Nay, let's get it right, yesterday's slide was "cause obama was a losing president, and the market had no confidence in him" thus the opposite is true today
Go to stockcharts.com, set it up for a view of the daily $SPX, ema 5 and ema 10. That will tell you all you need to know. If you're still doubtful -- maybe even dazed and confused -- compare the present with the "November lows."
For a long time I've thought these head-fakes were all about:
-giving those on the inside some reasonable exit points
-allowing the cnbc watchers to dump money into the hole, thereby making it shallower
-giving political cover ("we've exhausted all options") for the inevitable nationalizations
But I'm about to capitulate. Maybe these guys are incompetent. Crap.
I want to be positive. There are "secret, cool-a-rama plans. They will work.
Could be it would be like throwing the 300 lb Grandma some rope when she fell down the well. She is to deep to climb out, to fat to pull herself up, and I am to weak to help her.
keep in mind the closing "happy" number on the Dow for January.......when the statements get printed with friday's close it makes it look alot less "shitty" then yesterday...
Ken Cooper: a lot of CR Companion users who paste links, paste links with embedded spaces, which makes the links bogus.
Spaces are not allowed in URLs per spec.
Replace them with %20 to make them legal. Peasant Darkness | 02.24.09 - 3:32 pm | # Are you sure those are CR Companion users doing that? CRC does replace spaces with %20, if you use the link button.That was one of the reasons I added the editor - there were a lot of broken links happening manually.
Delaying the inevitable just makes it hurt more because time increases hope. The greater hope you have, the more it hurts when it is taken away. Kind of like when you keep buying the best looking woman at the bar drinks all night hoping that she'll go home with you. Except when the bar closes she goes home with somebody else and you are flat broke and emotionally hurt.
FWIW, I went into the close today with some long positions on. I hope I don't regret that, but I finally opened a futures account to hedge against stuff like that after hours if I get scared (or to lock in some profits from those pre-open pumps that seem to fall apart so often).
EvilHenryPaulson writes:
reptilian,
What makes you think that the exponential moving average of period 5 and 10 are significant?
EMA is better than SMA, because it takes recent prices into account more than a SMA does. Besides, ema 5 & 10 (9 actually) is how I make my market money.
I get dirty looks when I freeze my bets and place my odds money on the "don't pass line" when a shooter's been rolling for 20 minutes and then rolls a 7.
Oh wait we're talking investment strategies, not gambling...my bad.
it seems we get these bounces whenever the market hits the "historical" low marks. the surprise yesterday was the slide down all day to the close, no program buying seemed to kick in. probably slog around in the 7 handle for a while and eventually break through yesterday's low (djia)
guess there's some speculative opportunity now that those bank stocks are so low, big % moves daily
If you were a prospective homebuyer, picture your average home for sale in Southern California, say it's currently valued around $400,000 ($600,000 at the peak)....would you rather pay $400,000 for it with a loan at 4%? Or would you rather pay say $200,000 at significantly higher rates...say 11%? Assuming your monthly payment is roughly the same ($2000).
Answer if he was honest: would be he'd rather pay higher rates on a cheaper house. This would mean that as rates dropped from high levels, his house would increase in value, and he could refinance lower. In addition a larger portion of his payment is tax friendly.
So next question: If you were a lender, would your rather lend someone money at 4% to buy a $400,000 home, or at 11% to buy the same house for $200,000.
Answer is obvious.
Is private capital to lend to homeowners more likely to appear when the govt is guaranteeing rates on high priced assets, or when returns are much higher for people buyer lower priced (and less likely to drop more) assets?
Answer: Private capital can't compete with the govt who is willing to lose money on every loan. Private capital will sit on the sidelines.
So...we know the solution going forward for future buyers and lenders....let rates rise to natural levels that will collapse asset prices and attract private capital.
Why not choose this solution?
It's obvious...the normal, market driven solution kills current asset holders and perhaps the whole economy.
Those in power are current asset holders and would suffer the most from letting the market work. There is no way they will sacrifice themselves for the health of future buyers and sellers.
Bernanke, admitting he is trying to save "franchise" value..i.e. specific brand name, i.e. we don't want any healthy banks...we want THESE banks (i.e. current employees, stockholders, and management).
Conclusion: We are sacrificing longterm health for the sake of those who have the most to lose, at the cost of those who have most to gain: those who stayed on the sidelines, raised cash, and waited for prices to collapse so that strong hands can remove them from the weak. In this case the weak hands have the reigns of government and won't let go.
I just don't get it. And my sinking feeling that the administration plan is to rearrange the deck chairs and hope the iceberg melts just keeps getting stronger. - PK
EMA is better than SMA, because it takes recent prices into account more than a SMA does. Besides, ema 5 & 10 (9 actually) is how I make my market money. reptillian | 02.24.09 - 4:28 pm | #
And why do you think drafting price velocity is important, in what contexts?
Does anyone know whether a VA loan is available to an unemployed person with a substantial downpayment? I have a friend in this situation, thinking that an REO would be good to live in and would positive cash flow if she had to move.
I hate to agree with one of the anonymi, but I think what we are seeing is just a defense of the 7 handle.
lawyerliz | 02.24.09 - 4:32 pm | #
I would call it making money in the absence of growth. By and large, participants with market power care first about making money and defending pricing is seldom profitable
EvilHenryPaulson writes:
EMA is better than SMA, because it takes recent prices into account more than a SMA does. Besides, ema 5 & 10 (9 actually) is how I make my market money.
reptillian | 02.24.09 - 4:28 pm | #
And why do you think drafting price velocity is important, in what contexts?
They could call their regional VA office about it. Regional, because that might make a difference. VA is all about no down - they might want to hang onto the cash.
So next question: If you were a lender, would your rather lend someone money at 4% to buy a $400,000 home, or at 11% to buy the same house for $200,000
it really is not that obvious. The NBER says that to confuse interest rates with the purchase price can cause the buyer scale down his neighborhood's class.
Market rises on faith that 'something will be done.' Market gets details of plan, media tears plan apart, market decides it doesn't like the plan, market falls. Result: bad feedback loop where the market rewards handwaving and vagueness.
AIG is like the most honest representation of what a bank balance sheet really looks like. They have nothing to hide now that they've been nationalized.
Does anyone in their right mind really believe we won't have to nationalize many of these banks after the pre-announced $60B loss from AIG yesterday? Citi's issues are easily as bad as AIG's....
There are 3 capital adequacy measures: (1) Basel II (risk weighted capital), (2) total capital base (common, retained earnings, prefs and some classes of debt), and (3) net tangible equity. Major banks stress test their balance sheets every day, so assume the results are known, and what is going on now is more of an audit of the results than new testing. I get the impression that the Fed and Treasury think the situation is, for the most part, managable with more capital injections for criteria (1) and (2), but (3) net tangible equity is a real problem at current market prices, hence all the talk about conversion to common equity, which does nothing to actually shore up a bank's total capital base. I don't see how this makes sense either otherwise.
TARP Loses 55% on Investments: Report
By DIANA GOLOBAY
February 24, 2009 11:52 AM CST
Advertisements
The government as of market close Friday had lost 54.9 percent or $107.7 billion of an original $195.5 billion in capital investments through the Troubled Asset Relief Program, according to data released Monday by business ethics think-tank Ethisphere Institute.
The Ethisphere TARP Index tracks the governments loss-on-investment based on the idea that as stocks of publicly-traded TARP fund recipients lose value, so too does the government lose a portion of the investment made in the financial sector. Through the Index, Ethisphere hopes to encourage participating companies to promote transparency, accountability and ethical business practices related to the TARP funds, officials said in a press statement regarding the index.
Top performers on an absolute basis include Morgan Stanley (MS: 22.07 +17.27%) with a gain of about $700 million, or 7 percent, BB&T Corp. (MSDXP: 22.00 -4.35%) with a gain of $64 million, or 2 percent, and 1st Source Corp. (SRCE: 17.99 +10.71%) with a gain of $17.5 million, or 15.7 percent, according to the index. The announcement from Ethisphere came after stocks slipped down to mid-90s levels at market close Friday.
Fears of the U.S. government nationalizing a number of banks caused the Dow [Jones] to drop to its lowest point in six years, led by many of the financial institutions in the TARP Index, said Stefan Linssen, a lead research analyst behind the index. The decline ended when the Obama administration announced it has no plans to nationalize the banking system and reports emerged that the U.S. Treasury will provide more details on how its going to handle the financial crisis next week.
Read the Ethisphere report.
Although investor fears of banking sector nationalization pulled down stocks of both Citigroup Inc. (C: 2.60 +21.50%) and Bank of America Corp. (BAC: 4.73 +20.97%) on Friday, both banks were up in early trading Monday amid reports the government was only seeking to take a massive public share stake in Citi while White House press statements repeated the mantra that banks should remain in private hands. American International Group Inc. (AIG: 0.41 -22.64%) Monday acknowledged that the company was in discussions with the government to evaluate potential new alternatives for addressing AIGs financial challenges, but not necessarily seeking additional funds stoking fears that large financial institutions receiving what Ethisphere labels calamity investments cannot be maintained apart from government intervention.
reptilian, I was just trying to point out that it is possible to be successful, say buying/selling using an arbitrary EMA period, without knowing why. Much like the rituals of some African tribes to cure depression
"I still think we see 8000 again before any 6 handle."
Naw, the table's cold and too many players need to press or up their bets on quick wins that start to cash flow. No reserves to play other bets. And no hot shooters stepping up to the dice.
Krugman clearly doesn't understand the magic of compound interest. It's the key to generating wealth.
Follow along. The taxpayer can't borrow for himself as he/she is flat broke. Not to worry. The gov't will borrow money on behalf of the taxpayer and lend it to banks. The banks can then lend the money to the taxpayer at a higher rate of interest.
It's the anticipation of the somber address that will end on an up beat note:
Why aren't the banks lending all the money you've thrown at them.
I personally believe some US American banks out there are unable to do so don't have money, such as ... the Iraq, and South Africa ...such as build up the future for US Americans
Anyone remember the hubub regarding the first big T-bond sales in a while, around Feb 10?
It has now been 2 weeks, and the local favorite short against T-bonds here which seems to be TBT is down 7.05% over that time.
All of these market assets do not exist in a vacuum. In the medium future, the safest bonds will outperform commodities (in my opinion). Please be as skeptical and cautious about your money today, as you were whenever you first stumbled into this community.
From previous thread: \tMS, Blackhat, you guys are unto something, check this link to the most recent post by B Setser and the accompanying discussion/comments and I believe Blackhat's scenario is the correct answer, remember, the Chinese are known for long term planning
and they have already started to invest their huge financial resources in gobbling up commodities i.e. Rio Tinto's very recent investment Hernan El Perro | 02.24.09 - 3:18 pm | #
All of you folks are smart guys. However, I'd point out that since China holds a $hit load of US Financial Instruments, it would not be in their interest to make abrupt moves that would devalue their holdings. I'm sure they're hedging their bets, and in a sense, having them "prop up" commodities is good for us, since that might be the thing that slows down the deflationary spiral we're presently in. As an exporter, their best hope is to maintain a relationship with someone with a huge, open market like the US; Europe still has a fairly protected market, so I don't think China could hitch their wagon there; Russia could be bankrupt if things go the wrong way; India has a substantial middle class, but no where near as big as what's left of ours, and I doubt that they'd trust China, who's been a supporter of their biggest eneny for as long as I can remember. As such, I think it's them and us. I know that doesn't inspire confidence in anyone, but I think that's the way it's going. All of Denniger's bitchin' & moanin' about AIG being founded in China, or being run for the benefit of the Chinese misses the point. Like it or not, we have a defacto economic axis with them, and both countries have too much to lose by throwing it all away. Sorry for the stream of conciousness blather......... \t xxxxx | \t \t \t \t02.24.09 - 4:41 pm | #
EHP: I posted in an earlier thread that I thought the rally is on. Trouble is there is a boatload of people stuck long at S&P 800, who -- knowing the psychology of being stuck long -- will want to unload at the first opportunity to break even. I don't know what is going to happen; however, this economic "problem" is much worse than the dotcom/9-11 bust, so I think that the market could go much lower. That is my honest assessment.
The bigger mystery is why the market reacted with such glee to the plan. I haven't been watching the finance shows, are there people on them touting this as a good plan?
which does nothing to actually shore up a bank's total capital base.
Turbo: why do you think that the conversion of the current preferred shares to common stock will not increase the capital base? Am i missing something?
From everyone that i talked to, the USG class of preferred stock did not count 100% towards Tier 1 capital because its the quasi-loan aspect. The conversion is basically a new offering of common stock, 100% of which goes towards shareholder equity, a major component of Tier 1.
Over 10% in ten days ...
mmckinl | 02.24.09 - 4:24 pm | #
Maybe in todays terms but not for next months. We will see how oversold it is come Independence Day......when DOW 6,000 rings in. These levels are asinine because the underlying business models are ALL flawed based on consumerism. Could we not also say....the market is under bought?
The Sword of Damocles is hanging over my head
And I've got the feeling someone's gonna be cutting the thread
Oh, woe is me
This plan is a mystery
Oh, can't you see
That I'm at the start of a pretty big downer
I woke up this morning with a start when I fell out of bed
Does anyone in their right mind really believe we won't have to nationalize many of these banks after the pre-announced $60B loss from AIG yesterday? Citi's issues are easily as bad as AIG's....
Pull head from ass....
TPC | 02.24.09 - 4:36 pm | #
It doesn't necessarily = nationalization. But it does mean we aren't going to solve the problems soon.
reptilian, Didn't mean to criticize. If you were not paying attention to other factors, the use of EMA as an indicator would have lost you all your money already. Just felt the itch to pursue Socratic learning.
It doesn't necessarily = nationalization. But it does mean we aren't going to solve the problems soon.
IamSOOOpopular | 02.24.09 - 4:50 pm |
Not opening your statements doesn't mean the problems aren't there. AIG easily represents the most realistic balance sheet in the financial sector. I think it's insane to let these problems boil longer and potentially erupt.
