What if they had a Fed Meeting ...
Submitted by
CalculatedRisk on Sun, 12/14/2008 - 3:44pm (186 comments)
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um. top 10?
Does this mean the Fed is paying 0.14% on money they leant to the banks?
CR: Still believe in a mild recession?
Fed money creation is better than Treasury borrowing.
Non-event here with Fed and they really have nothing in the way of a mechanism to re-gain confidence at this point -- Thus Ben needs the boot ASAP. Confidence will be a matter of sustained trust which is something Ben will be unable to provide.
Maybe the can hire Madoff
As a special advisor
Top 10.
Why don't they give some $$ to some bank, any bank, and say when you show that you've lent that much more out than you did last quarter, we'll give you some more to lend out. And then do it again?
See DH Nov 24th:
On the Fed’s Shift to Quantitative Easing « naked capitalism
A third potential channel of quantitative easing, admittedly harder to pin down than others, might be called the signalling channel. Simply put, quantitative easing may complement the expectations management approach by providing a visible signal to the public about the central banks intended future policies"
Went to the mall yesterday and walked through JC Penny. I swear to god, absolutely EVERY rack had a 40% off tag on it. It was stunning. They have to be hurting. There's no way to maintain margin when selling that way. As the old saying goes- "we lose money on every sale, but we make up for it in volume!!"
--
Under the cover of emergency powers these evildoers can justify anything, but there is no justification for all the interventions that USG and the Fed have engaged in and would continue to.
Who is there to challenge them? The Supereme Court? LOL!
Moral bankruptcy lay at the heart of it all!
Jas
One last thing:
The shoe tossed at Bush was a set-up IMHO, because Bush ducked with perfected timing and then like Lady MacBeth, he started to give a lecture based on the shoe toss, thus he wanted that shoe toss to open up the potential for a dramatic policy remark. I remain skeptical.
There were people in line at JC Penneys to buy stuff today.
Also a short line at the movie/cd store.
A reasonable number of people in mall in Brevard County. A reasonable no of bags carried.
Fewer ugly people. I have noticed that in Xmas season, there are usually more people who don't look like they belong there/are missing teeth etc. Poor people who are doing their one foray of shopping for the year at a mall. Not there.
By the way my standards of attractiveness are fairly low and I like interesting faces.
Back to the shoe thread, which is far more fun. We need fun.
Maybe the shoe thing was a tie-in to enhanced Obama security?
"Now everyone must remove shoes in O's presence"
Back OT:
Yields are still near the lows and Treasury markets remain overextended. This prevents us from stepping in the Treasury market from the long side at current prices. However, on the other hand, the FOMC will next week give some guidance on the introduction of quantitative easing, which is a huge support for Treasuries and until now prevented a serious correction. The WS writes that the Fed is considering selling its own line of debt, which points to more quantitative easing and thus is a positive for Treasuries.
I guess the Secret Service banned hiking boots from the show.
Only allowed slippers.
Security was tight.
Do you think tomorrow we learn that Paulson and Bernanke had invested the TARP and Fed balance sheet with Madoff?
I'd like to offer, once again, a rather unconventional take on Bernanke's "Deflation" speech.
John Mauldin's book Bull's Eye Investing (a recommended book for 3 or 4 excellent chapters every investor should understand) published back in 2004 has a chapter devoted to this very speech, and I was surprised at Mauldin's interpretation.
Read the speech as though you have no bias vis a vis the inflation vs. deflation debate. Bernanke projects confidence at the FED's ability to stop/prevent deflation. He spelled out the exact policies the FED would undertake to fight this threat of deflation; therefore, and here's the real twist, Bernanke doesn't believe deflation is likely. And Mauldin agreed, stating that we shouldn't worry about it arising in the U.S.
But lookey here: we've got deflation, and zero interest rates, and quantitative easing, and fiscal stimuli. . . and house prices are still crashing and equity and commodity prices have stabilized at best. Unemployment is hitting decade highs, claims for unemployment multi-decade highs. Nominal GDP is at its lowest rate in 60 years. CPI will be negative and likely so will the GDP deflator for the first YOY quarter since the late '40s.
So Bernanke was wrong, and he probably doesn't even see his misjudgment with respect to deflation and its ability to take root in our modern economy. And so do all these nonsensical hyperinflationists whose response to the obvious signs of deflation are only to dig further into their war trenches.
Happy Depression
Bernanke now playing Texas hold um?
Learned from Bush
If so the US is FUBAR !
Federal Reserve Wants To Issue Its Own Line Of Debt
Wall Street Weather: Federal Reserve Wants To Issue Its Own Line Of Debt
Its likely that the Fed will have to pay a slightly higher interest rate than the Treasury because it does not have taxing authority. Economists will debate whether the Feds borrowings will be sterilized or actually lead to an increase in the money supply. When the Fed borrows they would be withdrawing money from the banking system at the same time that they would be adding money via purchasing securities or other assets. So the purpose must be to transfer money from risk adverse investors to financial institutions holding high risk assets. For example, the Fed might buy credit card securitizations or MBSs funded by selling debt to investors who would be adverse to such risk.
Ben has provided conclusive proof of another of Einstein's theories.Human Stupidity IS infinite.
They are instutionalized. They get just one trip to the mall each year, about a week and a half before Xmas. They each get like $10 to $20 of cash to buy Xmas presents for their loved ones. But it's not real. The institutions give back the merchandise to the stores a day or two later.
You should be ashamed of yourself for calling these poor people ugly. They are God's children.
"Fewer ugly people. I have noticed that in Xmas season, there are usually more people who don't look like they belong there/are missing teeth etc."
Maybe they weren't smiling :>)
Futures are rallying..... COME ON, SANTA.
Yah better re-read this if yah missed it:
The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.
Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.
Fed Weighs Debt Sales of Its Own - WSJ.com
Louis Crandall, an economist with Wrightson ICAP LLC, a Wall Street money-market broker, says the Fed's interventions also have the potential to clog up the balance sheets of banks, its main intermediaries.
"Finding alternative funding vehicles that bypass the banking system would be a more effective way to support the U.S. credit system," he says.
