75 bps would be a mistake; it would definitely stoke the panic in the markets. Even worse, it would make clear just how little of an effect the rate cuts are having.
That, of course, doesn't necessarily mean that the Fed won't do it; just that it would be a mistake, but it won't be the first mistake the Fed makes.
. . . and things are likely to get even more interesting as more inflation numbers come out. At some point the facade of the Fed as an inflation-fighter will have to drop, and it will be perfectly clear that their only role is to try and save the economy from itself.
And the closer the Fed rates get to 0%, the more the "Japan" word starts getting dropped. The Fed will have to keep rates above 2% to 3%, if only to prevent them from being compared with the Japanese central bankers who were powerless to stop the Japanese recession. Do not underestimate the importance to the Fed of attempting to save face.
Well, the banks don't trust each other and won't loan overnight to each other. So a 75bps cut will fix it eh? Not sure I'm buying this. Not since M3 has started slipping.
Does anyone else not find it rather humorous how this game plays out each month? I mean, first, it's one and done, then everything is fine, then the steady drumbeat of bad news, with the occasional market pop to make the debate about cuts still viable, then about midway between meetings its a consensus for a cut, then a wondering whether its 25, etc. And each time we play this silly game, the bets on the cuts get bigger. Kind of makes you think they should just bring the rate to the lowest they would allow, and end the charade.
OT - somewhat. I like it when talking heads say gold is at an "all time high".
I recently heard an earnest man say we are in the "stratosphere with gold prices". He looked older than I am. Apparently he didn't live in the 70s. But he was on the Street.com
If they really think liquidity has anything to do with it, and that there really is a problem, baby steps arent going to help. The real problem is, baby steps or one big step - neither one is going to help. Hence the charade.
ECB warns crashing dollar may stop Fed cuts
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:30am GMT 15/01/2008
Rumours of an emergency rate cut over coming days by the US Federal Reserve have swept the global markets, setting off a fresh plunge in the dollar.
Read the latest news on currencies
Get more of Ambrose Evans-Pritchard
Gold surged to an all-time high of $914 an ounce in New York on bets that the authorities will flood the global system with further liquidity to stave off a mounting debt crisis.
Bini-Smaghi is the first central banker to question the Fed's room to cut
Ashraf Laidi, a currency expert at CMC Markets, said futures contracts were starting to price in a serious likelihood of a half point cut before the next scheduled meeting at the end of January.
"With US equity indices testing their August lows and current macro-economic dynamics knocking at the door of recession, we place the probability of a 50 basis point inter-meeting rate cut as high as 70pc to occur as early as next week."
Lorenzo Bini-Smaghi, a member of the European Central Bank's executive council, warned that the tumbling dollar may now start to foreclose the option of US rate cuts and force the Fed to keep monetary policy tighter than it would like.
"I would not be so sure about the movements of the Fed. There is a serious problem with the dollar in America. We will see what margins they have for further rate cuts," he told Italy's La Repubblica newspaper.
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It is the first time that a top central banker has openly aired concerns that dollar weakness could constrain US economic policy.
Until now Washington has largely been able to ignore the currency, treating the slide as a headache for the rest of the world.
The euro briefly touched $1.49 today, just shy of its all-time high.
A leaked client note by HSBC added fresh fuel to the rate excitement, suggesting that Fed may now have to slash a full percentage point by month's end to fend off a serious downturn.
The bank's highly-rated New York economist, Ian Morris, said a new tone of urgency had been struck by top US officials over recent days, raising the possibility of two sets of cuts this month.
Fed chair Ben Bernanke prepared the way for drastic cuts with a speech on Thursday saying the authorities were "exceptionally alert" to the risks as the housing slump triggers the first wave of jobs losses. US unemployment jumped from 4.7pc to 5pc in December, the sharpest jump in a quarter century.
US Treasury Secretary Hank Paulson said the administration is rushing to craft a fiscal stimulus package to boost spending. "Time is of the essence," he said.
HSBC said the Fed had now raised expectations so far that it risks setting off fresh "financial stresses" if it fails to deliver a serious shot in the arm.
"If the Fed were to cut inter-meeting, we think it would by 50 basis points, followed by another
If the Chinese won't take any more Citi paper, how long will they take Treasury paper at decreasing rates with a falling dollar? Won't the US, like the tan man and MBIA, have to raise the rates to finance the DEBT? When will this happen?
"I have confidence that we properly assessed the issues," he said, adding that barring unexpected developments, Bank of America plans to stick with its $4.1 billion offering for Countrywide.
"We think we've struck a fair price," he said.
Asked about potential job cuts resulting from the transaction, Lewis noted that Countrywide will operate separately after the deal closes in the third quarter and it would not be integrated before 2009.
"At some point we will address the issue of jobs, but we haven't done that at this point," he said.'
I'd like to propose one of those geeky "alternative world" scenarios, You know where Douglas beats Lincoln or Alexander turns back from his India adventures.
What if: The Fed decided to defend the dollar instead of fight recession. In retrospect that pretty much describes recent policy choices. So, a strong dollar and an overdue recession. Time will tell if the choice was wise.
No f-in chance. Our leaders don't do anything which is upright and responsible. Everything is an attempt at an easy way out, a cop out, a dodge...it's truly disgusting.
They run out of string to push rather quickly at .5 and .75 a whack. Unless someone can come up with another trick this pony can do, its usefulness will soon be at an end. Time to wait and see in my book.
Rob Dawg: I don't think the fed is going to fight till labor costs go up dramatically. The fed keep increasing money supply to effectively lower labor rates because the laborers still don't notice.
Bernutty doesn't really strike me as having the kind of backbone Volker did. He'd sit in front of the banking comitttee's chomping on cigars and telling them all to pound sand.
A 50bps or 75bps cut is only going to make the pain worse for many many middle class Americans...
Americas inflated asset prices must fall
By Stephen Roach
January 7 2008
ft.com
The US has been the main culprit behind the destabilising global imbalances of recent years. Americas massive current account deficit absorbs about 75 per cent of the worlds surplus saving
A sharp decline in asset prices is necessary to rebalance the US economy.
As home prices move into a protracted period of decline, consumers will finally recognise the perils of bubble-distorted saving strategies. Financially battered households will respond by rebuilding income-based saving balances. That means the consumption share of gross domestic product will fall and the US economy will most likely tumble into recession.
"One and done" may be correct, but it may be describing Dr. Bernanke's tenure rather than the rate cuts. With the steep rate cuts already in play and an economic stimulus package (which will inevitably involve more Federal debt) coming soon, the Greenspan/Bernanke Keynesian school of government stimulus will be facing its ultimate test, a test which I suspect it will fail.
I believe during the depression rates were %2 interest.
OT - Someone in China actually has a long term plan. The Chinese buys Chrysler in 2 years? Ford agrees to become Ford-Tata(India)? The Chinese want/need the American market for autos. Watch the gov. agree along with the unions under some agreement were a % is made by American workers.
They could do the financing here at 2 %?
In 2 years Michigan will be desperate - already over 7% unemployment
China's BYD Aims to Sell Hybrid Cars in U.S. by 2010 (Update1)
By Tian Ying
Jan. 14 (Bloomberg) -- China's BYD Co., the world's biggest maker of mobile-phone batteries, said it will sell hybrid cars in the U.S. as soon as 2010 as Chinese automakers aim to offset shrinking domestic profit margins by expanding in North America.
``We are the best in battery technologies, and I am sure we will be the best in the automobile industry as well, because electricity will replace gasoline,'' founder and Chairman Wang Chuanfu said in an interview at the North American International Auto Show in Detroit today.
BYD is displaying four models including a hybrid sedan at the show as environmental concerns and rising oil prices boost demand for fuel-efficient vehicles. The Shenzhen, China-based company will sell a hybrid vehicle in China from the second half of this year, which may be priced $6,000 higher than gasoline- powered cars, Wang said. It also plans to make cars in the U.S. eventually, he said, without elaborating.
BYD has strength in developing batteries,'' said Yale Zhang, director of CSM Asia, which advises automakers in China.But it takes a lot more than batteries to sell cars.'
I love it being short when the stock market has 75 bs. pt. rate cut baked-in. It means the market is bound to be disappointed at some point...sooner or later. What a mess!
As for asset prices must fall - assets like oil and natural gas, wheat and corn are not going to fall. They are rising for reasons wholly unrelated to the fall of the dollar. It is not a bubble. It is constrained supply, and it's a problem that has NO solution. The falling dollar only steepens the curve, but the prices for these things are not out of whack.
"oil and natural gas, wheat and corn are not going to fall. They are rising for reasons wholly unrelated to the fall of the dollar. It is not a bubble. It is constrained supply, and it's a problem that has NO solution. The falling dollar only steepens the curve, but the prices for these things are not out of whack."
There is a solution that is usually imposed by nature. Depopulation. Did you know there was an economic boom following the Black Death of the 14th century in Europe? Nothing like a third of the workforce dying off to cause wages to rise. There were some unpleasant years before that though.
Misean,
Just mindless blackbox investing I suppose. Program the code to buy on dips and let 'er rip when the market is 'oversold'. Amazing how many of these rallies have been wiped out though.
But if more unexpected bad news comes out tomorrow, like a hot PPI, then the so-called oversold market looks overvalued.
If M1, M2, and M3 are dropping, as suggested at the Shadowstats link, the fed ABSOLUTELY should cut rates, and fast. If the money supply drop, we're looking at some very nasty economic times.
Dropping rates will do nothing as the conduit to lend is broken. I pointed to that earlier. Banks do not want to lend to each other. Low rates do not solve trust/solvency problems. M1/M' have been falling all year. M3 is now getting the picture. Lower rates won't fix it.
