold is STILL below its 1980 in REAL terms.
Many commodities were at 100-year lows in real terms around 2002 (pre-bubble). Look at a 100-year chart of corn adjusted for inflation.
Ponyless in NJ writes:
Are there any ways out of this that do not involve major government action?
Mass insolvency.
PeakVT,
Got it on and heard the tax credit/below market rate FHA loans plan they are pushing. There is no way the government could afford the spending necessary to effectively execute that. Mortgage payments are already tax deductible and part of the problem, not the solution.
In their case it really is an alcoholic trying to cure their hangover with more liquor drunk twice as fast
I laughed at whoever said this rally has legs yesterday.....I'm not so sure they are laughing today.
WFC printing money just gives me so much confidence....and they were cautious...
Love it.....
Race to the bottom with Japan resumes in 2.5 hours.
Ciao
MS
Just for reference, tulip bulbs never have returned to their 1637 prices.
People who think long-term will ultimately be rewarded.
Hang in there.
Are there any ways out of this that do not involve major government action?
Rapture.
Robyn writes:
...Paul Volcker...was trying to bring down runaway inflation and he did it by raising interest rates to ridiculous levels.
to be more specific : inflation was then 18% !
I just want Fuld's private squash court in Greenwich. Anyone can play when I'm not, even Dick.
"There are seven sharks in the tank with the economy.
The first is financialization.
The second is that you have this huge buildup of debt, absolutely unprecedented anywhere in the world. The third is you've now got home prices collapsing. The fourth is you've got global commodity inflation building up.The fifth is you've got flawed and deceptive government economics statistics. The sixth is that you've got what they call peak oil where the world is, to some extent, running out of oil. So it's not just commodity inflation, it's a shortage of oil. And then the last thing is the collapsing dollar."
is 18% alot ?
[Any thoughts on this would be appreciated, just please don't throw rotten tomatoes at me for bringing it up.
Show Me The Pony ]
Ben & Jerry's had such a model. It would also be useful to have dividends/shareprices factored in some way so the shareholders get paid rewarded.
Toll and Hovnanian: our business suck in an identical fashion. Bridges aren't our line of business. Government needs to give often and indiscriminately. But we're not talking our book! We're thinking of America. Really.
Anonymous/MS 4:40pm,
I had made a call for a bear market rally for a few weeks now, with a target entry of Monday's lows.
I'm comfortable standing by that.
I think next year will be terrible due to the disintegration of earnings, but there is freedom to dance around things for now.
If I had to try and explain today, it would be a shifting of money amongst equity markets related to the Fed swap lines. That does not materially affect my bear-market rally call.
I look forward to being held to account by all those who remember, at least until I admit error
Tulips are nice, on the organ or just about anywhere. Deflation of ordinary consumer prices should be a long term goal.
......"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence (or charity), the money of their constituents."
Robert Shiller admits he's more willing than others to express pessimism. He's not a head of a bank, nor a government official, and thus he feels free to be publicly pessimistic.
Why does Robert Shiller hate America?
Byzantine_Ruins, other than mass insolvency...
Imelda Blahnik writes:
Why does Robert Shiller hate America?
'Cause he's a lib, LOL.
Just a bunch of whiners. Relax and enjoy the collapse.
Cordially,
K.
Hovainian & Toll were just on CNBC saying thak God Obama got in. They say we should give 22K tax breaks and 2.99% 30yr fixed mtgs. This should be done before infrastructure.
These guys are *uckin jokers.
The US is going down the toilet fast!
you don't say - hovnanian was just on TV feel like I need a shower. perhaps we can have him working on the roads when his compny goes under.
I just can't believe where this country is going. It blows my mind!
EHP your analysis is so good it doesn't matter how your short term calls do.
Don't waste too much energy trying to figure the next 2 months. You never know when fundamental numbers will enter mass consciousness.
Tulips on my organ - hey! this is a family blog!
Obama's going to pull a Reagan and an FDR by blaming the proceeding administration and driving the economy so far into the ground that three years later the inevitable upswing will seem like a "miracle of visionary policy" and guarantee re-election.