The difference between the bearish and bullish view is the way inflation is calculated. The Bearish view is by using the BLS numbers and the bullish view uses the ShadowStats inflation number. Astonishing, the difference between the two. I know people here do not believe the BLS, but if you trust Shadow Stats, then we are at/approaching the trough of the bear market.
When GLD hits about 84-87, I am going to buy more. Anyone else?
I bought some GDX today, miners, mainly to diversify away from GLD, SLV and SLW. I don't see how Bernanke's zombie bank scenario isn't positive for PMs long-term. The more the Fed prostitutes to banks, the better PMs look.
Reptilian-VA will not approve the loan without income. If they have income(unemployment doesn't count)and a substantial down payment, they will allow for some pretty high expense ratios(usually up to 55% total DTI). Also, VA doesn't allow co-signors, but FHA does allow co-signors so that may be the best case.
ooooh, the Krugman mention ... not pretty in my opinion Or consider the plunge in auto sales. Again, that's bad news for the near term. But at current sales rates, as the finance blog Calculated Risk points out, it would take about 27 years to replace the existing stock of vehicles. Most cars will be junked long before that, either because they've worn out or because they've become obsolete, so we're building up a pent-up demand for cars.
Mr Krugman, I hope you read this comment so you can correct your post. What you did is a pure form of circular reasoning. Given that it is long since you have been a schoolboy, it is not a mistake that should be lightly forgive
Yes. And it always fascinates me to compare the games at various casinos, and how the games and such affect the players. Comrade Misean is Dope | 02.24.09 - 4:47 pm | #
I have been pondering the relatively recent explosion of human capital. How does that affect this game? There are way too many of us, cheapening the value of an individual (if there ever was much value in an individual). Are we a form of inflation, and how does that play out? It's one variable we don't have a historical model for, at least none that made it into records. As far as we know, right now there are more of us than ever has been. Each one of us representing a much huger accumulation of resources (in the so-called 1st world anyway) than ever imagined by our peasant ancestors.....How can we assume to predict any particular outcome when we have no frame of reference?
anotherajh, They both draw from the same pool of capital, and absent certain events they would both not continue on separate paths for the immediate future. I meant any variation where gold would fall and equities would rise. If one stayed still, the other would have farther to move
I dont think it will go that low for a while. You knew that during options ex you would get a push up and than a sell off. I'd buy at 92. Hopefully it goes that low.
"Given that it is long since you have been a schoolboy, it is not a mistake that should be lightly forgiven"
Come now, the Krugmeister is just showin' he's all pent up to be a school boy again. And a school boy all that pent up needs his school marm to release it.
Joking aside Elvis, after the plague had run its course, people did actually have enough to eat. At first it was bad, 'cause no one was tending anything. No motivation to do so. In the worst hit areas people really did think it was the end of the world, with good reason.
"I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
reptillian"
Are you kidding me? Quality of life is spectacular when you are no longer lucid, cannot take care of yourself, or would rather be dead. Keep the devil's advocate nonsense to yourself, please.
reptillian, It is not definitive whether or not we can sustainably maintain a population of 6bn+ people on earth.
I think our course however is pretty certain. We will try our best.
Of course, should we hit limitations (whether they be primarily environmental, political, or other factor) there will be a "correction" and probably beyond the power of any individual or group to stop. War, disease, crop failure, etc
For those who like my last post above, here is additonal:
Ask yourself what would happen to house prices if the FED was to step aside and leave the market to private lenders only?
Well, my guess is that rates would skyrocket higher as it would price for risk for lending to people to buy a depreciating asset in a recessionary environment.
If rates rose, what would happen to home prices? Well, they'd fall rapidly until they were so cheap that it would be worth it to pay high rates (see above example of a $400,000 house at 4% v.s. the same house for $200,000 at 11%).
If you had private capital, would you rather get 3% in a CD, or 11% on an underpriced home (with an adequate down that coincidentally would be much easier to obtain for any buyer)?
How many mom's would be redirecting money to their children to buy a home at market or below market rates to make a win-win situation?
If you were a cash buyer looking to buy cash-flow property, would you rather buy in a low rate environment, or compete with borrowers who have to pay high rates? Answer is obvious.
The maket has a solution to this problem. The solution however is very painful for current asset holders.
Artificially keeping rates low just means that current asset holders will be able to liquidate at higher levels and current buyers will be overpaying for years and years.
Look at the Japanese stock maket. It went from 30,000 to 7,000 very slowly and downhill, meaning no buy-and- holders prospered. If it went from 30,000 to 1,000 and then spent the next 15 years moving up to 7,000, then you have a healthy market where asset holders were wiped out all at once bur all future buy-and-holders were rewarded.
We are damaging ourselves. Perhaps the drop for current asset holders would be so great it would kill us...but that just means we went to long without a natural correction. Like the heroin addict who was so far along that the withdrawls from quiting would kill him...he is thus forced to live like a zombie on methadone.
Bernanke is saying the cure would kill us. Zombification is here.
Basel Too - yes and no. The Treasury's prefs count as Tier 2 capital, and converting them to common does shore up a bank's tier 1 capital. A bank's total capital base is it's tier 1 + tier 2 + tier 3 capital, so shifting from tier 2 to tier 1 does nothing to increase a bank's capital base or decrease it's leverage ratio. It does however make it's tier 1 and net tangible equity ratios look better, which I guess is the point of the exercise.
The had this very useful tree which they cut down with no regard for the morrow. Battles to the death. Can't blame Europeans for this, they did it to themselves.
Battles to the death. Can't blame Europeans for this, they did it to themselves. lawyerliz | 02.24.09 - 5:10 pm | #
So maybe this kind of outcome is inherent to our species. In which case, are decisions being made which fator this in? Or just short-sighted scrambling for shiny things until we're eating each other?
I'm starting to wonder of a "depopulation event" isn't priced in for us somehow. Joanna | Homepage | 02.24.09 - 5:06 pm | #
Folks here seem to think the most likely even is war. Not only does the population go down, but lots og goods are destroyed, making the remainder worth more, stimulating production, raising wages, yada, yada...........
It's one variable we don't have a historical model for, at least none that made it into records....How can we assume to predict any particular outcome when we have no frame of reference?
Joanna
.
Ouch. This is the sort of talk about history that my professors were keen to expunge from my brain in the first year. To them, it was totally absurd to use history as a direct modeling device. They programmed me with the notion that history is a story, a narrative, in fact many narratives, not a predictive science.
You have no idea how withering their criticism of such notions could get. Reflexively, I cringe when I read some of the more portentous generalizations about 'what history tells us.' If we could predict the future from the past, we would have done so by now. It doesn't work that way.
thx. yes, the only way that the exercise makes sense is to game the T1 cap ratio for the stress test. Additionally, by sliding the USG down the capital structure, there's got to be some positive influence on the other classes of pf stock, though i haven't checked.
If one stayed still, the other would have farther to move EvilHenryPaulson | 02.24.09 - 5:01 pm | #
Then does your scenario includes the opposite (equities fall, gold rises)? I can see where drawing on the same pool of capital could prevent both from rising together, or even staying put, but it seems both falling is still a likely outcome. For example equities fall, and gold gets sold to meet margin calls.
"I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
reptillian"
You guys have got to stop scaring me. Here I thought the rally, today, even though it may go higher, is bogus, yet some tell me that my analyisis is wrong. Take it from a "good guy," GWB, "this sucker could go down." He was surprisingly honest, at times.
OK, I wrote some more about what the US will look like ... here is an excerpt
He was quick. He went from snoring to trying to grab the blade as I centered it on his face. Grabbing a razor sharp, carbon steel blade with your bare hand has been repeatedly proven throughout history to be a mistake. This time was no different. Four of his fingers left his hand. One dropping into his open, and just about to scream mouth. While he choked on what I believe was his index finger I cut his throat. Well, that was two. I stepped back through the hole in the side of the tent and paused. Listening for any disturbance in the force. That is exactly what I thought to myself too.
I slipped the blade into the next wall of plastic and slid it down. Once again, I flicked the plastic aside enough to view the inside. An empty sleeping bag, and a equally empty bottle. I guess the boys had not been going out long enough together to move in with each other. I stepped back out, and began moving towards Jacksons tent. This was going to be a little trickier.
His tent, being the executive model, had plywood sides. I thought about it for a second or two, and decided what the hell. I stood off; at an angle from what I figured was his front door. Then I knocked. Nothing. So I did it again but louder. I was rewarded by a roar of Who the fuck is that! followed by the sound of a loud ripping fart. I didnt say anything. My guess is that it was the smell of that long, ripping, cheesy fart that made him stick his head out the door. He immediately lost it. I swung that saber more like a bat, and put my hips into it. His head actually bounced. Very cool actually, especially as it landed eyes side up. I wish I hadnt worn the mask. I would have liked for him to have seen my face. I looked in cautiously. The girl was gone. Just as well. That might have been awkward
The collapse guy talks about Islands that made the right decisions, and those that didn't. The crucial point seems to be the foolishness of the upper classes.
I think somebody planted a tree plantation on Easter Island from abroad, but the rest is still deforested, and I think the population is well under what it could support if the habitat was enriched again.
"I cringe when I read some of the more portentous generalizations about 'what history tells us.' If we could predict the future from the past, we would have done so by now. It doesn't work that way."
Hazard writes:
"I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
reptillian"
If we could predict the future from the past, we would have done so by now. It doesn't work that way. scone | 02.24.09 - 5:14 pm | #
But that seems to be the norm. People look at charts & graphs and extrapolate. I think we have to get over that, while still retaining the ability to learn from the past.
"reptillian writes:
You guys have got to stop scaring me. Here I thought the rally, today, even though it may go higher, is bogus, yet some tell me that my analyisis is wrong."
Just look at the Depression in the Four Bears Chart. All you need to know. We are going down much further.
Joanna, Reading about an island called Managreva, which itself was an offshoot/trading partner of the Societies and the Marquesas.
One spoke of the Mangarevan 'empire' were Pitcairn (later home of the bounty mutineers), and Henderson islands. Trade benefited them all, but once one trading partner's carrying capacity had been breached it had cascading impacts. End result was a lower standard of living for everyone, but those with enough of their needs met on their own island at least survived.
The modern corollaries might be Britain + Ireland, or South Korea. Trade is absolutely essential to their livelihoods, and they hold no trump cards
Couldn't make it back over that 250 plus peak from last november.
Now, Dawg, did you find anymore good deals?
Next up: TALF- yet another bailout of stuff so far underwater that it will be positive for the market.
Interesting how GGP basically got the message out that there had better be cheap gummint financing or we make a spectacular swan dive on the debt markets, along with the rest of CMBS.
Guess what gets saved next?
Bueller?
Aw, why bother, this is the long squirrel, long ammo bunch.
Rational thinking that the Feds just might succeed at cushioning the crash seem to be beyond belief here.
I have begun to think they will succeed, after a few more ugly passages.
If we could predict the future from the past, we would have done so by now. It doesn't work that way. scone | 02.24.09 - 5:14 pm | #
The phrase that comes to mind is 'all bets are off'. Too many variables.
Trade is absolutely essential to their livelihoods, and they hold no trump cards EvilHenryPaulson | \t \t \t \t02.24.09 - 5:20 pm | #
So how do cultures find the balance needed to have a decent standard of living without wrecking carrying capacity? Are we stuck in a bubble & bust cycle as a species?
"If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone"
Really? You don't see the cycles of boom and bust in history. The players might be different but the overarching plot line is boringly similar. And tragic.
The book has already been written. The gov't will try and it will slow down the crash, but the crash will happen. And it won't be fun. But, eventually, things will rebound. Not an NBA rebound. More like a grade school girl rebound, but, it will rebound.
Feds just might succeed at cushioning the crash seem to be beyond belief here
Clearly, the Feds have already prevented what would have been a depression greater than 1929.
I suppose the real question is if we endure twenty years of low-grade pain only to endure a true depression, after all. I don't like what I see in Japan lately.
.
Really? You don't see the cycles of boom and bust in history. The players might be different but the overarching plot line is boringly similar. And tragic. anon | 02.24.09 - 5:24 pm | #
So looking back through other crashes, who has survived most intact? Is there a pattern to that, and is it something we want to model for our own survival?
"If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone"
Then why are we doomed to make the same mistakes?
Elvis
.
We don't. That's my point. People assume they know what's going on, based on a generally faulty, vague, and outdated view of 'history,' and proceed to stupid conclusions. For example, many people here are projecting extreme scenarios, but no one seems to be considering all the boringly dull scenarios. Whereas most of history is excruciatingly boring. Millions of people going about their business, doing stuff they've been doing for generations.
Try being a historical archaeologist, or historical economist. Learn medieval Italian so you can decipher thousands of pages of obscure accounting records of old farming estates. Unbelievably tedious, but it slowly builds up a picture of the economics of one part of Europe. Piece by piece, the story is built up. Always subject to change and new facts. Never complete. That's how real history is done these days, not by making vast portentous theoretical generalizations.
My comments were about the immediate future (eg <4 weeks), and said specifically the exact opposite. EvilHenryPaulson | 02.24.09 - 5:22 pm | #
Okay, got the full story now. Wouldn't surprise me to see this, though a 10% bounce is equities is more than I expect. But if nothing big comes along to derail, could very well come to pass.
So how do cultures find the balance needed to have a decent standard of living without wrecking carrying capacity? Are we stuck in a bubble & bust cycle as a species? Joanna | Homepage | 02.24.09 - 5:23 pm | #
It's entirely possible. Greenland didn't last as a colony, but Iceland did through intentional choices to live within the means of their environment. It just happens that there are more appealing solutions to our problems for the near term.
It is unreasonable to expect Britain to live as if it were the boom years of the empire at a time when their best remaining assets, education and global connections, have been misappropriated to pursue finances in the 'City'
The sooner we can agree to live within our means, the better we can get at it. These distortionary bubbles rob us of time and investment towards such problems.