Top Chinese General: 'There Is No Need to Fear Us'
Top Chinese Official Talks Frankly to ABC News Before U.S. Meeting
By JONATHAN KARL
Jan. 14, 2008
In rare public comments, the Chinese military chief of staff told ABC News today that the United States should not be concerned about China's rapid military buildup, saying "there is no need to fear us."
"It is impossible for the U.S. to be afraid of our military development," said Gen. Chen Bingde, the chief of the General Staff Department of the People's Liberation Army.
Dave's Daily (404 Not Found is a pretty good "technical" site for those of us that invest based on trends but aren't necessarily schooled in technicals.
Anyway, he points out that despite the "oversold" maxim being thrown around the media and blogs of the world, a pretty reliable indicator/oscillator suggested neutrality going into today, and an overbought level after today.
The BDI downturn is beyond damning. I can't remember how many times CNBC types would point to the rising BDI as proof that Goldilocks lives. Now, of course, they're all back to bottom-calling (again).
If 75% of US households earn less than $75,000 annually (and most much less) it appears doubtful that either rate cuts or raising GSE loan limits will soften the landing.
It's not the growth rate but the direction. I show M3 declining. It's important to understand the acceleration argument. The brakes have been hit. Sure we're still moving forward but we're slowing. Base money is looking bad, and M2 is flat. This is important to understand. M3 growth rate is slowing. Further the turn down, albeit a synthetic measure (thanks fed), is rather sharp. It's early yet, but we've nothing since early 2005 where a significant downturn occured.
My suspiscion is that the removal of M3 was to hide a downturn in M3, no an upturn. Pick your poison...that's how I see it.
Reading things here then listening to MSM is making me Bi-polar. However the bears make more sense than the bulls anyday. Unfortunately they have for about 20 years.
how many of those 25K jobs cut by Citi are US? How many Indian call center?
Another thing, the last time the FRB did a surprise rate slash between FOMC meetings was the day before options exp back in August or something? Some one in an earlier thread mentioned it is options exp this Friday. hmmm
Hey, as long as the rate cuts lower the borrowing costs for PayDay Loan Centers, life in America will be great. Then they can improve their margins by another 300%.
"It'll drop until the crash. And then zero rates won't help. And then what???"
Well, it definitely removes the upside threat of an inter-meeting cut. There's always another stimulis package around the next corner to look forward to though. Always a bull market until BK!
MacWorld mean Apple should save equities across the board for another huge up day, just like IBM did today. More ponzi economics on Wall St. The markets trade based on certifiable insanity.
Fitch Ratings said it has placed California's about 43 bln usd outstanding general obligation (GO) and 5.9 bln usd in related state appropriation-backed bonds on negative watch, citing California's widening structural budget and cash flow imbalances as the state's economy slows largely due to the housing downturn.
Here's something for the bankers to panic about.... City of Cleveland sues lenders over foreclosures - Sacramento Business Journal: tells it like it is. Of course, it is unlikely to ever get resolved in this manner....however, my understanding is competent underwriting has always been the responsibility of the lender.....no?
Nikkei has broken through 14,000, major support level, for the first time in more than two years.
There is something that feels artificial and manipulative going on in the U.S. market. It's hard to say what. But it's not present in Japan, where economic conditions may be much better.
In any case, I like to short into artificially. It just creates weaker structural supports.
The Japanese have had their fill of our t-paper, too: their holdings peaked in Jan. '07, and have been moving down since.
jg - did you see how much the UK has bought? Overall there are ~$255 B more holdings in total in Oct 2007 than in Oct 2006... almost equal to the gain in UK holdings at ~$235 (everyone else adds up to about a $20B gain).
I was sitting at lunch thinking about the last quarter for housing up here in Los Angeles. Things got extremely whacky in 2003 because (IMHO) Countrywide started pushing option arm loans for purchases hard on the average joe. This then changed into the infamous IO 2/28 (I think the secondary market was more comfortable with a non negative amortizing loan).
Ever since Countrywide had to switch over to bank funding the market chilled tremendously. Yes, many players got hit at the same time. But Countrywide is the biggest and was looking for ways not to reject files. I think they are the story for 2008. Their absence will be what drives the number of sales down and what makes 2008 worse. Above anything I think it will be the defining story of 2008. There are big changes afoot, the adverse market charge for the GSE, the .25% origination fees for the GSE, the PMI companies tightening up. But I think the broker channel will severely restricted and it will hurt sales even more.
I think sales could hit 4.5 million this year.
But maybe I am just biased because I am in LA and have to drive by 10 Countrywide buildings along the 101 on the way to work.
Is it possible the deal was brokered by the feds but they know it isn't actually going to go through? Maybe they just want to buy time? Maybe BAC will get preferential treatment in BK court and Angelo won't get arrested?
Here's how large 1 trillion is in relation to the other "big" numbers. If you disagree with my use of an average of 3 seconds to count each number, you may use any time interval you want - it's the ratio that's important. I used the number 876,987,654,321, and figured 3 seconds was fair.
"the market can stay irrational longer than you can stay solvent"
no kidding, last Thurs and today have been brutal.
dunham,
What are you talking about? The first half of this month has been the best start of a year for bears I can ever remember. A lot of bear positions are up over 10% this year already, today included. I can't ever remember weaker fundamentals and technicals looking forward.
If you don't have more conviction that to be scared off by day to day or week to week volatility, get out.
This is going to be big year for patient bears. At some point this year, you'll see big cave-ins across the U.S. stock market. Just stick with it, and you'll be rewarded.
I agree about the difference between bulls and bears.
Bears need to be more selective as to opportunities. Probably 90% of my investment life, I've been pretty bullish.
You only get maybe 2-3 great bear market opportunities in a lifetime.
But when you're standing there on the ledge, looking out over the Grand Canyon stretched for miles in front of you...AIN'T LIFE GRAND? (to paraphrase Widespread)
John Paulson, president of the hedge fund, said: "Few people, if any in the world, have the experience with, and depth of understanding of, global financial markets [of Mr] Greenspan."
He said Mr Greenspan would share his perspectives with the Paulson investment management team on the direction of the economy, assessing the potential for and severity of a recession.
Has the Fed been abroad ? Do they know what a joke the US$ is at the moment ? against commodities, against the euro, against the Swiss franc, heck even Mr. .5% interest rate Yen ! They don't even need to leave the US - just watch CBNC Worldwide damnit - they have their own money-hunnies at that and they come in all nationalities too !
The Fed can't possible cut 1/2%, let alone 3/4% - do they know the interest differential we'll lose against the Euro central bank rates ?
i should have made clear that i was referring to just these past 4 trading days (with 3 updays - great friday though), not the year in general, which has obviously been profitable for those on the right (as of today anyway) side of the trade.
futures down a lot right now, but basically meaningless, as econ news tomorrow AM will dictate trading. hopefully no more random upside surprises with no CC and no guidance
also, someone mentioned in an earlier thread that a CNBC analyst was saying the ideal scenario for the market would be lower-than-expected retail sales and a benign inflation # wed - Was this the same analyst that said a poor employment figure on Jan 4 would be good for the market?
It matters what the Fed does, but only as confirmation of what we know: demand for loans is decreasing along with insolvency. US taxpayer-backed credit will follow the market price for quality debt down as evidenced by falling yields. BB is a follower, not a leader. Have we any doubts about that?
Yes, its already old news to the market, whether its 25, 50, even 75 beeps. What's being disregarded by those who speak but don't know, is that this is horrible news for the prices of all financialized things: houses, shares, bonds, derivatives, notationals and commodities.
Recall how the Fed followed rates down to 1% from the 1999-2000 market peaks? A lot of good those "policy easings" did to prevent deflating around 80% of the Nasdaq, and near 60% of the S&P. This time, it's different, but not the way the Pollyannas suggest.
Real GDP will continue auguring in until all the defaulted debt is written off, rolled over (!?!), or paid off. Then and only then will the chasened lenders and borrowers of tomorrow know what assets are really worth (all the auctions will clarify that mystery).
There won't be any "bottom callers" then, for fear that it isn't, yet. The opposite of the group-think over-optimism of today will be the conventional wisdom of that day.
It will be wrong then, too. Many will miss the greatest bull market of the next generation.
I love you all. Thanks for all the insight, pathos and wit. Night.
Watching gold and the commodities would lead one to believe that we have to be close to the end of this game. The dollar is the last place anyone wants to put their money so everyone is going to know we are bankrupt and very soon. I thought we might be able to fake it for a few more months!
people around the office (i work in commercial mortgage finance in NYC) are convinced financials have hit bottom and that this will be the "kitchen-sink" quarter for C, MER, etc. (b/c of new CEOs, among other things).
I'm waiting for the other shoe to drop - credit card debt? more RMBS? CMBS/Mezz? CDS? How about the realization that it will take 7 years before bank earnings hit 2006 levels again?
Also, i'm expecting Wells Fargo to come out with uglier than expected numbers & outlook. No way they dodge this mess. A lot of 2nd mortgages on their books!
Look at the yen go. Between the market action since the beginning of the year and the movement of the yen, there has to be some hedgies in serious trouble. I expect some serious selling if the Opex rally doesn't happen. Paging Dr. Bernanke...
AZ_Cowboy, I've been thinking the same thing. Dropping FF rates and a rising yen are a double whammy on the yen carry trade. I'd bet a lot of folks made wrong way all-in bets on that one. I guess the important question is: how long can they hide it or stall on the hopes of a rebound?
You're office buddies are no different than the consensus of the Barron's roundtable - tough first half followed by rebound in second half.