Evil-
This last two weeks was it.....reality is now going to be let back into the market. Can't speak to the Fed swaps but I don't think that was the major reason for today. Simple profit taking IMO. You had a 1500 point move up on low volume....letting some of that air out is most likely what is happening now. Today's volume was a bit below avg.
I gather today would not have been allowed to happen if McCain was the winner. That IMO is the real problem in our market today..it's just too managed.
They push/pull it at their whim....
it may get one more whoosh up but after that I have a hard time thinking it's sustainable in any form after that last gasp.
We'll see in due time. I am firmly in the sidelines camp as of yesterday. Cashed out of the last financial calls bought two weeks ago. Still have some core puts but those have time. I'm tired......but much more well off for it....
Ciao
MS
I think you can still buy this market until sp 1025. This was a low volume sell off. This changes nothing IMO. We already had capitulation selling in oct
Would you please expound on this theory, please?
Don't Freak writes:
Obama's going to pull a Reagan and an FDR by blaming the proceeding administration and driving the economy so far into the ground that three years later the inevitable upswing will seem like a "miracle of visionary policy" and guarantee re-election.
Don't Freak | 11.05.08 - 4:56 pm | #
"We already had capitulation selling in oct"
No way that was capitulation..not even close. What you saw in Oct. was an attempt to make it seem that way but it was not IMO.
We will be testing those lows soon....but not before one last euphoric attempt to get the last sucker's baited.
Ciao
MS
i am still trying to figure out if this botched bailout is
1) political can kicking
2) unbelievable ineptitude
3) greed and power plan
4) even NWO type theories almost make sense.
in practice its probably an exceptionally skillful and unabashed combination of 1-3
so anyway you cut it..weve been sold out to greed both in how we got here..and how they are trying to 'fix' it. its fixed all right
If someone wants a nice safe parking spot for the near future (eg near retirement, want long USD exposure)
See where TIPS are at.
You're guaranteed at least the coupon, plus whatever bonus if inflation is positive.
4.7% - 4.2% over the next couple years. Stays above 3% until 2017. There's almost no premium for that inflation protection right now, and unlike Treasuries if Paulson dumps too much debt too fast and causes bond yields to rise, then the dollar drops and you have that inflation adjustment offset
Probably not as safe as shorting the major indices over the next couple years, but maybe you have some tax treatment strategies or other reasons for not going net short
"We already had capitulation selling in oct"
When the actual capitulation begins, you'll beg for those halcyon days.
Cisco seeing global slowdown, guides Q2 down 5% to 10%. (Wall Street had them growing by 5%) Ouch.
The US is going down the toilet fast!
Topher | 11.05.08 - 4:49 pm | #
Uhhh...we already are...see you at S&P 610
Do you recall you history? What exactly was the issue 100 years ago?
I think Obama does, precisely.
Federal bailouts of financial instruments that weren't marketable.
"Railroad bonds" at that time.
Look up La Follette "railroad bonds"
Here for example:
La Follette's autobiography: a ... - Google Books
ah. u figure it out. 'znot rocket science.
Rich, re: SLW, I have been looking at this. This might be a dumb question, but why did it go down when silver went up.
Thanks.
Ponyless in NJ writes:
Rupert, you can model human action relatively well most of the time. its those inflection points that are tricky.
In other words, the models work until they don't.
Yeah, I guess it really is too much to expect holders of bad debt to own up to and accept their losses, and to let the more prudent individuals and businesses pick up the wasted capital and put it to more profitable uses.
Time for more heterodox monetary manipulation. Thats the prescription!
GMFF?
General Motors Failure Friday
GM to announce 'important changes' with Q3 results - Forbes.com
No way, Chrysler goes under first...then ResCap...then GMAC...then GM....then Cerberus
Topher writes:
Hovainian & Toll were just on CNBC saying thak God Obama got in. They say we should give 22K tax breaks and 2.99% 30yr fixed mtgs. This should be done before infrastructure.
