WSJ: Auto Bailout Deal Reached
Submitted by
CalculatedRisk on Tue, 12/09/2008 - 9:53pm (241 comments)
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Dow should rally at least 1000 points on this surprising news.
damn monkey!
We're giving them enough money to last until they ask for more in March. There's a reason why people don't buy American. Now we're given no choice.
What the hell is an "auto czar"? Is that like an "autocrat"?
The plans would have to be in place by March 31, identified as the time the CEOs will be in town asking Obama Bin Laden for the next, larger installment on their bridge to Atlantis.
cd
15 Billion and only one new job? Interesting how a czar is acceptable to English speakers, but a "central auto planner" would be taboo. Those damned Soviets set everything back.
I can't wait to see the Five Year Plan.
p.s.: Great Tanta picture, CR!!!
"What the hell is an "auto czar"? "
One would hope the job comes with a new Tesla roadster with a cool seal on the door.
Just as the "drug czar" always had access to the best evidence storage lockers in the country.
The Auto Commissar, under direction from the General Secretary, will insure that the workers of the three automakers will happily fulfill their quota under the glorious Five Year Plan, for make benefit the peoples of the United States.
The plans would have to be in place by March 31.
So if we over/under... do the fifteen bills even make it to March 31? My guess is they don't.
Republicans are still threatening to fillibuster and news is saying it may take until the weekend to get the deal done.
Comrade Bear --
This isn't even a five-month plan.
Myself, I am waiting for our Great Leap Forward.
P.S. Bailout Open Thread | The Big Picture
This will work perfectly.
The big 3 couldn't fix their problems in the last 20 yrs, so of course the solution will emerge in 3 months.
They parties involved just need to decide to fix it, and everything will be fine.
No problem.
as bearish as i am on the macro economy, empty freeways, etc, this is a compelling chart:
INO Futures and Commodities - Energy - RBOB GASOLINE Jan 2010 (E) (NYMEX:RB.F10.E) Price Chart and Quote
pretty classic bottom-type chart donchathink?
15 billion is cheap for millions of jobs ...
The alternative would have you bulls shitting in your pants.
can we get chainsaw Al for AC
The auto czar
will be given an extremely large hat
and an extremely tiny car.
mmckinl writes:
15 billion is cheap for millions of jobs ...
millions for how long?
.......
OT
how many years has it been since the athen's olympics? they were buried in debt by the buildout. now four days rioting. egads
millions for how long?
~~
At least two companies will make it ... their sales will be 50% of what they had before ...
Without an auto industry we become a third world country .... We'd better start making more of what we consume or it's hello bankruptcy.
mmckinl no love for intellectual capital Intellectual capital - Wikipedia, the free encyclopedia
I thought it was was explained the trade imbalance and let us sleep tight at night!
"we produce other things" is the mantra if I'm not mistaken...
..........
If we become third-world atleast our restaurant food will improve.
I say go for a mixture of Shanghai and Bangkok.
Is the large hat designed to hold his hoopajoop, or for bribes?
Will there be a glorious tractor czar too? This fixes everything now. If the UAW doesn't like its new terms, will they strike? If they strike what will happen next to our money? Will they throw more of it down the rathole?
Yes, Yes, Yes, Nothing good, and Hell yes.
we produce other things" is the mantra if I'm not mistaken...
Ya - like 'Dark Matter'.
The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
U.S. Fed mulling issuing own debt - WSJ
| Reuters
A currency doesn't get much more worthless then that.
Anyone see the news that China is cutting back on airplane orders? That's gonna put a dent in US GDP.
dryfly (damn!) thats the phrase i was looking for. Read a paper in my macro econ (grad school) class but 9 months ago. Oddly enough 3/4 of the class called bullshit. The professor said it was the first time he had anything other than a 50-50 split since he'd been teaching it... 5 years IIRC
.......
I wonder if Govenor Blagojeitch is sleeping on the sofa, or the lawn tonight? Man I bet his wife is still yelling at him.
Without an auto industry we become a third world country
Is this possible? Aren't we still near or at the top for buying cars? Someone will make one locally. Hell, maybe we'll get a few Dusenbergs, Avantis, and Willies back. I know, not going to happen, but it'd be nice seeing some different car stylings.
The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
~~~~
The banksters want to issue their own money, isn't that precious. I thought that what was CDS was for ... illusionary capital begetting more illusionary capital ...
The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
From gold backed to partial gold backing to metal backing for foreigners only to fiat only but backed by the treasury to fiat only backed by nothing...
Has Washington yet created a 'Czar' position that worked, or is that the kiss of death?
it'd be nice seeing some different car stylings.
~~~~
Aerodynamics is a bitch ...
dryfly (damn!) thats the phrase i was looking for. Read a paper in my macro econ (grad school) class but 9 months ago. Oddly enough 3/4 of the class called bullshit. The professor said it was the first time he had anything other than a 50-50 split since he'd been teaching it... 5 years IIRC
I got in a brouhaha on a couple forums over 'Dark Matter' 3 to 4 years ago - as far as I can tell it is pretty much debunked now along with a lot of the 'bubblethink'. It was mostly 'transfer pricing hocus pocus' - profit & tax management. No there there.
Hoopajoops LTD
Robert Rubin will be on the $10 bankster note ...
The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
Tis understandable, who wouldn't want to get in on Treasury's 0% yield hussle.
The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
OK clearly I'm not smart enough to understand this. Anyone care to take a shot how this works and how it will be different?
TIA
.........
Bush will be on the $1
Bernanke on the $5
Paulson on the $100 ... for favors received.
The Fed is broke, and now has to borrow.
Aerodynamics is a bitch ...
Yes, I remember the Citroen. But you can't tell me they were worried about aerodynamics when they weren't worried about gas mileage.
"Paulson on the $100 ... for favors received."
Will the knee-pads be part of the etching?
OK clearly I'm not smart enough to understand this. Anyone care to take a shot how this works and how it will be different?
~~~~
The Fed is a private institution run by the bankers and has no authority to tax to underwrite any currency whatsoever.
The U.S. Federal Reserve is considering issuing its own debt for the first time
Um...
Fed Weighs Debt Sales of Its Own - WSJ.com
What?
The article doesn't say much about why. Maybe a mechanism for the future when they want to remove some of the $1 trillion+ in dollars they just printed?
No different than US treasuries just more debt. I believe has always had this authority, just never used it.
Unintended consequence: most Americans didn't know the Fed had this power, and may not like it.
Yes, I remember the Citroen.
~~~~
Aerodynamics were then used to help low horsepower cars ...
The Jaguar XKE was designed in relation to a tear drop , as water takes the most efficient shape when falling through air.
New motto:
"They pretend to pay us and we pretend to work."
nades writes:
OK clearly I'm not smart enough to understand this. Anyone care to take a shot how this works and how it will be different?
A federal reserve note dollar bill represents a liability of the federal reserve bank which is also backed by the United States Treasury. The federal reserve bank maintains assets of its own which are supposed to "back" the currency, such as treasuries and certain commodities, but in the end, the treasury will backstop any amount that the federal reserve cannot cover, even if it has to exchange treasuries for dollars to pay you back in, or if this blows your mind, if it has to trade treasuries to obtain lumps of gold to pay you in.
Think of these new "federal reserve backed notes" to be as valuable as the federal reserve's stockpiled assets that it maintains to back its notes, but without the treasury's backing. So the tarp crap it took on its balance sheet will be backing these notes.
It will never come to pass that these notes are issued, because the spread between these notes and treasury-backed-FRN's (dollar bills) will indicate just how fucked the federal reserve is. Market forces will price a spread that will show weakness in the central bank and this will cause people on the street to question just why they transact with something called a "federal reserve note," and just what a "federal reserve" is and why they're trading using its notes. This cannot be allowed to happen, which is why I doubt that the fed will issue its own notes.
Pretty soon that means Paulsen and Bernanke will be on the Hill begging for bailouts? I guess we are running close to the debt limit again, no?
"Unintended consequence: most Americans didn't know the Fed had this power, and may not like it."
Most Americans have never even heard the phrase "unintended consequences" and couldn't see the problem you took them by the hand and led them to it.
Unintended consequence: most Americans didn't know the Fed had this power, and may not like it.