IMO, the real contrarian bet is being ultra bearish. The LEI is cliff diving. Typically the economy recovers 6-7 months after the LEI starts growing again. So the probability of a recovery in the second half is practically zip. Its going to take a while for a positively sloped yield curve to work its net interest margin. The banks are struggling to raise capital when the Chinese & the Sheikhs are flush. Wait till they take a bath! I remember very well in the 80s the Japanese sweeping in to buy all their trophy assets. Wall Streeters are expert at fleecing novice investors with cash burning a hole in their pockets. The banks will think they've cleared the decks but will be constantly "surprised" as another shoe drops.
We'll know when we are close to the bottom - Citi will not be able to get money from anyone except Uncle Scam! I don't think we have seen the end of this by any stretch.
Can Accounting Principles Survive the Mortgage Crisis?
Looser accounting gets SEC staff approval this week, while mortgage bankers petition FASB for more breaks.
rising yen are a double whammy on the yen carry trade.
The Chinese are cutting Japan off at the knee caps, as they revalue the Yuan they are buying the Yen, Japan's currency manipulation is over. America will soon be a carry trade currency with one of the lowest rates of the G-7.
Four Wall Street firms have received subpoenas from Senate investigators who are examining whether the firms improperly structured transactions to help hedge funds avoid dividend taxes, The Wall Street Journal reported on its Web site on Monday.
Citigroup Inc, Lehman Brothers Holdings Inc , Morgan Stanley and UBS AG have received subpoenas relating to the use of derivatives by offshore investors, including some big hedge funds, to help avoid withholding taxes on U.S. stock dividends, the Journal reported, citing people familiar with the matter.
This talk about bottom-calling...what if there is no bottom? There wasn't one for the Roman Empire.
When a system as large and complex as western civilization over-reaches itself, and lacks sufficient inputs of energy to sustain itself, and can no longer cannibalize its stored value, it disintegrates. It divides into smaller systems. These can be self-sustaining, albeit at a lower level of complexity than the previous whole.
Usually small systems are more efficient when they are unified into a larger one, but the over time that new, larger system can become so internally inefficient that it can't cohere.
That is possibly what is happening now. Just saying.
(While trying to keep up with all these marvellous threads!)
Is it possible the deal was brokered by the feds but they know it isn't actually going to go through? Maybe they just want to buy time? Maybe BAC will get preferential treatment in BK court and Angelo won't get arrested?
"Is it possible the deal was brokered by the feds but they know it isn't actually going to go through? Maybe they just want to buy time? Maybe BAC will get preferential treatment in BK court and Angelo won't get arrested?"
And how can Fed make this happen? When I last look US is still governed by laws. Which part of bk laws or crimal laws will allow any government offical to make good this kind of promise? This is conspiracy theory run amuck and we let our imaginary guide us becuase we don't understand actions taken by institution. May be the alternative explaination is CEO's ego and/or difference in the evalaution of the housing crisis cause the action. There are quite a lot of people in the world believe the housing crisis will turn around shortly. May be the BoA econimists belong on that camp and decide to bet on it. And if you look at CFC stock price, market participants obviously don't believe the buyout given the spread between what it is trading now vs what is being offered.
RARELY AVAILABLE corner unit in circular building. Dramatic floor-to-ceiling walls. Breathtaking, massively proportioned mortgage. This one won't last: moisture-drenched BR was formerly home to one of New York's oldest families of termites. Original mold throughout. Architect-designed, carpenter-built, and painter-painted, this 400 sq. ft. jewel box has been lovingly overpriced at $2.8M. Specious!
"jg - did you see how much the UK has bought? Overall there are ~$255 B more holdings in total in Oct 2007 than in Oct 2006... almost equal to the gain in UK holdings at ~$235 (everyone else adds up to about a $20B gain).
There is a story there somewhere."
The BoE is a widely recognised front for a lot of Fed activity in the bond markets. Parking bonds at the BoE saves nasty questions being asked.
the good news in the near-term is that credit markets continue to improve, albeit very slowly, the bad news is that we are going into a hy default cycle that will likely set precedent.
with mew decling, credit still tightening and likely to tighten much further with significantly smaller balance sheets from the issuers.
moving to 90% recession probability. Hedge funds and commodities soon to get a reality check.
Citi lost $1.99 a share, $18.1B writedown, raising $12.5B of new capital and cutting divvy to $0.32 from $0.54 - that should be good for what, a 5% runup in share price today lol?
"-- U.S. consumer credit costs increased $4.1 billion, comprised of $689 million in higher net credit losses and a net charge of $3.31 billion to increase loan loss reserves. The $3.31 billion net charge compares to a net reserve release of $127 million in the prior-year period. The increase in credit costs primarily reflected a weakening of leading credit indicators, including increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards, and auto loans. Credit costs increased also due to trends in the U.S. macroeconomic environment, including the housing market downturn, and portfolio growth. " Expired
RC-
"Hedge funds and commodities soon to get a reality check."
My thoughts too. I suspect many hedge funds are in roach motel small cap stocks- so the end game will be much like Absolute Capital in the UK on a far larger scale (a scam fund that invested majority of assets in US pink sheet stocks - extremely entertaining story. Page Not Found - Portfolio.com.
Absolute ended up setting up a side agreement, selling whatever liquid securities they had and giving them back to investors. The rest is being wound down slowly for pennies on the pound.
Commodities will also fall, but maybe only in nominal terms? Not sure.
BAC CFC hypothesis: BAC was already very exposed via credit lines, deriviatives and the first $2 bil. Fed encouraged them in every way possible for overall panic/structural reasons. Did this include some form of put back of the bad assets? Purportedly not, but I'm suspicious.
RARELY AVAILABLE corner unit in circular building. Dramatic floor-to-ceiling walls. Breathtaking, massively proportioned mortgage. This one won't last: moisture-drenched BR was formerly home to one of New York's oldest families of termites. Original mold throughout. Architect-designed, carpenter-built, and painter-painted, this 400 sq. ft. jewel box has been lovingly overpriced at $2.8M. Specious!
-The New Yorker 1/14/08
burnside | 01.15.08 - 5:34 am |
the unwind will be extremely messy, ie commodity space.
btw, the link on that is broken, but your summary does not surprise me. these assholes are reaching for alpha and are likely to show the real meaning of a capital depreciation strategy. couldn't happen to nicer people.
Gives up back M3 data and let the investment community see what you are really doing. Just as everyone wants more transparency from financial institutions, the same holds true for the Fed.
Why not make the rate negative, and send out letters to anyone who saves thanking them for being stupid and giving them instructions on where to send their money so we can bail out greedy home-moaners and Wall Street Pigs? Also, they should include various kinds of cat food with Social Security checks since once inflation is done with that, the older folks will be eating cat food on good days.
Well, at least thanks to 3rd world slave labor, there's no wage inflation, and that's the only kind the Fed cares about!
So, where do you think gold will stop? $1,000 per ounce? $1,200? Higher?
You know, at this point, CNBC could fire every analyst and just replace them with a Carl Sagan impersonator. ("Billions and billions..." could be the answer to every question.)
Commodities will also fall, but maybe only in nominal terms? Not sure.
rcyran | 01.15.08 - 7:48 am | #
rcyran,
Take this for what its worth...I talked with my uncles this weekend,they sold all the stored grain they had in the bins on the farm back in Nov-Dec. Funny thing is the buyer requested no delivery at that time. They also mentioned almost all neighbors have grain sold but stored waiting on word to deliver. The only grain actually delivered was sold in 06 under future contracts for 07 delivery.
I would be very leery of saying grains are going to the moon...Now, if we have a really bad harvest this year anything is possible.
I think the fed has done a great job with the credit markets thus far due to the underlying noticeable improvements, that said, we are balancing on a precipice(spell check) and the challenges ahead could have us revisit aug. which would not be a good thing.
People are underestimating the full impact of the across the board credit tightening, this amazes me due to many being very intelligent participants.
So, where do you think gold will stop? $1,000 per ounce? $1,200? Higher?
In the short term, it'll stop at $1,000 - more precisely something like $1,001.15 - for the same reason that the Nazz topped at 5,000 and oil topped at $100: because it's a nice round number, and there's always some speculator out there who cares about making a splash more than making a profit.
From that point, I'd be surprised if we didn't see it back below $700 before too long.
In the long term, all bets are off, because I can't even begin to predict what level of carnage the Fed stands willing to wreak on our dollar to save Wall Street.
Gold is now a bubble, consuming excess capital with no better place to go.
Gold is probably a mania rather than a bubble. That stupid GLD ETF is creating its own weather so to speak. The very act of holding gold in a vault in London as a way of tracking the price of a commodity like gold is guaranteed to self-reinforce any movement. What is happening by accident is what the hunt brother did on purpose with silver. Why the central banks are letting this ETF timebomb tick I cannot understand.
To complement Mike's post on latest weekly retail sales, December retail sales below expectation at -.4%. Some of that seems to be due to lower gas prices, but ex-gas it still comes in at -.2%.
Why do you think commodities will decline in a messy way, and why will they decline at all? A lot of the bearish argument has been that worldwide demand for commodities is killing USD and making life hard for U.S. consumers, and that money printing justifies higher commodity prices. So... why do you thin they're going down?
That stupid GLD ETF is creating its own weather so to speak.
Perhaps OT a bit, but this is one of the primary reasons I laugh out loud whenever I hear proponents of the "decoupling" theory expound on why emerging markets are going to be the "safe haven" from a US bear market.
How much of the 100, 200, 300% gains in these markets over the past year or two have been driven by "stupid money" from rich-world retail investors flowing in through these dozens of brand-new country- and region-specific ETFs, rather than domestic capital flows? I'd bet it's the majority, especially in the third-tier stock markets of the world.
