I figure another bear raid on the banks wouldn't be much fun unless they get fattened up a little bit more... and then bring on some of that Fibbonacci technical trading wizardry for the downleg.
I've read that the banks will have 30 days to present a plan to remove their deficiencies. They must also evaluate whether management is up to it (self evaluation?).
Capital One passed?? I don't get this stress test. Most of it looks logical but how can they pass? Is it possible because we have an impending downward-accelerating path for Capital One that the regulators can't see with the adverse scenario stress test?
I wonder how many short funds are still around. tice, fleck, lahde, among others, all basically sold at the top. Are they walking around, dazed and confused, like realtors, wondering where their 2/20 went?
The idea is to simultaneously fry shorts while comforting the most sheep-like of investors. The only thing for certain is that goldman created the plan before the fed implemented it - and that insiders there will be making money on whatever direction the market goes with it.
This is a "test" much like the kind of academic exam administered to highly-recruited freshmen starting linemen in SEC schools.
Do you really believe that Citi needs only 5 Billion? Do swines fly? Residental and commercial real estate is toast. Where are all of the losses going? Who is booking them? Did they sell all of their crap to Fani? So many questions no real honest answers. Who do you believe? Your neighborhood and your home prices or the Feds?
"I wonder how many short funds are still around" Considering the huge, nearly instant popularity of FAS and FAZ and the incredible trading volumes. Maybe the next bear raid doesn't need big short funds.
Is it possible because we have an impending downward-accelerating path for Capital One that the regulators can't see with the adverse scenario stress test?
According to the Journal (see CR's post the day the white paper on methodology was released) the more adverse scenario assumed 2-year cumulative 20% loss rates on credit cards. COF was at 8.4% annual as of last quarter.
the short funds had a pretty transparent strategy: short the stock + buy the CDS and force a ratings downgrade.
The ratings downgrade forced numerous institutional investors to liquidate their holdings. This type of hysteria can not be replicated with with the ultrashorts, absent a collapse of another money center bank, which is not politically possible. The next leg down will be protracted. It's the seventies show redux.
Can someone tell me which scenario the banks were held to? Do they need to raise this capital based on the baseline or based on the adverse? Or is it based on -25% of the adverse..aka reality.
I'm not fighting them, I've simply been a spectator for the last 18 months as far as the equity markets go.
I am trying to understand how to best short the Fed, cause I'm quite certain they are setting themselves up for a doozy of a fall. I'll give Ben credit for one thing (pun intended), he sure wasn't afraid to put his theories to the test. We're all gonna find out what happens if the theories don't quite work out in the real world.
This is one reason I pay attention to Anna Schwartz, and she still thinks his response is inappropriate to this situation.
I predict that in 90 days we will have another stress test with an Even More Adverse scenario. And another 90 days we will have another stress test with an Ridiculously Adverse scenario. And another 90 days another stress test with an Wildly Optimistic scenario.
Good point Basel. I guess I am looking at it this way. .... FAS May 9 calls were OTM at .61 last week ( when I sold.. Damn ! ) Today they popped up to 3.10. A huge percentage gain.. So If someone wants to short a stock and is afraid of getting their nuts in a vice on the squeeze, it is now easy to by leverage on the opposint 3X ETF to avoid loosing money. In that case the scenario can be set for a mass bear raid by multiple parties.
No Offense, CR.....but I gotta say it...........Nobody with a brain can possibly believe this tripe. But then I never would have believed an 8500 Dow either with a $1.5-trillion upcoming federal budget, much of which is "bad checks" floating around the globe.
This is nothing but a "warm & fuzzy" press release to help make the idiots feel secure. Seems there's a lot of that going around.
As the debt increases and the Chinese buy less, how do the debt carrying costs not increase?
Jubilee? Or an absolute crushing wave of debt deflation.
It's not treasury debt I'm concerned with, it's private. If individuals and most corporations are forced to pay debt at 70s rates they will default, even if wages/revenues inflate as well. Holders of long-term fixed debt would be crushed, short-term and adjustable-rate debtors would be crushed.
Whew, for a second there I thought that crazy janitor in New Jersey was gonna get some street cred with his wild-ass guess... (Dirk, better think twice before quoting him in the future!)
adornosghost (profile) wrote on Wed, 5/6/2009 - 8:48 pm reply Ignore user Like the French Aristocracy, the Banksters have a limited survival rate on the planet.
Don't know if will be by the guillotine this time.
Positively no guillotine.
It will be a quick and crude beheading with no superfluous technological embellishments.
for numerous reasons, you can't estimate relative impairment on balance sheets by defaults on mortgages vs credit cards simply by looking at the absolute numbers. Credit card ABS are generally structural differently, whereby the issuer had to keep more skin in the game. But more importantly, primary residential mortgages were considered "safer" and therefore were only risk weighted 20%, whereas credit cards were weighted at 100%, meaning that the banks had to keep 5X as much capital for every credit dollar lent. Also, the really toxic stuff, CDO squared (turd squared), were primarily real estate backed.
"February monthly net TIC flows were negative $97.0 billion. (Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion)"
"January monthly net TIC flows were negative $148.9 billion. (Of this, net foreign private flows were negative $158.1 billion, and net foreign official flows were positive $9.2 billion.)"
March monthly TIC flows.............what do you think? Over/Under: $100-billion ???