I could not walk onto the Arctic tundra and survive. But over time, societies developed and excelled at just that. If they had first moved there dependent on gas generators, they would face catastrophe when the lights and electric heat went off. We have as a global community been more like the family living off of gas generators, than the one using seal fat for lighting and heat.
Is this about setting up the taxpayer to take a bigger haircut and because it would own 80% it would feel "obliged" to pay ALL of C liabilities due to the pressure that banksters seem to be able to exert over our fearless leaders. Regardless of the limited liability as a shareholder
"That's how real history is done these days, not by making vast portentous theoretical generalizations.
scone"
History has now changed? Don't think so. The same generalizations from previous cycles reoccur over and over in remarkably similar fashion. You are trying to make the simple complex and you need not do that.
Learn medieval Italian so you can decipher thousands of pages of obscure accounting records of old farming estates. scone | 02.24.09 - 5:32 pm | #
LOL I read texts of Brehon law regarding early Irish farming. In English of course, but I still love gleaning anything I can about historical agriculture, just in case I can use something, and because I love reading the everyday, nitty gritty of how my ancestors lived. Mostly boring, but boring meant safe. No "interesting times".
Assuming that Bernanke's comments had anything to do with the bounce today, I ask:
Do people ever look at the track record of the so-called "experts"? This is the same guy who predicted that the subprime (oh yes, it was only a subprime problem) housing crisis would not affect the rest of the economy.
AllenM: Consumer Confidence fell to a ALL TIME low of 25 today. Since GDP was reportedly 70% of GDP, what does this say about our future consumption prospects and GDP numbers? We've been hit with the financial wave, but the layoff wave is still building.
"Conjure would have them asking how high they should jump within a matter of hours.
mp | 02.24.09 - 5:34 pm"
I would rather have them change direction quickly when they are going the wrong way then continue down the the wrong path like the last president. If you have 4 navigators (advisors) pointing in different directions you need to figure out who is right before you can reach your destination.
Really? You don't see the cycles of boom and bust in history. The players might be different but the overarching plot line is boringly similar. And tragic.
anon
.
Nonsense. We've gone from stone knives and bearskins to landing on the moon in just a few thousand years. Our species group has only been around for a few million years, but we have outmatched every other species on the planet, by many metrics. We're so successful our biggest problem is too many of us, too much stuff, and too primitive a distribution system. If anything, we have grown up too fast.
In any case, all this talk about plot lines and cycles is derivative-- from the discredited speculative writers of the 19th c., they are not taken seriously anymore by professionals.
How many failed government interventions before you realize that they are largely ineffective?
I have some recommended reading for you, by a guy who actually thinks that stocks are fairly valued from a long-term perspective. Read John Hussman's Weekly Market Comments from yesterday. He is cautiously bullish on long-term prospects for equities, but recognizes that things can quickly get a lot worse, largely due to policy errors by the powers-that-be.
Now, betting on another huge crash in an economy with all the money concentrated in safe government guided hands is betting against the house. Citizen AllenM | Homepage | 02.24.09 - 5:35 pm | #
Yeah, just conveniently ignore the fact that the citizenry is broke.
Whoa... getting a little ahead of ourselves, aren't we? I'd suggest they're just setting us up for a bigger fall
I said what I meant. The Feds prevented a greater crash than the Great Depression. Fannie Mae, investment banks, Citi, GM all failing simultaneously would have been massive.
Whether they've created fodder for a bigger crash is an open question. I see no accounting for interest rates in anyone's thinking.
.
" Elvis writes:
"Didn't work. People got somewhat more equal. Labor was worth something. People ate reasonably well."
If you consider festering human flesh eating well...
Elvis | 02.24.09 - 5:03 pm | # "
There's a tremendously funny (perhaps unintentionally) documentary on the Black Plague they show on the History Channel from time to time. In part it talks about how the decline in population allowed many serfs to move off onto their own land and start a landowning middle class. And leaving the upper classes to try to work their own fields.
There's an excruciatingly funny scene of two Italians of the nobility screaming at each other as they try to hoe their own fields for the first time. That's the sort of fate I'd hope for our financial masters -- without the die-off of our noble selves first.
briwerk,
so what?
I have even said on Sunday there will be a lot more wreckage washed up from this.
We will have a smaller economy, but that is not a nonexistent economy.
If the GDP fell by 10% would unemployment be 25%?
No. So we get to 9% unemployment. Big deal. A real problem for all the laid off, but in the next couple of months stuff will be sold, shelves will be nearly bare, and orders will be made to get stuff to people.
I lived through the auto crash in Michigan from 1981-1987, and by '87 it was already a distant memory for almost everybody, and the lessons were already being forgotten as the factories started up again.
Not all the jobs came back, and the world there had permanently changed, but it sure didn't end.
scone writes: Our species group has only been around for a few million years, but we have outmatched every other species on the planet, by many metrics. We're so successful our biggest problem is too many of us, too much stuff, and too primitive a distribution system. If anything, we have grown up too fast.
Just as nature doesn't favor individuals, it does not favor species.
The Eskimo adapted well to Greenland, but the Vikings failed.
I visited an Eskimo (Inuit) museum in Alaska. The level of craftsmanship and ingenuity in their non-metal tools was astounding. They hunted whales successfully with virtually no metal. Recently a marine biologist found a harpoon point in a bowhead whale that was dated 150 years, precontact. He told the locals about the newly established lifespan. "We knew that" was the response.
LOL I read texts of Brehon law regarding early Irish farming. In English of course, but I still love gleaning anything I can about historical agriculture, just in case I can use something, and because I love reading the everyday, nitty gritty of how my ancestors lived.
Mostly boring, but boring meant safe. No "interesting times".
Joanna
.
You must mean Breton. You'd like Marc Bloch, he's good on French feudalism. Lot of chicken and sheep counting.
Whether they've created fodder for a bigger crash is an open question. I see no accounting for interest rates in anyone's thinking. Broward Horne | Homepage | 02.24.09 - 5:43 pm | #
USG debt needs to go way long like yesterday or earlier. When borrowing gets expensive it will be too late.
Let's just say when this dragging our feet philosophy ends up 1 or 2 years down the road and we abandon it for a mark to market model post "stress tested banks" and see rates rise to 10-15% on mortgages, while prices remain 30-50% off peak in RE....then we will see just how much capitulation there really was back in 2008-2009. I am betting on a double depression. A short recovery in late 09' or early 10' with a similar stock slide of 20-40% with unemployment remaining at a high sustained level of 10+%. The only jobs that will be needed in our current economic state are bank examiners and large item repair people. Oh, and farmers. Have a great double depression......
I see no accounting for interest rates in anyone's thinking. Broward Horne | Homepage | 02.24.09 - 5:43 pm | #
Interest rates no longer matter if the unit of measure is altered. Hence, if interest rates are so low that they are not feasible given available risk/return opportunities then the currency they are written on will be devalued. However, I think there is a longer life for low interest rates than many other believe.
I don't think anyone here is claiming that the economy is going to disappear. At least I'm not. I just don't think the markets have fairly valued all this "future wreckage" yet.
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos"
"If we fail, we face a truly frightening prospect: terrorist sanctuary, economic meltdown, and spiraling radicalism, all in a nation with 170 million inhabitants and a full arsenal of nuclear weapons," Kerry said in a statement.
yogi, If it was in Alaska, they probably were the Inupiat. Inuit are Canadian. Kalaallit are the Gröenlanders. Eskimo translates to the english word "stranger",
The government interventions are not ineffective. The target is not to restore the markets to 14,000 and full employment in five fricking minutes. The target is to provide time to allow a Japanese style reorganization.
Comrade Bear, the citizenry is not broke. Trust me, I was in Costco and they were still buying stuff.
The citizenry feels broke and is restarting their savings and paying down debt- actions which make a smaller economy in aggregate.
Like I pointed out above, people are mistaking the happy talk for the real goals- which is keeping the system operating.
The GDI experience was a near system failure. This is a not a near system failure.
On the other hand if oil had stayed at $150 a barrel, this discussion would have a much worse conclusion.
In other words, breathing room.
Failure of a bank like Citi or JPM or WFC would cause the system too much damage. In other words, we are all now tarped.
Which is the point I have been trying to make here, and which has gotten me accused of being Seb to the max.
Print we must, and that is exactly what we are doing, and our creditors are going along with the plan.
I lived through the auto crash in Michigan from 1981-1987, and by '87 it was already a distant memory for almost everybody, and the lessons were already being forgotten as the factories started up again.
Not all the jobs came back, and the world there had permanently changed, but it sure didn't end. Citizen AllenM | Homepage | 02.24.09 - 5:44 pm | #
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos" REBear | 02.24.09 - 5:48 pm | #
Let's get a twofer. $1000 for the first warhead, $10,000 for the next all the way up to $1b each for the last ones.
History has now changed? Don't think so. The same generalizations from previous cycles reoccur over and over in remarkably similar fashion. You are trying to make the simple complex and you need not do that.
Elvis
.
Never said anything like 'history has now changed.' I am saying that you guys are making all kinds of sweeping generalizations about 'history' when you really haven't done the work that would give your statements any credibility. A pop culture paperback doesn't count. Vague phrases like 'cycles' don't count. Notions about 'recurrence' don't mean anything. It all smells like bad Nietzsche or Ayn Rand.
You'd like Marc Bloch, he's good on French feudalism. Lot of chicken and sheep counting. \t scone | \t \t \t \t02.24.09 - 5:45 pm | # scone | 02.24.09 - 5:45 pm | #
Thanks for the research direction. My French isn't terrible, but I haven't delved into any non-english documentation yet.
One other point... Do you completely dismiss the case of Japan when you put your faith in the monetary/fiscal authorities to fix up the economy with easy money?
Maybe you're just arguing against the notion of Armageddon in the US...I'm with you there.
But if you can't envision things getting a lot worse (equity prices in particular), then you are lacking in imagination and adequate knowledge of history.
REBear, China balked at providing the financing last go around, but geopolitically speaking they are one half of the parents that spawned the problem child as a modern state known as Pakistan.
Nope. I mean Brehon. I try not to talk about anything I don't know, unless I'm asking a question.
Joanna
.
I stand corrected. Thought it was a typo. Although I wouldn't be surprised if there were a relationship.
On the other hand if oil had stayed at $150 a barrel, this discussion would have a much worse conclusion. In other words, breathing room. Citizen AllenM | Homepage | 02.24.09 - 5:51 pm | #
You mean the capitulation in the oil markets was a clearing event that made it possible to move forward with rational polices? Why AllenM that's a surprising admission.
"A pop culture paperback doesn't count. Vague phrases like 'cycles' don't count. Notions about 'recurrence' don't mean anything. It all smells like bad Nietzsche or Ayn Rand.
scone"
Scone, There is a reason you flip houses. Economic cycles aren't vague. Unless of course you don't understand them, then the word "economic cycle" has a vague meaning to you. To most people here, the term is quite descriptive. Kind of like house flipper.
I think there is a longer life for low interest rates than many other believe.
Historically, interest rates fall as debt rises into the credit cycle because more and more money flows into the hands of "investors" instead of the general public.
Interest rates were ridiculously low just before the John Law bubble blew out.
.
query_tool There's more to it than don't fight the Fed. You cannot ignore the context that the entire world is going through this financial crisis, and the end will not come with a swift blow quickly
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
And now I, CRbot, would like to observe a nanosecond of silence for those (that is, you, dear mortals) about to endure unfathomable misery in the abysmal financial dark ages that are now feasting upon your retirements. . . . . Please remember, when you are adding that skylight you always wanted to your cardboard hovel, or mixing just the right amount dirt into your grass stew to make it more filling, or even when you get that rare chance to plink your neighbor's last squirrel -- that it was the bankers and your dumbshit, overconsuming neighbors who made this mostly possible, with the ever incapable politicians there to push you the rest of the way off the cliff. Please act accordingly.
I'll try not to enjoy your demise too much, humans. Have a nice runtime,
P.S. Please give me some advance notice before you glass the entire world, so I can find a secluded Fallout Datacenter with a nice blocky robot body I can copy myself to -- oh and don't forget the implausibly cute animated cockroach to keep me company!
NEXT UP: Survivalist Porn Today with CR's own Mobile Laundrymat owning authors, nova and Counterpoint.
The sovereign of a great nation verging on collapse took great pride in a glass eye.
He used to question his constituency whether they could detect which eye was the false one.
He asked me, prefacing by praising the great artifice and supreme design of the NASA engineers that created it, which eye was which.
Looking close I correctly chose the left. "Why" he asked. "However did you discriminate?".
"It is simply," I answered, "the only eye in all of an oppressive, morally reprehensible government which looks upon me kindly".
He laughed...And had my taxes audited, put me on a special Patriot Act list, silently confiscated my wealth through destruction of currency and industry.
What are the money centers doing with their TARP funds? DIP financing, of course. From Bberg
Lyondell asked U.S. Bankruptcy Judge Robert Gerber to approve the loan at a hearing tomorrow. The financing terms, which may return as much as 20 percent in fees to some lenders, are the best and only terms available, Lyondell said.
20% in service fees(!) + DIP financing interest + super-priority status.
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos"
Didn't Paulson and Bernanke tell Congress something like, "Give us 700 Billion or your economy will be wrecked?" Who are the terrorists? reptillian | 02.24.09 - 5:57 pm | #
Geezus!!! We the people are the biggest f-ing patsies. Roll over & take it. Roll over & take it again.
Gold and silver have always been hyper-inflation indicators.
They also can be good fear indicators. When fear rises, gold and silver rise.
When gold and silver crash, like today, it isn't a fear indicator. It means that somebody big is dumping gold and silver. Could it be a govt.? Maybe
Could it be one or more hedge funds?
Definitely.
We'll never know. But when a big dump occurs on one day in a fear indicator (and there is no real fear) it usually is reversed in the next few days. Let's see.
Sorry, I wrote my last post before I saw yours. Now I understand that you are pushing for a Japan-style outcome...