In which case the root cause of these huge gains aren't decoupling, but these ETFs "creating their own weather" (love that phrase, BTW). The problem is, we rich-world retail investors are a fickle bunch, and the same actions of ours that magnified the move up are going to do the same to the inevitable move down.
I wouldn't want to be the Chinese broker who has to explain this in 12 months to a slew of their clients who were wealthy on paper for a few months and are now broke.
Why the central banks are letting this ETF timebomb tick I cannot understand.
Rob Dawg,
What exactly do you propose for the central bankers to do, Rob Dawg? It's real gold, real demand, and ETF structures that work for any security or commodity (not just gold).
Oh, and which central bankers are you talking about...because to ban gold ETFs, wouldn't it have to be all 453?
Gold ETFs are a great thing. Ordinary people can buy and sell gold quickly and easily without futures, storage, or much commission.
Who exactly gets hurt by increasing demand for gold?
Rob Dawg, I guess your next mission is a trip to India, where you will strip the gold bands off the arms and necks of 500 million peasants?
explains exactly how the Fed would like to cut 75 bps, but is afraid people would read that as panic.
He argues that in times of shock or financial instability, the traditional response of a central bank (25, 50 bps adjustments) is not appropriate. He argues for greater "flexibility" which may include more frequent adjustments or significant adjustments to address the risk of the propagation of the adverse feedback loop of deteriorating collateral and credit tightening. However, the flexibility to act against financial disruption raises the threat of inflation as people perceive preventive action as a foreboding economic prediciton. This can only be done if the public "trusts" the bank will address inflation. Right now he thinks the Fed has been timely, decisive, and the public trusts them on inflation so that they have the flexibility to properly address this crisis in the near term with further action.
Who exactly gets hurt by increasing demand for gold?
If you cannot answer this yourself then you surely will not believe any answer I could give. Doesn't matter. I won't waste my time on a topic that includes accusations of my striping peasants of their jewelry.
Thanks Heliben & Rob Dawg,
Deflation happens infrequently (every 80 to 100 years) and with ferocious speed. Few understand it's cause (fear of lending and monetary contraction). Most resist acknowledging it's commencing and fail to grasp it's eventual impact on all financialized (credit fueled) price fictions... gold, both ETF represented and bullion, not excluded.
There is no supply and demand that determines the price of financial assets when every "security" or "asset" holder is both a buyer and seller of the same item simultaneously. Optimism and fear are the major movers of markets. Period.
Some say it's heresy, but fundamentals are usually misinterpreted as causes of market moves; they're the end product of the over-arching social mood, as indicated by correlation studies.
If you think a quality education is costly, try "conventional wisdom."
wow
Hell, it'd be more efficient if they simply cut the rate to .5%.
I'd pay a dollar to see that.
75 bps would be a mistake; it would definitely stoke the panic in the markets. Even worse, it would make clear just how little of an effect the rate cuts are having.
That, of course, doesn't necessarily mean that the Fed won't do it; just that it would be a mistake, but it won't be the first mistake the Fed makes.
. . . and things are likely to get even more interesting as more inflation numbers come out. At some point the facade of the Fed as an inflation-fighter will have to drop, and it will be perfectly clear that their only role is to try and save the economy from itself.
And the closer the Fed rates get to 0%, the more the "Japan" word starts getting dropped. The Fed will have to keep rates above 2% to 3%, if only to prevent them from being compared with the Japanese central bankers who were powerless to stop the Japanese recession. Do not underestimate the importance to the Fed of attempting to save face.
Hopefully we will see commodities break soon instead of continuing to move upwards.
Well, the banks don't trust each other and won't loan overnight to each other. So a 75bps cut will fix it eh? Not sure I'm buying this. Not since M3 has started slipping.
Inflation, Money Supply, GDP, Unemployment and the Dollar - Alternate Data Series
Cheers,
"Come on down to Bernanke's Automart. I have got a great deal for you. 0% loans, no docs, no income, no problem."
Misean,
Its not a matter that the banks don't trust each other. Its the only way they are keeping interest rates up so people don't refinance.
Does anyone else not find it rather humorous how this game plays out each month? I mean, first, it's one and done, then everything is fine, then the steady drumbeat of bad news, with the occasional market pop to make the debate about cuts still viable, then about midway between meetings its a consensus for a cut, then a wondering whether its 25, etc. And each time we play this silly game, the bets on the cuts get bigger. Kind of makes you think they should just bring the rate to the lowest they would allow, and end the charade.
OT - somewhat. I like it when talking heads say gold is at an "all time high".
I recently heard an earnest man say we are in the "stratosphere with gold prices". He looked older than I am. Apparently he didn't live in the 70s. But he was on the Street.com
Geoff,
The problem is the Fed doesn't know the "lowest rate" the public will tolerate. They are probably just as mystified.
It'll drop until the crash. And then zero rates won't help. And then what???
If they really think liquidity has anything to do with it, and that there really is a problem, baby steps arent going to help. The real problem is, baby steps or one big step - neither one is going to help. Hence the charade.
Why does this strike me as socializing the results of bad decisions?
When all you have is a hammer everything looks like a nail.
ECB warns crashing dollar may stop Fed cuts
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:30am GMT 15/01/2008
Rumours of an emergency rate cut over coming days by the US Federal Reserve have swept the global markets, setting off a fresh plunge in the dollar.
Read the latest news on currencies
Get more of Ambrose Evans-Pritchard
Gold surged to an all-time high of $914 an ounce in New York on bets that the authorities will flood the global system with further liquidity to stave off a mounting debt crisis.
Bini-Smaghi is the first central banker to question the Fed's room to cut
Ashraf Laidi, a currency expert at CMC Markets, said futures contracts were starting to price in a serious likelihood of a half point cut before the next scheduled meeting at the end of January.
"With US equity indices testing their August lows and current macro-economic dynamics knocking at the door of recession, we place the probability of a 50 basis point inter-meeting rate cut as high as 70pc to occur as early as next week."
Lorenzo Bini-Smaghi, a member of the European Central Bank's executive council, warned that the tumbling dollar may now start to foreclose the option of US rate cuts and force the Fed to keep monetary policy tighter than it would like.
"I would not be so sure about the movements of the Fed. There is a serious problem with the dollar in America. We will see what margins they have for further rate cuts," he told Italy's La Repubblica newspaper.
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It is the first time that a top central banker has openly aired concerns that dollar weakness could constrain US economic policy.
Until now Washington has largely been able to ignore the currency, treating the slide as a headache for the rest of the world.
The euro briefly touched $1.49 today, just shy of its all-time high.
A leaked client note by HSBC added fresh fuel to the rate excitement, suggesting that Fed may now have to slash a full percentage point by month's end to fend off a serious downturn.
The bank's highly-rated New York economist, Ian Morris, said a new tone of urgency had been struck by top US officials over recent days, raising the possibility of two sets of cuts this month.
Fed chair Ben Bernanke prepared the way for drastic cuts with a speech on Thursday saying the authorities were "exceptionally alert" to the risks as the housing slump triggers the first wave of jobs losses. US unemployment jumped from 4.7pc to 5pc in December, the sharpest jump in a quarter century.
US Treasury Secretary Hank Paulson said the administration is rushing to craft a fiscal stimulus package to boost spending. "Time is of the essence," he said.
HSBC said the Fed had now raised expectations so far that it risks setting off fresh "financial stresses" if it fails to deliver a serious shot in the arm.
"If the Fed were to cut inter-meeting, we think it would by 50 basis points, followed by another
If the Chinese won't take any more Citi paper, how long will they take Treasury paper at decreasing rates with a falling dollar? Won't the US, like the tan man and MBIA, have to raise the rates to finance the DEBT? When will this happen?
"I have confidence that we properly assessed the issues," he said, adding that barring unexpected developments, Bank of America plans to stick with its $4.1 billion offering for Countrywide.
"We think we've struck a fair price," he said.
Asked about potential job cuts resulting from the transaction, Lewis noted that Countrywide will operate separately after the deal closes in the third quarter and it would not be integrated before 2009.
"At some point we will address the issue of jobs, but we haven't done that at this point," he said.'
Expired
uh huh-
"Lewis noted that Countrywide will operate separately after the deal closes in the third quarter and it would not be integrated before 2009."
Or when all you have is a nail everything looks like a hammer.
Only problem is, it's a finger nail.
I'd like to propose one of those geeky "alternative world" scenarios, You know where Douglas beats Lincoln or Alexander turns back from his India adventures.
What if: The Fed decided to defend the dollar instead of fight recession. In retrospect that pretty much describes recent policy choices. So, a strong dollar and an overdue recession. Time will tell if the choice was wise.
No f-in chance. Our leaders don't do anything which is upright and responsible. Everything is an attempt at an easy way out, a cop out, a dodge...it's truly disgusting.
They run out of string to push rather quickly at .5 and .75 a whack. Unless someone can come up with another trick this pony can do, its usefulness will soon be at an end. Time to wait and see in my book.
Rob Dawg: I don't think the fed is going to fight till labor costs go up dramatically. The fed keep increasing money supply to effectively lower labor rates because the laborers still don't notice.
Rob,
Bernutty doesn't really strike me as having the kind of backbone Volker did. He'd sit in front of the banking comitttee's chomping on cigars and telling them all to pound sand.
Cheers,
INO Equities Stocks Indexes - CONTINUOUS COMMODITY INDEX (NYBOT:CI) Price Chart and Quote
Commodities say 75bps
Lower by 100bps, just so we can see gold hit $1,000!!!