"The 70s had nothing like today's total debt to GDP ratio. Debt carrying costs are the critical factor today, and they cannot increase."
That is why we will have stagflation to a T this time. Must be a stronger word for stagflation? Staggerflation?
In any case, the way to short the Fed is to short the USD against "commodity-backed" dollars like Canada or the Aussie dollar. At least they have raw materials to sell to the Chinese, and are in relatively good shape fiscally (the Canadian govt actually ran a surplus for 10 years until this year).
Or just stay short and start buying tbills as Zimbabwe Ben starts raising rates in a futile attempt to fight commodity inflation by slowing an already slow US economy. Wait to see how that works.
Maybe he can sell all the MBS he has bought....uh, forget it.
If individuals and most corporations are forced to pay debt at 70s rates they will default, even if wages/revenues inflate as well.
The inflation of the late seventies was caused by the devaluation earlier that decade. Which is basically what we're going to go through. We'll pay off private debt with helicopter ben's devalued dollars, which will make borrowing more expensive down the road; simultaneously, borrowers are becoming more risk averse, which will lead to higher savings.
BB is only concerned about getting us out of the deflationary spiral, and his weapons are extremely blunt...
"The explosive rise of the U.S. budget deficit and debt burden will lead to serious inflation down the road," says billionaire and Obama supporter Warren Buffett.
The Congressional Budget Office predicts that government debt will peak around 54 percent of GDP in 2011.
But Buffett said Monday morning that the ratio could surpass 80 percent"
“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett said.
We'll pay off private debt with helicopter ben's devalued dollars
I don't see how that works. Creditors are going to accept negative real rates? Either nominal rates adjust upward to keep real rates positive or creditors get crushed. And domestic creditors don't get crushed. They run the place.
And if nominal rates adjust upward along with inflation, the percentage increase in carrying costs is far, far greater than the inflation rate.
Cramer......"It's hard for me to wrap my head around why the bears continue to be negative" Cramer, the best sell signal ever.. maybe that is another signal for the next leg down.
“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett said.
I don't buy this argument either. Why inflate and spread the pain evenly among all holders of all dollar-denominated debt when you can selectively default and put the pain precisely where you want it?
@Basel: I also 100% concur with the future inflation expectations...eventually it will boomerang...and they are betting on another Volcker-like beheading to stop that.
Once inflation gets started, it tends to feed on itself as consumers hurry to buy before prices go up again... Fed has to raise rates and either stop buying or even start selling tbonds to raise rates and dampen demand.... It's a never ending battle... and every interference in the market distorts it, guaranteeing that there will be more unnatural volatility in the future...
Creditors are going to accept negative real rates?
If I recall correctly, the Saudis weren't too happy about it during the seventies. could have one of the factors in that whole embargo hullabaloo.
And domestic creditors don't get crushed. They run the place.
Banks are not really creditors. They're financial intermediaries, even more so in a securitized world. It's the fixed income investors that are going to really feel the pain.
when you can selectively default and put the pain precisely where you want it?
We're doing both. Inflate via monetary and fiscal policy + selective default (GM, Chrysler, etc., and maybe mortgage cramdown)
"If individuals and most corporations are forced to pay debt at 70s rates they will default, even if wages/revenues inflate as well. Holders of long-term fixed debt would be crushed, short-term and adjustable-rate debtors would be crushed."
Yep, kick the can down the road does not change the fact that the banks are still broke, housing will continue to fall and Tim and Ben are just moving the IOU's from one pocket to another.
I'm moving in a few days and wanted to see the diesel prices so I checked out This Week in Petroleum on the EIA website. Looks like distillate demand is falling off a cliff.
griz - that's amazing - we have been hearing reports of increasing truck traffic and we are already getting into the summer travel season... I'm surprised at those charts...
....From two hours ago. Hey, if the bear ETF's keep getting swatted down the rest of the week it leaves a huge upside during inevitable pullback. Cha Ching !
Banks are not really creditors. They're financial intermediaries, even more so in a securitized world. It's the fixed income investors that are going to really feel the pain
I wasn't talking about banks. It's the bondholders who really run the place, not the banks.
ot --
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is... The Geography of Jobs - TIP Strategies
There is no way for this to turn out well for the administration, I think.
On the one hand, you have economists and banking analysts who have produced wildly different estimates with respect to the banks' capital position. And you have the federal government itself, which for months has been begging for bailouts, talking about how this is the worst financial crisis since the Great Depression and worthy of dramatic intervention, proposing programs to take the toxic assets off the banks' balance sheets, and then you have results like this come out.
Either the administration is saying, not that banking analysts and economists have been wrong this whole time, but that the Treasury itself been wrong this whole time in estiamting banks' needs, which completely eliminates any credibility they might have had in terms of quantifying the problem... or they are just flat-out lying and this is a Soviet-style propaganda exercise.
If they are flat-out lying, 1) it is hard to believe that they would even think to undertake that kind of thing in the US and 2) it is hard to think that the Federal Reserve would actually risk throwing the US into a wildly inflationary environment on the hope that it could help banks earn their way out of this crisis. How in the world does this turn out well?
".........when you can selectively default and put the pain precisely where you want it?"
....how so?