\t 1 currency soon [yogi] | \t \t \t \t12.10.08 - 1:41 am | #
If they keep their jobs they won't care... That's a big 'IF' right now.
Damn, maybe it was the SAAB, named after it's drag co-eff. Okay car guys what was it?.
Will the knee-pads be part of the etching?
~~~~
The reverse side will be a portrait of a tax payer holding their ass with both hands.
Hoopajobs, so you think it's just more jaw-boning?
Scratch that, according to the WSJ. I am wrong, they can only issue "currency".
mmckinl --
The Fed is a private institution run by the bankers and has no authority to tax to underwrite any currency whatsoever.
But they can already create as many dollars as they want. The only reason for them to issue debt is to remove dollars from the system.
This sounds to me like somebody is concerned about potential hyperinflation and wants to make sure they have the tools to deal with it. Normally they would sop up liquidity by selling stuff on their balance sheet. But if that stuff turns out to be crap, they may need to be able to create something else to sell...
Compared to the ability to create money, this is really no big deal. I think.
"
The reverse side will be a portrait of a tax payer holding their ass with both hands."
Oh I get it, the new bill will have a hole in the middle.
Since mp isn't here let's all have a nice little flashback.
The Conjure Clock now reads:
11:58:59
The clock has been moved back 1 second because Warren is now in the bond insurance business.
mp | 12.28.07 - 4:59 pm |
Eh, that didn't work as well as conjure would've hoped... no?
Federal Reserve BONDS? Is that what we're talking about? I think I already know the answer. The question is, backed by what? Worthless MBS?
"The question is, backed by what?"
The full faith and credit of the Federal... uh, Reserve
So the tarp crap it took on its balance sheet will be backing these notes. ~hk
I'm out! ! ! ! !
(thanks for the answer and good point about the spread and the inherent questions that would arise)
......
I had a '92 SAAB, and since it was made in Sweden you would think it had a great heater. Nope, I froze in the winter, but in the summer the air conditioner worked so well,you could hang beef in the back seat.
This sounds to me like somebody is concerned about potential hyperinflation and wants to make sure they have the tools to deal with it.
~~~~~
Wrong, this is to get their big fat nose under the money printing tent to add liquidity to the likes of C, GS, JPM and the like ... Those institutions are all but BK and everyone knows it .... it's another subsidy for Wall Street Banks.
The Federal Reserve won't be dissolved because the average American gets sick of clowns like Hank and Ben - it will be dissolved because guys like Jamie Dimon and Ken Lewis get sick of them.
Pissed Off In California(Good) writes:
Hoopajobs, so you think it's just more jaw-boning?
"Hoopajobs" I like that. I can't tell whether it's jawboning or not; I can only think of the consequences of such a move and they're pretty dire. I'm uncomfortable writing it off as talk simply because so much undesirable conduct has been undertaken regardless of dire consequences in this environemnt.
Nemo(Good) writes:
mmckinl --
The Fed is a private institution run by the bankers and has no authority to tax to underwrite any currency whatsoever.
But they can already create as many dollars as they want. The only reason for them to issue debt is to remove dollars from the system.
This sounds to me like somebody is concerned about potential hyperinflation and wants to make sure they have the tools to deal with it. Normally they would sop up liquidity by selling stuff on their balance sheet. But if that stuff turns out to be crap, they may need to be able to create something else to sell...
I think the fed already has enough treasuries on its balance sheet to mop up liquidity. If it needs more treasuries, instead of issuing more bonds, it can simply pay the federal government dollar bills in a direct treasury issue auction and then resell them on the secondary market and then sit on the dollars it receives in return. If it can coordinate with treasury it can do this in an infinite manner to take as much liquidity as there is a market for treasuries at any yield.
I'll bring some tater tot hot dish to the Fed riot. Down here they call it casserole.
maybe the new Fed notes will be backed by tater tot hot dish.
I'm short tater tots
Jamie Dimon and Ken Lewis get sick of them.
~~~~
NOT ... these two would be busted broke if it weren't for Bernanke and Paulson ...
Hoopajoops --
but in the end, the treasury will backstop any amount that the federal reserve cannot cover, even if it has to exchange treasuries for dollars to pay you back in, or if this blows your mind, if it has to trade treasuries to obtain lumps of gold to pay you in.
Um... What are you talking about?
The Federal Reserve already issues notes. They are called "Federal Reserve Notes" just like it says across the top. You probably have some in your pocket right now.
They are good "for all debts, public and private". You can trade them to the Federal Reserve for... Identical notes. Not gold. Not anything "backstopped" by the Treasury. Just identical notes, printed by the same Federal Reserve. They can always "cover" them because they will create a new one to replace any that wear out.
This new idea of the Fed issuing debt can only be for one purpose: To drain liquidity from the system. Of course, in the end, they convert back to dollars, so wouldn't they just function similarly to dollars?
Hm.
"Hoopajoops LTD,
Sorry about the mis-spelt name.
Hoopajobs = 'make-work'
Anyone got a good read (book or inet) on the whole federal reserve / treasury / money creation. I've read some and looked up a bit but its still a little confusing.....
TIA and g'nite!
........
Nemo(Good) writes:
Hoopajoops --
Um... What are you talking about?
I only gave the example of the treasury "backing" the federal reserve notes with gold to figure out some way of providing this backing in something other than a federal reserve note. The idea that FRN's are backed by the treasury is kind of mind blowing to convey as a concept, so it helps to pontificate some scenario where this backing would arise in the form of hard assets of some sort.
Hoopajoops --
I think the fed already has enough treasuries on its balance sheet to mop up liquidity.
Used to be true a year ago. Not true anymore. Read the WSJ article for starters...
In the early stages of the crisis, officials funded their programs by drawing down on holdings of Treasury bonds, using the proceeds to finance new programs. Officials don't want that stockpile to get too low. It now is about $476 billion, with some of that amount already tied up in other programs.
If it needs more treasuries, instead of issuing more bonds, it can simply pay the federal government dollar bills in a direct treasury issue auction and then resell them on the secondary market and then sit on the dollars it receives in return.
Nope. That would put dollars in and then pull them out again. Net effect on the monetary base would be zero.
The only way for the Fed to shrink its balance sheet is to sell some assets, which right now are a few hundred billion of Treasuries and a couple trillion of... other stuff. If the "other stuff" turns out not to be salable, then they have a problem. I suspect this proposal is an attempt to preempt that problem.
Nemo writes:
The Federal Reserve already issues notes. They are called "Federal Reserve Notes" just like it says across the top. You probably have some in your pocket right now.
Yes, I'm aware of this, which is why I stated, up thread:
"A federal reserve note dollar bill represents a liability of the federal reserve bank which is also backed by the United States Treasury. The federal reserve bank maintains assets of its own which are supposed to "back" the currency, such as treasuries and certain commodities, but in the end, the treasury will backstop any amount that the federal reserve cannot cover, even if it has to exchange treasuries for dollars to pay you back in, or if this blows your mind, if it has to trade treasuries to obtain lumps of gold to pay you in."
This new idea of the Fed issuing debt can only be for one purpose: To drain liquidity from the system. Of course, in the end, they convert back to dollars, so wouldn't they just function similarly to dollars?
Hm.
Nemo
~~~~~
These notes would be used to prop up BK banks and only God Knows how deep the hole is their in. This is another scam to keep the banks from going back to Congress for the other $700 billion because they know that they would have to pay interest on preferred and the conditions, after the auto bailout would be onerous.
They are using the good faith and credit of the American people to backstop their bankruptcy.
Nemo writes:
Nope. That would put dollars in and then pull them out again. Net effect on the monetary base would be zero.
No, Nemo. If the fed reserve buys treasuries via a direct auction, pays with dollar bills, which the UST then agrees to bury in a hole or burn, and then turns around and sells these UST's in a secondary auction, thus absorbing dollars, which it then sits on as well, this will effectively drain dollars and sop up liquidity.
There's no point in following the news... it's the same old, same old...
If the Fed bonds are backed by shares of SKF, I'm in. The world makes money go around too.
skf = silver backing
faz = pure gold, baby
Could the Fed's WSJ test balloon be interpreted as issuing FRNs with an expiration date i.e. maturity?