ShortCourage,
No need for that. It'll get there without any help from the Fed.
Cheers,
another bailout-
http://www.sec.gov/divisions/investment/noaction/2008/sticlassic010208-17a.pdf
Found this little gem over at naked cap. Let me act surprised.
Goldman Bet on Subprime Mortgage Drop for Most of 2007
Goldman Bet on Subprime Mortgage Drop for Most of '07 (Update1) - Bloomberg.com
A 50bps or 75bps cut is only going to make the pain worse for many many middle class Americans...
Americas inflated asset prices must fall
By Stephen Roach
January 7 2008
ft.com
The US has been the main culprit behind the destabilising global imbalances of recent years. Americas massive current account deficit absorbs about 75 per cent of the worlds surplus saving
A sharp decline in asset prices is necessary to rebalance the US economy.
As home prices move into a protracted period of decline, consumers will finally recognise the perils of bubble-distorted saving strategies. Financially battered households will respond by rebuilding income-based saving balances. That means the consumption share of gross domestic product will fall and the US economy will most likely tumble into recession.
Physical ruin, financial ruin & emotional ruin.
Damn, it like they planned it or something.
YouTube - U2 Super Bowl halftime show 2002 - 9/11 Tribute
(5:00)
.
"One and done" may be correct, but it may be describing Dr. Bernanke's tenure rather than the rate cuts. With the steep rate cuts already in play and an economic stimulus package (which will inevitably involve more Federal debt) coming soon, the Greenspan/Bernanke Keynesian school of government stimulus will be facing its ultimate test, a test which I suspect it will fail.
I believe during the depression rates were %2 interest.
OT - Someone in China actually has a long term plan. The Chinese buys Chrysler in 2 years? Ford agrees to become Ford-Tata(India)? The Chinese want/need the American market for autos. Watch the gov. agree along with the unions under some agreement were a % is made by American workers.
They could do the financing here at 2 %?
In 2 years Michigan will be desperate - already over 7% unemployment
China's BYD Aims to Sell Hybrid Cars in U.S. by 2010 (Update1)
By Tian Ying
Jan. 14 (Bloomberg) -- China's BYD Co., the world's biggest maker of mobile-phone batteries, said it will sell hybrid cars in the U.S. as soon as 2010 as Chinese automakers aim to offset shrinking domestic profit margins by expanding in North America.
``We are the best in battery technologies, and I am sure we will be the best in the automobile industry as well, because electricity will replace gasoline,'' founder and Chairman Wang Chuanfu said in an interview at the North American International Auto Show in Detroit today.
BYD is displaying four models including a hybrid sedan at the show as environmental concerns and rising oil prices boost demand for fuel-efficient vehicles. The Shenzhen, China-based company will sell a hybrid vehicle in China from the second half of this year, which may be priced $6,000 higher than gasoline- powered cars, Wang said. It also plans to make cars in the U.S. eventually, he said, without elaborating.
BYD has strength in developing batteries,'' said Yale Zhang, director of CSM Asia, which advises automakers in China.But it takes a lot more than batteries to sell cars.'
50 bps or 75 bps.
thats like a choice between "should we let america drown or burn?"
I'd pay a dollar to see that.
You'll pay with half of all your dollars pretty soon. Bring on the $150/bbl oil!
I love it being short when the stock market has 75 bs. pt. rate cut baked-in. It means the market is bound to be disappointed at some point...sooner or later. What a mess!
3-month Libor for September priced at 2.90% in the Eurodollar futures markets. Puts base rates ~2.75% or so by then.
futuresource.com |
Futures & Commodities Charts - Real-Time Charts, Free Charts
Asia is up big for some silly reason.
Cheers,
As for asset prices must fall - assets like oil and natural gas, wheat and corn are not going to fall. They are rising for reasons wholly unrelated to the fall of the dollar. It is not a bubble. It is constrained supply, and it's a problem that has NO solution. The falling dollar only steepens the curve, but the prices for these things are not out of whack.
$4 gas by May.
One solution is stop promoting ethanol. Jeesh!
Mike,
Just a quibble. The things you site are commodities, not assets.
Cheers,
Geoff,
Especially corn squeezins.
Cheers,
Check out the market internals today:
NYSE - 52 week highs 39, 52 week lows 61
Nasdaq- 52 week highs 14, 52 week lows 96.
Wow, lots of strength in that rally today, huh?
Is there honestly nothing we can do to stop this fed rate madness?
Denzel,
The markets are up. It doesn't matter. This is a new era.
Pffffttttt.
Cheers,
The central bank has set the yuan central parity rate at a record 7.2454 to the dollar, according to the China Foreign Exchange Trading System.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
China cooking to frog slowly.
Is there honestly nothing we can do to stop this fed rate madness?
Anonymous | 01.14.08 - 9:51 pm |
Nope.
Cheers,
Misean,
Just a quibble. It's "cite", not "site".
"oil and natural gas, wheat and corn are not going to fall. They are rising for reasons wholly unrelated to the fall of the dollar. It is not a bubble. It is constrained supply, and it's a problem that has NO solution. The falling dollar only steepens the curve, but the prices for these things are not out of whack."
There is a solution that is usually imposed by nature. Depopulation. Did you know there was an economic boom following the Black Death of the 14th century in Europe? Nothing like a third of the workforce dying off to cause wages to rise. There were some unpleasant years before that though.
Misean,
Just mindless blackbox investing I suppose. Program the code to buy on dips and let 'er rip when the market is 'oversold'. Amazing how many of these rallies have been wiped out though.
But if more unexpected bad news comes out tomorrow, like a hot PPI, then the so-called oversold market looks overvalued.
If M1, M2, and M3 are dropping, as suggested at the Shadowstats link, the fed ABSOLUTELY should cut rates, and fast. If the money supply drop, we're looking at some very nasty economic times.
Denzel,
I suspect you are 100% correct.
Cheers,
Fair Economist,
Dropping rates will do nothing as the conduit to lend is broken. I pointed to that earlier. Banks do not want to lend to each other. Low rates do not solve trust/solvency problems. M1/M' have been falling all year. M3 is now getting the picture. Lower rates won't fix it.
Cheers,
Top Chinese General: 'There Is No Need to Fear Us'
Top Chinese Official Talks Frankly to ABC News Before U.S. Meeting
By JONATHAN KARL
Jan. 14, 2008
In rare public comments, the Chinese military chief of staff told ABC News today that the United States should not be concerned about China's rapid military buildup, saying "there is no need to fear us."
"It is impossible for the U.S. to be afraid of our military development," said Gen. Chen Bingde, the chief of the General Staff Department of the People's Liberation Army.
Top Chinese General: 'No Need to Fear Us'
Perhaps Gen. Chen Bingde knows that China's $1Trillion dollars has created enough fear than BB is dropping pants more...
Dave's Daily (404 Not Found is a pretty good "technical" site for those of us that invest based on trends but aren't necessarily schooled in technicals.
Anyway, he points out that despite the "oversold" maxim being thrown around the media and blogs of the world, a pretty reliable indicator/oscillator suggested neutrality going into today, and an overbought level after today.
FWIW.
Fair Econ:
Money Supply isn't dropping. M3 is growing at 15% instead of 16%.
The BDI downturn is beyond damning. I can't remember how many times CNBC types would point to the rising BDI as proof that Goldilocks lives. Now, of course, they're all back to bottom-calling (again).
Corn will fall if the ethanol subsidies/incentives are cut off.
Red Pill, don't give the White House any ideas.
Hon Kong Phooey,
M3 is falling. Inflationary booms are sustained by increasing credit and accelerating credit. M3 is falling. M1/M' is falling. M2 is flat.
Inflation, Money Supply, GDP, Unemployment and the Dollar - Alternate Data Series
Cheers,
And Hazard wins the thread, IMO, with brutal analysis. If anyone thinks it's off-base, educate me.
enuf with this sillyness already, power to the zirps!
Misean,
One of us is looking at that graph wrong & it may be me.
Doesn't it show roughly 15% y/y growth of M3 at year end 2007?
If 75% of US households earn less than $75,000 annually (and most much less) it appears doubtful that either rate cuts or raising GSE loan limits will soften the landing.
Well Phooey,
It's not the growth rate but the direction. I show M3 declining. It's important to understand the acceleration argument. The brakes have been hit. Sure we're still moving forward but we're slowing. Base money is looking bad, and M2 is flat. This is important to understand. M3 growth rate is slowing. Further the turn down, albeit a synthetic measure (thanks fed), is rather sharp. It's early yet, but we've nothing since early 2005 where a significant downturn occured.
My suspiscion is that the removal of M3 was to hide a downturn in M3, no an upturn. Pick your poison...that's how I see it.
Cheers,
Reading things here then listening to MSM is making me Bi-polar. However the bears make more sense than the bulls anyday. Unfortunately they have for about 20 years.
I do feel we have hit peak credit though.
how many of those 25K jobs cut by Citi are US? How many Indian call center?
Another thing, the last time the FRB did a surprise rate slash between FOMC meetings was the day before options exp back in August or something? Some one in an earlier thread mentioned it is options exp this Friday. hmmm
Hey, as long as the rate cuts lower the borrowing costs for PayDay Loan Centers, life in America will be great. Then they can improve their margins by another 300%.
J6P is toast.
"It'll drop until the crash. And then zero rates won't help. And then what???"
Well, it definitely removes the upside threat of an inter-meeting cut. There's always another stimulis package around the next corner to look forward to though. Always a bull market until BK!
I'm buying pitchfork, shovel, and torch futures.