I'm sure the plan will be far more subtle and opaque, but I'm imagining a scenario something like this:
(1) require all holders of treasury debt to to register with the USG
(2) suspend interest remittances to non-domestic holders. Or perhaps simply to holders domiciled in, or the central banks of, certain countries designated as "hostile" or "human rights violators", etc.
Who the middle finger gets extended to, and how deep it's thrusted, depends on just how bad things get and how the debt winds up getting distributed. The point is, I think default will be a more favorable option for the people that matter than inflation, but I suspect allowances will be made for domestic Treasury investors.
And obviously this is still a long way down the road. The consequences could be frightful and things have to be pretty bad before we pull the trigger.
"the Banksters have a limited survival rate on the planet.
Don't know if will be by the guillotine this time. "
It should be interesting to see how that plays out in a democracy. When J6P starts calling for the heads of bankers, will congress turn on their masters or join them in line at the gallows? As it is now, it looks like they have abdicated the dirty work to Tim and Ben, but 2010 is coming fast and one of the parties is going to re-invent themselves as hostile to bankers. (R)'s will have a tough sell to distance themseves from thier business friendly history, and (D)'s now have fresh blood on their hands. Perhaps it will give a 3rd party an opportunity.
the largest holder of treasury debt is the Social Security Administration. The US will default on its senior citizens before it defaults on the rest of the world. We're already starting to see effective "defaults", e.g. no COLAs, changes in withholding, eligibility, etc.
"I wasn't talking about banks. It's the bondholders who really run the place, not the banks."
Seems the banks and Wall St. are of the opinion that that point of view is open for debate. Bondholders are likely to teach that lesson the hard way. Take a look at the 10 year over the past 20 years. That is a trend that is unlikely to continue.
JPM - No capital needed. I can understand their BSC junk won't cost them much since Zimabwe Ben signed the US Taxypayer up to take the hit but what about WM's treasure chest. Did FDIC take a chunk of losses there ?
"It's the fixed income investors that are going to really feel the pain."
Well, more specifically, the long-maturity fixed income investors. Like Jas. Though we could end up with some crazy inverted yield curves for awhile. Those holding short maturities will just roll over into higher yielding short maturities. My duration in fixed income today is around 3 months.
Also crushed will be the middle to lower classes, who are net debtors, usually at short rates, and spend more of their disposable income on necessities like gas, food, and clothing.
And of course the US govt, who has a weird preponderance to borrow short.
I have no idea what is going to happen to the stock market - I don't think as a rule inflation is good for all stocks, which is why I wouldn't buy all stocks.
All I know is my gut feeling is there is going to be some serious pain thanks to Zimbabwe Ben's monetary experiment. He should know that monetary easing takes time to work, instead he got trigger happy and started this quantitative easing. We are not Japan in the 90s, we are not a net exporter, we are not a nation of savers (until now).
"For example, the first quarter’s unemployment rate of 8.1% is higher than the regulators’ “worst case” scenario of 7.9% for this same period. At the rate of job losses in the U.S. today, we will surpass a 10.3% unemployment rate this year — the stress test’s worst possible scenario for 2010." - Matthew Richardson
Goldman Sachs’s Tax Rate Drops to 1%, or $14 Million (Update1)
Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.
"pretend to be hostile to bankers, then do a 180 when they get into office."
I expect they will try. J6P has swallowed it over and over again. They may get wise though when the bankers are made whole while U3 stays stays sky high along with prices. Misery loves company.
sneering nihilist (profile) wrote on Wed, 5/6/2009 - 9:28 pm
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is... The Geography of Jobs - TIP Strategies
Holy freakin' moley!
That's possibly the most blatantly graphic, horrific chart snuff-porn IMAGINABLE!
Excellent post, sneering nihilist! Commendable investigative reporting -- I salute you!
Yogi - I have no connection to Acorn, but in my mind it is synonymous with voter registration fraud, attempts to intimidate banks into making bad loans in low income areas, and breaking and entering into private property which video was shown on national news. Whatever else they do, I dont know. But I would wager it has a lot to do with advancing the Cultural Marxism agenda.
Let's leave it there - and get back to economics... no flame war...
Bond Girl, this is what happens when you live in the bond market, you actually start understanding economics and the consequences of what is going on.
Note that the only person on CNBC who seems to have any sense is a bond guy, Santelli?
As for equities, they are a joke, nothing but a casino. You can get some decent indirect exposure to commodities and the like, but most of them? Get real. Why is AAPL worth 20X earnings one day and 30X earnings another day, when it doesn't return a dime to shareholders.
The S&P is still below the levels of 1997, despite kicking out a ton of loser companies in the past 12 years and replacing them with stronger companies.
If the govt is taking a cue on the strength of the economy from the stock market, God help us all.
Deflation in the UK:
"Weekly wages fell at the fastest rate in 60 years in February as City bonuses were slashed and workers agreed to reduced hours in the wake of recession, the latest official figures show.
The Office for National Statistics said average weekly earnings fell 5.8pc compared with the same month last year,"
"sneering nihilist (profile) wrote on Wed, 5/6/2009 - 9:28 pm
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is...
http://tipstrategies.com/archive/geography-of-jobs/"
"I have no connection to Acorn, but in my mind it is synonymous with voter registration fraud, attempts to intimidate banks into making bad loans in low income areas, and breaking and entering into private property which video was shown on national news."