Some private economists worry that Fed-issued bonds could create new problems. Marvin Goodfriend, an economist at Carnegie Mellon University's Tepper School of Business and a former senior staffer at the Federal Reserve Bank of Richmond, said that issuing debt could put the Fed at odds with the Treasury at a time when it is already issuing mountains of debt itself.
"It creates problems in coordinating the issuance of government debt," Mr. Goodfriend said. "These would be very close cousins to existing Treasury bills. They would be competing in the same market to federal debt."
With Treasury-bill rates now near zero, it seems unlikely that Fed debt would push Treasury rates much higher, but it could some day become an issue.
There are also questions about the Fed's authority.
This is retarded, because Treasury has usurped power from Congress and illegally engaged Treasury as an entity for commerce, and now The Fed illegally wants to issue play money ... this coup is now at the edge of treason!
They may be goddess' children.
But I noticed before, am reporting (without contempt, which may be hard to discern in a blog) that they aren't there now.
This is NOT a good thing.
Means the lowest tier has no money to spend even at Christmas.
I believe the market will rally on the expected Fed interest rate cut.
Why? Because that's what the Fed wants. It's part of the theater.
Try to get into the spirit of the drama. You will be happier.
My dog just came in with a shoe full of cash.
Not sure but it may have been empty when the neighbor threw it at him.
If The Fed falls and no one listens does it still make a sound?
This is retarded, because Treasury has usurped power from Congress and illegally engaged Treasury as an entity for commerce, and now The Fed illegally wants to issue play money ... this coup is now at the edge of treason!
Kona | 12.14.08 - 7:52 pm | #
In other breaking news, water is wet, and fire is hot!
Is there an absolute zero in the velocity of money.
Instead of no smoking day, we have no spending day, and scare the crap out of the PTB. Velocity to zero!!!
You can lead a dead pony to water....but ya' can't make him drink. Who cares what the inept, insane, crooked federal reserve is up to? Just more of the same we need to issue more credit to consumers mumbo jumbo. Print..Print..Print
Fewer ugly people. I have noticed that in Xmas season, there are usually more people who don't look like they belong there/are missing teeth etc. Poor people who are doing their one foray of shopping for the year at a mall.
Merry Christmas! Glad the ugly and the poor didn't invade your upper middle class lilly white world. How old are you, early sixties? Not many people find old women attractive. You ever think about that?
At least we don't have to worry about the feds deciding to inflation adjust the minimum wage to 1973 levels.
LL,
I think they're are lots of people currently engaged in no spending days. Lots and lots...
Now if everyone did it at once... that's a different story
....
are those new cds (on fed) out yet?
How long will it take for current CDS to clear? Five years?
Bernanke has already announced his favoring of a drastic and one time devaluation of the dollar for dealing with a deflationary environment. You can count on anyone who has saved money to pay for this by having their savings looted. You can also count the masses not to understand that their savings have been looted at all because the nominal value of their accounts will remain the same.
Tally Yo I read some where that some went out 30+ years. It is pure gambling.....
....
I have lost weight and men are looking again. I find it annoying. (Except for the hub.) Been there, done that.
Is it a surprise that being poor makes people less attractive? can't afford dentristry etc?
I am upset that they are not invading my lily white world, not that they are. It is a bad sign of the times.
And my world in Miami Dade is not at all lily white. In fact, if you count Cubans as "of color", which they don't and I don't, I am in a strict minority.
And the evidence that Bernake's new "approach' will work is ________.
Time, I think to say the obvious: actions to date have no visible effect and this is strong evidence that the Fed does not know what it is dealing with. Of course we can go deeper and deeper until the evidence is overwhelming - but at what cost?
Please re read Lawyer Liz's comment and stop flaming her.geez,develop some reading skills willya.Her comment was that the bottom tier has been squeezed out,and they have.
Tom now you're going to have to convince me that better looking people do better for themselves or that successful people can make themselves better looking. Or maybe a little of both!
"nades writes:
LL,
I think they're are lots of people currently engaged in no spending days. Lots and lots...
Now if everyone did it at once... that's a different story ;)"
My wife takes part in knitting swaps through Ravelry, a huge fiber arts site, where groups of people each do their own take on a small knitting project and then exchange them by mail. She's reporting that some of her trade partners have been late or dropped out of the exchanges because they can't spare the price of a skein or two of cheap yarn ($2-4 total), much less the postage.
It doesn't have to be no-spend day everyday for everyone. 25 percent of the population will do it. At most.
On what possible news is the Nikkei up 5%??? Anyone got a clue?
anyone watching 60 minutes?
how are they just NOW reporting on this crap? If they read CR 2 years ago they would have had enough information to do it then.
...........Asian markets were over reacted on Friday by GM news....natural rebound.....
I meant, "it would only take 25 percent, at most, of the population to stop spending" on anything but food and utilities, to bring the economy down.
On what possible news is the Nikkei up 5%??? Anyone got a clue?
jeff | 12.14.08 - 8:05 pm | #
Business confidence just hit a 34 year low. They're following the US market model. Rally on horrendous news. Plus Yen has weakened a lot from 90 to 91.
Her comment was that the bottom tier has been squeezed out,and they have.
Tom Stone | 12.14.08 - 8:03 pm | #
The bottom tier is getting larger.
The amount of the swings are just insane...I haven't gotten used to it. (I'm mostly safe, just interested in getting insight. Thanks!)
On what possible news is the Nikkei up 5%?
Most of the competition for Toyota, Honda and Nissan is ready to go bankrupt.
Rally beacuse no nukes were unleashed over the weekend. Other than that, there is no good news.
"Why don't they give some $$ to some bank, any bank, and say when you show that you've lent that much more out..."
Because, Lawyerliz, the government wants its money back - it is a loan. So, who would a bank lend to so that it was confident it was making a safe loan? The Airlines? Automakers? Real Estate Developers? Hotels? Retail? Homebuyers? Manufacturing? Other Banks? Truckers and Shippers?
The problem here is not liquidity or credit lock-up for the reasons that Bernanke thinks. It is a debt-deflation credit collapse. I don't think he acknowledges that such things exist, so is unlikely to try to effectively fight it.
Hoopajoops, LTD writes:
"Bernanke has already announced his favoring of a drastic and one time devaluation of the dollar for dealing with a deflationary environment."