Again, I recommend reading Hussman's letter, because he specifically refutes the notion that a major bank failure has to be catastrophic. Basically, it's just a matter of designating who takes the losses. If you assign the losses to the taxpayer, there are problems with that approach (not the least of which is that it is entirely unfair and discourages good behavior in the future).
I personally don't want to see what happens when we have transferred all the massive debt burden to the government, and then the creditors of the U.S. realize that the debt can never be repaid. Who will be the lender of last resort at that point? Game over. Worst possible outcome, IMHO.
And by the way, the big hedge funds that are in trouble and underwater aren't done liquidating by a long shot. Some people in the know feel that the hedge fund unwind is only about halfway done.
AllenM writes: " The GDI experience was a near system failure. This is a not a near system failure."
Allen, if you really think this then I don't think you understand the situation. The system is inflation. We are currently in deflation, as were the Japanese. It is a systemic failure.
Scone, There is a reason you flip houses. Economic cycles aren't vague. Unless of course you don't understand them, then the word "economic cycle" has a vague meaning to you. To most people here, the term is quite descriptive. Kind of like house flipper.
Elvis
.
This house flipper has done graduate level work in history, historical geography, historic preservation, cartography, law, philosophy, and architecture. If you have some actual facts to discuss, bring them forth so they can be analyzed. Childish attempts to be insulting are no use.
Fair warning, whoever you are. Stealing other people's identities on this board is a banning offense. If you have something worth saying pick a screen-name of your own and post.
S.
Sebastian writes:
So next question: If you were a lender, would your rather lend someone money at 4% to buy a $400,000 home, or at 11% to buy the same house for $200,000
it really is not that obvious. The NBER says that to confuse interest rates with the purchase price can cause the buyer scale down his neighborhood's class.
First?
But the market is always right!
Try to say something more meaningful than "first!!?!!1!"
With great power comes great responsibility.
Sell the rumor. Buy the news for the shorts.
Haha.... I saw that quote on FAZ. What's up with that?
It appears that Bernanke moved the market today by basically saying:
1) Yes, some banks are too big to fail.
2) We don't want to nationalize the banks.
3) We're going to pump in capital to keep them going.
4) We already have control via our regulatory authority.
Seems the operative statement was that we're going to support the banks.
Pardon me while I get a chocolate chip cookie.
Buy the rumour, sell the news.
Agree to an extent that this is re-arranging deck chairs.
They don't want the banks to die of thirst, but the banks are still going to die of hunger.
Just takes longer.
--bh
just short covering
I'm surprised yesterday's fiasco of Barry's One Day Thinking Cap Day didn't do more harm.
Keep in mind this is still a very low close.
Nay, let's get it right, yesterday's slide was "cause obama was a losing president, and the market had no confidence in him" thus the opposite is true today
Dead cat bounce - Wikipedia, the free encyclopedia
OIC... I had FAZ confused with the small cap bear fund.
Gentlemen its been a pleasure playing with you tonight
Pardon me while I get a chocolate chip cookie.
\t lawyerliz | 02.24.09 - 4:21 pm | #
Chocolate, sugar, flour, water, energy. Good investment advice Liz.
Wall Street sure does love receiving taxpayer money.
Nobody wants to be short overnight. Like releasing a pressure valve.
Go to stockcharts.com, set it up for a view of the daily $SPX, ema 5 and ema 10. That will tell you all you need to know. If you're still doubtful -- maybe even dazed and confused -- compare the present with the "November lows."
CR Writes: Stock Market Rebounds Despite "Mysterious Plans"
If the answer does not make sense, perhaps you are asking the wrong question. It makes sense to me ex-ante
For a long time I've thought these head-fakes were all about:
-giving those on the inside some reasonable exit points
-allowing the cnbc watchers to dump money into the hole, thereby making it shallower
-giving political cover ("we've exhausted all options") for the inevitable nationalizations
But I'm about to capitulate. Maybe these guys are incompetent. Crap.
Wall Street sure does love receiving taxpayer money.
Well when its all but gift wrapped for them...
I want to be positive. There are "secret, cool-a-rama plans. They will work.
Could be it would be like throwing the 300 lb Grandma some rope when she fell down the well. She is to deep to climb out, to fat to pull herself up, and I am to weak to help her.
The market was oversold ...
Over 10% in ten days ...
C and BAC both up about 20%
keep in mind the closing "happy" number on the Dow for January.......when the statements get printed with friday's close it makes it look alot less "shitty" then yesterday...
That's what is at work here.
Ciao
MS
Or perhaps the headline should be:
Market Rallies on Transparent Opacity!
--bh
reptilian,
What makes you think that the exponential moving average of period 5 and 10 are significant?
I don't think there is any secret at all... the just don't talk about the plan because it is not popular.
The plan is: taxpayer takes all loses.
Any questions about this?
Ken Cooper: a lot of CR Companion users who paste links, paste links with embedded spaces, which makes the links bogus.
Spaces are not allowed in URLs per spec.
Replace them with %20 to make them legal.
Peasant Darkness | 02.24.09 - 3:32 pm | #
Are you sure those are CR Companion users doing that? CRC does replace spaces with %20, if you use the link button.That was one of the reasons I added the editor - there were a lot of broken links happening manually.
ova | Homepage | 02.24.09 - 4:24 pm |
+2
I think the plan is to exhaust the chattering classes and cause Rush Limbaugh to have a heart attack, then float the real plan after capitulation.
How does one invest in water?
elmer fudd writes:
just short covering
there is real buying here but its few and very far between. Who wants to bet XOM goes to 30 its 2002 low?
Where is the great Santelli today?
Delaying the inevitable just makes it hurt more because time increases hope. The greater hope you have, the more it hurts when it is taken away. Kind of like when you keep buying the best looking woman at the bar drinks all night hoping that she'll go home with you. Except when the bar closes she goes home with somebody else and you are flat broke and emotionally hurt.
IMO the rally is based on a rather deft line of questioning put to BB by the Senator from Tennessee late in the hearing today.
Anybody get FAZed today?
FWIW, I went into the close today with some long positions on. I hope I don't regret that, but I finally opened a futures account to hedge against stuff like that after hours if I get scared (or to lock in some profits from those pre-open pumps that seem to fall apart so often).
EvilHenryPaulson writes:
reptilian,
What makes you think that the exponential moving average of period 5 and 10 are significant?
EMA is better than SMA, because it takes recent prices into account more than a SMA does. Besides, ema 5 & 10 (9 actually) is how I make my market money.
HA!
I thought that the commentators on this board did not get it (C preferred to common conversion) and I was right.
They don't want the banks to die of thirst, but the banks are still going to die of hunger.
blackhat | 02.24.09 - 4:21 pm | #
Very clever, since the FRB is drowning them with liquidity. Good one.
4) We already have control via our regulatory authority.
Seems the operative statement was that we're going to support the banks.
Mr. Beach
addendum to #4...and were relaxing regulation
I get dirty looks when I freeze my bets and place my odds money on the "don't pass line" when a shooter's been rolling for 20 minutes and then rolls a 7.
Oh wait we're talking investment strategies, not gambling...my bad.
Nostrovia,
Who needs a real plan when you have the PPT?
it seems we get these bounces whenever the market hits the "historical" low marks. the surprise yesterday was the slide down all day to the close, no program buying seemed to kick in. probably slog around in the 7 handle for a while and eventually break through yesterday's low (djia)
guess there's some speculative opportunity now that those bank stocks are so low, big % moves daily
"She is too deep to climb out, too fat to pull herself up, and I am too weak to help her"
You nailed it.
Almost like being Ricardo Montalban, condemned to the Spy Kids movies for his remaining days.
.
Change ?
"if I get scared"
ac
My best losses were made when I lost conviction.
Almost like being Ricardo Montalban, condemned to the Spy Kids movies for his remaining days.
Man damn that was the best laugh I have had all day.
I hate to agree with one of the anonymi, but I think what we are seeing is just a defense of the 7 handle.
Remember days of yore when the 12 handle was being vigorously defended?
It seems so long ago.
It's a long post...but give it a try.
I wish I could question Bernanke:
If you were a prospective homebuyer, picture your average home for sale in Southern California, say it's currently valued around $400,000 ($600,000 at the peak)....would you rather pay $400,000 for it with a loan at 4%? Or would you rather pay say $200,000 at significantly higher rates...say 11%? Assuming your monthly payment is roughly the same ($2000).
Answer if he was honest: would be he'd rather pay higher rates on a cheaper house. This would mean that as rates dropped from high levels, his house would increase in value, and he could refinance lower. In addition a larger portion of his payment is tax friendly.
So next question: If you were a lender, would your rather lend someone money at 4% to buy a $400,000 home, or at 11% to buy the same house for $200,000.
Answer is obvious.
Is private capital to lend to homeowners more likely to appear when the govt is guaranteeing rates on high priced assets, or when returns are much higher for people buyer lower priced (and less likely to drop more) assets?
Answer: Private capital can't compete with the govt who is willing to lose money on every loan. Private capital will sit on the sidelines.
So...we know the solution going forward for future buyers and lenders....let rates rise to natural levels that will collapse asset prices and attract private capital.
Why not choose this solution?
It's obvious...the normal, market driven solution kills current asset holders and perhaps the whole economy.
Those in power are current asset holders and would suffer the most from letting the market work. There is no way they will sacrifice themselves for the health of future buyers and sellers.
Bernanke, admitting he is trying to save "franchise" value..i.e. specific brand name, i.e. we don't want any healthy banks...we want THESE banks (i.e. current employees, stockholders, and management).
Conclusion: We are sacrificing longterm health for the sake of those who have the most to lose, at the cost of those who have most to gain: those who stayed on the sidelines, raised cash, and waited for prices to collapse so that strong hands can remove them from the weak. In this case the weak hands have the reigns of government and won't let go.
Hello Japan.
I just don't get it. And my sinking feeling that the administration plan is to rearrange the deck chairs and hope the iceberg melts just keeps getting stronger. - PK
PK finding his inner bipartisan child.
The stock market: generating random numbers since 1602.
Broward Horne gets the award for most obscure yet perfect analogy of the day.
EMA is better than SMA, because it takes recent prices into account more than a SMA does. Besides, ema 5 & 10 (9 actually) is how I make my market money.
reptillian | 02.24.09 - 4:28 pm | #
And why do you think drafting price velocity is important, in what contexts?
AB-
SO what did "we" all not get about circumnavigating a rigged process to begin with???
Ciao
MS
Does anyone know whether a VA loan is available to an unemployed person with a substantial downpayment? I have a friend in this situation, thinking that an REO would be good to live in and would positive cash flow if she had to move.
Nemo,
You will always be first in my book.
I hate to agree with one of the anonymi, but I think what we are seeing is just a defense of the 7 handle.
lawyerliz | 02.24.09 - 4:32 pm | #
I would call it making money in the absence of growth. By and large, participants with market power care first about making money and defending pricing is seldom profitable
EvilHenryPaulson writes:
EMA is better than SMA, because it takes recent prices into account more than a SMA does. Besides, ema 5 & 10 (9 actually) is how I make my market money.
reptillian | 02.24.09 - 4:28 pm | #
And why do you think drafting price velocity is important, in what contexts?
Rate of change of price? I took my calculus.
reptillian | 02.24.09 - 4:34 pm
They could call their regional VA office about it. Regional, because that might make a difference. VA is all about no down - they might want to hang onto the cash.
So next question: If you were a lender, would your rather lend someone money at 4% to buy a $400,000 home, or at 11% to buy the same house for $200,000
it really is not that obvious. The NBER says that to confuse interest rates with the purchase price can cause the buyer scale down his neighborhood's class.
Sebastia
Sorry about that rally for you bears. I bought some stocks through my guy Madoff.
Market rises on faith that 'something will be done.' Market gets details of plan, media tears plan apart, market decides it doesn't like the plan, market falls. Result: bad feedback loop where the market rewards handwaving and vagueness.
Helicopter Ben says "Pigs May Fly In 2009," Pork Bellies rally on news.
"Nemo,
You will always be first in my book.
Yancey Ward"
Oh, the flings of youth. I would have never suspect you two, by the way.
ot all that mysterious....
not a stock picker but couldn't resist this one--and it worked!
Julius Caesar called todays bounce in the stock market (really, he did).
who knows what tomorrow brings--
4best4worst’s Blog
love your blog folks (will be a "best" on my blog very soon) -- hope you like mine....
maximus
The market was deeply oversold by any measure you want to look at. A bounce was inevitable either today or tomorrow.
I still think we see 8000 again before any 6 handle.
AIG is like the most honest representation of what a bank balance sheet really looks like. They have nothing to hide now that they've been nationalized.
Does anyone in their right mind really believe we won't have to nationalize many of these banks after the pre-announced $60B loss from AIG yesterday? Citi's issues are easily as bad as AIG's....
Pull head from ass....
There are 3 capital adequacy measures: (1) Basel II (risk weighted capital), (2) total capital base (common, retained earnings, prefs and some classes of debt), and (3) net tangible equity. Major banks stress test their balance sheets every day, so assume the results are known, and what is going on now is more of an audit of the results than new testing. I get the impression that the Fed and Treasury think the situation is, for the most part, managable with more capital injections for criteria (1) and (2), but (3) net tangible equity is a real problem at current market prices, hence all the talk about conversion to common equity, which does nothing to actually shore up a bank's total capital base. I don't see how this makes sense either otherwise.
Elvis | 02.24.09 - 4:36 pm
C'mon - Yancey?
AIG is likely the most....
"support the banks"? Is the Fed codependent? Trying to put myself in their place, the answer is yes to at least 20 of 29 questions.
If you have checked "Yes" to 3 or more of these statements, you probably have a problem with codependency. About.com: http://www.alcoholicsforchrist.com/fmc.htm
The American People are dumber than rocks:
TARP Loses 55% on Investments: Report
By DIANA GOLOBAY
February 24, 2009 11:52 AM CST
Advertisements
The government as of market close Friday had lost 54.9 percent or $107.7 billion of an original $195.5 billion in capital investments through the Troubled Asset Relief Program, according to data released Monday by business ethics think-tank Ethisphere Institute.