"FRNs with an expiration date"
I was once in a Central American airport, getting over a case of badly upset stomach (the obvious), and pondered using the lowest denominator note as hygenic paper. It was the best solution at the time, but I couldn't do it. I didn't want to be that American, so I figured something else out.
But, that being said, I'd have no such reservations with this particular currency.
Somehow, this 'idea' seems to have 'Ponzi' written all over it, but what do I know?
Faz is the new triple?
Hoopajoops --
If the fed reserve buys treasuries via a direct auction, pays with dollar bills, which the UST then agrees to bury in a hole or burn
How exactly do you think the Treasury's books would account for "burying dollars in a hole"? They have a procedure for collecting money and a procedure for spending money. They do not have a procedure for destroying money...
Put another way, the government does not destroy dollars. It takes them from workers (or borrows them) and then spends them on many stupid things... But it always spends them.
Heck, the Treasury could just collect the dollars in taxes and "bury them in a hole or burn them". This would have the same effect as what you propose. It has also never happened and never will.
The Fed buys assets when it wants to create dollars and it sells assets when it wants to destroy dollars. Issuing debt serves no immediate purpose; they already have all the dollars they need because they can create them at will.
This proposal only makes sense in the context of the deteriorating balance sheet, as an alternative way for the Fed to remove dollars from the system rather than selling distressed assets.
"Damn, maybe it was the SAAB, named after it's drag co-eff. Okay car guys what was it?."
The name Saab has nothing to do with coefficients of drag. Its the name of thw Swedish firm that made aircraft during/prior to WWII, and after the war, shifted to making cars. Their expertise in aerodymanics lead to the unusual shape of their cars.
Remember all of the bitching that started in the 80s about all cars looking alike? A trend started by Audi, then followed by the Taurus, the most "perfect" areodynamic shape is the raindrop. Forced to contend with escalating mileage standards, and trying to get performance from smaller engines, all mfgs. gravitated towards the "perfect" shape.
This proposal only makes sense in the context of the deteriorating balance sheet, as an alternative way for the Fed to remove dollars from the system rather than selling distressed assets.
~~~~
Not Quite :.... These notes would be used to prop up BK banks and only God Knows how deep the hole is their in. This is another scam to keep the banks from going back to Congress for the other $700 billion because they know that they would have to pay interest on preferred and the conditions, after the auto bailout would be onerous.
They are using the good faith and credit of the American people to backstop their bankruptcy.
"This new idea of the Fed issuing debt can only be for one purpose: To drain liquidity from the system."
No probably to get around CONgress who are the only ones that are suppose to have the power to spend taxpayer money so they can buy what they damn well please and the taxpayers still get stuck with the bill.
Count on Karl to notice. I sense this is a very big deal since it is "unprecedented."
There is a flash on the WSJ Newswire that The Fed has "approached Congress" about issuing its own debt.
"Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter.
It isn't known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn't explicitly permit the Fed to issue notes beyond currency."
No kidding. Then again The Federal Reserve Act doesn't permit buying other than agency and treasury debt as it stands, but that hasn't kept Bernanke from doing so more than once through chicanery and his famous "Maiden Lane LLCs", has it?
Congress (and the FBI!) seem rather adverse, shall we say, toward enforcing the law. Why?
And what would this debt be backed by? Nothing?
Then nobody would buy.
Full Faith and Credit (directly or indirectly by obligating the currency of) United States? That's a problem.
The Federal Reserve, a private bank, is asking for permission to issue debt in the name of the taxpayers of this nation, obligating them to pat it down and cover the interest on same, without oversight as to how the proceeds are used and under what limits and terms it is issued?
You're kidding me, right?
If this report is real and Congress does not immediately disavow this attempt - publicly - we no longer have a Constitutional Republic.
That The Federal Reserve would even discuss such a thing with Congress is, in my opinion, grounds for instantaneous revocation of The Federal Reserve Act of 1913 and a return of the control of our monetary system to Congress where it belongs.
It is my considered opinion that any attempted usurpation of the Constitutional power to obligate the citizens of this nation to pay debt via taxation, which under the Constitution of The United States must originate by specific bill in The House of Representatives (all spending bills must originate in The House), is a blatant attempt to overthrow by chicanery The Government of The United States and must be treated as such by The FBI, The Department of Homeland Security and the citizens of this nation.
Let me be clear. This is not "reflating" or "inflating" or "hyperinflating" or anything of the kind, although I'm sure some people will pipe up and make all sorts of noise in that regard.
In my opinion this "discussion" constitutes an attempted coup - period.
Bernanke must resign.
Today.
(Yes, I'm well-aware that such a proposal does not meet the definitions that permit indictment under 18 USC 2385, as violence and/or force is not being proposed - unless you consider destruction of the nation's currency and tax base a violent act, of course. In that case Bernanke has a 20 year long date with someone named "Bubba" in his future. It couldn't happen to a nicer guy.)
When Mr. worldwide creditor demands a hedge against this nonsense, my handle will be gold.
All paper promises tied to global weighted basket of current currencies, metals, other hard stuff, watts, calories, gigabits, etc., or a basket of such baskets, if the G-1000 can not agree.
"Faz is the new triple?"
yes, but you knew that. what you meant to ask is "is there decent volume in way-way-out-of-the-money calls on FAZ?"
GM | 12.10.08 - 2:15 am
Great Post !
The Market Ticker
Nemo. So you are saying that the Fed believes that it will not have the assets to sell were it to need to mop up excess liquidity? Say in case there was a risk of hyperinflation? Great... It has other ways though, right? Can't it just increase the rate it pays to banks for storing their cash at the Fed?
This whole maneuver by Bernanke is to avoid a Bank Holiday ...
My uneducated guess is that Volcker is whispering "Swedish Plan" in Obama's ear ...
Even with all their political donations Wall Street will not be allowed to take down the U.S. and the world with it ... I hope.
mmkinl --
These notes would be used to prop up BK banks and only God Knows how deep the hole is their in.
Nonsense; they can already print dollars to "prop up BK banks" if they want. They have zero reason to issue debt if that is their goal.
GM --
I don't know who "Karl" is, but I think he is full of crap.
Ponyless in NJ --
Increasing the rate they pay for banks to store cash at the Fed only affects short-term interest rates. I do not think it changes the monetary base.
Another possibility: Maybe the Fed wants greater ability to manipulate interest rates in both directions. They can already drive rates lower by printing dollars to buy Treasuries; if they could also print (something like) Treasuries to trade for dollars, they could put the interest rate wherever they like. Maybe they are concerned about the negative interest rates for short-term bills and want to convince banks to put that money elsewhere...
Read this article very, very carefully. The Rubicon has been crossed. Could also be maneuvering to oust Bernanake.
The Board has usurped authority, said William Poole, former president of the St. Louis Fed and now a senior fellow at the Cato Institute in Washington. This dramatic change in policy direction has not been announced or even acknowledged.
Bernanke must now try to bring the Federal Open Market Committee, which includes district presidents and Fed governors, along as he turns to more radical strategies, such as buying Treasuries to drive down long-term rates. A lack of consensus at next weeks FOMC meeting could result in muddled communication that confuses investors and undermines confidence.
Whatever our communications problems are now, they are going to be magnified in this new world we are going to be in, James Bullard, Pooles successor at the St. Louis Fed, said in an interview. We have a bunch of analysis in the works right now. Frankly, I am mulling it over myself.
Bernanke ‘War Powers’ Undermine Fed Bank Presidents (Update1) - Bloomberg.com
Actually, that is my new theory. If the Fed could create&dump arbitrary amounts of "safe" bonds at the short end of the curve, they could make those bonds arbitrarily unattractive.
All the bailout money is flying into short-term Treasuries now. Maybe the Fed wants to put a stop to that.
Thanks for the analysis Nemo
"My strategy with SRS is actually way way IN the money calls."
that is probably smarter. hopefully you had the patience to hold off on that one lately. deep in the money calls on that girl when she was over 200 would have been a true disaster.
Nonsense; they can already print dollars to "prop up BK banks" if they want. They have zero reason to issue debt if that is their goal.
~~~~
Really? Then what was the original TARP for ?
It was $700 billion to prop up the banks ... Now the Fed wants to do it then selves circumventing Congress ... We know they have written off 600 billion, they'll use the other 350 billion for 700 billion which leaves them 700 billion short to cover the 2 trillion in losses that were projected.