Do you recall where you read this? I'd like to read about it myself.
who really cares anymore?
On what possible news is the Nikkei up 5%??? Anyone got a clue?
jeff | 12.14.08 - 8:05 pm |
Everything that has happened or will happen is priced i
Bernanke's plan sounds like a good one to me.
I think it will work.
I also likes the idea of Federal Reserve issued credit cards, so I'm up for either one.
Except that if the banks start lending out all of this extra cash, I sure hope this time they lend it to people that will pay them back.
Otherwise, we'll have the same problem again in a few years.
Japan Reuters picked my dog story.
Back in August, somebody on this board asked: "When is the stock market going to fall?" I gave my answer in one word: October.
So, when is the market going to fall again big-time? I think this current Fed-manipulated rally has legs. I'm starting to think the momentum will last most of January.
So my answer this time is: February.
Keep your short powder dry.
60 Minutes explaining housing crisis in JSP terms.../09 worse.../10 2xworse.
Interesting quarterback coffee come Monday.
At least roads will be repaired for departure.
Well, if they aren't gonna loan it to anybody, what use are they? And if they don't loan it to anybody, how are they gonna make any money?
Was it Shiller who was just on 60 minutes? The hub just reported to me on a 60 minutes interview, but doesn't know who it was. Who ever it was thought it was all priced in, in the stock mkt. I said, Hah.
Anonymous writes:
On what possible news is the Nikkei up 5%??? Anyone got a clue?
jeff | 12.14.08 - 8:05 pm |
There was a new Japanese stimulus package:
Japan's economic stimulus package tops $500b - ABC News (Australian Broadcasting Corporation)
" nades writes:
Tom now you're going to have to convince me that better looking people do better for themselves or that successful people can make themselves better looking. Or maybe a little of both!
nades | 12.14.08 - 8:05 pm | # "
That's what the anecdotal evidence suggest. Do your own research.
ABC News - Top Stories - Breaking news from Australia and the world stori...ection=business
trader walt | 12.14.08 - 8:19 pm |
Thanks!
trader walt writes:
There was a new Japanese stimulus package:
Is it possible to apply for bailout money in two countries?
When it comes to the Fed, I don't think it matters if it is dead or just mostly dead, regardless of Miracle Ben.
trying to refresh; right clicked hit open and it bounces around like i dont know what.
now on topic: i dont think we are anywhere close to any bottom. we got to much stuff to unwind,untangle
plan for the worse hope for the best
Plz, guy on 60 minutes?
"On what possible news is the Nikkei up 5%???"
Maybe they think it would be a good thing if the US big 3 automakers went under.
trader walt writes:
Hoopajoops, LTD writes:
"Bernanke has already announced his favoring of a drastic and one time devaluation of the dollar for dealing with a deflationary environment."
Do you recall where you read this? I'd like to read about it myself.
Damn, I hate to drop quotes and run, but I can't find where the hell I read this. I think it was part of a discussion about how great the dollar re-peg against gold was, how it solved the deflation problem over night, etc.
So if the dollar is going down in '09 (something I've read from people who have been pretty good so far) what is a currency that will do well?
Euro? - no
Pound - LOL!
RMBY (sp) - dont know...
Anyone have any theories.... TIA!
....
That silly factory sit-in is a perfect example of why Bernanke's plan won't work.
BofA didn't loan that window factory the money because they were a bad risk.
Finally, the banks have stopped lending money to those who won't pay it back, and now we are mad they wouldn't make the loan anyway??
The beginning of the end.
It doesn't have to be no-spend day everyday for everyone. 25 percent of the population will do it. At most.
Bob Dobbs No Bob I was saying that 25% of the population practices this 3 days a week.....
Are you kidding?
This is the best market I've ever seen for fleecing the vast majority of investors.
You're gonna be on this board, soak up all the knowledge, and sit on the sidelines?
Live, learn and fleece!
Overt devaluation of the USD will cause popular discontent, putting it mildly.
Ummm, rich, fleecing people just might make them poor and ugly.
what is a currency that will do well?
JPY
Just another good reason not to short this market anymore. The ultra-shorts will be burned just like the ultra-bulls. Same thing happened in the great depression. Only suckers play this market.
B2 - I'm still shocked how long they've been in trouble. I think they are well overdue.
I once had a random thought. The US would be the same as Japan if we ran a current accounts surplus. Or put another way. They would have been partying the last 15 years had the run a deficit!
They've re built from the ground up... Next up is _____!
.......
Anon, I'm still on the sidelines, but itching to get back in. Have discipline, will stay there for a while.
LL,
Link to 60 minutes online:
A Second Mortgage Disaster On The Horizon? - 60 Minutes - CBS News
I have not watched the program.
Devalue the dollar?
Before you assume that you have to ask: unilaterally? If the US did that, a lot of shoes would be thrown and probably far worse.
If not unilateral, would several countries devalue simultaneously? If so, it would have no relative national effects, but sure as hell would reward the debtors at the expense of the savers, worldwide.
All currencies will sink in value. Real assets will inflate.
This will be quantitative easy on a global basis.
You cant fight city hall. In this case ALL the city halls....
poor and ugly
The peasants are revolting!
Lawyerliz seems to be a good person, but she deserves a little heat, if not a complete flame, for the ugly people comment to describe a social class.
Anyone have any theories.... TIA!
My naive view is that currencies of countries with high savings rate will appreciate against countries with low savings rate. It is tricky to estimate US savings rate in 2009, but I think it will still be less than in Japan or Europe, hence JPY and EUR will appreciate against USD.
Oh, the government is now become landlords.
Fannie Mae Lets Renters Stay Despite Foreclosures
In a move that provides relief to thousands of renters who face eviction but draws the federal government even deeper into the housing market, the loan giant Fannie Mae said Sunday that it would sign new leases with renters living in foreclosed properties owned by the company.
Wintey Tillson on 60 minutes reports on the mortgage crisis that's far from over, with a second wave of expected defaults on the way that could deepen the bottom of the U.S. recession.
The Mortgage Meltdown - 60 Minutes - CBS News
Much worse anticipation....