Wow, I would be the first to admit they have a liberal agenda and dubious methods, but you seem to have swallowed the Rights propaganda whole hog. How can you be such a critical thinker with regard to financial issues, but so apathetic to social ones?
"It's the fixed income investors that are going to really feel the pain."
Well, more specifically, the long-maturity fixed income investors.
I agree with the long bond crash, and probably 7yr+ will take a serious beating. I know the US is not Japan, but I am not so sure we won't have a fairly long period of deflation. It's hard to know when rates will spike, but when they do, the entire thing might spin out of control.
Either the administration is saying, not that banking analysts and economists have been wrong this whole time, but that the Treasury itself been wrong this whole time in estimating banks' needs, which completely eliminates any credibility they might have had in terms of quantifying the problem... or they are just flat-out lying and this is a Soviet-style propaganda exercise.
The Administration (Summers?) believes that given the super-low funding costs for the banks (ZIRP plus government guarantees) and the steep yield curve (300 bps between 1 month and 10 yrs), all banks will be able to earn enough money to absorb losses they will incur. Banks just need to be left alone. It seems that the objective of the stress tests was not to estimate capital needs but simply to give banks more time to catch their breath.
$1.5 Bil for Morgan Stanley or $5 Bil for Citi are just rounding errors put up there to create perception of propriety and sincerity.
It is not even a lie - this is bullshit in Harry Frankfurt's sense , when the bullshitter does not care whether what he says is true or false.
I thought after Bush I could not become more cynical about politicians. Yes I can!
I think everyone should read a book on corporate finance, and the myriad of legal ways for management and select shareholders to disgorge cash from a company. Jas is definitely, right, it really is a scam market, especially when you consider that for 99% of stocks, the investor only makes money by finding a greater fool...
yalt that is the ugliest statue I have seen in a long time
I'm sorry I can't find a better picture so you can see just how ugly they are. There are four of them on the riverfront in Cincinnati--it's the symbol of the city.
But you want ugly? A few years back there was a charity gig where flying pig statues were put up on display around town and then auctioned off. Pictures here:
n the interest of economic Marxism I'll share with you how to get that WSJ article for free
What i do is go to news.google.com and search for the title (e.g. "Banks Need at Least $67 Billion in Capital"). For some reason (probably a referrer tag), when you don't come from the wsj.com homepage, it doesn't prompt for a subscription.
I would say that if I was Acorn I would be running classes on parenting and how to do job interviews, handing out alarm clocks and copies of the want ads, and teaching the poor that they are going to remain poor unless they work themselves out of it.... that they will never get rich by living on handouts... And since the public schools do a terrible job teaching basic skills, I'd probably run some reading, writing, and arithmetic classes too... When the students are capable I would teach them how to save and invest and work their way up... The left always runs this line of helping the poor but all their actions do little to actually help them other than feed them for a day.... instead of teaching them how to feed themselves for their whole lives...
"sneering nihilist (profile) wrote on Wed, 5/6/2009 - 9:28 pm
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is...
http://tipstrategies.com/archive/geography-of-jobs/"
Brings to mind, financial weapons of mass destruction.
Well, hey, maybe Bernanke has stumbled on some sort of economic truth about booms and busts. Let the banks fuel the mother of all credit sprees, send a lot of money to money heaven, then let the central bank print money to fill the holes in bank balance sheets, eventually the banks will be even and they can start the next spree. Genius. We never have to produce anything real ever again!
"The left always runs this line of helping the poor but all their actions do little to actually help them other than feed them for a day.... instead of teaching them how to feed themselves for their whole lives..."
I think ACORN sees themselves as the AARP or NRA for the poor. Getting political representation for the poor and minorities. Key to having that level of political clout is to have members who vote. The Right does not historically represent ACORNS constituents, so they tend to vilify them, whenever possible.
The Feds have decided that no major asset class will be allowed to deflate, and have acted accordingly. This is the result of $3+ trillion in action. Wait till the stimulus money kicks in at years end. How it ends, I don't know. Perhaps poorly.
"Jas is definitely, right, it really is a scam market, especially when you consider that for 99% of stocks, the investor only makes money by finding a greater fool..."
Absolutely. Just ask the guys who bought CSCO at 80 back in March 2000, who are now down 75% in nominal terms, much more in real terms, and have received not one dime in dividends.
Sure, management buys back stock - to soak up the shares they issue to their employees.
I'd have to do some research to get the exact facts, but I think the Duhb administration doubled the education budget... I'm not sure of anything else to quote, but the Republicans did not do any budget cutting during the 6 years they had control of the congress... My point is that the poor have little incentive to become an entry level employee when they can get a better deal from govt programs... And I think the biggest shame of all is that they will never experience the exhilaration of successfully completing a difficult task.... The thrill of the big win... The left uses them as a voting bloc to retain power and funnel taxpayer money into their own pockets too...
"The left always runs this line of helping the poor but all their actions do little to actually help them other than feed them for a day"
The obvious answer is yes, plenty of people still don't get enough food each day and millions of children have starved to death in the last 100 years despite all the leftist conspiracies. I'm involved with a non-profit "urban squash" program. The kids play squash after school 4-5 days a week (nyc public schools have few sports programs), get mentoring, tutoring, and SAT prep., and perform community service. 100% college admission so far. Founded by lefties.