I propose my friend Boris for car czar. He has many five year plans experience at tractor factory #9.
He promise skim no more then 1b in the 2 or 3 months before they go BK again.
Maybe the end of the FED? Governments seizing control from the central banks?
This should get interesting.
interested beginner on options here ... what lense/framework do you use to determine that ... how do you evaluate the risk / reward value of those options (e.g. absurdly low).
@1 currency soon [yogi] writes:
My strategy with SRS is actually way way IN the money calls. The premiums are absurdly low. (I'm playing with house money this year)
1 currency soon [yogi] | 12.10.08 - 2:30 am | #
Speaking of efficient cars:
Israel pilots electric car network |
World news |
The Guardian
The Israeli Government is backing the drive for electric cars by 2011, and they get things done on time when they need to.
Actually, that is my new theory. If the Fed could create&dump arbitrary amounts of "safe" bonds at the short end of the curve, they could make those bonds arbitrarily unattractive.
All the bailout money is flying into short-term Treasuries now. Maybe the Fed wants to put a stop to that.
Nemo | Homepage | 12.10.08 - 2:27 am | #
~~~~
Bond buyers are not fools. They would scream to high heaven if the Fed tried this.
This tactic is to avoid going back to Congress because without more money they go broke. Everybody knows that C, JPM, GS, MS are BK and need the infusions ... which will only kick the can down the road.
We need an FDR Bank Holiday to sort the mess out or we don't make it. Japan was in much better shape with a trade surplus and a high savings rate in the early 90s to try this. We won't make it ...
Maybe the end of the FED? Governments seizing control from the central banks?
~~~~
It;s their only real choice. The banks are taking more and more and giving less and less ... only to leave a gargantuan financial mess that they are playing favorites in ...
Oh no, between 85-120. I'm a little worried about peak shorty though. Once they all go BK what do the ETF's do for profit?
Yes, I remember the Citroen. But you can't tell me they were worried about aerodynamics when they weren't worried about gas mileage.
Well, some of the Citroens were very aerodynamic for their time. Just look at the DS19:
http://www.motorbase.com/profiles/vehicle/picture.ehtml?i=512;p=124027417
Improved vehicle sales graph: http://3.bp.blogspot.com/_xO1f68tBRQc/ST9ss1N2Q0I/AAAAAAAAAFk/Lk58embKmXk/s1600-h/Light_vehicle_sales.PNG
I'll try to answer my own question ... I see SRS calls for apr09 at $170 are $23.00. And 1 contract = 100 shares, so you end up paying $2300. But, Jan09 calls at $75 are $25.10 ... so you end up paying $2510. which means as long as we're above $75 you are good, right? But with the OTM calls, you have to climb a bigger hurdle?
Fed Ponders Issuing Debt to Finance Its Mushrooming Balance Sheet « naked capitalism
So the tarp crap it took on its balance sheet will be backing these notes.
Oh I get it now - they want to factor their accounts receivable.
Cool.
Thanks for the explanation, for a moment there I was actually worried.
Might be time to read up on this:
US CODE: Title 12,CHAPTER 3—FEDERAL RESERVE SYSTEM
DC makes everythang look so easy...
AZ I think you're looking at last trade not the ask. There is very little volume in these.
I am fascinated with your post GM.
Here is the link to the WSJ entry you speak of.
Fed Weighs Debt Sales of Its Own - WSJ.com
I am not yet able to comprehend the implications of such a policy. It's astounding to say the least.
You pay for extra time, especially with srs which is extremely volatile. For Jan. 09 75s the asking price appears to be 27.60, so for you to profit, srs must trade above 92.60 before expiration. Between 75 and 92 your calls are worth something, but less than you paid.
Thanks, yogi. I think I'm catching on now.
hahaha. All you optimists. You have no idea what's coming. Read your history. This isn't new. Good luck.
GH
Nothing new but the word dollar does not appear in the Constitution.
Getting sleepy, AZ. I meant 102 of course.
I don't understand how it is ok for us to pay to stop a huge PRIVATE EQUITY COMPANY from losing a few billion. They bought Chrysler hoping to make a buck, and their gamble did not pay off. They can more than afford to either take the loss and close it up, or to keep running it. Why do they get public cash????
Fed (Not US government) is to issue BONDS! Did the printing press run out out of paper and ink? They need money, so they borrow it!
MarketWarnings: Federal Reserve Bonds
Gavshire,
You're hinting that this issue of bonds by the Fed has a precedent, and that studying what happened then will enlighten us.
It's late. Why not just tell us (dopes), briefly?
"They bought Chrysler hoping to make a buck, and their gamble did not pay off. They can more than afford to either take the loss and close it up, or to keep running it. Why do they get public cash????
Justin | 12.10.08 - 3:13 am | #"
Check out who runs and invests in Cerberus, Justin.
You're hinting that this issue of bonds by the Fed has a precedent, and that studying what happened then will enlighten us.
It's late. Why not just tell us (dopes), briefly?
It has a precedent in the way that ponzi schemes fail. In the same way that fiat currencies collapse. In the same way that corrupt governments have historically toppled.
At least 2/3's of the above will happen. Crossing fingers that number 3 does not.
I see job losses, increasing desperation, disbelief, anger. But still denial. This will pass. The financial system as we know it is imploding with the force of an atom bomb. It cannot be stopped.
I'm short on hope and optimism right now. And I'm dead serious.
The US can survive the collapse of the dollar and financial system. We have more houses than we need. We use more oil than we need to. We have a large grain surplus for the xxxth consecutive year.
Our standard of wasteful consumption must fall but not our values.
http://thumbsnap.com/v/KstT7j6m.jpg
strangemoney you always kill me
Interesting Bloomberg article, if a bit deceptively titled -
'BMW, Daimler to Gain Along With Detroit From U.S. Auto Bailout'
BMW, Daimler to Gain With Detroit From U.S. Bailout (Update2) - Bloomberg.com
Some highlights -
'Bayerische Motoren Werke AG and Daimler AG, the largest luxury-car makers, stand to benefit more from a government rescue of the U.S. automobile industry than if their competitors go bankrupt.
A proposal to grant General Motors Corp. and Chrysler LLC $15 billion in emergency funding should avert a meltdown that would depress sales and drag down the financially strapped parts makers that supply the European companies plants both in North America and elsewhere.'
Interesting to see how at least some people view the auto industry as being much more than a few major brand names. Unfortunately, most of those people seem to be in the foreign auto industry.
'Parts purchased by manufacturers account for 75 percent of the value of an average car, according to Germanys VDA industry group. That makes Continental AG, Robert Bosch GmbH and Magna International Inc., which all make parts for both U.S. and European customers, critical for maintaining production.'
At least German companies are able to see that a 'bailout' of a car company is actually more of a continuation of a long supply chain. And now that you have read it from Bloomberg, that means it isn't simply a lowly commenter's recent observation.
'Italys Fiat SpA and PSA Peugeot Citroen and Renault SA of France, which compete with the European units of GM and Ford, are among companies that say the U.S. bailout may put them at a competitive disadvantage. Christian Wulff, premier of the German state of Lower Saxony, where VW is based, has labeled the rescue plan illegal and VDA President Matthias Wissman has called for Europe to create a level playing field.'
Can you imagine - Europeans are now starting to complain about the sort of government meddling that the United States used to complain about when it was European meddling. Sadly for the U.S., the Europeans will use institutions (WTO, for example) to keep America from doing what America previously wanted others to stop doing, back when the U.S. thought it was rigging the game in its favor- oops, not rigging, 'creating a level playing field.' Though in this case, levelling the playing field means either cancelling the American subsidies through trade laws, or matching American subsidies to one's own national auto industry.
'Daimler and Volkswagen, which have the biggest U.S. sales among European carmakers, have posted a combined profit of 25 billion euros since the end of 2004, while GM and Ford have lost $95 billion. Yet the deepening global recession has led even Europes leanest producers to fire workers or cut hours.'
Well, see the difference between the dynamic miracle of the American economy, and the moribund social welfare state of Germany? In one, the state is involved in health care, pensions, union favorable rules - all the awful things which makes Europe such a disaster for business. In the other, 95 billion dollars of losses is just the cost of doing business. Plus 15 billion in taxpayer money to stay in business for another 3 months or so. And some people wonder why a country like Germany is reluctant to follow America's vision of a post-industrial paradise.