Speed writes:
Overt devaluation of the USD will cause popular discontent, putting it mildly.
What are you gonna do about it? Protest? Ok, file a permit and we'll put you in a pen 3 blocks away from your target. You gonna protest by not spending? Ok, fine, we'll just attrition away your dollars anyway. Gonna protest by underworking, by taking an easy job, loafing? That's fine; we're sure someone willing to work harder than you will get your apartment once the rent raises, and will send their kids to the college you couldn't afford, hippy. Oh, you gonna write a letter to your representative? That's fine, I've got a little basket for those under my desk. Feel a little bit like rioting? No problem, if you want to break windows, you're probably poor. Poor people ruining the poor businesses around them don't concern us. Oh, you wanna get really clever and try to shoot a rich person you think is to blame? That's fine; all the real actors are so far up in tall buildings and so unknown to the vast majority that they won't get touched. You'll probably kill a politician, you know, one of those guys who doesn't pull any of the real strings. We put them out there and make sure they're well known so you go after them instead. You want to demonstrate your discontent? Go ahead. We've rigged things so that most citizens are in their own little tantrum pens. Good american. Cheer for your stupid hockey team, like it really matters. Do what you're told. Take what you're given. And do it with a smile, like the lunatic you are. Be proud to be an american.
On what possible news is the Nikkei up 5%??? Anyone got a clue?
jeff | 12.14.08 - 8:05 pm | #
They were down on Friday, they closed before we rallied.
Liz -
I think the easy money has already been made on the short side. If you're itching to get back in then long probably will be the next play - although I'm with you - the sidelines is a safer place and I am finding much better value in certain debt securities. Quantitative easing will also help the value of debt securities before it helps the value of equities.
Caveat emptor....and if you're short Caveat shorter....
syvanen writes:
Lawyerliz seems to be a good person, but she deserves a little heat, if not a complete flame, for the ugly people comment to describe a social class.
Being poor, stupid, and ugly are all traits which have a high correlation. It might be an unpleasant conclusion to state, but you're a goddamn moron if you don't see the correlation or deny yourself the good information about your environment that can be gleaned by taking proper account of it.
Thanks Gary, someone named Tilson. Never heard of him.
2.4m condo for sale at 936k, at 80 cents on the dollar--building sold out and only and I do mean only, 25% in foreclosure, so 80 not 90% off, should be about 500k.
and check to see the garbage haulers are paid for.
Some of them aren't quite finished, and never sold more than a few. 90% off or welfare hotels.
Hoop I thought I said that!
--
Just imagine what the former Japanese central bankers talk about these day in private!
Jas
Basel Too writes:
Oh, the government is now become landlords.
Fannie Mae Lets Renters Stay Despite Foreclosures
This is ruining my chances to pick up cheap foreclosed properties!
Why are they doing this...they are just prolonging the inevitable!
Get houses cleared out already, I need to start purchasing.
Hoopajoops, LTD
Geez man, run for Governor, congress, start a PAC, I'll cut you a check tomorrow
Zell I'd still with the print!
OT: What's better, CFA or MBA. For those who say niether, how would you suggest one educate themselves on finance and investing?
Link to the '60 Minutes' story about the asset bubbles:
A Second Mortgage Disaster On The Horizon? - 60 Minutes - CBS News
The story is well-done, considering the constraints. The segment can't be longer than 15 minutes, so the depth of the analysis is lower than the kiddie pool.
To make matters worse, the editors at the show think half of their viewers will flip the channel if the facts become too complex --- or too depressing.
60 Minutes is a highly-rated show, and its just because of coverage like this: an important topic, covered superficially, containing a lot of buzzwords that viewers will remember the next time they hear them.
Best you could hope for in the mainstream media...
Sunday, December 14, 2008
Quotes from the Wise: Week ending Dec 14th
'Many investors may decide to get long socialism.' - Stephanie Pomboy
'What Madoff's investors lacked in numbers they more than made up in wealth, proving that cupidity and stupidity are as rife among the rich as among us peons.' - Alan Abelson
'They watch CNBC all day and surf the web. Investment banking had this boisterous vibe. Now they are completely beaten down.' - Anonymous Citigroup banker
Posted by Anonymous Monetarist
My dog just bit a pretty Fannie Mae renter.
Heat is ok. I can take heat, I've lived in Florida a long time.
I try to be polite, but don't try to be politically correct.
But I find it more insulting to be called stupid than ugly, so if you want to flame, at least don't use a conventional insult.
"What are you gonna do about it? Protest? Ok, file a permit and we'll put you in a pen 3 blocks away from your target. You gonna protest by not spending? Ok, fine, we'll just attrition away your dollars anyway. Gonna protest by underworking, by taking an easy job, loafing? That's fine; we're sure someone willing to work harder than you will get your apartment once the rent raises,"
In protest to the above actions we sold our house, sold out of the market and have started moving our assets out of USD and out of the US period.
At work they're trying to drag me into a project with lots of midnight support calls. Tried to give me the whole "layoffs are coming, it's best for job security to take whats given to you"
I pointed out that even during an economic downturn good software engineers are still in demand. As was the case during the dot-com bust. I also mentioned that we're fine going back to Canada if both of us lose our jobs.
I've been moving my assets out of USD.
Jennifer writes:
"Finally, the banks have stopped lending money to those who won't pay it back, and now we are mad they wouldn't make the loan anyway??"
The fed is the liquor supplier. The banks are the bartender. The party has been going on for 10 years. There are people lying on the bar floor dead. There are a bunch puking their guts out all over the bar floor. There are others so drunk they are hallucinating. There are a few in the back of the bar still lucid and watching in fascinated horror at the carnage. Some have left the bar.
So the liquor supplier brings in cases and cases and cases of more liquor, and it's rotgut at that, and says to the banks. "Give them more liquor! Give them more. Why won't you give them more?"
The dead are dead. The ones that have left the bar won't come back. The ones in the back staring in horror say "no thanks", but this show is sure interesting. The bartender won't give any more to the ones puking their guts out. He will kill them if he does, and he knows it.
So the only ones that are left are the ones hallucinating, and the bartender takes one look at them and says, "I don't think so."
The ones in the back staring in fascinated horror, that's the CR community.