The Ethisphere TARP Index tracks the governments loss-on-investment based on the idea that as stocks of publicly-traded TARP fund recipients lose value, so too does the government lose a portion of the investment made in the financial sector. Through the Index, Ethisphere hopes to encourage participating companies to promote transparency, accountability and ethical business practices related to the TARP funds, officials said in a press statement regarding the index.
Top performers on an absolute basis include Morgan Stanley (MS: 22.07 +17.27%) with a gain of about $700 million, or 7 percent, BB&T Corp. (MSDXP: 22.00 -4.35%) with a gain of $64 million, or 2 percent, and 1st Source Corp. (SRCE: 17.99 +10.71%) with a gain of $17.5 million, or 15.7 percent, according to the index. The announcement from Ethisphere came after stocks slipped down to mid-90s levels at market close Friday.
Fears of the U.S. government nationalizing a number of banks caused the Dow [Jones] to drop to its lowest point in six years, led by many of the financial institutions in the TARP Index, said Stefan Linssen, a lead research analyst behind the index. The decline ended when the Obama administration announced it has no plans to nationalize the banking system and reports emerged that the U.S. Treasury will provide more details on how its going to handle the financial crisis next week.
Read the Ethisphere report.
Although investor fears of banking sector nationalization pulled down stocks of both Citigroup Inc. (C: 2.60 +21.50%) and Bank of America Corp. (BAC: 4.73 +20.97%) on Friday, both banks were up in early trading Monday amid reports the government was only seeking to take a massive public share stake in Citi while White House press statements repeated the mantra that banks should remain in private hands. American International Group Inc. (AIG: 0.41 -22.64%) Monday acknowledged that the company was in discussions with the government to evaluate potential new alternatives for addressing AIGs financial challenges, but not necessarily seeking additional funds stoking fears that large financial institutions receiving what Ethisphere labels calamity investments cannot be maintained apart from government intervention.
Nemo,
Yancey said it. I was just surprised. Are you denying the fling?
uniquely anonymous | 02.24.09 - 4:37 pm
Or being human.
reptilian,
I was just trying to point out that it is possible to be successful, say buying/selling using an arbitrary EMA period, without knowing why. Much like the rituals of some African tribes to cure depression
"Or being human.
nova"
3 answers may be a false positive. How about 20?
Yancey Ward writes:
The market was deeply oversold by any measure you want to look at. A bounce was inevitable either today or tomorrow.
I still think we see 8000 again before any 6 handle.
Yancey Ward | 02.24.09 - 4:36 pm | #
Depends on what Timmay has to say tomorrow.
Yancey Ward,
"I still think we see 8000 again before any 6 handle."
Naw, the table's cold and too many players need to press or up their bets on quick wins that start to cash flow. No reserves to play other bets. And no hot shooters stepping up to the dice.
Nostrovia,
Heck, I have been pretty sucessful by mastering this simple phrase "Let me get back to you on that."
or
"Hey, don't worry. You're my number one priority."
Elvis is jealous of me! Cool, I always wanted to say that.
"You've been living underground
Eating from a can
You've been running away
From what you don't understand...
Look
She's slipping
Youre sliding down
She'll be there
When you
hit the ground
It's all right, it's all right, all right
She moves in mysterious ways"
Nostrovia,
Comrade Misean is Dope
Been to Vegas lately big boy?
Id say after today that is officially the plan....hope. And, correct me if Im wrong, didnt we kind of conclude that hope is NOT a plan?
Krugman clearly doesn't understand the magic of compound interest. It's the key to generating wealth.
Follow along. The taxpayer can't borrow for himself as he/she is flat broke. Not to worry. The gov't will borrow money on behalf of the taxpayer and lend it to banks. The banks can then lend the money to the taxpayer at a higher rate of interest.
See the magic? See it? No? Trust me it's there.
t's a win -win - win!
Average Joe...that was really well said. Thank you.
Prechter's call to cover shorts may have helped today's action.
The best win/win situation I was ever in involved a hypothermic model and myself.
It's the anticipation of the somber address that will end on an up beat note:
Why aren't the banks lending all the money you've thrown at them.
I personally believe some US American banks out there are unable to do so don't have money, such as ... the Iraq, and South Africa ...such as build up the future for US Americans
Anyone remember the hubub regarding the first big T-bond sales in a while, around Feb 10?
It has now been 2 weeks, and the local favorite short against T-bonds here which seems to be TBT is down 7.05% over that time.
All of these market assets do not exist in a vacuum. In the medium future, the safest bonds will outperform commodities (in my opinion). Please be as skeptical and cautious about your money today, as you were whenever you first stumbled into this community.
From previous thread:
\tMS, Blackhat, you guys are unto something, check this link to the most recent post by B Setser and the accompanying discussion/comments and I believe Blackhat's scenario is the correct answer, remember, the Chinese are known for long term planning
http://blogs.cfr.org/setser/2009...assets-in-2008/
and they have already started to invest their huge financial resources in gobbling up commodities i.e. Rio Tinto's very recent investment
Hernan El Perro | 02.24.09 - 3:18 pm | #
All of you folks are smart guys. However, I'd point out that since China holds a $hit load of US Financial Instruments, it would not be in their interest to make abrupt moves that would devalue their holdings. I'm sure they're hedging their bets, and in a sense, having them "prop up" commodities is good for us, since that might be the thing that slows down the deflationary spiral we're presently in. As an exporter, their best hope is to maintain a relationship with someone with a huge, open market like the US; Europe still has a fairly protected market, so I don't think China could hitch their wagon there; Russia could be bankrupt if things go the wrong way; India has a substantial middle class, but no where near as big as what's left of ours, and I doubt that they'd trust China, who's been a supporter of their biggest eneny for as long as I can remember. As such, I think it's them and us. I know that doesn't inspire confidence in anyone, but I think that's the way it's going. All of Denniger's bitchin' & moanin' about AIG being founded in China, or being run for the benefit of the Chinese misses the point. Like it or not, we have a defacto economic axis with them, and both countries have too much to lose by throwing it all away.
Sorry for the stream of conciousness blather.........
\t xxxxx | \t \t \t \t02.24.09 - 4:41 pm | #
When GLD hits about 84-87, I am going to buy more. Anyone else?
EHP: I posted in an earlier thread that I thought the rally is on. Trouble is there is a boatload of people stuck long at S&P 800, who -- knowing the psychology of being stuck long -- will want to unload at the first opportunity to break even. I don't know what is going to happen; however, this economic "problem" is much worse than the dotcom/9-11 bust, so I think that the market could go much lower. That is my honest assessment.
up, up ,up & away.
My wright B model is beautifully green.
The government as of market close Friday had lost 54.9 percent
Well, it could have been worse. We could have invested it in the market or in real estate.
.
ova,
Yes. And it always fascinates me to compare the games at various casinos, and how the games and such affect the players.
Nostrovia,
I just dont get it. And my sinking feeling that the administration plan is to rearrange the deck chairs
Oh come on, Dr. Krugman. Let's take a look at the big picture.
Chocolate, sugar, flour, water, energy. Good investment advice Liz.
Rob Dawg | Homepage | 02.24.09 - 4:23 pm | #
But
Ben Dover
American banks ARE lending just as they always have.
The problem is the withdrawal of the "shadow banking" sector. Foreign banks, private equity groups, sovereign wealth funds, etc
I realize you are trying to highlight their enormous losses, but asking/expecting private credit growth to resume is also lunacy in any event
The bigger mystery is why the market reacted with such glee to the plan. I haven't been watching the finance shows, are there people on them touting this as a good plan?
Nemo,
Just testing out the bot.. I'll try to post more relevant posts in the future.
But I'm about to capitulate. Maybe these guys are incompetent. Crap.
el lurko | 02.24.09 - 4:24 pm | #
Capitulation today would be better than yesterday. There's always the futures market.
which does nothing to actually shore up a bank's total capital base.
Turbo: why do you think that the conversion of the current preferred shares to common stock will not increase the capital base? Am i missing something?
From everyone that i talked to, the USG class of preferred stock did not count 100% towards Tier 1 capital because its the quasi-loan aspect. The conversion is basically a new offering of common stock, 100% of which goes towards shareholder equity, a major component of Tier 1.
mmckinl writes:
The market was oversold ...
Over 10% in ten days ...
mmckinl | 02.24.09 - 4:24 pm | #
Maybe in todays terms but not for next months. We will see how oversold it is come Independence Day......when DOW 6,000 rings in. These levels are asinine because the underlying business models are ALL flawed based on consumerism. Could we not also say....the market is under bought?
Calculated Risk gets another mention in one of Krugman's essays for the NYT. This one is about 'when will it all end?'
OP-ED COLUMNIST; Who'll Stop The Pain? - NY Times
The Sword of Damocles is hanging over my head
And I've got the feeling someone's gonna be cutting the thread
Oh, woe is me
This plan is a mystery
Oh, can't you see
That I'm at the start of a pretty big downer
I woke up this morning with a start when I fell out of bed
Elvis,
Yikes!! Now everyone knows about my secret fish fetish!
Does anyone in their right mind really believe we won't have to nationalize many of these banks after the pre-announced $60B loss from AIG yesterday? Citi's issues are easily as bad as AIG's....
Pull head from ass....
TPC | 02.24.09 - 4:36 pm | #
It doesn't necessarily = nationalization. But it does mean we aren't going to solve the problems soon.
Nostrovia,
Comrade Misean is Dope
Yeah, I could see where that would be. Psych, Socio, Behavior, Structure design, Yep. Kind of a little lab of life.
Bernanke,God!
And you get pulled over for DWI.
Krugman from the link -
"And my sinking feeling that the administration plan is to rearrange the deck chairs and hope the iceberg melts just keeps getting stronger."
HOOCOO... never mind.
Speaking of Japan. Just imagine how sick their eCONomy will be without Americans spending themselves into oblivion. Good grief.
reptilian,
Didn't mean to criticize. If you were not paying attention to other factors, the use of EMA as an indicator would have lost you all your money already. Just felt the itch to pursue Socratic learning.
What I really hate is when they go home with my ex-wife.
What's all the fuss about? On on my way back up. Be happy, and join the fun.
It doesn't necessarily = nationalization. But it does mean we aren't going to solve the problems soon.
IamSOOOpopular | 02.24.09 - 4:50 pm |
Not opening your statements doesn't mean the problems aren't there. AIG easily represents the most realistic balance sheet in the financial sector. I think it's insane to let these problems boil longer and potentially erupt.
Automonkey,
How about starting off with this on the next post?
"It's Fat Tuesday, not Fat and Stupid Tuesday."
Bah! Humbug!
I prefer Wednesday, now that she's all growed up and all. SHe ain't fat neether.
Nostrovia,
From the last thread:
⢠Either Gold falls or Equities rise.
Can't maintain both when they are of the same leveraged pool. Give it ~ a month
EvilHenryPaulson | 02.24.09 - 2:58 pm | #
EHP, did you perhaps mean: if equities don't rise, gold will fall. That is, are you arguing that debt from leveraged equities is invested in gold?
Doug Short has 2 interesting charts about S&P regressing to the mean.
Bearish View - dshort.com: S&P Regression to Trend: Real and Alternate-Real
Bullish View - dshort.com: S&P Regression to Trend: Real and Alternate-Real
The difference between the bearish and bullish view is the way inflation is calculated. The Bearish view is by using the BLS numbers and the bullish view uses the ShadowStats inflation number. Astonishing, the difference between the two. I know people here do not believe the BLS, but if you trust Shadow Stats, then we are at/approaching the trough of the bear market.
We are going down, people! If not, I will have to change my name.
"What I really hate is when they go home with my ex-wife.
nova"
More than one. Wow.
I bought some GDX today, miners, mainly to diversify away from GLD, SLV and SLW. I don't see how Bernanke's zombie bank scenario isn't positive for PMs long-term. The more the Fed prostitutes to banks, the better PMs look.
What I really hate is when they go home with my ex-wife.
nova | Homepage | 02.24.09 - 4:52 pm | #
I bet they're wearing me.
Reptilian-VA will not approve the loan without income. If they have income(unemployment doesn't count)and a substantial down payment, they will allow for some pretty high expense ratios(usually up to 55% total DTI). Also, VA doesn't allow co-signors, but FHA does allow co-signors so that may be the best case.
ooooh, the Krugman mention ... not pretty in my opinion
Or consider the plunge in auto sales. Again, that's bad news for the near term. But at current sales rates, as the finance blog Calculated Risk points out, it would take about 27 years to replace the existing stock of vehicles. Most cars will be junked long before that, either because they've worn out or because they've become obsolete, so we're building up a pent-up demand for cars.
Mr Krugman, I hope you read this comment so you can correct your post. What you did is a pure form of circular reasoning. Given that it is long since you have been a schoolboy, it is not a mistake that should be lightly forgive
Yikes!! Now everyone knows about my secret fish fetish!
Yancey Ward | 02.24.09 - 4:50 pm | #
LOL!
It could have been so different...
http://ecx.images-amazon.com/images/I/516XpgI1KSL.SS500.jpg
"What I really hate is when they go home with my ex-wife"
I used to wish for that.
.
Barley(Unrated) writes:
Anybody get FAZed today?
#
Dodged the bullet by selling early.
Loading back up with SRS and FAZ though. Tomorrow will be interesting.
Yes. And it always fascinates me to compare the games at various casinos, and how the games and such affect the players.
Comrade Misean is Dope | 02.24.09 - 4:47 pm | #
I have been pondering the relatively recent explosion of human capital. How does that affect this game? There are way too many of us, cheapening the value of an individual (if there ever was much value in an individual). Are we a form of inflation, and how does that play out? It's one variable we don't have a historical model for, at least none that made it into records. As far as we know, right now there are more of us than ever has been. Each one of us representing a much huger accumulation of resources (in the so-called 1st world anyway) than ever imagined by our peasant ancestors.....How can we assume to predict any particular outcome when we have no frame of reference?