'Still, VW may emerge as a winner in the U.S., along with Toyota Motor Corp. of Japan, as it takes an increased share of the regular market as GM struggles to reposition itself even with federal help, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.'
A company like VW has a lot of experience in dealing with markets where default, government meddling (a polite way to cover the ugly scent of cronyism and corruption), and a basic lack of industrial prowess are a feature, not a drawback. After all, VW makes a lot of money in Brazil and Mexico as it is now. I can imagine that many Americans in the near future will be quite happy to buy inexpensive products engineered for what most Americans still consider to be 3rd world markets.
Do you really think a Bloomberg reporter is more reliable to most readers than a poster like yourself?
[A]n auto czar ... would bring together labor, management, creditors and parts suppliers to negotiate a long-term restructuring plan...
A bankruptcy by any other name...
Czar is not the right word to use here.
Cheif bailout officer.
More on Fed debt..
Fed Ponders Issuing Debt to Finance Its Mushrooming Balance Sheet « naked capitalism
Barney is Bailout Czar.
I heard and econ prof comment that there may be some merit to letting auto makers go broke slowly. That might ease the negative impact for auto workers as they leave by attrition and are not replaced and for the rest of Detroit as younger workers gradually leave for places that are creating new jobs.
Gosh, imagine how much better this would all be if only the other political party were in charge.
Good times ahead says Russel Napier
history suggests the ratio must sink further as deflation sets in, he said. The S&P may plunge another 55 percent to a trough of 400 by 2014, the strategist said.
I am still figuring out the CR companion and it killed my link. Here it is
Russel Napier
4 visitors online? Haven't seen that in almost 5000 Dow points.
GM - many thanks.
Here's an idea: Fed buys CDSs, then approves wholesale write-offs under Sec 248(g) of aforementioned act. System crash averted by concurrent creation of open exchange for CDS market. Investors unwind T-bill protection, yields rise, system looks healthier and more solvent. Confidence rises. Smaller bubble reflates on stimulus already under way.
Alternative idea: KABOOM. Entire system goes tango uniform.
C
Italys Fiat SpA and PSA Peugeot Citroen and Renault SA of France, which compete with the European units of GM and Ford, are among companies that say the U.S. bailout may put them at a competitive disadvantage.
And let saving ourselves mark the beginning of the Trade Wars!
Just saw the car production segment of Science channel's How Do They Do It show. The future of car production is apparently Proton City in Malayasia. This bailout money is going right into a black hole.
Looks a lot like Pleasantville... Mmmmm... floating cafes... better tow the company line, or back to the primitive village with you...
http://www.iproperty.com.my/coverstory/protoncity/coverpage.htm
Pragmatism is becoming a rare feature in American life at this point, it seems, as ideology triumphs reality.
Huh? Letting auto giants die and decompose and therefore fertilizing our re-emergence is the ideological route. Pretending that we can save our pet dinosaur by feeding him the last of our seed corn seems to be the pragmatic route.
OMG!
Chinese export dropped 2.2 % in November. Expekted was + 14.8.
Chinese import dropped 17.9 % in November, expekted was +12 %
This is a major crisis!
dr strangemoney-
basically, only one society with a major historical role in car manufacturing has managed to essentially lose that capability.
That society has also managed to have equal to higher levels of debt than Americans, problems with teenagers (violence, pregnancy, etc.) at a level that approaches American levels (in comparison to its neighbors), and also decided that financial engineering was much better than allowing manufacturing and unions to play a major role in its economy.
How is Great Britain's fertilizing and re-emergence going these days? After all, it has been roughly ten years since the last major remnants of the British car industry finally became non-British.
As a matter of fact, what major manufacturing/product innovations have come out of the home of the industrial revolution in the last decade?
Use it or lose it does not simply apply to nuclear war.
Economy Collapse!(Unrated) writes:
OMG!
Chinese export dropped 2.2 % in November. Expekted was + 14.8.
Chinese import dropped 17.9 % in November, expekted was +12 %
Quoted for emphasis.
"Looks like we might be in for some chop."
A note - 'unions' in this case should not be meant in the current American terms, but in the sense of workers' rights to an equal share of the profit of their labor. That is, labor is not a 'stakeholder,' productive labor is the basis for a successful manufacturing economy. Exploited labor, on the other hand, is a sign of a declining or inefficient manufacturing economy.
" Anonymous writes:
The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
Page Not Found | Reuters.com
b...P36242620081210
A currency doesn't get much more worthless then that.
Anonymous | 12.10.08 - 1:28 am | # "
Debt repayment comes from future production.
What does the Fed produce?
This is a major crisis!
What was your first clue?
When you reward, you get more lies.
Fed Weighs Debt Sales of Its Own - WSJ.com
A little coffee through the nose for Jas and the rest of my fellow deflation_forever_crew
Not one cent beat me to it!
Economy Collapse!(Unrated) writes:
OMG!
Chinese export dropped 2.2 % in November. Expekted was + 14.8.
Chinese import dropped 17.9 % in November, expekted was +12 %
Link?
Exports declined 2.2 percent in November from a year earlier, the customs bureau said in a statement on its Web site today. Imports plunged 17.9 percent...
source:
China’s Exports Decline for First Time in 7 Years (Update2) - Bloomberg.com
How is Great Britain's fertilizing and re-emergence going these days?
Just because Great Britain's car industry died does not imply that America rebuilding our industry through dismantling of the dinosaurs and creating efficient vehicle producers is destined for failure. But I would agree that maybe the dynamics of dying empires might have a lot more to do with the correlations. Might be a good time to ree-read the Eichengren paper:
http://209.85.173.132/search?q=cache:Ce1ReBtMsiwJ:www.bcra.gov.ar/pdfs/eventos/eichengreen_i.pdf
"This is a major crisis!
Economy Collapse!"
Good morning and we're glad you are awake...to the situation. Welcome.
Actually-- it might night be a bad thing for Congress to insist that whatever money received by the Big 3 is also received by whatever car manufacturing start-ups can be found in the states...
Regarding the Fed article issuing debt, why not issue as much debt as the market will give you at extremely low rates, lend it out on the same duration/timeframe at higher rates which are still well below rates businesses can access?
It's arbitrage as long as you protect your duration.
Actually-- it might night be a bad thing for Congress to insist that whatever money received by the Big 3 is also received by whatever car manufacturing start-ups can be found in the states...
"Why electric vehicles have stalled"
Facing technical challenges and a weak market, many of Silicon Valley's electric-car startups are changing direction.
source:
Why electric vehicles have stalled - Dec. 4, 2008
via Economists View:
This is the angry soil in which populist backlashes can take root.
Economist's View: A Populist Backlash?
You bet your ass! After this is said and done, there are going to be two types of people in this country. Those who benefited from free government cash and those who didn't. Get ready for some political dissent!
Meredith Whitney iz hawt. When she prognosticates I get all tingly, 18 months at least for the big banks before any recovery of their businesses. More to come, throwing good moey after bad by continuing to back AIG types as they get slammed by asset valuation destruction. She is also warning about the disruption from credit card cuts. She's mentioning that credit withdrawal is cold turkey rather than methodone. More bank write downs coming. She's concerned that 5 banks control 2/3rds of the consumer credit market. Advocates recapitalizing regional banks. Byg banks are investor dead money. Goverment is powerless to prevent home price revaluation.
IMHO the 15B gets us (GM) to January 21. The plan is to keep the turds (GM & Chrysler) floating just awhile longer... Could Ford make it if the others collapse?
Could Ford make it if the others collapse?
They already have a new model ready...
http://img.photobucket.com/albums/v144/LearningHowToSmile/moz-screenshot-412.jpg
.
Electric cars are the moller volantors of the new century.
The GM and Chrysler bailouts are not about manufacturers but about the financing pyramid upon which they rest.
There is a nice article in the WSJ today, below the fold p. 1 about the Italian government subsidizing the cheese producers. Specifically, the govt. is purchasing 100,000 wheels each of Parmigiano Regiano and Grana Padano and donating it to charity.
Gives a new meaning to "Government Cheese." I'd line up for that...,
I think Ford should be commended for not participating in the bailout.