Marcus,
LOL
Cheers,
MacWorld mean Apple should save equities across the board for another huge up day, just like IBM did today. More ponzi economics on Wall St. The markets trade based on certifiable insanity.
wristbands
Fitch Ratings said it has placed California's about 43 bln usd outstanding general obligation (GO) and 5.9 bln usd in related state appropriation-backed bonds on negative watch, citing California's widening structural budget and cash flow imbalances as the state's economy slows largely due to the housing downturn.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
sfac: "...how long will they (Chinese) take Treasury paper at decreasing rates with a falling dollar?"
Holdings of U.S. Treasuries by the Chinese peaked in March '07, and have been in near monotonic decline since then.
http://www.treas.gov/tic/mfh.txt
The Japanese have had their fill of our t-paper, too: their holdings peaked in Jan. '07, and have been moving down since.
Anyone else notice that the dollar just hit a new low vs. the Euro and is a hair away from a new low vs. the Yen?
Thanks, A-, for the link. It's about time that folks started getting cold feet about California bonds, especially the 'revenue anticipation' type.
Here's something for the bankers to panic about.... City of Cleveland sues lenders over foreclosures - Sacramento Business Journal: tells it like it is. Of course, it is unlikely to ever get resolved in this manner....however, my understanding is competent underwriting has always been the responsibility of the lender.....no?
As far as commodity prices go, there's an old saying "The only cure for high prices is....high prices"
Bernanke warms up the helicopter.
"[Bernanke] said his thoughts on a fiscal stimulus were 'inchoate.'"
Bloomberg
Conjure says, "GO EURO, GO!"
mp wants a pony.
oh wow, nikkei takes a nose dive under 14K after the 8 sake lunch!
Nikkei has broken through 14,000, major support level, for the first time in more than two years.
There is something that feels artificial and manipulative going on in the U.S. market. It's hard to say what. But it's not present in Japan, where economic conditions may be much better.
In any case, I like to short into artificially. It just creates weaker structural supports.
MBAA came out with their 2008 projection for home sales.. 4.94 million.
Total volume of originations is supposed to be under $2 billion for the first time since 2000
Holdings of U.S. Treasuries by the Chinese peaked in March '07, and have been in near monotonic decline since then.
http://www.treas.gov/tic/mfh.txt
The Japanese have had their fill of our t-paper, too: their holdings peaked in Jan. '07, and have been moving down since.
jg - did you see how much the UK has bought? Overall there are ~$255 B more holdings in total in Oct 2007 than in Oct 2006... almost equal to the gain in UK holdings at ~$235 (everyone else adds up to about a $20B gain).
There is a story there somewhere.
"Total volume of originations is supposed to be under $2 billion for the first time since 2000"
Cal, I think you mean $2 trillion. Just trying to help.
OT -- just as sdtfs (sp?) said; tough times in San Diego: resale home prices down 13.0% YOY, and down 6% month-to-month; units sold down 42% YOY.
Page not found
As my wife just remarked, this unwind of prices may happen faster than we think.
eh trillion.. billion.. whats the difference.
(Thanks MP, I did mean trillion, "my bad")
times like this my least favorite saying is:
"the market can stay irrational longer than you can stay solvent"
no kidding, last Thurs and today have been brutal.
Well at least gold is holding over $905.
I'll sleep well tonight with that info.
Cheers,
d-f-, be careful on the U.K. numbers; it's really the oil sheikhs' British bank accounts that account for the rise.
mp,
As long as conjure doesn't want to eat the pony.
jg,
I was sitting at lunch thinking about the last quarter for housing up here in Los Angeles. Things got extremely whacky in 2003 because (IMHO) Countrywide started pushing option arm loans for purchases hard on the average joe. This then changed into the infamous IO 2/28 (I think the secondary market was more comfortable with a non negative amortizing loan).
Ever since Countrywide had to switch over to bank funding the market chilled tremendously. Yes, many players got hit at the same time. But Countrywide is the biggest and was looking for ways not to reject files. I think they are the story for 2008. Their absence will be what drives the number of sales down and what makes 2008 worse. Above anything I think it will be the defining story of 2008. There are big changes afoot, the adverse market charge for the GSE, the .25% origination fees for the GSE, the PMI companies tightening up. But I think the broker channel will severely restricted and it will hurt sales even more.
I think sales could hit 4.5 million this year.
But maybe I am just biased because I am in LA and have to drive by 10 Countrywide buildings along the 101 on the way to work.
OT -- the San Diego resale home median price of $470K is the lowest it has been since March 2004.
Back to '04 prices in San Diego.
And, the fun really has not yet begun.
...with fava beans and a nice Chianti...thp thp thp thp...
Makes sense, cal.
Going off topic and back to BACCFC:
Is it possible the deal was brokered by the feds but they know it isn't actually going to go through? Maybe they just want to buy time? Maybe BAC will get preferential treatment in BK court and Angelo won't get arrested?
Do you guys honestly think that BAC didn't run the CFC deal past the Fed before proceeding with it?
It's looks to Conjure and I like the thing is being fast-tracked.
FFDIC, your thoughts?
s/b Conjure and me
eh trillion.. billion.. whats the difference.
cal | 01.14.08 - 11:38 pm | #
An interesting comparison:
Here's how large 1 trillion is in relation to the other "big" numbers. If you disagree with my use of an average of 3 seconds to count each number, you may use any time interval you want - it's the ratio that's important. I used the number 876,987,654,321, and figured 3 seconds was fair.
If you have a problem with my math, so do I.
So....
3 seconds x 1,000,000 = 3,000,000 seconds
3,000,000 seconds/60 = 50,000 minutes
50,000 minutes/60 = 833.3 hours (keep in mind, 1,000,000 seconds = 11.5 days)
833.3 hours = 34.72 days
It takes 34.72 days to count to 1 million
Now it gets interesting - to count to 1 billion:
34.72 days x 1000 = 34,722.22 days
34,722.22 days/365.25 = 95.064 years
It takes 95.064 years to count to 1 billion
To 1 trillion:
95.064 years x 1,000 = 95,064.26 years
Bottom line: It takes 95,064 years to count to 1 trillion.
A little context never hurts.
"the market can stay irrational longer than you can stay solvent"
no kidding, last Thurs and today have been brutal.
dunham,
What are you talking about? The first half of this month has been the best start of a year for bears I can ever remember. A lot of bear positions are up over 10% this year already, today included. I can't ever remember weaker fundamentals and technicals looking forward.
If you don't have more conviction that to be scared off by day to day or week to week volatility, get out.
This is going to be big year for patient bears. At some point this year, you'll see big cave-ins across the U.S. stock market. Just stick with it, and you'll be rewarded.
American banker (requires subscription) had an interesting "what if" article.
A Systemic Risk Averted in Servicing? - American Banker Article
What would have happened to all those mortgage being serviced if CFC went bankrupt.
d-f-, be careful on the U.K. numbers; it's really the oil sheikhs' British bank accounts that account for the rise.
jg | 01.14.08 - 11:39 pm | #
Bush might workout some deal with the Arabs to bailout US with all those oil profits during his Middle East visit.
rich,
i agree - up ~12% this year on bearish positions, plus ~7% in December, but these whipsaw days can be tough sometimes.
BUT,
bulls can always fall back on the fact that someday, sometime their overall bullish position will go up.
bears don't necessarily have that knowledge to fall back on. Even if i believe we are due for a major crash/recession.
50, 75bps,...not going to matter.
YouTube - Glenn Beck - The Real Story, Touching the Third Rail
dunham,
I agree about the difference between bulls and bears.
Bears need to be more selective as to opportunities. Probably 90% of my investment life, I've been pretty bullish.
You only get maybe 2-3 great bear market opportunities in a lifetime.
But when you're standing there on the ledge, looking out over the Grand Canyon stretched for miles in front of you...AIN'T LIFE GRAND? (to paraphrase Widespread)
I bet Bernanke told Maria Bartiromo how much he's cutting.
Everyone! To thew Bartiromo residence!
Greenspan joins NY hedge fund
InfoViewer: Greenspan joins NY hedge fund
John Paulson, president of the hedge fund, said: "Few people, if any in the world, have the experience with, and depth of understanding of, global financial markets [of Mr] Greenspan."
He said Mr Greenspan would share his perspectives with the Paulson investment management team on the direction of the economy, assessing the potential for and severity of a recession.
Has the Fed been abroad ? Do they know what a joke the US$ is at the moment ? against commodities, against the euro, against the Swiss franc, heck even Mr. .5% interest rate Yen ! They don't even need to leave the US - just watch CBNC Worldwide damnit - they have their own money-hunnies at that and they come in all nationalities too !
The Fed can't possible cut 1/2%, let alone 3/4% - do they know the interest differential we'll lose against the Euro central bank rates ?
Nutz.. truly nutz.
-K
"Has the Fed been abroad ? Do they know what a joke the US$ is at the moment ?"
Conjure says, "GO EURO, GO!"
And yeah, mp wants Uncle Ben to bring him a pony in his big helicopter.
i hear you rich......
i should have made clear that i was referring to just these past 4 trading days (with 3 updays - great friday though), not the year in general, which has obviously been profitable for those on the right (as of today anyway) side of the trade.
futures down a lot right now, but basically meaningless, as econ news tomorrow AM will dictate trading. hopefully no more random upside surprises with no CC and no guidance
also, someone mentioned in an earlier thread that a CNBC analyst was saying the ideal scenario for the market would be lower-than-expected retail sales and a benign inflation # wed - Was this the same analyst that said a poor employment figure on Jan 4 would be good for the market?
It matters what the Fed does, but only as confirmation of what we know: demand for loans is decreasing along with insolvency. US taxpayer-backed credit will follow the market price for quality debt down as evidenced by falling yields. BB is a follower, not a leader. Have we any doubts about that?