A large contingent of unemployed, educated people is not a good thing for any government.
If unemployment shoots up to where people are projecting it, we'll be looking at either revolt or war. That's why all the attention is given to employment.
Here's a good story, from today's Denver Post, about the step that can happen between losing your home and living on the street.
Families Reach Last Stop Motel
Families reach last-stop motel - The Denver Post
Used to live off Colfax, back when I was a sports kid.
The bottom tier is getting larger.
\t Mel | \t\t\t\t12.14.08 - 8:08 pm | #
A new twist on the term, "the bottom is in."
Great ric.
But it's still true that banks make money by loaning it.
I suggest they start by loaning money to people who are paying 45% off peak in Miami Dade County, and have a good job, and something of a down payment.
And the rental thing is good, it's better than rotted houses. I think 60 minutes said there are about 68,000 distressed houses for sale, and there are some 10s of thousands in foreclosure right now.
Both these things avoid the rotted houses dilemma.
Forgive me from repeating it, but I have nightmares over the idea of that many rotted houses.
The beginning of the end.
\t Jennifer | \t\t\t\t12.14.08 - 8:28 pm | #
Um, sorry, but you're a little late with that observation.
Pissed off in California:
How are you moving your assets out of USD, and where are you moving them? I want to protest by withholding my wealth from these motherfuckers, but I can't figure out how.
Oh great. That abusive douchenozzle Exit is back.
What if they handed out wheel barrows of cash and nobody came?
Mo money - less value.
Sports Guy Lafleur writes:
Here's a good story, from today's Denver Post, about the step that can happen between losing your home and living on the street.
Families Reach Last Stop Motel
Why do these stories always have to start off with a 24 year-old mother of three...one of whom is 7 years old?
Turns me right off on their plight.
Because you are supposed to be politically correct.
Except that if the banks start lending out all of this extra cash, I sure hope this time they lend it to people that will pay them back.
Corbin Fisher | 12.14.08 - 8:15 pm | #
Problem: Those of us who will pay them back are too smart to take on more debt in this environment to start with. It's a catch 22.
but you're a goddamn moron if you don't see the correlation or deny yourself the good information about your environment that can be gleaned by taking proper account of it.
Hoopajoops,
I am quite aware that many social, religious and ethnic groups can be stereotyped but it is generally considered being considerate of other peoples feelings to not attribute those stereotypes to individuals from those groups. This is behavior that is condusive to social peace, sort of like being polite. Perhaps you live by different standards.
Oh great. That abusive douchenozzle Exit is back.
\t Richard Dare | \t\t\t\t12.14.08 - 8:49 pm | #
Hi Dick. Didn't realize I'd offended you before. Was it a video, or a late night question philosophical question?
At the risk of re-igniting the earlier controversy -- I was out at Woodfield Mall (large regional mall NW of Chicago) yesterday. Took me 10 minutes to find a parking place, mall was comfortably full but not jammed, every item I bought was on sale and in some cases discounted from the marked sale price via a cash card bonus or special deal. Did not wait in line at a cashier once. The only long line in the mall was at Starbucks.
If I understand the FEDs motive they are trying to get money moving in the economy by putting it where it will be put into action. If that's right, then why don't they just give the money to the states and cities, much like Nixon did with "Federal Revenue Sharing"?
I will guarantee you that local and state governments will spent it pronto.
Atlanta Metro News | ajc.com
I have learned more studying on this site for 2 years (and others that are similar in the blog ecosystem) about economics and finance than I did getting a MBA and working for 10 years in business.
I think it's a similar phenomenon to those Internet poker stars who play 2 Million hands before they are 20 years old and can oldfox guys in the big games. There's so much information and knowledge at places like this, that you can advance your understanding at a very, very rapid pace.
MBA is a nice rubber stamp that positioned me to get a good job with "Initech" (for now ... knocking on wood, as round II of lay-offs happen within 60 days), but I didn't learn that much. And I have way too much student loan debt.
Tally Yo writes:
OT: What's better, CFA or MBA. For those who say niether, how would you suggest one educate themselves on finance and investing?
Tally Yo | 12.14.08 - 8:41 pm | #
The poor mom is not the problem, Tyler; it's the newspaper's cliched approach, which fits a tired old narrative. If you read the whole story, you may have noticed that it's playing catch-up to a regulatory action to which The Post had been none the wiser.
FWIW from an old newspaper hand...
Joe Stalin writes:
I swear to god, absolutely EVERY rack had a 40% off tag on it. It was stunning. They have to be hurting.
Joe Stalin | 12.14.08 - 7:30 pm
Another anecdotal data point:
I bought 7 pairs of blue jeans in JCP yesterday (12/13) for a total cost of $114 (Tax included). When you are buying inventory for 50-60% off plus a flyer's $20 USD off coupon, it shows how "good" the bargains are and how "bad" the asset misallocations are. (e.g. Did I need to buy 7 new pairs of jeans? Did they need that much inventory that needed that much of a discount to move?) Also as I've been reading in various finance & economic blogs over the past few months, I am unsure if TPTB really grasp a large problem along with some blogs' commentators.
To clarify:
I find myself reading a lot of commentary looking for historical comparisons, technical analysis, and (global?) trends to explain our current relationship with Mr. Market. I've been interested in conversations about fiscal and public policies of the USG, echo domes surrounding Wall Street and D.C., and the sideline's (e.g. blogosphere) commentary on the whole shabang (News, Articles, Analysis, etc). What really makes my head hurt have been the calls for bottom and recovery in the midst of this ordeal. More interesting to me, some people have touched upon the psychology of the current environment, and I think that that academic question is going to be the core of where we are going:
"How are you going to instill confidence and sobriety on the masses?"
As I can see it, one does not necessarily beget the other. People having their own little bubble popped via investments, job security, and personal security ("Sobriety") will not create the confidence needed to work out of this hole. Force (e.g. Guns, Raping of Savers' Funds) might get TPTB some changes on paper, but it will not form the kind of foundation needed to power our society as we know of it today ("Confidence" with some forced "Sobriety"). Now, I can imagine some form of lip service being shown to mimic these traits. However, economic performance will only be a percentage of what it could be, and in the cracks of that inefficiency, we may find the "bottom". Regardless of how much it is mentioned, Zimbabwe still has an economy. People will buy, sell, and trade goods and services for other goods and services including their currency. Is it ideal? No. Is it doing well? No. Is it still puttering? Yes.