I've worked on Toll bros. homes, lipstick on pigs, nothing else. Jam packed full of illegals doing half-assed work for have the pay. Death to all these homebuilders.
PS -- you can download that book from the link:
http://books.google.com/books/pdf/La_Follette_s_Autobiography.pdf?id=fPFEAAAAIAAJ&output=pdf&sig=ACfU3U21PGXpeZlXfLqSN2aBC4pZ0mHckw
Or get full text there on the website for the book.
100 years ago.
Ding.
... his plan to make railroad bonds a security for currency issue ... .
I covered in my argument the railroad bonds provision and discussed it thoroughly. I presented facts to show that 75 per cent, of the railroad bonds With its highly organized banking system the entire holdings would be at the command of the big group banks. In the course of my argument I was also able to demonstrate that the legislation would operate to place the money trust in a position to control for their own advantage any issue of emergency currency. When government bonds were made the basis for national bank issues, it was avowedly for the purpose of enhancing their market value. It had that effect. ...
Hey guys, thanks for your responses to my post, and thanks for not making me feel stupid for asking.
how about The Federal Auto Manufacturing Integral National Entity(FAMINE) for GM/Chry/Ford. One stop shopping!
Get your electric vehicles on layaway.
Obama's going to pull a Reagan and an FDR by blaming the proceeding administration and driving the economy so far into the ground that three years later the inevitable upswing will seem like a "miracle of visionary policy" and guarantee re-election.
O doesn't have to --the economy's managing to auger itself deep underground w/out his help quite nicely, thank you.
FDR - inherited mess from 3 prev. laissez-faire R. administrations 3+ years after the stock market already crashed. Depression: well underway by Inauguration Day (despite all the right-leaning revisionist historians who have convinced themselves otherwise).
Reagan - appointed Volcker to strangle inflation, which he did, and which contributed mightily to the early 80's recession. "Miracle of visionary policy"? Perhaps not, but a necessary and very effective action.
There it is again.
"Crisis of confidence".
Schiller has the chicken and egg reversed. There's no confidence because people know there's too much debt and it won't be paid back.
Damn.
How HARD is that to understand?
It's amazing to watch even the Doomster get it wrong over and over again, trapped in a delusional cultural paradigm.
Probably not as safe as shorting the major indices over the next couple years, but maybe you have some tax treatment strategies or other reasons for not going net short
Holy moly, shorting the major indices is anything but safe. If the inflation machine gets revved up to even moderate levels you could be wiped out.
I agree TIPS are about as safe as it gets. Generically speaking, however, asset prices are too high and the Fed has enormous discretion on which classes will take the losses by controlling the degree of inflation we get. Nothing, and I mean nothing, is safe.
We already had capitulation selling in oct
Tim the casual observer.
Heh.... when people are saying "I just don't open the statement", that's denial, and not even close to capitulation.
Tim, Prechter pointed out in his October update that the Oct. '87 and Oct. '29 crashes were on volume of 3-4X the summer averages.
The Oct. '08 drops were with low volumes.
I'm staying in my S&P 500 shorts, because I think the capitulation crash is still ahead (within days/weeks/by year end).
EvilHenryPaulson - I can accept your concept of "trigger". And I think what Volcker did was right. Took a while (look at the bond charts) - like years - but eventually inflation came down. Which was one of the major causes of the great bull markets in equities and bonds in the 80's and 90's.
What Volcker did also caused a big housing bust in Florida (my second as a Florida resident - the first was in '73-'74). We bought our first condo in '73 (when we were in our 20's) from a speculator who sold at a loss because she couldn't afford to close - and our second in '85 (when we were in our 30's) from a speculator who took a little less than what he had paid for the unit in '79.