"Well, hey, maybe Bernanke has stumbled on some sort of economic truth about booms and busts. Let the banks fuel the mother of all credit sprees, send a lot of money to money heaven, then let the central bank print money to fill the holes in bank balance sheets, eventually the banks will be even and they can start the next spree."
That actually is a great plan, if you want to become the next Argentina or Zimbabwe.
I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?
I think that would have happened in a severe deflationary recession, but with Ben printing dollars like crazy, I think the gap is going to grow wider and wider, despite BHO's attempts at closing it. In five years the middle class are going to be on the endangered species list.
"My point is that the poor have little incentive to become an entry level employee when they can get a better deal from govt programs..."
Yeah the 5.75/hr job will make you, not poor... Also, I am not familiar with these government programs that would put the children of the poor on the same playing field as the children of the bankers.
And the incentive for banks to get off of the government dole is?
//I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?//
Well you have to start someplace and work your way up - develop yourself, gain skills, gain confidence, and of course always be looking for a better job... Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder...
I would hate to be Americans under the age of 30 - 35 because most of them will probably be living a good part of their lives in the biggest Banana Republic in the world !
Keep believing in that stuff.. delusions can reduce the feelings of hunger when you end up on the streets.
//Well you have to start someplace and work your way up - develop yourself, gain skills, gain confidence, and of course always be looking for a better job... Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder...//
"But I doubt he sees the sovereign debt/USG default crisis that's coming."
Well, that is an interesting issue. Will the USG default on it's debt? I think the probability is remote.
Much more likely, though, is it will eventually let Fannie/Freddie default. Remember, Ben owns a lot of their debt, so a default just means money has been created that won't be able to be taken out of the system.
I would suspect most other investors that matter (i.e. foreign governments) have sold out of their positions. The only ones hurt would be some US-based funds and banks, but the govt didn't care too much about them when they wiped out the preferreds.
Totally anecdotal, but I saw a semi hauling an auto trailer crammed full of various makes and years (mostly the last few years) and on the top tier of the trailer was a Chevy half-ton pickup with the bed half full of living room furniture. NEVER EVER saw that before in my life! It's got to be full of fresh repos. They obviously snatched the pickup while the family was in the process of moving out of somewhere into who knows where.... This is not good.
Never been out of work, only HS ed, 8 years in the military, worked my butt off, retired at 58.... Never stopped studying, learning, improving my skills... Grew up on a farm - my great-grandad was a covered wagon pioneer...
Are we back to the welfare queen in her caddy? Yep, they're still living it up even after the '96 changes, particularly when cavorting with the radical homosexuals and the NEA. They really paint the town red. Seriously, this is a duckduckgoose-like obsession.
Banks that are found by government stress tests to need additional capital will have two choices: raise the money from the private sector, or go back to the government trough. But instead of taking more money, the government expects many banks to exchange the Treasury Department's existing preferred stakes -- which it acquired last year at the height of the financial crisis -- for a new type of preferred share.
This new instrument, called a "mandatory convertible preferred" share, gives banks the ability to create common equity as needed. The preferred shares convert to common shares when a bank or its regulator decides they should, or within seven years. Regulators are paying more attention to the common equity each bank holds, in part because it measures what shareholders would have left if a company were liquidated.
"Much more likely, though, is it will eventually let Fannie/Freddie default. Remember, Ben owns a lot of their debt, so a default just means money has been created that won't be able to be taken out of the system."
What about AIG? Lots of money headed for parts unknown, out of there. Plus Fannie/Freddie, FHA and the Fed have been paying $$$ for assets that are worth near 0, hand over fist. That money is going to turn up eventually.
I believe that at the end of the day, the Fed will have doubled the $$$ in circulation, regardless of who ends up BK.
If only kids today go could back in time to be able to do what you did... Unfortunately the new globalized reality is that its far more difficult today to go from Lower -> Middle class and from Middle -> Upper class than at any time in the last century.
Either the administration is saying, not that banking analysts and economists have been wrong this whole time, but that the Treasury itself been wrong this whole time in estiamting banks' needs, which completely eliminates any credibility they might have had in terms of quantifying the problem... or they are just flat-out lying and this is a Soviet-style propaganda exercise.
Bond Girl, I'll argue that they're flat out lying. We know that things were bad enough that the financial system did seize up, and if it were really as easy to clean up as they're implying, there simply wouldn't have been such a dramatic result, or such a dramatic response (TARP, TALF, etc.) Hence I think the most reasonable conclusion is that this is an exercise to prevent panic and buy some time.
Let's agree that generalizations are foolish and a few instances of fraud don't mean a program should be scrapped. If that were true no one would be employed by the military for 8 years...
Just one more hit, man. C'mon bro, I'm getting better. I just need a little tiny teensy bit more capital, just this once. C'mon man, you don't wanna make me fail do you? I'm a lot better than before, I just...you know...need a little help right now. I'm under a bit of stress, and just need one last hit. I promise...
I doubt it, Doc. I've sent out thousands of vehicles for repo in my time, and personal property was always inventoried and kept at the repo guys facility. Why haul shit to an auction if you don't have the right to sell it when it gets there? I'm not sure what you saw, but it doesn't sound like it was repossessed vehicles.