Yes, its already old news to the market, whether its 25, 50, even 75 beeps. What's being disregarded by those who speak but don't know, is that this is horrible news for the prices of all financialized things: houses, shares, bonds, derivatives, notationals and commodities.
Recall how the Fed followed rates down to 1% from the 1999-2000 market peaks? A lot of good those "policy easings" did to prevent deflating around 80% of the Nasdaq, and near 60% of the S&P. This time, it's different, but not the way the Pollyannas suggest.
Real GDP will continue auguring in until all the defaulted debt is written off, rolled over (!?!), or paid off. Then and only then will the chasened lenders and borrowers of tomorrow know what assets are really worth (all the auctions will clarify that mystery).
There won't be any "bottom callers" then, for fear that it isn't, yet. The opposite of the group-think over-optimism of today will be the conventional wisdom of that day.
It will be wrong then, too. Many will miss the greatest bull market of the next generation.
I love you all. Thanks for all the insight, pathos and wit. Night.
Watching gold and the commodities would lead one to believe that we have to be close to the end of this game. The dollar is the last place anyone wants to put their money so everyone is going to know we are bankrupt and very soon. I thought we might be able to fake it for a few more months!
people around the office (i work in commercial mortgage finance in NYC) are convinced financials have hit bottom and that this will be the "kitchen-sink" quarter for C, MER, etc. (b/c of new CEOs, among other things).
I'm waiting for the other shoe to drop - credit card debt? more RMBS? CMBS/Mezz? CDS? How about the realization that it will take 7 years before bank earnings hit 2006 levels again?
Also, i'm expecting Wells Fargo to come out with uglier than expected numbers & outlook. No way they dodge this mess. A lot of 2nd mortgages on their books!
Knoxville, TN.
New Tazewell bank ordered by FDIC to halt unsafe practices (but everything is fine now)
New Tazewell bank ordered to halt unsafe practices» Knoxville News Sentinel
Look at the yen go. Between the market action since the beginning of the year and the movement of the yen, there has to be some hedgies in serious trouble. I expect some serious selling if the Opex rally doesn't happen. Paging Dr. Bernanke...
Siv (hope you're still lurking) - Here's a good piece on your ABK investment: MBIA, Ambac: Dead Men Walking « naked capitalism
AZ_Cowboy, I've been thinking the same thing. Dropping FF rates and a rising yen are a double whammy on the yen carry trade. I'd bet a lot of folks made wrong way all-in bets on that one. I guess the important question is: how long can they hide it or stall on the hopes of a rebound?
vital strong
Sounds like the folks at New Tazewell (can't believe that name) have been studying the Press Spokesperson's 'Little Lifesaver' Book of Adjectives.
Centro chief quits.
Centro Chief Quits; Lenders May Ease Funding Deadline (Update6) - Bloomberg.com
Lenders may ease funding deadlin.
deadline, not deadlin.
dunham
You're office buddies are no different than the consensus of the Barron's roundtable - tough first half followed by rebound in second half.
IMO, the real contrarian bet is being ultra bearish. The LEI is cliff diving. Typically the economy recovers 6-7 months after the LEI starts growing again. So the probability of a recovery in the second half is practically zip. Its going to take a while for a positively sloped yield curve to work its net interest margin. The banks are struggling to raise capital when the Chinese & the Sheikhs are flush. Wait till they take a bath! I remember very well in the 80s the Japanese sweeping in to buy all their trophy assets. Wall Streeters are expert at fleecing novice investors with cash burning a hole in their pockets. The banks will think they've cleared the decks but will be constantly "surprised" as another shoe drops.
We'll know when we are close to the bottom - Citi will not be able to get money from anyone except Uncle Scam! I don't think we have seen the end of this by any stretch.
Can Accounting Principles Survive the Mortgage Crisis?
Looser accounting gets SEC staff approval this week, while mortgage bankers petition FASB for more breaks.
Can Accounting Principles Survive the Mortgage Crisis? - - CFO.com
The whole system is rotten to the core.
rising yen are a double whammy on the yen carry trade.
The Chinese are cutting Japan off at the knee caps, as they revalue the Yuan they are buying the Yen, Japan's currency manipulation is over. America will soon be a carry trade currency with one of the lowest rates of the G-7.
Four Wall Street firms have received subpoenas from Senate investigators who are examining whether the firms improperly structured transactions to help hedge funds avoid dividend taxes, The Wall Street Journal reported on its Web site on Monday.
Citigroup Inc, Lehman Brothers Holdings Inc , Morgan Stanley and UBS AG have received subpoenas relating to the use of derivatives by offshore investors, including some big hedge funds, to help avoid withholding taxes on U.S. stock dividends, the Journal reported, citing people familiar with the matter.
Senate subpoenas four Wall Street firms: report
| Reuters
Anon 2:33, yes for communists the Chinese appear to be quite astute capitalists. Home team, not so much.
This talk about bottom-calling...what if there is no bottom? There wasn't one for the Roman Empire.
When a system as large and complex as western civilization over-reaches itself, and lacks sufficient inputs of energy to sustain itself, and can no longer cannibalize its stored value, it disintegrates. It divides into smaller systems. These can be self-sustaining, albeit at a lower level of complexity than the previous whole.
Usually small systems are more efficient when they are unified into a larger one, but the over time that new, larger system can become so internally inefficient that it can't cohere.
That is possibly what is happening now. Just saying.
(While trying to keep up with all these marvellous threads!)
I have to wonder if the Arabs and the Chinese will decide to wait "until there's blood in the streets" before buying any more of American financials.
FFDIC - "New Tazewell bank ordered by FDIC to halt unsafe practices (but everything is fine now)"
What, they gotta put on a prophylactic? Sorry, low hanging fruit...
M3 is falling
No. the rate of growth in M3 is falling (there is less credit) but the fed is compansating for it with all the rifraf
Going off topic and back to BACCFC:
Is it possible the deal was brokered by the feds but they know it isn't actually going to go through? Maybe they just want to buy time? Maybe BAC will get preferential treatment in BK court and Angelo won't get arrested?
it also saves Cramer
Do you guys honestly think that BAC didn't run the CFC deal past the Fed before proceeding with it?
mp | 01.14.08 - 11:51 pm | #
Of course they did: it's SOP in the banking industry to make sure the regulator agrees before you announce a deal. It's simply daft not to do so.
"Is it possible the deal was brokered by the feds but they know it isn't actually going to go through? Maybe they just want to buy time? Maybe BAC will get preferential treatment in BK court and Angelo won't get arrested?"
And how can Fed make this happen? When I last look US is still governed by laws. Which part of bk laws or crimal laws will allow any government offical to make good this kind of promise? This is conspiracy theory run amuck and we let our imaginary guide us becuase we don't understand actions taken by institution. May be the alternative explaination is CEO's ego and/or difference in the evalaution of the housing crisis cause the action. There are quite a lot of people in the world believe the housing crisis will turn around shortly. May be the BoA econimists belong on that camp and decide to bet on it. And if you look at CFC stock price, market participants obviously don't believe the buyout given the spread between what it is trading now vs what is being offered.
OT, but wanted to share this . . .
RARELY AVAILABLE corner unit in circular building. Dramatic floor-to-ceiling walls. Breathtaking, massively proportioned mortgage. This one won't last: moisture-drenched BR was formerly home to one of New York's oldest families of termites. Original mold throughout. Architect-designed, carpenter-built, and painter-painted, this 400 sq. ft. jewel box has been lovingly overpriced at $2.8M. Specious!
-The New Yorker 1/14/08
From Prior comment;
"jg - did you see how much the UK has bought? Overall there are ~$255 B more holdings in total in Oct 2007 than in Oct 2006... almost equal to the gain in UK holdings at ~$235 (everyone else adds up to about a $20B gain).
There is a story there somewhere."
The BoE is a widely recognised front for a lot of Fed activity in the bond markets. Parking bonds at the BoE saves nasty questions being asked.
I've just seen a reference to rumours of a $20-30bn writedown by JPM. Anybody have any info to support or refute this?
ML gets $6.6 billion from Korean Investment Corp., Kuwait Investment Authority, and Mizuho Corporate Bank.
Starting to scrape the bottom of the barrel - Korean Investment Corp?
the good news in the near-term is that credit markets continue to improve, albeit very slowly, the bad news is that we are going into a hy default cycle that will likely set precedent.
with mew decling, credit still tightening and likely to tighten much further with significantly smaller balance sheets from the issuers.
moving to 90% recession probability. Hedge funds and commodities soon to get a reality check.
Tough period, but manageable.
Citi lost $1.99 a share, $18.1B writedown, raising $12.5B of new capital and cutting divvy to $0.32 from $0.54 - that should be good for what, a 5% runup in share price today lol?
Bloomberg reports a $14.5B in new investment (correction)
from citi-
"-- U.S. consumer credit costs increased $4.1 billion, comprised of $689 million in higher net credit losses and a net charge of $3.31 billion to increase loan loss reserves. The $3.31 billion net charge compares to a net reserve release of $127 million in the prior-year period. The increase in credit costs primarily reflected a weakening of leading credit indicators, including increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards, and auto loans. Credit costs increased also due to trends in the U.S. macroeconomic environment, including the housing market downturn, and portfolio growth. "
Expired
RC-
"Hedge funds and commodities soon to get a reality check."
My thoughts too. I suspect many hedge funds are in roach motel small cap stocks- so the end game will be much like Absolute Capital in the UK on a far larger scale (a scam fund that invested majority of assets in US pink sheet stocks - extremely entertaining story.
Page Not Found - Portfolio.com.