I guess my experience plays a part in my opposition to bailing out the housing market (unless of course a bank and an owner agree between themselves to renegotiate the terms of a mortgage). These are great buying opportunities for younger people - particularly those who have acted prudently when it comes to financial planning. Roby
"WFC said late Wednesday it will offer $10 billion in common shares via a public offering. J.P. Morgan Securities Inc. is acting as global coordinator for the offering, and Goldman Sachs & Co. Morgan Stanley, UBS Investment Bank and Wachovia Securities are joint bookrunning managers. "
Are these banks in the business of joint running or bookmaking now.
Free Jeff Skilling!
It is immoral to have him locked up when the rest of these Wall street crooks are running free.
Either lock them up or let Jeff out.
I've worked on Toll bros. homes, lipstick on pigs, nothing else. Jam packed full of illegals doing half-assed work for have the pay. Death to all these homebuilders.
Borrow money from China then buy stuff from low-wage, regulation-free factories there.
Provide cheap money to buy homes. Then build them with low-wage, unregulated workers.
Bundle mortgage loans then trade them for fantastic profits using CDOs to mitigate risk. Then hire low-wage, unregulated workers to cut your lawn.
The economic model in a nutshell.
La Follette, March 1908:
"... As I had predicted, the railroad bonds provision had been restored to the bill, but buried under an obscure phrase. The bill also contained
an infamous provision which permitted
the use of bonds as security for currency at less_than_par_value.
..."
(Emphasis in original)
asl hearts lenin
Very good
Why is that? Why shuld the major averages go up if the inflation goes up?
Fair Economist writes:
Holy moly, shorting the major indices is anything but safe. If the inflation machine gets revved up to even moderate levels you could be wiped out.
Eric & MS,
We had worldwide Capitulation IMO. Iceland as a country failed. IMF needs a loan. GM is failing. 10 percent unemployment. All that was known and possibly "knowable" was all over the newswires.
Individual banks and REIT and retail stores probably are not done but being more than Halfway through the home declines (60%) I think the Broad market put in a bottom.
That being said average bear markets last 2 years, at least. We'll see in a year.
I've worked on Toll bros. homes, lipstick on pigs, nothing else. Jam packed full of illegals doing half-assed work for have the pay. Death to all these homebuilders.
Joe the carpenter | 11.05.08 - 5:08 pm | #
I have to agree on the quality issues. The home warranties are also worthless and non actionable except through mediation. You couldn't give me a mass produced home from the last 10 years.
Volcker was heroic. We had wage/price spiral in inflation. He did NOT cause the recession. The recession was there and just being covered up by the massive inflation.
I think if Volcker were in today he would start with insisting on total transparency. No more off-balance sheet crap like SIVs. The CDS would have a clearinghouse (already happening) and he would then enforce that since they operate like insurance that they are regulated like insurance. I think he would move systemically important companis to federal jurisdiction - AIG would no onge be regulated by the Fed. I think he would make Fed business rules for multi-state and/or multinational companies. No more Delaware HQ.
Finally I think Volcker would spell out the rules to be aided by the Fed and then he would allow a good portion of the rest to go bust, or not, on their own.
Any thoughts on what Obama might do with the GSEs?
DAWG
Bust 'em up (by State)
Watch out Lenin. Obama may want to prove to everyone that he isn't red.
(I meant t say AIG would not be regulatedby New York) I mean, AIG could sink Germany, France, and a number of national pension funds.
Btw, new thread up on America's favorite two monolines companies.
Recommend a good source for La Follete's career?
seems to be heroic figure.
Too big to fail is too big to allow....
Trustbusters!
asl learts lenin - Sickening, isn't it?
HARM, read some history: the Great Depression (Aug. '29-Mar. '33) was over when FDR took office.
NBER lasted 6 months and that happened once
He just botched the recovery.
Me, I have complete confidence that O- will better FDR, and botch things on both the way down and way up.
Actually, the way up will be in the subsequent Libertarian/Fascist administration, as we are in year one of the five year unwind.
No way does O- get reelected with all the 'economic blood' that he will have on his hands. He has the good luck of being President during the decline, just like Hoover.
Fair Economist,
The reason we can't end the inflation/deflation debate is because either is possible depending on what the fed and gov't decide to do.