The preferred shares convert to common shares when a bank or its regulator decides they should, or within seven years.
I love that feature. I understand they'll also be selling equity options that convert at the seller's discretion rather than the buyer's, and common shares that require the holder to pay the bank a dividend whenever the bank declares one.
1-800-JESUS (profile) wrote (in reply to...) on Wed, 5/6/2009 - 7:43 pm
If only kids today go could back in time to be able to do what you did... Unfortunately the new globalized reality is that its far more difficult today to go from Lower -> Middle class and from Middle -> Upper class than at any time in the last century.
First love you handle name.
Yes indeed Horatio Alger to achieve the American Dream of wealth and success through hard work, courage, determination, and concern for others is pretty much life support in todays America.
So sad but true...but if you still believe call 1-800-JESUS
"Unfortunately the new globalized reality is that its far more difficult today to go from Lower -> Middle class and from Middle -> Upper class than at any time in the last century."
Yep, tough to make that transition from the Min wage job, to a factory job, when they are all in, or moivng to, China. Or even worse, if you manage to work your way through night school, to lose out to a doctor/lawyers/bankers son from India with an H1B.
Shnaps, all I know is that I've NEVER seen family furniture in the back of a newer model pickup that's in a vehicle trailer! There have been stories of late about banks doing FC's and selling them in bulk at huge discounts, leaving money on the table. What if the repo people are overwhelmed and it's just load 'em up, ship 'em out! Would not surprise me in the least. Protocols and procedures can go out the window when there is too much on the plate.
worked for a startup which failed and was bought out in 2001. Their web traffic is down 40% in 2009, they laid off 400 last quarter and 1000 this week. Same as it ever was. Working your way up is more luck than work, more lie than skill.
Subcommander Doom says:
Wednesday, December 24, 2008, 7:22:09 PM
“Franklin D. Schwarzenegger Museum of Disposable History where I dazzle and amaze the children of tomorrow with the edutaining puppet shows of yesterday.
"And that's how Jesus wrote the Constitution," says me.
"Tell us more tales of your savage time!" says one a the disembodied floatin brains.
"Well back in the ol days we didn't have your fancy Senatrons and Congressbots," says me. "We hadda pick our presidents the ol fashioned way, with a money-eating contest. The first candidate to swallow half a billion dollars without throwin up would be King of all Florida!"
"Intriguing!" says the second brain. "Now battle Clone Lincoln... to the death!"
"Raaarrrrr!" says Clone Lincoln.
"But I doubt he sees the sovereign debt/USG default crisis that's coming."
Well, that is an interesting issue. Will the USG default on it's debt? I think the probability is remote.
The USG can't really default as long as the dollar is the world reserve currency. May have to effectively default through inflation if the market for US debt dries up and the Fed has to buy all of it. That seems possible to me if interest rates spin out of control. When interest on the debt becomes unserviceable except through monetization, then the USG has effectively defaulted.
Let's see, we are at 11.2 trillion today, will add 2 trillion to the debt this year and probably another 2 trillion next year. Then, 1-2 trillion each year thereafter until the boomers hit Social Security and Medicare en mass, then we can add 4-5 trillion a year until interest on the debt overwhelms us circa 2021.
The whole stress test is either a complete ruse or a stall tactic so the usg can get the real plan implemented. In the meantime a lot of $$$ flowed in cranking up bank equity. That is a sweep off the table waiting to happen on the first wobble of the knees.
broward luck is the residue of diligence and power networking. I've been consulting or working with early stage software startups for past 15 yrs. In short easy breezy in 1990's, tougher from 2000 - 2005 and from then on you've got to be really good to get gigs that pay really good $$$
It occurs to me that the stress tests may be setting the banks up for failure. The fact that the adverse scenario is already invalid underscores this. It's like saying, yes, we agree, you are not in such bad shape, so go take care of yourself. But if you come back, you will leave us with no choice. Basically, I think the government recognizes that the problem has been too much lending and is putting the banks in a position where they must put up by earning their way out on existing loans (I don't believe anyone really believes more lending is the answer in the current economic environment) or shut and take their medicine (government control). Be careful what you wish for.
Yes, that's what I said. "lie"
Tell people what they want to hear, which is one of the core problems today
Did my first startup in 92, although it was funded by the Feds. Economy has gotten progressively worse since 2006.
One question mark hanging over the tests is whether they will be perceived as tough enough. From the start, some economists and bank analysts argued that the Fed's worst-case economic scenario was overly rosy. Since the Fed informed banks of the preliminary test results, the government appears to have softened somewhat as banks pushed back.
Among other things, regulators accepted banks' bullish arguments about their profit outlooks. The Fed initially planned to use banks' lackluster 2008 revenues as a jumping-off point to predict future incomes, according to people familiar with the matter. But many big banks logged robust first-quarter profits and argued that should serve as the "run rate" for the stress-test period.
Not that I don't hedge my positions, as who knows what the GOV is going to do on their mission to save the insolvent banks.
Just playing around, at the recent "bottom" I did a "straddle" with calls on FAZ and FAS for 500$ worth of well out of the money, OCT FAZ and Mar/Jun FAS each. So far. I have doubled my money on the FAS calls five times now, took my FAS profits and re-placed my bets. The net result is I now have OCT calls for FAZ at 90, 85, 70, 40 and 30 and still have a JUN FAS at 14 (that is about to double again).