I hope they do survive.
sorry, cheese article link:
Hard Times for Parmigiano Makers Have Italy Ponying Up the Cheddar.
Hard Times for Parmigiano Makers Have Italy Ponying Up the Cheddar - WSJ.com
This is the angry soil in which populist backlashes can take root. - Robert Reich
I blogged about this yesterday. Of course Reich has it all backwards with respect to solutions; more government and more debt but at least he admits that the more debt and more government to date has been ineffective. That brings up the thing that bugs me most about Keynesians. No matter the size of the failure they will always fall back on the excuse that no matter what was done if only a little more had been attempted then it would have succeeded. And that is my prediction for these bailouts.
No matter the size of the failure they will always fall back on the excuse that no matter what was done if only a little more had been attempted then it would have succeeded
Strangely, Free Marketeers make the same argument
.
Rob Dawg: "the financing pyramid upon which they rest."
Is that phrase part of the Pledge of Allegiance yet?
Strangely, Free Marketeers make the same argument - Broward Horne
Agreed but I just couldn't force myself to put the words "free marketeer" in the same post as a Robert Reich quote.
Not One Cent writes:
Rob Dawg: "the financing pyramid upon which they rest."
Is that phrase part of the Pledge of Allegiance yet?
No, but if you squint real close at the Great Seal on the back of a dollar bill you can almost make out a three headed dog glaring back.
And the questions he poses are often the questions which touch upon points many Americans would simply wish to ignore. Or worse, points too many Americans seem completely ignorant about
Memes which were most successful are the memes which are most difficult to dislodge.
I haven't been able to figure it all out but I'm fairly sure that it involves 60-year credit cycles of behaviorial conditioning, catering to ego to extremes, television and professional sports.
It's a long way
To The Top...
If you want to rock and roll.
I may be starting to part with two experts I've listened to very intently over the last year and a half...Whitney and Battipaglia. Whitney calling for consumer pressure and greater housing declines.
It's one thing to call what will happen and it not be baked into the market vs calling what is already expected. Appraisals are extremely conservative on residential and I'm sure CRE right now as well. Banks are forcing appraisers to include distress sales/foreclosures into their calculations. I know from talking to relators and individuals that deals have fallen apart due to the low appraisals after the higher sale price had been agreed to.
The downside on the stock/real estate market (short-term ie through 2009, probably 2010), has a strong support with quantitative easing and other measures imo. The fear, lack of spending and greatly reduced lending/borrowing is quickly setting the stock and real estate floor as well. I believe the market will be on the other side of these economic issues by February (though horrible economic news will still be flowing) and I expect a housing bottom by mid-summer.
If the banks are indeed stock piling cash as CR speculated last night, when real estate prices show upward movement from the bottom, it could create a lot of lending activity.
The Dow dipped below it's Oct 10th bottom one time in the last two months, although the S&P went relatively lower, but not substantially given the amount of economic news that has come forth. Consider all of the news that came our way since early October and the amount of "catching up" to the economic situation the market/investors had to do.
Just showing the other side of the coin to the all of the shorts here for consideration.
Dawg
It is funny how smart you seem to me when I agree with you but the reality is probably the opposite on my part.
I expect a housing bottom by mid-summer
And exactly why would the biggest RE bubble in history bottom four years sooner than the 1990 RE bubble?
Come on, man.
tg,
I get a lot of that. It really bugs those who reflexively disagree with me because they have incorrectly pidgenholed me as neocon or libertarian or anti-rail or whatever. Don't beat yourself up over it, just take my comments at face value.
China exim tanks. Shanghai and Shenzhen rally hard.
Still trying to translate PPT into mandarin.
C
And exactly why would the biggest RE bubble in history bottom four years sooner than the 1990 RE bubble?
While I agree wholeheartedly that we can't even see the bottom from here you have to admit the correction this time is remarkably less sticky than in any previous retracement.
OT -just saw this Tanta tribute on huffington post (just wish Tanta were here to be flattered, amused and annoyed all at the same time). Arianna Huffington (or should I say Heffington) on rewarding those who got it right:
And, as was the case with Iraq, it's not as if there weren't those that got it right when it came to the economy. Economists Joseph Stiglitz, Nouriel Roubini, Nassim Taleb, and Paul Krugman did. And financial blogger Tanta (aka Doris Dengey), who raised a red flag about Citigroup in late 2006, while Rubin continued to rake in mega-millions on the bank's increasingly risky moves. Tanta died last month at 47 -- much too soon, but long enough to know she had gotten it right.
Arianna Huffington: Rewarding Those Who Got It Right
@ GiezCubed
There may be a short term housing bottom (or a temporary cessation of decline) next year but not "the bottom". Not even close.
The real bottom will occur many years from now when interest rates on the long end (along with mortgage rates) have broken free of all this short term credit market manipulation(and we get on the other side of the current deflationary episode) and reflect the true risk of lending long.
Housing is dead as a doornail for at least a generation.
Moin from Germany,
i´m not making this up..... havn´t heard anything during their testomony.....
GMAC extending exchange offer deadline
NEW YORK (MarketWatch) -- GMAC Financial Services said Wednesday that the results of its exchange offers are insufficient to meet regulatory capital requirements to become a bank holding company. As a result it is extending exchange-offer deadlines for final consideration by investors. "Based on the results of the GMAC and ResCap offers to date, GMAC would not obtain a sufficient amount of total regulatory capital in connection with the GMAC and ResCap offers to meet the requirements set forth by the Federal Reserve for GMAC to become a bank holding company," GMAC said in a statement. The Federal Reserve has required GMAC to achieve a minimum amount of total regulatory capital of $30 billion in connection with its applicatio
Back to the Fed issuing debt; I dont quite understand it, but being an instinctive adherent of the Conspiracy rather than Cock-Up Theory of history, it does feel like it's significant. Could someone have a stab at explaining it in (really) simple steps, or point me at an analysis? Thanks.
I've wondered how business leaders and investors so close to this situation missed the credit and real estate bubble.
Three Main thoughts (all connected)
1) "Ignorance is bliss"
when you're growing well and making nice profits no one wants to consider other options. Quarter by quarter behavior and thinking persists. Short-term thinking is often our peril.
2) "Denial"
Recency Effect takes hold and you don't want to bring yourself to consider what a downturn would mean for you. I believe this is a very difficult thought process for most people. So, you don't think through the possibilities as well as you should. You don't research the negative news and you spend your time looking for the continued growth story until that point in time in which the data is forcing your hand. People have a hard time cutting back on expenses, I've said for years that this is one of the hardest things for individuals to do. So this would also hold for businesses, ministries and other organizations. I've been telling every church and ministry leader I can to cut back projections for 2009 by 20 - 40% due to the decreased giving that will certainly be headed our way. Most do not want to hear it and wrap their minds around it. Our company is acting the same way to our repeated warnings.
3) "Your Area of Expertise"
when you have a hammer, everything looks like a nail. When you sell life insurance, it's amazing how it becomes the answer to al of life problems. When you're in the real estate market, everyone needs more homes and bigger homes. When you're in the lower quality paper area (thinking of a specific bond fund manager) due to the above areas you think there will be great values in your space.
There have been too many individuals that you would presume would not miss this type of event. It is truly amazing how hard dealing with reality is for many people.
No, but if you squint real close at the Great Seal on the back of a dollar bill you can almost make out a three headed dog glaring back.
Rob Dawg | Homepage | 12.10.08 - 8:09 am | #
LOL, I guess the old man ferries us across the bridge loan now in a PT cruiser.
LOL, I guess the old man ferries us across the bridge loan now in a PT cruiser. - tg
Wouldn't that be Charon polling across the River Stocks to the gates of HELOC?
It was late at night on the open road,
Speeding like a man on the run,
A lifetime spent preparing for the journey;
He is closer now and the search is on,
Reading from a map in the mind,
Yes, there's the ragged hill,
And there's the boat on the river,
And when the rain came down,
He heard a wild dog howl.
There were voices in the night - "Don't do it!"
Voices out of sight - "Don't do it!
"Too many men have failed before;
Whatever you do:
Don't pay the ferryman;
Don't even fix a price.
Don't pay the ferryman;
Until he gets you to the other side!"
In the rolling mist, then he gets on board,
Now there'll be no turning back,
Beware that hooded old man at the rudder.