Finally, I see the combination of the people's Sobriety and Confidence playing out along the lines of London Banker's deflation post: "I wont invest in a country that bails out failure and punishes savers." Along these lines, whatever comes out of the Fed's Meetings, D.C.'s bills, or Mr. Market's (non-)returns, I would imagine that many sober & confident people will just ignore what they can of those High Edicts if it punishes the prudent and rewards the imprudent. To bring it home:
rich has written about what he is doing in response to the bailouts and the Fed's movements, and he isn't endorsing those movements.
mp has written how many of these events have moved Conjure's Depression Clock forward.
I think someone here wrote a comment along the lines of (Paraphrasing):
"In trying to function as best without them on a local and regional level and in trying to minimize their ham-fasted acts and policies, you will come out about as well as can be expected and maybe better." I believe that this "shadow" economy is where the real recovery will originate, and it will take a while before CNBC et al start to cover it. Heck, the Ivory Towers of the Ivy Leagues may be shocked that reasonable, productive responses can be formed without a high-priced education or upper social echelon connections...
I am quite aware that many social, religious and ethnic groups can be stereotyped but it is generally considered being considerate of other peoples feelings to not attribute those stereotypes to individuals from those groups.
syvanen | 12.14.08 - 8:53 pm | #
Once some individuals from those groups present themselves and are personally maligned -- as individuals -- by lawyerliz, I'll come over to your side and call it rude. However, stereotypes are useful when doing a crude look-see poll of several anonymous strangers. Forbidding one's self from using this useful information or reasoning with it is sheer insanity. I won't deny myself information about my environment because of some hypothetical person's sensibilities.
Hoopajoops, LTD,
We've been using HSBC US and have been happy so far. Allows you to open HSBC accounts that are physically outside the US. Read about Argentina and find out what happened to people who thought that they are safe because they were holding other currencies with their Argentinian bank accounts.
He's also said that devaluing the dollar would have the same impact as raising prices/stoking inflation if funds rate was too low. That's been a consistent theme.
Hoopajoops, LTD writes:
trader walt writes:
Hoopajoops, LTD writes:
"Bernanke has already announced his favoring of a drastic and one time devaluation of the dollar for dealing with a deflationary environment."
Do you recall where you read this? I'd like to read about it myself.
Damn, I hate to drop quotes and run, but I can't find where the hell I read this. I think it was part of a discussion about how great the dollar re-peg against gold was, how it solved the deflation problem over night, etc.
Hoopajoops, LTD | Homepage | 12.14.08 - 8:26 pm | #
Pissed Off in California:
So you open an HSBC account and it's in a foreign country and foreign currency? What's your country/currencie(s) of choice? I looked around and it's all fiat all I can see, so I despaired of denominating my debts in a different currency.
Swiss Francs are 20 pct or so backed by gold. At least that's something.
Commodities will be the new cash for investment purposes.
Basel remember "The bank was saved but the people were ruined."? (Mid-Nineteenth C.)
Keeping people in their houses as long as possible is a reasonable goal. Bankers can keep theirs too.
Hoopajoops,
Mostly Canadian dollar as we have a longer term interest in moving back. A bit of euro/hongkong dollar/yuan. Not much in any of these accounts just have them setup in preparation.
1 currency soon [yogi] writes:
Basel remember "The bank was saved but the people were ruined."? (Mid-Nineteenth C.)
Keeping people in their houses as long as possible is a reasonable goal. Bankers can keep theirs too.
But those aren't "their houses"...you have to pay for something before it is yours.
It's hopeless.
I was missing the ugly people.
I was sad they weren't there.
If you are poor and don't eat right you will have bad teeth. But at least last year they had enough to come to the mall and spend a little money.
You'd think that being poor and ugly was a crime. Both can be fixed. Please note that tv makeover program that fixed the ugly people for a whole lot of money.
Short fat ugly people make less money. Tall men make more money. Short women wear high heels.
I guess a lot of people think ugly is the worst possible fate. I think being Bernie Madoff is the worst possible fate. He, if you didn't know who he was and what he did, looks like a cute twinkly friendly grandfatherly Jewish elf. Ugly is infinitely preferable.
My last word on the subject.
What, not care??
Cutting by 50% is like the biggest rate cut ever (percentage wise).
Ok, I dont care. Havent cared about the last 4
Pissed off in California,
That's an excellent idea. This seems like an ideal time to do something like that, given the recent relative strength of the dollar, and the fact that this won't last long.
Speaking of my MBA. I love this ...
YouTube - Fed Ex MBA Ad
Basel remember "The bank was saved but the people were ruined."?
As far as I know, the federal government doesn't have the regulatory infrastructure in place right now to be landlords for individual properties.
Strange intersection of state property law + federal due process requirements.
Who do you call if the air conditioner stops working at your house?
Madoff's list of losers :
The List of Losers in the Madoff Case - DealBook Blog - NYTimes.com
Just eyeballing this, gets you to under $20 bil. So if it is $50 bil, some of those "undetermined" figures are going to be pretty whopping.
An MFA is probably more useful than either an MBA or CFA because you can draw lovely conclusions starting with no data at all.
I think it's overly optimistic to think that the resources on the internet such as financial blogs are a game changer this time round. I don't think enough people are spending the time required to absorb enough information to make informed decisions about capital allocation. Esp. since many many of them will have all ready made terrible choices in relation to housing.
However the blogisphere has to be making a difference politically.
The conversation has evolved rapidly and the people who read these blogs are more than likely influencials in there own local sphere.
By the time Obama comes to launching his massive fiscal stimulus package perhaps some genius somewhere will have figured out how to spend the money in such a way that it doesn't send the US into a descending spiral of debt burden. Maybe that genius will garner a following and political influence by proxy. Maybe there is a really simple answer that is politically expedient and effective. Who knows there probable is but you need to be the economic equivilant of Einstein to find it in time.