If there is a sizable pull-back, I stand to make a tidy profit. If we ever re-test the low, well then it is time for my European vacation as FAZ went to 100 last time.
Doc, have you never heard of the auto transport / shipping industry? Folks who can't or don't want to drive their car across the country, so they contract with a transporter to ship it to their destination? What would make you assume that a car hauler full of mixed-make vehicles is full of repos?
I've been long since about late Feb, which sucked for about a week, when I was thinking "who the hell is buying FAZ at 110?" But at the same time, I too familiar with banking law, so i knew that the banks would never be nationalized without Congressional authorization, despite the astroturfers. Mostly been playing the earnings calendar; i would say about 4/5 have popped. Sold out of my $4 BAC too early this week; now I'm in only two positions: FAS and AIG.
"Well you have to start someplace and work your way up - develop yourself, gain skills, gain confidence, and of course always be looking for a better job... Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder..."
Well first you would need to own you house free and clear, sell it to yourself. via a loan to yourself, sell that loan as an MBS to yourself, buy default insurance from AIG on that loan, default on that loan, maybe get paid by AIG, and then sell the MBS to Ben and Timmy.
so, I thought this was a joke when I first heard about it, but earlier today Oprah apparently was going to feed the world Oprah KFC Coupon Riot! - Kfc - Gawker
Riots over free 2 piece chicken meal erupted all over, did it have anything to do with the economy and people pinching pennies?
since Goldman Sachs and JP Morgan pass that makes it a done deal. The rich and powerful are OK to remain rich and powerful. Get back to eating McDonalds and watching Dancing with the Stars. There gift to us is 2000 pts on the Dow since early March. Take advantage of the crumbs! All is well! Dance and be happy. They left us coloring books to fill in the details.
@ShadowInventory: my apologies (sort of). I didn't read your bio until later. You grew up in a different time, predominated by a false sense of stability and relatively constant growth... the so-called "great moderation". Hard work and brains certainly helped one advance in that environment. "Relationships" helped more. Today, it's all (and only) about "relationships".
Alas (fortunately for you), we only really know what we've experienced.
"I always have to caveat this. Let's agree to call inflation "soft default" and continue discourse"
Looking at a 20 year chart of the 10 year US T-bill, I do not see how they can keep it together. That looks an awful lot like the next bubble to pop. I look at that and my mind boggles how anyone would be caught holding long term Ts. To be honest, how have they kept it together this long?
I have this image of Eddie Murphy's Kit, in Bowfinger, saying his litany of "Keep it together. Keep it together. Keep it together." as Steve Martin's Bowfinger, is busy turning his world upside down. Mindhead indeed.
RockyR - appreciate that - well I appreciate yogi and halo too - it's a different world now for sure... If I was graduating HS today I think I would be looking at plumbing, hvac, electrical or something - but if I was that young again who knows - I didnt operate on so much knowledge back then... Lot of the time I think we are into the transition to a world with no work - if the smart robot shows up that will be the end of work for sure... then everyone has to get a living allowance and it will be a totally different world... I have no idea how it will shake out...
Also I didnt have a linear climb to success there were a lot of setbacks along the way - career changes, bad decisions - and of course no one could reliably predict the future back then either... My grandmother told me that our advantage in the US was that we got a free education through HS while most of the world didnt, and it was my obligation to take advantage of it... My dad taught me a lot of things, how to do a lot of things, but mostly that whenever I got around someone who knew how to do something that I didnt know, I should try to get them to teach me... that worked out well - for now even though I no longer want to do the work I know how it should be done - so I can tell if someone is doing things properly...
Ah well - "Walker, there is no path for you.... You make the path when you walk."
"If I was graduating HS today I think I would be looking at plumbing, hvac, electrical or something"
Good call. Rental maintenance is going to boom.
"My grandmother told me that our advantage in the US was that we got a free education through HS while most of the world didn't"
Now most of the ROW gets free ed through college, and we don't. And it looks to me like the PTA and Teacher's unions, have turned our HS into something less than it was.
You want to know how I know this stock market rally is a ghost? Sector valuations haven't changed. Every time there is a big crash, it only ends when some sector or company starts to bring in real money to in turn fuel a larger rally. Government funding of corporations has only had a time horizon of about 60-90 days max throughout this process. Only when we have gone longer than that with no funding (be it debt guarantee, equity stakes, buying 'illiquid' assets, etc), can you even know things might be solvent
If I was graduating HS today I think I would be looking at plumbing, hvac, electrical or something
Because of the racket that education can be, the HS would do everything in its power to prevent you from doing so. After all, the % of graduates going to college is a tracked metric of high school performance, and you'd be lowering their stats. but feel free to rack up $100K in student loans.
As with influenza H1N1, beware the second wave after mutations in the organizing-governing nucleic code. Affluenza, once the market tampering, currency printing, and pyramidal IOU layering changes governance in the free market, will have a devastating unpredictable second wave.
There has been a lot of work done on agricultural robots too - fruit pickers, weed pullers etc... but the equipment has not been widely adopted because of low cost labor, and the requirement in some case to replant the orchards... There is an existing machine now that can pull weeds from among strawberry plants, and also a strawberry harvester that picks the fruit one piece at a time... amazing stuff really....