And then the lightning flashed, and the thunder roared,
And people calling out his name,
And dancing bones that jabbered and a-moaned on the water;
And then the ferryman said,
"There is trouble ahead,
So you must pay me now," - "Don't do it!"
"You must pay me now," - "Don't do it!"
And still that voice came from beyond,
"Whatever you do:
Don't pay the ferryman;
Don't even fix a price.
Don't pay the ferryman;
Until he gets you to the other side!"
Mr. T., I was specifically addressing the next couple of years and intentionally not addressing the longer term issues. You may very well be correct.
I'm working on making my clients money in 2009, 2014 (Tobin's Q bottom) will have to wait.
@ GiezCubed
Fair enough.....a lot of difference in opinions regarding investing seem to be largely ones of timeframe in my experience.
Good luck.
wow.
Indian car sales down 18%.
Indian car sales post biggest fall in eight years - 18% drop - Democratic Underground
So much for decoupling.
C
Counterpointer | 12.10.08 - 8:23 am | #
I think this is huge, here is the AP:
China's exports fall for first time in 7 years
Wednesday December 10, 8:27 am ET
By Joe Mcdonald, AP Business Writer
China's exports fall for first time in 7 years, adding to pressure to reverse slump
BEIJING (AP) -- China's trade growth collapsed in November as global consumer demand plunged, adding to pressure on Beijing to reverse a worsening economic slump and avert heavy job losses, data showed Wednesday.
November's exports fell 2.2 percent from the year-earlier period, the first decline in seven years, the government reported. That was down sharply from October's export growth of 19.1 percent and well below analysts' forecasts of a 13 to 15 percent rise.
Imports fell by 17.9 percent, pushing China's trade surplus to a new high of $40.1 billion.
Expired
With all this talk of "reversing the slump" and "combating deflation" I am thinking that our largely baby boomer financial and political "leaders" are just getting old and may be suffering from massive amounts of erectile dysfunction and so are just projecting.
Why do they have an almost pathalogical need to re-inflate?
Here is a little bear pr0n to cheer you all up this morning...
Q Ratio Signals Horrific Market Bottom, CLSA Says (Update1)
By Patrick Rial
Dec. 10 (Bloomberg) -- A global stock slump may have further to go, according to Tobins Q ratio, which compares the market value of companies to the cost of their constituent parts, CLSA Ltd. strategist Russell Napier said.
The ratio, developed in 1969 by Nobel Prize-winning economist James Tobin, indicates the Standard & Poors 500 Index is still too expensive relative to the cost of replacing assets, said Napier. While the 39 percent drop in the S&P this year pushed equity prices below replacement cost, history suggests the ratio must sink further as deflation sets in, he said. The S&P may plunge another 55 percent to a trough of 400 by 2014, the strategist said.
Things have always looked absolutely terrible at the bottom, said Napier, Institutional Investors top-ranked Asia strategist from 1997-1999. With deflation the value of assets falls and the value of debt stays up, then equity gets crushed. The results are always horrific.
Q Ratio Signals ‘Horrific’ Market Bottom, CLSA Says (Update4) - Bloomberg.com
good morning people.
...Morning....a little OT, but, how is it states (like mine) can solve the state budget deficit (in our case $160-million) by taking out a line of credit? They can't legally run a deficit but can borrow money? WTF?
I thought a "balanced budget" meant allocating LESS than is percieved for revenues?
Maybe I've just gotten older than logic.
Oh oh, looks like they are going to have to build cars
Dec. 10 (Bloomberg) -- GMAC LLC, the auto and consumer lender seeking federal aid, failed to obtain enough capital to become a bank holding company and may abandon the effort, casting new doubt on the companys ability to survive.
GMAC Rescue Plan Falters, Raising Bankruptcy Concern (Update1) - Bloomberg.com
Here's a headline on Reuters:
Office Depot says to close 112 underperforming stores in North America over next three months; announces update of strategic review 8:46am EST
My strategy with SRS is actually way way IN the money calls. The premiums are absurdly low. (I'm playing with house money this year)
Nemo writes:
But they can already create as many dollars as they want. The only reason for them to issue debt is to remove dollars from the system.
This sounds to me like somebody is concerned about potential hyperinflation and wants to make sure they have the tools to deal with it. Normally they would sop up liquidity by selling stuff on their balance sheet. But if that stuff turns out to be crap, they may need to be able to create something else to sell...
Compared to the ability to create money, this is really no big deal. I think.
I think it IS a big deal. This would let them sop up dollars without increasing the official U.S. debt. It would be off-balance sheet for the U.S.
It smells like the Fed is approaching insolvency. Combined with the FDIC issuing debt, the system is nearing some kind of limit. Bad news.
Why do they have an almost pathalogical need to re-inflate?
Mr. T. | 12.10.08 - 8:51 am | #
No debt, no money, ponzi collapse. Our system is about borrowing from your future labor to pay for today with most of the benefit to banks & government. You need continual exponential growth in either goods and services or in money. IMO we just had growth in money for some time.
YouTube - Money As Debt (1 of 5)
SBI to restructure its credit card portfolio : Rupee Times
Credit card delinquencies in India.
Man.... how bad is your day going (if you're an auto-company exec), when "the Donald" is offering advice on how to re-org your companies?
Trump: Rescue Big 3, But Put Them in Chapter 11 - CNBC
Although I guess if you're talking about companies going into the shitter, there's no better expert than Mr. Trump.
REBear -
how dare you post an article about India. We only talk about America, the land of the bred and the dope. Anything else is the defensive reaction of those living in a land of crooks and gangsters.
Everything - EVERYTHING - involves America, and only Americans are too stupid to realize that the rest of the world doesn't exist.
Besides, posting to anything involving India is likely racist, too.
Ooops - no one can rant like the one and true Jas.
Sorry about that.
Selective Default and Devaluation
Jesse's Café Américain
this looks like a step in anticipation of an eventual partial default or devaluation of US debt and the dollar
Two-tier currency, probably evolving into an external trade currency and internal-to-US currency.
It's been rumored for years.
Madness.
We are witnessing true insanity.
Many people on this blog are despondent over the notion that we (the taxpayers) are going to be the bagholders for all of these bad investment decisions and subsequent bailouts.
I have an alternative view . . . Wouldn't the ultimate bagholders be the people buying public debt right now? The last one holding the bad of debt is by definition the bagholder. To that end, isn't it likely that the bagholders are going to be the foreigners running for 'safety' to US Treasuries.
Let's use buying a house as an analogy. If I bought a house that was over my head, then took out some equity, spent it on goodies and vacations, and then stopped paying my loan, who took the loss? The person who lent me the money.
Look at this chart to see the bagholders:
http://www.treas.gov/tic/mfh.txt
And you can bet that the foreign holding skyrocketed since this was published. If the US was like a subprime borrower, this is like 2006, we know the game is about up but the banks are still lending us money, and we are going to town buying flatscreens for every room.
As to this Fed issuing its own money thing: does that mean that the US is going to have the same thing as in the UK? They have Scottish pound notes over there, and I recall boarding a Glasgow to London train once, and being warned by a friendly gentleman that the buffet car would stop accepting them once in England. Clear case of liquidity preference: we swapped them into cans of lager and stayed mildly intoxicated throughout the trip. If so, which part of the US will accept which types of printed paper?
As to the SAAB: if I recall correctly, it's just an abbreviation of something like Svenska Aeroplan Aktiebolaget, or Swedish Aeroplane Inc.
Forbes Dan Gerstein on Chysler's Hidden Coffers: Why is Cerberus, one of the world's richest private equity firms, begging for a bailout?
Buried on the business page of The New York Times Saturday were the details of Detroit's biggest snow job yet--literally as well as figuratively. Turns out that Cerberus CEO John Snow, who spent three-and-a-half lackluster, and some might say lap-doggish, years as President Bush's second Treasury secretary, is leading a who's who of crony capitalists in a lobbying campaign for a taxpayer bailout to "salvage Cerberus' investment in Chrysler."
That's right. Not to save the jobs of Chrysler employees or America's disappearing manufacturing base,... but to prevent "one of the world's richest and most secretive private investment companies" from having to take a relatively modest financial hit and use some of its own capital to prop up the smallest of the major automakers.