I was at the Montgomery mall last night from 7-11. This mall is located in Potomac -- about the wealthiest area in the suburbs of DC. I go there every year at Christmas and a couple of times a year for kids birthdays.
It was as though I was shopping in mid-March.
There was no hustle and bustle. No lines. Parked close up without having to drive around at all. No waiting in the stores. Macy's was DEAD. Nordstroms? DEAD. I felt sorry for the man playing the lovely piano music on the baby grand for no one. I'm at the bottom of the economic food chain and I felt as though I didn't get the memo.
OTOH, I hit Target tonight around 6:00 -- the nearest one in the same geographical area -- and it was busy, but I still parked easily without having to drive around. I also have noticed very few trees on tops of cars this year, same with houses decorated with lights.
FWIW.
I was just in a meeting last week where two gentlemen from a nameless European bank's asset management group got into a debate about whether the Fed needed to cut just 50 or 75 bps. Wasted ammunition and all that. FWIW, Bernanke still has some otherwise intelligent people completely snowed. I think the eff has traced the target rate so long that people forgot to care about the difference.
Santa is going to come down the chimney with a can of ass whip along with a big frigging stick and commence to beat the crap out of good old Benny.
Whoever you are renting it from. If you are living there for free, I'm afraid you have to fix the ac yourself.
Ok:
What happens, when the banks stop paying taxes, when they don't fix the property up and muni liens are filed, when they don't pay the garbage, the HOA, the condo HOA, the special assessments to fix the condo roof, the hazard (homeowners) insurance, or fix the individual roof, or notice for a day a week, or a month that the pipes are busted/leaking? Not to speak of the whole insides trashed, copper stolen, drywall busted out. Literal crap on the floor from bad guys/animals, rats roaches other bugs. Weeds growing up cracks and trees fallen on houses.
The muni gov't has to do something, that's what, and there are also nuisance suits possible.
There are a whole lot of unexpected consequences of a disaster of this sort will generate that only a few local gov'ts--or hopefully many local gov'ts will have thought of/planned for.
This will shortly be a physical disaster, not just a financial one.
simon writes:
Well, for at least me ... it saved my skin. I pulled my money out of equities in mid 2007 because of Calculated Risk. And didn't buy a house in late 2006 ... again because of CR.
@simon writes:
I think it's overly optimistic to think that the resources on the internet such as financial blogs are a game changer this time round. I don't think enough people are spending the time required to absorb enough information to make informed decisions about capital allocation. Esp. since many many of them will have all ready made terrible choices in relation to housing.
Terrance I can drop the "their". But moving out of a house has costs despite what economists assume. The government paying people's rent for a few months may not be the worst option.
Did Americans pay the Cherokee for their Real Estate?
I haven't put any lights up or a tree for winter solstice day. I just haven't felt like it.
Didn't spend any less on presents.
Just a small note here: HSBC is listed as having lost a B in the Madoff thing.
We cut our christmas budget in half this year and did it all online - no trip to the mall.
POIC: Allows you to open HSBC accounts that are physically outside the US.
I think you actually have to go to another country and open an HSBC account there. Then HSBC will allow you to connect the two accounts.
I do not think you can simply open an account with HSBC in Canada or Hong Kong without leaving California.
prairiedog,
Thanks for the info. This is why I am staying under FDIC limits in the US and under whatever limit coveregage there is in the foreign country that the account resides in (ie CDIC in Canada).
New Thread Goodness To Go Into The Sweet, Sweet Night
@ RhodesianGreenbackinAZ writes:
I sold my house in late 2006 not because I saw a financial crises but I made a simple assesment that the value of the house was to good to be true. I wondered what would be down the pipe line to knock the price down and figured that peak oil would do it.
My logic then was... Oil price rises lead to inflation which leads to higher interest rates which leads to people having trouble with there mortgages.
I didn't know anything about international economics or finance at that time. Now I know better but I still have a sneaking suspicion that my original logic was not completely wrong.
We sold our house and bought a much cheaper one. Now I am husbanding the resulting nest egg and trying to save. While I try not to get too annoyed about the whole mess.
I think you actually have to go to another country and open an HSBC account there. Then HSBC will allow you to connect the two accounts.
I do not think you can simply open an account with HSBC in Canada or Hong Kong without leaving California.
MrM | 12.14.08 - 9:25 pm | #
You can, I did this in the last few months. You open your US account and then request the Countries you want other accounts opened in. You supply documentation and it is all sent to a central HSBC location that handles opening the accounts. You are then supplied a representative in each geographic location you open your account.
If the Fed goes through with this latest free-form improvisation that would make Coltrane proud, it will simply crowd out other forms of government debt (muni bonds, GSE debt, treasuries) and create more chaos in an already schizophrenic market.
There is only so much money out there, and favoring one asset class over another just creates more problems. An example of how bad monetary policy from the Fed has created a mess is the muni bond market right now. Auctions are failing and spreads have blown out.
Not good.
Amen!
@While I try not to get too annoyed about the whole mess.
simon | 12.14.08 - 9:26 pm | #
ric, interesting analogy. I guess I've been having club soda with lime all night.
Whoever just called out Exit, I throw a shoe in your general direction.
Pissed Off In California - Thanks for the pointer! i actually called HSBC a couple months ago and they explicitly told me no to opening accounts in different countries. Did you just walk into a branch in CA and open an HSBC account in HK?
Hey, thanks Schnaps.
Reminds me of that song, with the refrain, "Shoe... Are You, Shoe, Shoe, Shoe Shoe... Shoe the F&$# Are You?"
Oh, and my 9 year old son told me this one last night.
Why can't kids see pirate movies?
Because they're RRRRRRRRR -rated.
Sorry - I thought it was funny....
[simon writes:
Well, for at least me ... it saved my skin. I pulled my money out of equities in mid 2007 because of Calculated Risk. And didn't buy a house in late 2006 ... again because of CR]
Oooooooooohhhhh - CR is now causing deflation and the recession/depression.
Chicken, meet egg.
"Pissed Off In California - Thanks for the pointer! i actually called HSBC a couple months ago and they explicitly told me no to opening accounts in different countries. Did you just walk into a branch in CA and open an HSBC account in HK?"