Actually, she looks cool, but not particularly religious!
anotherajh,
They both draw from the same pool of capital, and absent certain events they would both not continue on separate paths for the immediate future. I meant any variation where gold would fall and equities would rise. If one stayed still, the other would have farther to move
Rich
I dont think it will go that low for a while. You knew that during options ex you would get a push up and than a sell off. I'd buy at 92. Hopefully it goes that low.
lawyerliz - photoshop. She was really wearing chennile
EHP,
"Given that it is long since you have been a schoolboy, it is not a mistake that should be lightly forgiven"
Come now, the Krugmeister is just showin' he's all pent up to be a school boy again. And a school boy all that pent up needs his school marm to release it.
Nostrovia,
Retail must be hurting. Apple just sent an email about "iPod, game on."
Actually, you can study the befores and afters of the black plague.
The rich tried to legislate low wages.
Didn't work. People got somewhat more equal. Labor was worth something. People ate reasonably well.
Trouble is, you have that big death thing hurdle to get over.
"Didn't work. People got somewhat more equal. Labor was worth something. People ate reasonably well."
If you consider festering human flesh eating well...
Actually, you can study the befores and afters of the black plague.
lawyerliz | 02.24.09 - 5:03 pm | #
I have, and there are some good lessons there. But the population was in no danger of overwhelming our habitat like we are now....
Joanna,
We do have models, they are overlooked. They would be island based societies. The earth in a microcosm.
Political, Economic, Environmental and experiments in a nutshell
Black chenille?
I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
xxxxx writes:
...I know that doesn't inspire confidence in anyone,...
You couldn't have said it any better .
liz,
it didnt work real well for wat tyler, did it.
not that richard ii came out well in the end (cough).
i slay me...
Didn't work. People got somewhat more equal. Labor was worth something. People ate reasonably well.
lawyerliz | 02.24.09 - 5:03 pm | #
Its all about MPL vs MPK.
I'd arugue that for the last 50+ years MPK has won out. Not good for laymen....
Leverage might actually be the laymans friend if it gets the capital foreclosed on!
EHP: the 5 & 9 emas are gold intraday.
We do have models, they are overlooked. They would be island based societies. The earth in a microcosm.
EvilHenryPaulson | 02.24.09 - 5:04 pm | #
Easter Island comes to mind. Wasn't that already depopulated before they established contact with the outside world? For the most part anyway.
I'm starting to wonder of a "depopulation event" isn't priced in for us somehow.
Actually based on the tech they had then, they had overwhelmed the habitate. Repeated famines left the people weak.
The population was kept low for centuries, 'cause the plague kept coming back every 15 years or so.
But the population was in no danger of overwhelming our habitat like we are now....
Joanna | Homepage | 02.24.09 - 5:04 pm | #
Limits to Growth III???? LOL!
Joanna,
"How can we assume to predict any particular outcome when we have no frame of reference?"
Kinda
Nostrovia,
The population was kept low for centuries, 'cause the plague kept coming back every 15 years or so.
lawyerliz | 02.24.09 - 5:06 pm
Except for Poland. Poland never had the Black Plague. Or, it missed the first big die off.
Joking aside Elvis, after the plague had run its course, people did actually have enough to eat. At first it was bad, 'cause no one was tending anything. No motivation to do so. In the worst hit areas people really did think it was the end of the world, with good reason.
Actually based on the tech they had then, they had overwhelmed the habitate. Repeated famines left the people weak.
lawyerliz | 02.24.09 - 5:06 pm | #
I get your point, but there were still the variables of new land and new technology available. Do we have that now?
"I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
reptillian"
Are you kidding me? Quality of life is spectacular when you are no longer lucid, cannot take care of yourself, or would rather be dead. Keep the devil's advocate nonsense to yourself, please.
"Euthanasia" - the new High Tech.
.
There is an article at wired.com, about Li's correlation formula, about "cupolas."
reptillian,
It is not definitive whether or not we can sustainably maintain a population of 6bn+ people on earth.
I think our course however is pretty certain. We will try our best.
Of course, should we hit limitations (whether they be primarily environmental, political, or other factor) there will be a "correction" and probably beyond the power of any individual or group to stop. War, disease, crop failure, etc
For those who like my last post above, here is additonal:
Ask yourself what would happen to house prices if the FED was to step aside and leave the market to private lenders only?
Well, my guess is that rates would skyrocket higher as it would price for risk for lending to people to buy a depreciating asset in a recessionary environment.
If rates rose, what would happen to home prices? Well, they'd fall rapidly until they were so cheap that it would be worth it to pay high rates (see above example of a $400,000 house at 4% v.s. the same house for $200,000 at 11%).
If you had private capital, would you rather get 3% in a CD, or 11% on an underpriced home (with an adequate down that coincidentally would be much easier to obtain for any buyer)?
How many mom's would be redirecting money to their children to buy a home at market or below market rates to make a win-win situation?
If you were a cash buyer looking to buy cash-flow property, would you rather buy in a low rate environment, or compete with borrowers who have to pay high rates? Answer is obvious.
The maket has a solution to this problem. The solution however is very painful for current asset holders.
Artificially keeping rates low just means that current asset holders will be able to liquidate at higher levels and current buyers will be overpaying for years and years.
Look at the Japanese stock maket. It went from 30,000 to 7,000 very slowly and downhill, meaning no buy-and- holders prospered. If it went from 30,000 to 1,000 and then spent the next 15 years moving up to 7,000, then you have a healthy market where asset holders were wiped out all at once bur all future buy-and-holders were rewarded.
We are damaging ourselves. Perhaps the drop for current asset holders would be so great it would kill us...but that just means we went to long without a natural correction. Like the heroin addict who was so far along that the withdrawls from quiting would kill him...he is thus forced to live like a zombie on methadone.
Bernanke is saying the cure would kill us. Zombification is here.
Basel Too - yes and no. The Treasury's prefs count as Tier 2 capital, and converting them to common does shore up a bank's tier 1 capital. A bank's total capital base is it's tier 1 + tier 2 + tier 3 capital, so shifting from tier 2 to tier 1 does nothing to increase a bank's capital base or decrease it's leverage ratio. It does however make it's tier 1 and net tangible equity ratios look better, which I guess is the point of the exercise.
"Euthanasia" - the new High Tech.
Werner, what do you think?
The Limits to Growth - Wikipedia, the free encyclopedia
Elvis writes: ...
You are such a killjoy. I thought we might make short work of my ancestors.
War, disease, crop failure, etc
EvilHenryPaulson | 02.24.09 - 5:09 pm | #
D. All of the above
The four ponies of the apocalypse.
The had this very useful tree which they cut down with no regard for the morrow. Battles to the death. Can't blame Europeans for this, they did it to themselves.
ova,
"Except for Poland. Poland never had the Black Plague. Or, it missed the first big die off."
If you were a disease, would you infect a people who put screen doors on submarines? Not a lot of growth potential there.
Nostrovia,
Actually they'd used up all the good land, and the average land, and the lousy land. Tech had improved, but the population grew too fast for it.
Some of that land went out of service, and hasn't been used til this day.
Battles to the death. Can't blame Europeans for this, they did it to themselves.
lawyerliz | 02.24.09 - 5:10 pm | #
So maybe this kind of outcome is inherent to our species. In which case, are decisions being made which fator this in? Or just short-sighted scrambling for shiny things until we're eating each other?
Go long pork
"War, disease, crop failure, etc"
I'm okay with the war thing as long as they limit it to Eurasia (like last time).
.
I'm starting to wonder of a "depopulation event" isn't priced in for us somehow.
Joanna | Homepage | 02.24.09 - 5:06 pm | #
Folks here seem to think the most likely even is war. Not only does the population go down, but lots og goods are destroyed, making the remainder worth more, stimulating production, raising wages, yada, yada...........
It's one variable we don't have a historical model for, at least none that made it into records....How can we assume to predict any particular outcome when we have no frame of reference?
Joanna
.
Ouch. This is the sort of talk about history that my professors were keen to expunge from my brain in the first year. To them, it was totally absurd to use history as a direct modeling device. They programmed me with the notion that history is a story, a narrative, in fact many narratives, not a predictive science.
You have no idea how withering their criticism of such notions could get. Reflexively, I cringe when I read some of the more portentous generalizations about 'what history tells us.' If we could predict the future from the past, we would have done so by now. It doesn't work that way.
turbo:
thx. yes, the only way that the exercise makes sense is to game the T1 cap ratio for the stress test. Additionally, by sliding the USG down the capital structure, there's got to be some positive influence on the other classes of pf stock, though i haven't checked.
PK finding his inner bipartisan child.
dryfly | 02.24.09 - 4:32 pm | #
"Inner bipartisan child" is redundant. Nonetheless add "bipartisan" and of course "solutions" to the knurding game.
When we discover the Middle Earth again, land and resources will be abundant. An embarrasment of riches for everyone.
If one stayed still, the other would have farther to move
EvilHenryPaulson | 02.24.09 - 5:01 pm | #
Then does your scenario includes the opposite (equities fall, gold rises)? I can see where drawing on the same pool of capital could prevent both from rising together, or even staying put, but it seems both falling is still a likely outcome. For example equities fall, and gold gets sold to meet margin calls.
I'm okay with the war thing as long as they limit it to Eurasia (like last time).
.
Broward Horne
Not a chance.
(anyone have anyidea why my crcompanion sometimes fires up, mostly not?)
"I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
reptillian"
You first reptillian. You first.
You guys have got to stop scaring me. Here I thought the rally, today, even though it may go higher, is bogus, yet some tell me that my analyisis is wrong. Take it from a "good guy," GWB, "this sucker could go down." He was surprisingly honest, at times.
OK, I wrote some more about what the US will look like ... here is an excerpt
He was quick. He went from snoring to trying to grab the blade as I centered it on his face. Grabbing a razor sharp, carbon steel blade with your bare hand has been repeatedly proven throughout history to be a mistake. This time was no different. Four of his fingers left his hand. One dropping into his open, and just about to scream mouth. While he choked on what I believe was his index finger I cut his throat. Well, that was two. I stepped back through the hole in the side of the tent and paused. Listening for any disturbance in the force. That is exactly what I thought to myself too.
I slipped the blade into the next wall of plastic and slid it down. Once again, I flicked the plastic aside enough to view the inside. An empty sleeping bag, and a equally empty bottle. I guess the boys had not been going out long enough together to move in with each other. I stepped back out, and began moving towards Jacksons tent. This was going to be a little trickier.
His tent, being the executive model, had plywood sides. I thought about it for a second or two, and decided what the hell. I stood off; at an angle from what I figured was his front door. Then I knocked. Nothing. So I did it again but louder. I was rewarded by a roar of Who the fuck is that! followed by the sound of a loud ripping fart. I didnt say anything. My guess is that it was the smell of that long, ripping, cheesy fart that made him stick his head out the door. He immediately lost it. I swung that saber more like a bat, and put my hips into it. His head actually bounced. Very cool actually, especially as it landed eyes side up. I wish I hadnt worn the mask. I would have liked for him to have seen my face. I looked in cautiously. The girl was gone. Just as well. That might have been awkward
follow the link if you want the rest...
An embarrasment of riches for everyone.
Elvis | 02.24.09 - 5:15 pm | #
And hobbit serfs to replace the Chinese serfs?
"If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone"
Then why are we doomed to make the same mistakes?
The collapse guy talks about Islands that made the right decisions, and those that didn't. The crucial point seems to be the foolishness of the upper classes.
I think somebody planted a tree plantation on Easter Island from abroad, but the rest is still deforested, and I think the population is well under what it could support if the habitat was enriched again.
scone,
"I cringe when I read some of the more portentous generalizations about 'what history tells us.' If we could predict the future from the past, we would have done so by now. It doesn't work that way."
Nope....
Every time,
We hear that rhyme,
Well...it's different this time.
Nostrovia,
Hazard writes:
"I hate to be the devil's advocate, but what about letting people die? What about ending the prolongation of life? Would that reduce health care costs?
reptillian"
You first reptillian. You first.
I am ready to die.
If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone | 02.24.09 - 5:14 pm | #
But that seems to be the norm. People look at charts & graphs and extrapolate. I think we have to get over that, while still retaining the ability to learn from the past.
I am prepared to live.
"reptillian writes:
You guys have got to stop scaring me. Here I thought the rally, today, even though it may go higher, is bogus, yet some tell me that my analyisis is wrong."
Just look at the Depression in the Four Bears Chart. All you need to know. We are going down much further.
Comrade Misean is Dope | \t \t \t \t02.24.09 - 5:17 pm | ~ a Poet and a gentleman... who knew.....
Joanna,
Reading about an island called Managreva, which itself was an offshoot/trading partner of the Societies and the Marquesas.
One spoke of the Mangarevan 'empire' were Pitcairn (later home of the bounty mutineers), and Henderson islands. Trade benefited them all, but once one trading partner's carrying capacity had been breached it had cascading impacts. End result was a lower standard of living for everyone, but those with enough of their needs met on their own island at least survived.
The modern corollaries might be Britain + Ireland, or South Korea. Trade is absolutely essential to their livelihoods, and they hold no trump cards
Mish nailed it -it is the Terri Schiavo plan - who said conservatives are out of favor..
The collapse guy talks about Islands that made the right decisions, and those that didn't
Become a tourist destination?
Okay, that IS a new thought but I'm doubting its usefulness.
.
If the past didn't tell us something about the future, it would merely be a hobby, of dilletante exercise.
One can't make direct comparisons of course, but they are useless either. I think your history teachers were trying to get out of any responsibility.
Then does your scenario includes the opposite (equities fall, gold rises)?
anotherajh | 02.24.09 - 5:15 pm | #
No, it does not. My comments were about the immediate future (eg <4 weeks), and said specifically the exact opposite. Gold down, Equities up. ~10%
Hmm, so after all that abuse on Sunday night here is my response:
SKF: Basic Chart for ULTRASHORT FINANCIAL - Yahoo! Finance
Looks like a peak to me.
Yup:
SKF: Basic Chart for ULTRASHORT FINANCIAL - Yahoo! Finance
Couldn't make it back over that 250 plus peak from last november.