To me, it is clear they have no idea what they are doing.
The best outcome imo would be to let the the system deflate. Unpayable debts are a burden on the productive economy. More bad debt will only make the situation worse. At least this approach would preserve a free market and leave a pool of real savings behind.
The move to file for Chapter 11 bankruptcy protection Tuesday came as Agriprocessors faced a hearing today in federal court, where St. Louis-based First Bank was seeking to foreclose on the Postville plant and appoint a third party to oversee Agriprocessors' assets. The company owes First Bank at least $33 million.
kosher meats the bubble! really!
Let's just get it over with. Drive the DOW down to 5K, mass foreclose and have 20% homeless, fire lay off millions to get Unemployment up to 15%, riots in the streetss, firebomb some Govt. and Wall St. bldngs and nuke somebody. F#ck it, let's do it tomorrow so we can move o
The Great Depression bottomed almost exactly when FDR took over. There's no significant debate on that, although there is debate on coincidence vs. causations.
Reagan didn't appoint Volcker, Carter did. I think Reagan is a good analogy for Obama - he inherited a pretty messed up economic situation he wasn't responsible for but most of the really bad stuff happened on his watch. Nonetheless, people mostly understood Reagan was fixing pre-existing problems and not responsible for the recessions, so he stayed fairly popular. (Reagan's deficits caused other problems later, but not his recessions.)
Obama IMO will be similar to Reagan in the popular treatment he gets. If he pursues relatively popular policies, blames past administrations, and can portray himself as trying to improve things he'll stay pretty popular.
Accent Windows files Chapter 11 bankruptcy
Accent Windows files Chapter 11 bankruptcy - Denver Business Journal:
U.S. consumer bankruptcy filings increased 40 percent nationwide in October from the same period a year ago, according to the American Bankruptcy Institute, relying on data from the National Bankruptcy Research Center.
The overall October consumer filing total of 106,266 also represented a 20 percent increase from September.
Bankruptcy Filings Top 100,000 in October
TIPS are about as safe as it gets
TIPS won't be safe until China determines the offical inflation rate.
Buy beer.
More GE problems:
New Delhi (PTI): Vijay Mallya-led Kingfisher Airlines on wednesday said that it has got "protection" against repossession of aircraft by GE, the company that has leased four airplanes to the private carrier
the Bangalore-based airline has defaulted on lease payments for four Airbus-320s to GE Commercial Aviation Services
There's no confidence because people know there's too much debt and it won't be paid back.
Ding, Ding, Ding! We have a winner!
This is spot on, but I would add that banks aren't lending because they have to cover their bad debt.
This is why nothing is moving. This just goes to show you what happens when you have an economy made up of 70% consumption, which is driven by mega-trillion dollar debt combined with a 10% manufacturing base and then for fun a 50 Tillion dollar entitlement coming down the track.
What did anyone in their right mind think was going to happen?
That the Money Store with Jim Palmer and Phil Rizzuto was going to just forgive $100 Trillion dollahs and over $1 quadrillion in derivatives?
Lordy!
How did we get collectively this stupid in 25 years.
I am so sick of the whole thing.
Good riddance. Let it all go to rot.
Soup for everyone!
Maybe, just maybe we get our priorities straight with a second chance after GD 2.0!
EvilHenryPaulson,
Thoughts on I-Bonds? I've got a bunch from about 4 years ago at 1% fixed plus inflation. Currently getting 5.9% for the next 6mos, which is not too shabby for my safe money IMO.
i was predicting -400 on the Dow, missed by a little. i love all the explanations, but how about this one: cap gains tax rates are going up, so all else equal, why wouldn't equities be worth less?
add on that a healthy does of income redistribution, reducing incentives to work, and the -486 today is just a start.
welcome to 1976 revisited.
re OCDan:
forgott to mention
a 30% casino.. ergh make that 30% financial industry.
welcome to 1976 revisited.
The market was pretty much flat in 1976...