MrM, I setup an appointment with a Premier Service rep. at one of their locations. They were the one's that explained everything to me. I believe that if you call the 1800 number they should be able to help you if you explain exactly what you want to do.
FYI HSBC is the only bank that I have found that has this sort of service.
Pissed Off In California - Many thanks!
Hoopajoops, LTD(Unrated) writes:
\tPissed off in California:
How are you moving your assets out of USD, and where are you moving them? I want to protest by withholding my wealth from these motherfuckers, but I can't figure out how.
\t Hoopajoops, LTD | \t \t \tHomepage | \t12.14.08 - 8:49 pm | #
My own favorite is MERKX. I'd appreciate any comments from anyone who cares to look into this fund.
MrM, Glad I could help (:
3rd QTR '08 losses in RE, equities, mutual funds, private business and pension/insurance reserves are apparently $2.8 Trillion.
The fed will need QM, not QE to solve this bleeding.
Damn... the new tool isn't letting me post. Back to Chrome...
Basically I agree with the GSE's getting some revenue. This isn't a thing. Of all the policies, this makes the most sense. Think about it... this only applies in areas with lots of speculative homes. It will not apply to the now BK flipper's first home.
Empty homes, as already noted, create Ghettos. We want a healthy reform of society, not chaos.
Got Popcorn?
Neil
The point of quantitative easing is to make it so onerous for banks, life ins.cos., etc ("real" money investors) to own low risk assets (TSYs, agency debt/MBS)that they are forced into the credit markets. These institutions can't make a spread in low risk assets when those assets yield 2%-ish, and therefore hold their noses but buy corporate debt, finance commercial & residential real estate, originate commercial loans, etc. Of course, there is a bit of a problem with an exit strategy for the Fed, because once you reflate the economy and own all that 5 and 10 year paper when yields are going from 2% back to 6%, you've got some mark-to-market problems, but that's a 2010-12 issue.
Damn... the new tool isn't letting me post. Back to Chrome...
Neil | Homepage | 12.14.08 - 9:53 pm | #
What version are you running? 1.03 includes a bug fix for posting. If you'll tell me when you're experiencing problems, perhaps I can fix them.
I pointed out that even during an economic downturn good software engineers are still in demand. As was the case during the dot-com bust.
Depends on location.
I imagine that NYC sucks.
But I'll admit, I've had more interviews in the past six weeks than I expected.
Even though the effective rate is 0.14%, look for the target rate to be cut by 75 basis points during two day meeting. There is no choice but to force capital out of the Reserves and back into private lending.
Further, it sets the stage for a very large fiscal stimulus early in 2009.
Even though the effective rate is 0.14%, look for the target rate to be cut by 75 basis points during two day meeting. There is no choice but to force capital out of the Reserves and back into private lending.
And how will lowering of the Fed Funds rate impact the credit risk of those private counterparties?
"There is no choice but to force capital out of the Reserves and back into private lending."
Ah, but there is. The correct route for Bernanke at this point is to simply go on 'hold' with rates, admit he can do no more and then do all he can to direct 'stimulus' spending into government infrastructure. The economic effect is twofold, first: the actual jobs keep people employed and second, there will be some companies (designers, engineering firms, construction companies, manufacturers of materials) who sill have solid contracts and thus be creditworthy for private lending.
You cannot 'do' without doing something - but that's what Bernanke has been trying. That is the irony of "quantitative easing": it eclipses quality. The quality of the money sink is as important, or more so, than the quantity. I think 'capital betrayed' is a term the old timers would have used for the quantative stuff.
"Get houses cleared out already, I need to start purchasing."
Really? You ready to purchase this winter, spring? Empty houses lose value fast. How much would you spend on copper wire, rodent damage etc. if those houses sat unoccupied.
Look, it was a big misallocation of capital but is a dry roof that someone can use and watch over. Let the renters ride the price down first!
re: "...an attempt by the Fed to flood the financial system with so much cash that some of it will have to be lent out...."
this is so stupid - if the banks won't lend the money out, then,
set up a new agency that'll lend it directly back to the people who's money it is anyway - us, the taxpayers
at the interest we're willing to pay for our own money...not much
Measures open to Ben Bernanke, the Fed Chairman, include a series of steps known by experts as quantitative easing, which is already being used unadvertised by the US central bank on a more limited scale. These could involve giving the American economy extra money through the Fed buying up commercial debt in bonds or asset-backed commercial paper held by US banks, or directly buying government bonds from the US Treasury. This would aim to drive up the amount of money in circulation and drive sharply downwards the true cost of borrowing for businesses and consumers.
The Fed is expected to make clear whether official rates will be pushed below 0.5 per cent amid fears that any such move would trigger a destabilising flood of money out of money market mutual funds that would no longer deliver any return a development that could wreak havoc in US credit markets.
"winter solstice day"
Come now, Festivus poles are the thing this year. I have mine.
Hoopajoops, LTD | Homepage | 12.14.08 - 8:36 pm | #
One of the more depressing comments I've read. Hope -1, reality +10
Everything Ben has tried has an unintended consequence. In his gold example he forgets one thing -- Once gold has no value payment will be demanded in another currency. The flaw in his Japanese example is that the Japanese had savings to soften the blow of job losses and still maintained some trust in its system. The US population has little saving and after impulsive bailouts and revelations like Madoff little remaining trust in the system.
Too bad the Fed doesn't have the power to zero the capital gains rate or zero business taxes.
I don't understand ``purchasing long-term Treasuries.''
The long end of the curve is set by inflation expectations.
Has this mechanism been disabled?
About the only thing Big Bone Benny and his band of merry makers are going to do is re-launch the commodities bubble again right when things are in the crapper. Go Benny Go! FOOD and Fuel!
"And I looked, and behold a pale horse: and his name that sat on him was Death, and Hell followed with him. And power was given unto them over the fourth part of the earth, to kill with sword, and with hunger, and with death, and with the beasts of the earth."
Revelation 6:8
The printing of money might actually save our collective american asses in a big way if done right - sell treasuries like crazy, refi the national debt at close to 0% and laugh all the way to the bank.
Refinance at 0% and watch inflation progressively wipe out the real value of that debt. Good for US - bad for those who buy our debt.