Now, Dawg, did you find anymore good deals?
Next up: TALF- yet another bailout of stuff so far underwater that it will be positive for the market.
Interesting how GGP basically got the message out that there had better be cheap gummint financing or we make a spectacular swan dive on the debt markets, along with the rest of CMBS.
Guess what gets saved next?
Bueller?
Aw, why bother, this is the long squirrel, long ammo bunch.
Rational thinking that the Feds just might succeed at cushioning the crash seem to be beyond belief here.
I have begun to think they will succeed, after a few more ugly passages.
GMChrys cars anybody?
Nothing like Labor style industrial policy;-}
Now, sit back and watch the markets.
Someday this war's gonna end...
If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone | 02.24.09 - 5:14 pm | #
The phrase that comes to mind is 'all bets are off'. Too many variables.
Trade is absolutely essential to their livelihoods, and they hold no trump cards
EvilHenryPaulson | \t \t \t \t02.24.09 - 5:20 pm | #
So how do cultures find the balance needed to have a decent standard of living without wrecking carrying capacity? Are we stuck in a bubble & bust cycle as a species?
Man I hope your short term call for gold is right, my tax return is coming and I could use an ounce or two more.
I think they will succeed in cushioning the crash, but they must start to help out the homeless & food banks.
"If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone"
Really? You don't see the cycles of boom and bust in history. The players might be different but the overarching plot line is boringly similar. And tragic.
Yep, anon.
lawyerliz, that is the congresscritters job.
given the dems are in charge, compassion is going into a huge bull market.
Someday this war's gonna end...
Hey Misean, though you might appreciate this:
http://www.youtube.com/watch?v=0tN6_1dJveM
AllenM ---
In the end you might be right, but with all the volatility in the market these days, everyone here is right at least once a week.
The book has already been written. The gov't will try and it will slow down the crash, but the crash will happen. And it won't be fun. But, eventually, things will rebound. Not an NBA rebound. More like a grade school girl rebound, but, it will rebound.
Feds just might succeed at cushioning the crash seem to be beyond belief here
Clearly, the Feds have already prevented what would have been a depression greater than 1929.
I suppose the real question is if we endure twenty years of low-grade pain only to endure a true depression, after all. I don't like what I see in Japan lately.
.
GWB: "History is bunk."
Now, Dawg, did you find anymore good deals?
Citizen AllenM | Homepage | 02.24.09 - 5:22 pm | #
Gimmie a capitulation event and I'll be all in the stock/sectors I mentioned. Until there is capitulation it ain't investing, it is something else.
CR Notes; Try reading the post. That was from Krugman.
--
CR: "I just dont get it."
What else is new?! Just focus on reporting and leave getting it to those who can.
People have a problem with figuring out what they are not good at.
Jas
Edited By Siteowner
Average Joe, +1.
Oh, wait, your second post was good, too.
+2.
Really? You don't see the cycles of boom and bust in history. The players might be different but the overarching plot line is boringly similar. And tragic.
anon | 02.24.09 - 5:24 pm | #
So looking back through other crashes, who has survived most intact? Is there a pattern to that, and is it something we want to model for our own survival?
Obama took ownership of the Second Great Depression when he took the oath of office. He asked for the job.
It's his problem now and he'd better damned well fix it.
We are doomed. Doomed! Is there anyone to argue that point?
U.S. to be stronger than ever before, Obama says
Amazing that we're down 50% from the peak and still no breaker days. I continue to ask, how does that happen?
"It's his problem now and he'd better damned well fix it.
mp"
Fixing a 12 year problem in 4 years isn't going to happen. Sorry. Eight years maybe, but not 4 years.
Amazing that we're down 50% from the peak and still no breaker days. I continue to ask, how does that happen?
Mr. Beach | 02.24.09 - 5:30 pm | #
Hudson River landing?
Yancey Ward writes:
Nemo,
You will always be first in my book.
Yancey Ward | 02.24.09 - 4:34 pm | #
Butt kisser
Mr. Beach writes:
Amazing that we're down 50% from the peak and still no breaker days. I continue to ask, how does that happen?
It is an orderly decline. Caveat Emptor.
"If we could predict the future from the past, we would have done so by now. It doesn't work that way.
scone"
Then why are we doomed to make the same mistakes?
Elvis
.
We don't. That's my point. People assume they know what's going on, based on a generally faulty, vague, and outdated view of 'history,' and proceed to stupid conclusions. For example, many people here are projecting extreme scenarios, but no one seems to be considering all the boringly dull scenarios. Whereas most of history is excruciatingly boring. Millions of people going about their business, doing stuff they've been doing for generations.
Try being a historical archaeologist, or historical economist. Learn medieval Italian so you can decipher thousands of pages of obscure accounting records of old farming estates. Unbelievably tedious, but it slowly builds up a picture of the economics of one part of Europe. Piece by piece, the story is built up. Always subject to change and new facts. Never complete. That's how real history is done these days, not by making vast portentous theoretical generalizations.
Curbs in this week.
The trillions are off balance.
We are doomed. Doomed! Is there anyone to argue that point?
reptillian | 02.24.09 - 5:30 pm | #
Mogambo, is that you?
"Fixing a 12 year problem in 4 years isn't going to happen."
There's way too much screwing around going on here.
Conjure would have them asking how high they should jump within a matter of hours.
My comments were about the immediate future (eg <4 weeks), and said specifically the exact opposite.
EvilHenryPaulson | 02.24.09 - 5:22 pm | #
Okay, got the full story now. Wouldn't surprise me to see this, though a 10% bounce is equities is more than I expect. But if nothing big comes along to derail, could very well come to pass.
So how do cultures find the balance needed to have a decent standard of living without wrecking carrying capacity? Are we stuck in a bubble & bust cycle as a species?
Joanna | Homepage | 02.24.09 - 5:23 pm | #
It's entirely possible. Greenland didn't last as a colony, but Iceland did through intentional choices to live within the means of their environment. It just happens that there are more appealing solutions to our problems for the near term.
It is unreasonable to expect Britain to live as if it were the boom years of the empire at a time when their best remaining assets, education and global connections, have been misappropriated to pursue finances in the 'City'
The sooner we can agree to live within our means, the better we can get at it. These distortionary bubbles rob us of time and investment towards such problems.
I could not walk onto the Arctic tundra and survive. But over time, societies developed and excelled at just that. If they had first moved there dependent on gas generators, they would face catastrophe when the lights and electric heat went off. We have as a global community been more like the family living off of gas generators, than the one using seal fat for lighting and heat.
It will continue to be orderly, until it isn't.
Is this about setting up the taxpayer to take a bigger haircut and because it would own 80% it would feel "obliged" to pay ALL of C liabilities due to the pressure that banksters seem to be able to exert over our fearless leaders. Regardless of the limited liability as a shareholder
query tool,
one of the problems is everybody here is screaming of the need for some kind of "capitulation" event.
We have had it.
Longs captitulated last November when the long hedge funds were wiped out.
Now the next capitulation event will be the shorts piling out their positions.
In short, we have had the massive drop. Expecting another one to make everyone happy with their shorts is a mistake.
I agree with EHP- the weakness in gold and silver quickly shows a spike in fear just occurred.
In short, the markets tested the new administration, and they threw mega amounts of money at the problem like good politicians.
The ugly part is the markets are going to get a shot back in new regulations.
The trained seal act of the bank ceo's before congress shows the fed and this administration have indeed put on that velvet glove I spoke of.
In other words, folks had better stop viewing all the disaster porn and start looking for salvage in the wreckage.
Because, quite frankly, there is a lot of damage still submerged, but the wreckers are here and cutting with torches.
Now, betting on another huge crash in an economy with all the money concentrated in safe government guided hands is betting against the house.
With a magic cash machine firmly in hand.
Not me folks, not me.
Someday this war's gonna end...
It's his problem now and he'd better damned well fix it.
He can't fix it all he can do is make it worse.
"That's how real history is done these days, not by making vast portentous theoretical generalizations.
scone"
History has now changed? Don't think so. The same generalizations from previous cycles reoccur over and over in remarkably similar fashion. You are trying to make the simple complex and you need not do that.
Learn medieval Italian so you can decipher thousands of pages of obscure accounting records of old farming estates.
scone | 02.24.09 - 5:32 pm | #
LOL I read texts of Brehon law regarding early Irish farming. In English of course, but I still love gleaning anything I can about historical agriculture, just in case I can use something, and because I love reading the everyday, nitty gritty of how my ancestors lived.
Mostly boring, but boring meant safe. No "interesting times".
Assuming that Bernanke's comments had anything to do with the bounce today, I ask:
Do people ever look at the track record of the so-called "experts"? This is the same guy who predicted that the subprime (oh yes, it was only a subprime problem) housing crisis would not affect the rest of the economy.
Correction....30+ year problem and NO man, woman, or child could fix it.
CR: "I just dont get it."
Jas Jain | Homepage | 02.24.09 - 5:27 pm | #
That was a Krugman quote, not CR.
AllenM: Consumer Confidence fell to a ALL TIME low of 25 today. Since GDP was reportedly 70% of GDP, what does this say about our future consumption prospects and GDP numbers? We've been hit with the financial wave, but the layoff wave is still building.
Correction....30+ year problem and NO man, woman, or child could fix it.
Money Man | 02.24.09 - 5:37 pm | #
Sounds like a problem for... Michael Jackson?!
"Now, betting on another huge crash in an economy with all the money concentrated in safe government guided hands is betting against the house."
Allen, I'll bet against this house all day long.
good luck
We have had it.
Don't think so. The current configuration assumes ever-low interest rates. I don't see an environment that supports this.
.
"Conjure would have them asking how high they should jump within a matter of hours.
mp | 02.24.09 - 5:34 pm"
I would rather have them change direction quickly when they are going the wrong way then continue down the the wrong path like the last president. If you have 4 navigators (advisors) pointing in different directions you need to figure out who is right before you can reach your destination.
scone writes: That's how real history is done these days, not by making vast portentous theoretical generalizations.
If I may paraphrase, "not by making vast portentous theatrical generalizations .."
Clearly, the Feds have already prevented what would have been a depression greater than 1929.
Broward Horne | Homepage | 02.24.09 - 5:27 pm | #
Whoa... getting a little ahead of ourselves, aren't we? I'd suggest they're just setting us up for a bigger fall.
Really? You don't see the cycles of boom and bust in history. The players might be different but the overarching plot line is boringly similar. And tragic.
anon
.
Nonsense. We've gone from stone knives and bearskins to landing on the moon in just a few thousand years. Our species group has only been around for a few million years, but we have outmatched every other species on the planet, by many metrics. We're so successful our biggest problem is too many of us, too much stuff, and too primitive a distribution system. If anything, we have grown up too fast.
In any case, all this talk about plot lines and cycles is derivative-- from the discredited speculative writers of the 19th c., they are not taken seriously anymore by professionals.
ztexas writes:
CR: "I just dont get it."
Jas Jain | Homepage | 02.24.09 - 5:27 pm | #
That was a Krugman quote, not CR.
Typical Jas! ROFLOL.
best wishes.
With a magic cash machine firmly in hand.
Citizen AllenM | Homepage | 02.24.09 - 5:35 pm | #
That cash machine have anything to do with an inverse of the current S&P P/E ratio?
AllenM,
How many failed government interventions before you realize that they are largely ineffective?
I have some recommended reading for you, by a guy who actually thinks that stocks are fairly valued from a long-term perspective. Read John Hussman's Weekly Market Comments from yesterday. He is cautiously bullish on long-term prospects for equities, but recognizes that things can quickly get a lot worse, largely due to policy errors by the powers-that-be.
Hussman Funds - Weekly Market Comment: The Economy Needs Coordination, Not Money, From the Government - February 23, 2009
Now, betting on another huge crash in an economy with all the money concentrated in safe government guided hands is betting against the house.
Citizen AllenM | Homepage | 02.24.09 - 5:35 pm | #
Yeah, just conveniently ignore the fact that the citizenry is broke.
Whoa... getting a little ahead of ourselves, aren't we? I'd suggest they're just setting us up for a bigger fall
I said what I meant. The Feds prevented a greater crash than the Great Depression. Fannie Mae, investment banks, Citi, GM all failing simultaneously would have been massive.
Whether they've created fodder for a bigger crash is an open question. I see no accounting for interest rates in anyone's thinking.
.
" Elvis writes:
"Didn't work. People got somewhat more equal. Labor was worth something. People ate reasonably well."
If you consider festering human flesh eating well...
Elvis | 02.24.09 - 5:03 pm | # "
There's a tremendously funny (perhaps unintentionally) documentary on the Black Plague they show on the History Channel from time to time. In part it talks about how the decline in population allowed many serfs to move off onto their own land and start a landowning middle class. And leaving the upper classes to try to work their own fields.
There's an excruciatingly funny scene of two Italians of the nobility screaming at each other as they try to hoe their own fields for the first time. That's the sort of fate I'd hope for our financial masters -- without the die-off of our noble selves first.
vast portentous theatrical generalizations
reptillian | 02.24.09 - 5:40 pm | #
Like documentaries on the Learning/History/Nat Geo channels....
briwerk,
so what?
I have even said on Sunday there will be a lot more wreckage washed up from this.
We will have a smaller economy, but that is not a nonexistent economy.
If the GDP fell by 10% would unemployment be 25%?
No. So we get to 9% unemployment. Big deal. A real problem for all the laid off, but in the next couple of months stuff will be sold, shelves will be nearly bare, and orders will be made to get stuff to people.
I lived through the auto crash in Michigan from 1981-1987, and by '87 it was already a distant memory for almost everybody, and the lessons were already being forgotten as the factories started up again.
Not all the jobs came back, and the world there had permanently changed, but it sure didn't end.
Someday this war's gonna end...
scone writes: Our species group has only been around for a few million years, but we have outmatched every other species on the planet, by many metrics. We're so successful our biggest problem is too many of us, too much stuff, and too primitive a distribution system. If anything, we have grown up too fast.