Of course, Cerberus is sparing no expense to spare their investors any exposure. Together with Chrysler, it has spent $7 million to hire such high-rent lobbyists as Dan Quayle (who runs one of Cerberus' international units), former Sen. John Breaux (D-La.) and former Bush legislative liaison David Hobbs. Their goal: $7 billion from the auto industry bailout package Congress is working on now and another $8.5 billion in loans from the Energy Department that have already been authorized.
Taxpayers can't afford the Bullshi*t & Bailout Billionaires Circus Show. Gather 'em up and ship them to a deserted island. Nationalize the Auto Industry
I have an alternative view . . . Wouldn't the ultimate bagholders be the people buying public debt right now?
Yes they will. But, they are only the first in line. Once they fall, the US taxpayer moves to the front.
although i recognize the poor direction the big three have taken over the past decade, their treatment in the capital is nothing short of an outrage..these are the few ceos who didnt make egregious sums of money and yes, their companies were actually producing durable goods. they provided "real employment" making "real" things...and america'economic greatness was born with the american automobile. but, for these guys to get just $15bln in aid, they had to drive 10 hrs down to dc and beg on their knees before our shameful congress. how have the bank ceo's gotten down to dc for their multiple hearings? the difference in treatment bewteen bank ceo's and wall st ceo's is appalling..our cars aint so bad..i just got a ford pickup truck. people just cant afford to buy them anymore or lease them...the banks fcked this up, not the autos..the banks debased our currency to the point where our workers simply cannot live off of the global wage for car production. hence, higher wages for us workers..hence, not so competitive for the bottomline...
bgates wrote:
pretty classic bottom-type chart donchathink?
bgates
Do you also read goat entrals or cards? No wonder we are melting down. Cramer and chartists.
Will the Auto Czar position go up for auction? Does it come with a golden parachute if the big three go chapter seven?
Broward Horne "And exactly why would the biggest RE bubble in history bottom four years sooner than the 1990 RE bubble? Come on, man."
I'm on may way, a couple of quick reasons...
1) Interest rates now are 5 - 6%, interest rates in 1990 were at 10%
2) The Depth and Speed of this decline - and this was reported on Sept 30th with data through July http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_093042.pdf
"The decline in the S&P/Case-Shiller U.S. National Home Price Index recording a 14.1% decline in the 2nd quarter of 2008 versus 2007, the largest in the series 20-year history. As a comparison, during the 1990-91 housing recession the annual rate bottomed at -2.8%. As of July 2008, two years later, the 10-City Composite has fallen by a total of 21.1% and the 20-City Composite is down 19.5%. "
Again, predicting what will happen vs what is baked into expectation and predictions are two completely different things.
Cerberus owns 51% of GMAC, GM holding the rest. GMAC was refused bank status, need to raise an additional $30B. Expensive game being played here with bondholders refusing haircut to allow bank status. This is more important to Cerberus than Chrysler, much more money at stake.
No, the Auto Czar gets $ 1 per year (or portion thereof, should his job last less due to nothing left to oversee), plus any car he fancies. As long as it's US-made. Financing can be arranged through GMAC. Oops, they just got their banking status application rejected.
RE: Fed issuing debt
What would be the difference between U.S. debt and Fed debt if it comes to this? U.S. debt is backed by taxpayers and Fed debt is backed by a balance sheet of taxpayer debt. What is the f'n difference? And both would be competing for the same investors. Good thing we have Ben. He is an expert.
mmckinl writes:
millions for how long?
Without an auto industry we become a third world country .... We'd better start making more of what we consume or it's hello bankruptcy.
Rubbish, with no "fear of failure" in the system we can build Ladas and/or Yugos. Good Glod! Bring bankruptcy on and straigen these guys out...or will we damage all the senior management and union guys self esteem? If failure is made impossible, success is made impossible.
"these guys to get just $15bln in aid, andbeg on their knees before our shameful congress."
Hmmm, bended knee = $15bln. Versus 40hr work week, minimum wage, 1hr lunch, two 15min breaks, and 2 wks vacation per year. Where do I get in the $15bln begging line?
The deal should be for every $100mln taxpayer bailout, a CEO wears an orange jumpsuit for 10 years. Seems fair to me.
Default and devaluation guaranteed.
U.S. taxpayer, after alerting congress to their wishes not to back TARP, are overridden. Taxation without representation, or taxation in contravention of constituency.
I see smouldering tax revolts about to erupt into tax-fail receipts for Uncle Sammy.
Maybe we can ask China to prop even more. The communists (archenemies) propping the wiser capitalists. That's rich. Can't make this stuff up.
Good thing Geither speaks Mandarin. He'll be able to assist in the dismantling and shipping to China of whatever remains of the physical economy.
Again, predicting what will happen vs what is baked into expectation and predictions are two completely different things
Well, at least you've got some reasoning behind your opinion. I think it would be nuts to buy most RE in summer of '09 but go for it.
I don't buy the interest rate argument at all. Please check rates in 1988 versus 1992, and relative rate of change.
If you loved the bailouts the Brits did for British Leland you will love our new 5 year plan for the big three. Oh, I forgot British Leland is not around anymore.
This Fed debt thing reminds me of how the French recycle republics. Whenever nothing works anymore, they just throw the state away and pronounce a new state. They are now at the Fifth Republic, I think. Works fine.
Nice 4% jump in AU, surely the rumour of backwardation is false.
A good read :
US auto rescue - a society health check
Asia Times Online :: Asian news and current affairs
[I] .....these are the few ceos who didnt make egregious sums of money.....our workers simply cannot live off of the global wage for car production.....hence, not so competitive for the bottomline...[/I]
What? Wagoner's $24-million is now considered "chump change" for CEOs of companies that lose money and then come crawling for handouts like common tramps and transients???
Excuse me while I retch.
Breaking the buck, good thing the gov't guarantees these too, or do they?
Money-Market Fund Yields May Fall to Less Than Zero (Update1) - Bloomberg.com
Get on the phone now . -
Mish's Global Economic Trend Analysis: It's Car Czar or Bankruptcy for GM
From the summary, we can infer Nancy Pelosi LIED about presenting a plan to Congress as a condition of the bailout.
Keep borrowing from China !
Cheers,
Kilgore
Please correct me if I'm wrong... everyone is positing that the purpose of the new Fed debt issue is to drain liquidity, yes, I agree...But will it be effective??? Given that the money is already out there and quantity is increasing, and given the the multiplicative effects of the banking system and credit on the injected money, the longer that the newly issued money remains in circulation, the harder it would be to remove its inflationary affect.
Is my reasoning sound...or should I wait until I fully wake up before I say anything??
Hi all,
At least the bail out is a temporary loan.
Best,
Youri
Global View Today!
Didn't the Russians get rid of the Czar when they had their communist revolution? Why are we introducing one in the same circumstance?
The auto workers did not seem to want a bailout for the homeowners who lost their homes because of the banks.
For the millions who have lost their homes let the auto workers join them. No bailout for the wealthy auto workers and their Detroit junk.
These Union people need to join
the American public. Fair is fair.
'These Union people need to join
the American public. Fair is fair.'
Toyota, VW, Honda, Mercedes, Nissan, and associates applaud your patriotism, sir!
However, these companies may also regret to inform you that they will not be accepting dollars in the future, so you will need to figure out how to pay them to their satisifaction.
After all, the Japanese and German car companies are also run by people who put their nation's interests first.
'f you loved the bailouts the Brits did for British Leland you will love our new 5 year plan for the big three.'
I wondered when someone was finally going to bring up the result of half-hearted government intervention, minimal union concessions, and a company group's mediocre products as something to avoid.
Not that anyone here seems to be expecting America to more competent than the British, even when having that wretched example right in front of them as an object lesso
This is just the first $15 billion or so. I bet they get $200 billion before it is all over.
I was thinking about applying for the "Auto Czar" position.
Then I stood up, went over to the wall, and bounced my head off of it several hundred times.
I feel like I've achieved the same thing I would have as the Auto Czar, without wasting any taxpayer money, and without soiling myself by spending a few months dealing with some of the most incompetent, selfish and otherwise odious characters in corporate America, unions and government.
We're all auto czars now.
A "CZAR" that recomends? Now we can't even do Czar right in this country.