Absolute ended up setting up a side agreement, selling whatever liquid securities they had and giving them back to investors. The rest is being wound down slowly for pennies on the pound.
Commodities will also fall, but maybe only in nominal terms? Not sure.
Sorry, should read:
Absolute ended up setting up a side agreement, selling all the liquid securities they had and giving the proceeds back to investors.
BAC CFC hypothesis: BAC was already very exposed via credit lines, deriviatives and the first $2 bil. Fed encouraged them in every way possible for overall panic/structural reasons. Did this include some form of put back of the bad assets? Purportedly not, but I'm suspicious.
OT
ICSC-UBS Store Sales take a pause before picking up soooon...
Jan 15, 2008 11:45 GMT
Store Sales - W/W change
Actual -0.9%
Previous 0.4%
Store Sales - Y/Y
Actual 1.1%
Previous 1.9%
http://www.eventpak.com/calen/showevent.asp?fid=581200
eh trillion.. billion.. whats the difference.
(Thanks MP, I did mean trillion, "my bad")
cal | 01.14.08 - 11:38 pm | #
I will destroy the ozone layer unless they pay me one million dollars.
RARELY AVAILABLE corner unit in circular building. Dramatic floor-to-ceiling walls. Breathtaking, massively proportioned mortgage. This one won't last: moisture-drenched BR was formerly home to one of New York's oldest families of termites. Original mold throughout. Architect-designed, carpenter-built, and painter-painted, this 400 sq. ft. jewel box has been lovingly overpriced at $2.8M. Specious!
-The New Yorker 1/14/08
burnside | 01.15.08 - 5:34 am |
Thank you for sharing...
rcyran-
the unwind will be extremely messy, ie commodity space.
btw, the link on that is broken, but your summary does not surprise me. these assholes are reaching for alpha and are likely to show the real meaning of a capital depreciation strategy. couldn't happen to nicer people.
Message to Boom Boom Ben:
Gives up back M3 data and let the investment community see what you are really doing. Just as everyone wants more transparency from financial institutions, the same holds true for the Fed.
Why not make the rate negative, and send out letters to anyone who saves thanking them for being stupid and giving them instructions on where to send their money so we can bail out greedy home-moaners and Wall Street Pigs? Also, they should include various kinds of cat food with Social Security checks since once inflation is done with that, the older folks will be eating cat food on good days.
Well, at least thanks to 3rd world slave labor, there's no wage inflation, and that's the only kind the Fed cares about!
So, where do you think gold will stop? $1,000 per ounce? $1,200? Higher?
Let's try the absolute capital link again:
Absolute Capital Halts Redemptions After Homm Resigns - DealBook Blog - NYTimes.com
You know, at this point, CNBC could fire every analyst and just replace them with a Carl Sagan impersonator. ("Billions and billions..." could be the answer to every question.)
rcyran-
thanks. I always loved those hedge funds that suspended nav reporting due to the assets not reflecting their full value-
for the good of the investor of course. (:
I am waiting for pension funds to adopt this practice-
due to market dislocation, of course.
Commodities will also fall, but maybe only in nominal terms? Not sure.
rcyran | 01.15.08 - 7:48 am | #
rcyran,
Take this for what its worth...I talked with my uncles this weekend,they sold all the stored grain they had in the bins on the farm back in Nov-Dec. Funny thing is the buyer requested no delivery at that time. They also mentioned almost all neighbors have grain sold but stored waiting on word to deliver. The only grain actually delivered was sold in 06 under future contracts for 07 delivery.
I would be very leery of saying grains are going to the moon...Now, if we have a really bad harvest this year anything is possible.
Chris
Pondering the Mess
Gold is now a bubble, consuming excess capital with no better place to go.
one more thing-
I think the fed has done a great job with the credit markets thus far due to the underlying noticeable improvements, that said, we are balancing on a precipice(spell check) and the challenges ahead could have us revisit aug. which would not be a good thing.
People are underestimating the full impact of the across the board credit tightening, this amazes me due to many being very intelligent participants.
ok, last one-
and if one more asshole tells me to buy tech, I will puke.
So, where do you think gold will stop? $1,000 per ounce? $1,200? Higher?
In the short term, it'll stop at $1,000 - more precisely something like $1,001.15 - for the same reason that the Nazz topped at 5,000 and oil topped at $100: because it's a nice round number, and there's always some speculator out there who cares about making a splash more than making a profit.
From that point, I'd be surprised if we didn't see it back below $700 before too long.
In the long term, all bets are off, because I can't even begin to predict what level of carnage the Fed stands willing to wreak on our dollar to save Wall Street.
Yes, let's cut interest rates again. Wall Street needs to drive the few remaining savers into the stock market to support stock prices.
Gold is now a bubble, consuming excess capital with no better place to go.
Gold is probably a mania rather than a bubble. That stupid GLD ETF is creating its own weather so to speak. The very act of holding gold in a vault in London as a way of tracking the price of a commodity like gold is guaranteed to self-reinforce any movement. What is happening by accident is what the hunt brother did on purpose with silver. Why the central banks are letting this ETF timebomb tick I cannot understand.
About BAC, is it a given that they lost most of their first $2B investment? They could have hedged their investment, right?
C down 2.5% although the writedown is smaller than feared ! strange..
Floyd Norris is liveblogging the Citigroup conference call.
To complement Mike's post on latest weekly retail sales, December retail sales below expectation at -.4%. Some of that seems to be due to lower gas prices, but ex-gas it still comes in at -.2%.
riskcapital,
Why do you think commodities will decline in a messy way, and why will they decline at all? A lot of the bearish argument has been that worldwide demand for commodities is killing USD and making life hard for U.S. consumers, and that money printing justifies higher commodity prices. So... why do you thin they're going down?
thanks.
That stupid GLD ETF is creating its own weather so to speak.
Perhaps OT a bit, but this is one of the primary reasons I laugh out loud whenever I hear proponents of the "decoupling" theory expound on why emerging markets are going to be the "safe haven" from a US bear market.
How much of the 100, 200, 300% gains in these markets over the past year or two have been driven by "stupid money" from rich-world retail investors flowing in through these dozens of brand-new country- and region-specific ETFs, rather than domestic capital flows? I'd bet it's the majority, especially in the third-tier stock markets of the world.
In which case the root cause of these huge gains aren't decoupling, but these ETFs "creating their own weather" (love that phrase, BTW). The problem is, we rich-world retail investors are a fickle bunch, and the same actions of ours that magnified the move up are going to do the same to the inevitable move down.
I wouldn't want to be the Chinese broker who has to explain this in 12 months to a slew of their clients who were wealthy on paper for a few months and are now broke.
Rob Dawg,
What exactly do you propose for the central bankers to do, Rob Dawg? It's real gold, real demand, and ETF structures that work for any security or commodity (not just gold).
Oh, and which central bankers are you talking about...because to ban gold ETFs, wouldn't it have to be all 453?
Gold ETFs are a great thing. Ordinary people can buy and sell gold quickly and easily without futures, storage, or much commission.
Who exactly gets hurt by increasing demand for gold?
Rob Dawg, I guess your next mission is a trip to India, where you will strip the gold bands off the arms and necks of 500 million peasants?
Speech by Governor Mishkin (available here FRB: Federal Reserve Board: Error Page
explains exactly how the Fed would like to cut 75 bps, but is afraid people would read that as panic.
He argues that in times of shock or financial instability, the traditional response of a central bank (25, 50 bps adjustments) is not appropriate. He argues for greater "flexibility" which may include more frequent adjustments or significant adjustments to address the risk of the propagation of the adverse feedback loop of deteriorating collateral and credit tightening. However, the flexibility to act against financial disruption raises the threat of inflation as people perceive preventive action as a foreboding economic prediciton. This can only be done if the public "trusts" the bank will address inflation. Right now he thinks the Fed has been timely, decisive, and the public trusts them on inflation so that they have the flexibility to properly address this crisis in the near term with further action.
sorry. that close paren ought not be hyperlinked:
FRB: Speech--Mishkin, Monetary Policy Flexibility, Risk Management, and Financial Disruptions--January 11, 2008
Who exactly gets hurt by increasing demand for gold?
If you cannot answer this yourself then you surely will not believe any answer I could give. Doesn't matter. I won't waste my time on a topic that includes accusations of my striping peasants of their jewelry.
Why the central banks are letting this ETF timebomb tick I cannot understand.
Rob,
They are letting it happen because gold is "only a barbarous relic".
HeliBen,
Good one.
There's probably some idiot in an office somewhere that thinks all the central banks gold reserves are suddenly worth more as well.
Well, if everything is in a bubble, where does one put one's money? It's not like they are going to let you keep it thanks to run-away inflation.
I love how the Fed things the public "trusts" them on inflation. No, the public just hasn't figured it out yet: the Fed's stupidity causes inflation!
Thanks Heliben & Rob Dawg,
Deflation happens infrequently (every 80 to 100 years) and with ferocious speed. Few understand it's cause (fear of lending and monetary contraction). Most resist acknowledging it's commencing and fail to grasp it's eventual impact on all financialized (credit fueled) price fictions... gold, both ETF represented and bullion, not excluded.
There is no supply and demand that determines the price of financial assets when every "security" or "asset" holder is both a buyer and seller of the same item simultaneously. Optimism and fear are the major movers of markets. Period.
Some say it's heresy, but fundamentals are usually misinterpreted as causes of market moves; they're the end product of the over-arching social mood, as indicated by correlation studies.
If you think a quality education is costly, try "conventional wisdom."
Could you pls post an updated version of the probability graph? It must have changed quite a bit after the weak retail numbers today... Thanks!