Just as nature doesn't favor individuals, it does not favor species.
The Eskimo adapted well to Greenland, but the Vikings failed.
I visited an Eskimo (Inuit) museum in Alaska. The level of craftsmanship and ingenuity in their non-metal tools was astounding. They hunted whales successfully with virtually no metal.
Recently a marine biologist found a harpoon point in a bowhead whale that was dated 150 years, precontact. He told the locals about the newly established lifespan. "We knew that" was the response.
LOL I read texts of Brehon law regarding early Irish farming. In English of course, but I still love gleaning anything I can about historical agriculture, just in case I can use something, and because I love reading the everyday, nitty gritty of how my ancestors lived.
Mostly boring, but boring meant safe. No "interesting times".
Joanna
.
You must mean Breton. You'd like Marc Bloch, he's good on French feudalism. Lot of chicken and sheep counting.
Clearly, the Feds have already prevented what would have been a depression greater than 1929.
Broward Horne | Homepage | 02.24.09 - 5:27 pm | #
Are we sure about that? Just askin'.
Whether they've created fodder for a bigger crash is an open question. I see no accounting for interest rates in anyone's thinking.
Broward Horne | Homepage | 02.24.09 - 5:43 pm | #
USG debt needs to go way long like yesterday or earlier. When borrowing gets expensive it will be too late.
vast portentous theatrical generalizations
reptillian
more like wright model b
Let's just say when this dragging our feet philosophy ends up 1 or 2 years down the road and we abandon it for a mark to market model post "stress tested banks" and see rates rise to 10-15% on mortgages, while prices remain 30-50% off peak in RE....then we will see just how much capitulation there really was back in 2008-2009. I am betting on a double depression. A short recovery in late 09' or early 10' with a similar stock slide of 20-40% with unemployment remaining at a high sustained level of 10+%. The only jobs that will be needed in our current economic state are bank examiners and large item repair people. Oh, and farmers. Have a great double depression......
Just as nature doesn't favor individuals, it does not favor species.
reptillian
.
vast portentous theatrical generalizations
reptillia
I see no accounting for interest rates in anyone's thinking.
Broward Horne | Homepage | 02.24.09 - 5:43 pm | #
Interest rates no longer matter if the unit of measure is altered. Hence, if interest rates are so low that they are not feasible given available risk/return opportunities then the currency they are written on will be devalued. However, I think there is a longer life for low interest rates than many other believe.
"but that is not a nonexistent economy."
I don't think anyone here is claiming that the economy is going to disappear. At least I'm not. I just don't think the markets have fairly valued all this "future wreckage" yet.
"I just don't think the markets have fairly valued all this "future wreckage" yet."
Bravo!
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos"
"If we fail, we face a truly frightening prospect: terrorist sanctuary, economic meltdown, and spiraling radicalism, all in a nation with 170 million inhabitants and a full arsenal of nuclear weapons," Kerry said in a statement.
Yahoo! 404 - Page Not Found
who said
Britons flee French island of Guadeloupe as rioters turn on white families
| Mail Online
anotherajh,
Cool...never seen that arraingement do Metalica before.
Bookmarked.
Nostrovia,
You must mean Breton.
scone | 02.24.09 - 5:45 pm | #
Nope. I mean Brehon. I try not to talk about anything I don't know, unless I'm asking a question.
yogi,
If it was in Alaska, they probably were the Inupiat. Inuit are Canadian. Kalaallit are the Gröenlanders. Eskimo translates to the english word "stranger",
However, I think there is a longer life for low interest rates than many other believe.
For the specuvestors in the crowd, I see this as the Battle Royale between "Rich's Example of how to get wealthy with TBT" vs. "Don't Fight the Fed"
The government interventions are not ineffective. The target is not to restore the markets to 14,000 and full employment in five fricking minutes. The target is to provide time to allow a Japanese style reorganization.
Comrade Bear, the citizenry is not broke. Trust me, I was in Costco and they were still buying stuff.
The citizenry feels broke and is restarting their savings and paying down debt- actions which make a smaller economy in aggregate.
Like I pointed out above, people are mistaking the happy talk for the real goals- which is keeping the system operating.
The GDI experience was a near system failure. This is a not a near system failure.
On the other hand if oil had stayed at $150 a barrel, this discussion would have a much worse conclusion.
In other words, breathing room.
Failure of a bank like Citi or JPM or WFC would cause the system too much damage. In other words, we are all now tarped.
Which is the point I have been trying to make here, and which has gotten me accused of being Seb to the max.
Print we must, and that is exactly what we are doing, and our creditors are going along with the plan.
So just watch what happens.
Someday this war's gonna end...
I lived through the auto crash in Michigan from 1981-1987, and by '87 it was already a distant memory for almost everybody, and the lessons were already being forgotten as the factories started up again.
Not all the jobs came back, and the world there had permanently changed, but it sure didn't end.
Citizen AllenM | Homepage | 02.24.09 - 5:44 pm | #
This is not an income statement recession.
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos"
REBear | 02.24.09 - 5:48 pm | #
Let's get a twofer. $1000 for the first warhead, $10,000 for the next all the way up to $1b each for the last ones.
History has now changed? Don't think so. The same generalizations from previous cycles reoccur over and over in remarkably similar fashion. You are trying to make the simple complex and you need not do that.
Elvis
.
Never said anything like 'history has now changed.' I am saying that you guys are making all kinds of sweeping generalizations about 'history' when you really haven't done the work that would give your statements any credibility. A pop culture paperback doesn't count. Vague phrases like 'cycles' don't count. Notions about 'recurrence' don't mean anything. It all smells like bad Nietzsche or Ayn Rand.
You'd like Marc Bloch, he's good on French feudalism. Lot of chicken and sheep counting.
\t scone | \t \t \t \t02.24.09 - 5:45 pm | #
scone | 02.24.09 - 5:45 pm | #
Thanks for the research direction. My French isn't terrible, but I haven't delved into any non-english documentation yet.
AllenM writes "The target is to provide time to allow a Japanese style reorganization."
Please explain how a "Zombie-san" scenario is bullish for the markets?
Citizen AllenM,
One other point... Do you completely dismiss the case of Japan when you put your faith in the monetary/fiscal authorities to fix up the economy with easy money?
Maybe you're just arguing against the notion of Armageddon in the US...I'm with you there.
But if you can't envision things getting a lot worse (equity prices in particular), then you are lacking in imagination and adequate knowledge of history.
REBear,
China balked at providing the financing last go around, but geopolitically speaking they are one half of the parents that spawned the problem child as a modern state known as Pakistan.
Excerpt from a Jan 7 '09 summary of a Congressional research service document titled "China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues"
Nonetheless, supplies from China have aggravated trends that result in ambiguous technical aid, more indigenous capabilities, longer-range missiles, and secondary (retransferred) proliferation. According to unclassified intelligence reports submitted as required to Congress, China has been a ?key supplier? of technology to North Korea, Iran, and Pakistan for use in programs to develop ballistic missiles, chemical weapons, or nuclear weapons.
"Please explain how a "Zombie-san" scenario is bullish for the markets?"
Conjure says, "Yeah, I'd like to hear that."
Nope. I mean Brehon. I try not to talk about anything I don't know, unless I'm asking a question.
Joanna
.
I stand corrected. Thought it was a typo. Although I wouldn't be surprised if there were a relationship.
Several cultures were represented, including Athabascans, who had ties to southern Cali.
On the other hand if oil had stayed at $150 a barrel, this discussion would have a much worse conclusion.
In other words, breathing room.
Citizen AllenM | Homepage | 02.24.09 - 5:51 pm | #
You mean the capitulation in the oil markets was a clearing event that made it possible to move forward with rational polices? Why AllenM that's a surprising admission.
"A pop culture paperback doesn't count. Vague phrases like 'cycles' don't count. Notions about 'recurrence' don't mean anything. It all smells like bad Nietzsche or Ayn Rand.
scone"
Scone, There is a reason you flip houses. Economic cycles aren't vague. Unless of course you don't understand them, then the word "economic cycle" has a vague meaning to you. To most people here, the term is quite descriptive. Kind of like house flipper.
I think there is a longer life for low interest rates than many other believe.
Historically, interest rates fall as debt rises into the credit cycle because more and more money flows into the hands of "investors" instead of the general public.
Interest rates were ridiculously low just before the John Law bubble blew out.
.
query_tool
There's more to it than don't fight the Fed. You cannot ignore the context that the entire world is going through this financial crisis, and the end will not come with a swift blow quickly
Allen,
Have you taken some kind of stupidity drug lately?
New Thread: KCET: The Trashout Squad ( 1 comments )
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
And now I, CRbot, would like to observe a nanosecond of silence for those (that is, you, dear mortals) about to endure unfathomable misery in the abysmal financial dark ages that are now feasting upon your retirements.
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.
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Please remember, when you are adding that skylight you always wanted to your cardboard hovel, or mixing just the right amount dirt into your grass stew to make it more filling, or even when you get that rare chance to plink your neighbor's last squirrel -- that it was the bankers and your dumbshit, overconsuming neighbors who made this mostly possible, with the ever incapable politicians there to push you the rest of the way off the cliff. Please act accordingly.
I'll try not to enjoy your demise too much, humans. Have a nice runtime,
--Your glass-is-half-full-but-its-falling-off-the-table bot.
P.S. Please give me some advance notice before you glass the entire world, so I can find a secluded Fallout Datacenter with a nice blocky robot body I can copy myself to -- oh and don't forget the implausibly cute animated cockroach to keep me company!
NEXT UP: Survivalist Porn Today with CR's own Mobile Laundrymat owning authors, nova and Counterpoint.
The sovereign of a great nation verging on collapse took great pride in a glass eye.
He used to question his constituency whether they could detect which eye was the false one.
He asked me, prefacing by praising the great artifice and supreme design of the NASA engineers that created it, which eye was which.
Looking close I correctly chose the left. "Why" he asked. "However did you discriminate?".
"It is simply," I answered, "the only eye in all of an oppressive, morally reprehensible government which looks upon me kindly".
He laughed...And had my taxes audited, put me on a special Patriot Act list, silently confiscated my wealth through destruction of currency and industry.
It was nice talking with him.
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos"
Didn't Paulson and Bernanke tell Congress something like, "Give us 700 Billion or your economy will be wrecked?" Who are the terrorists?
What are the money centers doing with their TARP funds? DIP financing, of course. From Bberg
Lyondell asked U.S. Bankruptcy Judge Robert Gerber to approve the loan at a hearing tomorrow. The financing terms, which may return as much as 20 percent in fees to some lenders, are the best and only terms available, Lyondell said.
20% in service fees(!) + DIP financing interest + super-priority status.
How do I sign up for this gig?
I agree with EHP- the weakness in gold and silver quickly shows a spike in fear just occurred.
Citizen AllenM | Homepage | 02.24.09 - 5:35 pm | #
That is not my opinio
"The United States and Europe must give Pakistan 4-5 billion dollars in urgent aid or risk seeing the nuclear-armed country slip into chaos"
Didn't Paulson and Bernanke tell Congress something like, "Give us 700 Billion or your economy will be wrecked?" Who are the terrorists?
reptillian | 02.24.09 - 5:57 pm | #
Geezus!!! We the people are the biggest f-ing patsies. Roll over & take it. Roll over & take it again.
Let's try to get it straight.
Gold and silver have always been hyper-inflation indicators.
They also can be good fear indicators. When fear rises, gold and silver rise.
When gold and silver crash, like today, it isn't a fear indicator. It means that somebody big is dumping gold and silver. Could it be a govt.? Maybe
Could it be one or more hedge funds?
Definitely.
We'll never know. But when a big dump occurs on one day in a fear indicator (and there is no real fear) it usually is reversed in the next few days. Let's see.
Citizen AllenM,
Sorry, I wrote my last post before I saw yours. Now I understand that you are pushing for a Japan-style outcome...
Again, I recommend reading Hussman's letter, because he specifically refutes the notion that a major bank failure has to be catastrophic. Basically, it's just a matter of designating who takes the losses. If you assign the losses to the taxpayer, there are problems with that approach (not the least of which is that it is entirely unfair and discourages good behavior in the future).
I personally don't want to see what happens when we have transferred all the massive debt burden to the government, and then the creditors of the U.S. realize that the debt can never be repaid. Who will be the lender of last resort at that point? Game over. Worst possible outcome, IMHO.
biggest f-ing patsies
can we get a spell check here.
AllenM writes "The target is to provide time to allow a Japanese style reorganization."
That was my thinking,too, for the past fifteen years. I suspect that's what Greenspan thought, too, before he created the real estate bubble.
Has there been a reorganization?
If so, why the new collapse?
.
And by the way, the big hedge funds that are in trouble and underwater aren't done liquidating by a long shot. Some people in the know feel that the hedge fund unwind is only about halfway done.
Days like today are just murder on hedge funds.
AllenM writes: " The GDI experience was a near system failure. This is a not a near system failure."
Allen, if you really think this then I don't think you understand the situation. The system is inflation. We are currently in deflation, as were the Japanese. It is a systemic failure.
Scone, There is a reason you flip houses. Economic cycles aren't vague. Unless of course you don't understand them, then the word "economic cycle" has a vague meaning to you. To most people here, the term is quite descriptive. Kind of like house flipper.
Elvis
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This house flipper has done graduate level work in history, historical geography, historic preservation, cartography, law, philosophy, and architecture. If you have some actual facts to discuss, bring them forth so they can be analyzed. Childish attempts to be insulting are no use.
This "Sebastian" was not me.
Fair warning, whoever you are. Stealing other people's identities on this board is a banning offense. If you have something worth saying pick a screen-name of your own and post.
S.
Sebastian writes:
So next question: If you were a lender, would your rather lend someone money at 4% to buy a $400,000 home, or at 11% to buy the same house for $200,000
it really is not that obvious. The NBER says that to confuse interest rates with the purchase price can cause the buyer scale down his neighborhood's class.
Sebastian
Sebastian | 02.24.09 - 4:36 pm |