Yes - I am Robyn in Florida with munis
. And what happened was I spent a couple of weeks getting ready to go to Paris. Was in Paris late September - early October. And - no offense to you guys - there was a lot I wanted to do in Paris other than read this blog 
. Had a great time - except for watching all the Americans running around with their Blackberrys checking their stock prices every 2 minutes.
We got home late on 10/9 - and then all hell broke loose in the markets on the 10th. So apart from doing all the catch-up which is necessary after a trip - I had a lot of market work to do during the next 2-3 weeks. Like sifting through the wreckage of the muni market (they were throwing them out the windows for a couple of weeks).
I was very busy - and very tired. And I don't much like to talk when I'm doing intense market work. There are a lot of decisions to make. And I don't like to get input from anyone else (except my husband and one very trusted friend who is a professional portfolio manager).
Or to give input to anyone else for that matter. Times of market and financial crises are bad times to develop new financial strategies - or try new investments. So I would have been hard-pressed to tell someone how to buy his or her first municipal bond in October - or which bond to buy.
Note that the muni market has settled down a bit in the last week or so. Yields aren't screaming bargains - but they are still quite good. And I'm not sure the market will improve much in the short term (there are too many sellers like AIG who are periodically dumping huge blocks of bonds on the market). But that is good for patient buyers who are looking for yield - and willing to overlook the day-to-day volatility. And what volatility! At some point in October - I owned high quality 5% GO bonds that had been trading at par or above a month earlier which were trading at 80.
BTW - I know a lot less about equities than bonds - and have very little money in equities even when I am fully invested in equities. I bought a little SPY at the open on 10/10 (jet lag buy!). But - as someone mentioned above - you need an exit strategy too (your exits are probably more important than your entries). My equities work is all technical intermediate term trend following trading. Since the SPY I bought on 10/10 wasn't on a "buy" (and still isn't) - I don't have a clue when to sell.
Also note that a good "short" system isn't the inverse of a good "long" system. It has become much easier to "short" these days through things like ETFs - even leveraged ETFs - but that doesn't make trading "short" any easier. Also - based on my experience with some currency ETFs (we hedged the cost of our trip to Paris through ETFs) - unless the ETF is traded VERY actively (like the SPY) - when the markets go nuts - the ETFs can trade more like closed end than open end funds (i.e., they can trade at large premiums or discounts to NAV). Also - many have limited liquidity (large buy/sell spreads).
In other words - unless you're just playing around with some money that is meaningless to you - these are IMO dangerous markets for beginners. On my part - all of my money is meaningful. I'd rather spend $500 on a new purse than lose $500 screwing around with trades or investments I don't understand.
Anyway - hope all has been well with all of you while I've been "gone". Roby
schiller is brilliant but a terrible orator. one can tell he is holding back
Finally the voice of reason; right after the elections as expected.
I rather like Shillers remarks about unpredictability. To me, he's not saying human behavior is unpredictable. He's saying when there are big shock waves or shocks, the speed and momentum coming out are unknown vectors. You don't know the direction and you don't quite know how much energy has been released or remains within the system until it is revealed. It is like two colliding stars; how do you predict which direction the plasma is going to spurt or how far it's going to extend in space? Well, actually, I can imagine that there are some physicists who specialize in explosives that might have an approach to modeling shocks.
Keeping a cool head through the crises is vital. The "let's get it over with ASAP" attitude can only land you in trouble. Be patient. Breathe. It's all just a big game/illusion.
Anonymous - I know it's probably pointless to ask, but do you sometimes post as small 'a' anonymous? The reason I ask, is that's who I'm used to getting clarity from, and I'm getting confused.
BTW I think one of the real crimes committed by the Federal Reserve in recent years was to suggest that they were experts at this type of economic surgery so there was no need for the nation to be economically and financially cautious.
ac | 11.05.08 - 3:54 pm | #
Very well stated, ac. Yes, and Wall Street always celebrated after every rate cut or hint of a rate cut, or everytime Greenspan farted. I guess the reality is that there is no Bernanke put afterall.