Now most of the ROW gets free ed through college, and we don't. And it looks to me like the PTA and Teacher's unions, have turned our HS into something less than it was.
Most HS today are way better than most were in the past but the bar is higher now... my youngest is just now graduating from HS - mid sized rural midwest public school - plenty of middle class to poor kids [none rich - not one]... surprisingly good 'basic' education. Way better than I got from a similar school 30 years ago. But 30 years ago the global competition wasn't what it is now. So even though theyare better educated they have fallen behind similar age kids from our developed world competition.
As for those who say do construction - you have got to be kidding or don't know anyone in the trades. I talked with my plumber lately - did a job for me - he said once the house bust hit even those who focused on 'repair' got hosed... price competition. He said he is only working 3-4 days a week because laid off construction plumbers are flooding the 'repair' market. He still has income unlike a lot of laid off plumbers but it is pretty low now compared to what it was say two years ago.
Back in the 80s construction bust I a had friends who were in the trades and it wasn't uncommon for them to go a year or two between jobs.
There is no 'easy' sure fire career - at best all you can do is learn to scramble.
I'm sure that everyone in DC is trying to figure out how to get things straightened out so it will look good for the election next year... but with all the scheduled loan resets and everything else, even with unlimited spending I'm not sure they can get it done in time... So far we havent heard much from the republicans or any 3rd party but I know that some people have been having discussions - Michael Reagan said he had a group but he was not interested in being a candidate himself...
I always have to caveat this. Let's agree to call inflation "soft default"...
Works for me.
Like any other kind of default we'll only get to do it once - next time they either won't lend to us at all OR lend to us in THEIR currency backed by some kind of collateral.
If the banks packaged and sent most of their mortgage bonds downstream to sovereign wealth funds and pension funds are we just seeing the tip of the losses iceberg?
I'm sure the building trades are lousy all over the country... my friend who has a 40 truck plumbing company says his biz is off 30% and he is getting a lot of competition from the laid off construction plumbers too - they run an ad in the little dollar saver magazine and do cut price work... and if the recovery is sluggish it could go on like this for a long time - but I agree with you there is not now and never was any sure fire easy career - the more stuff you know how to do the more likely you are to find something...
Did Freddie report any results since that CFO hung himself in the basement? There was a story about accounting irregularities and improper loss accounting going back to 2000 as I recall...
Effective Demand, sorry, but those types of things really incense me (whether or not they ever become law). The Senate had a chance to do something significant for the benefit of homeowners in foreclosure, namely give them the same right that investors who own 8 or 10 houses have to have the foreclosure put on hold while the matter of the size of the lien is adjudicated.
The Senate's vote was a resounding NO; hence the quoted remark by Sen. Durbin that bankers own this place.
For the Senate now to express its sentiment in a nonbinding way that servicers really shouldn't foreclosure until they've let the poor homeowners call 1-800-HELP ME OUT strikes me as not just absurd, but an insult.
They just want to trot out the campaign slogan next year about how much they were doing to try to help homeowners when in fact they were working for the bankers all along.
"Problem is these type of things become reality whether its a law or not."
Yeah the banks were all for the TARP, until they noticed all the strings attached. Hmm, something about a camel's nose or was it a camel through the eye of a needle than a banker to enter the kingdom of heaven? Moral Hazard? Socializing losses, has it's cost.
See what happens when you abandon the free market, not so free now.
I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?
I feel that the gap will indeed grow wider and wider.
What I see slowly (in most cases) happening is that the upper-middle and middle classes are being pushed down to the level of the working poor, due to job loss, underemployment, high local fees/taxes, healthcare and other 'needs' costs (food, meds, water, power, etc.) Little to no savings in this group, especially if they have kids.
I think in the next year, you will see dramatic changes in lifestyles and spending. A lot of activities previously thought 'necessary' are going to be dispensed with - even those considered 'must haves' for the kids. I'm already seeing that here where I live -- people are really thinking about big lifestyle changes. Not making 'em yet, generally, but getting ready to make 'em.
My thinking is that the really wealthy might be less wealthy than before, and there might be a greater spread between the top 'wealthy' tiers, but they will remain much more wealthy than the downwardly mobile.
Well we ARE on the bad side of a bubble. Remember how hard, expensive and low quality you got when you had work done. when we were on the other side?
If you don't shop price too hard. I always got great work done in the bubble but (1) I was a backwater - not real bubblish (2) I paid premium to people I knew who were good & (3) I understood they were busy & didn't ride their ass.
I had learned the hard way in the 80s - an out of work contractor low bid a renovation project I wanted done & I let him do it [friend of the family]... it was post bubble then too and I got a super low price - shittiest work I have ever had done. Live and learn.
Point about the trades is if 70s & 80s style busts are common going forward - tradesman will be out of work a lot [like 30& of the time]. If we have a 1930s like depression they will be out of work for decades at a time... my father's uncle was a tradesman in the 20s-30s-40s-50s... he was very busy all through the 20s... he literally didn't work at all through the 30s... then worked steady again all through the war & cold war.
That is part of being in the trades - it always was and still is - we just forgot that during the Greenspan Years. We relearn the hard way again.
The Madoff thing wiped out a lot of really wealthy people and took a big bite out of another bunch...
I think the kids will be better off if they dont get everything they want, and if they have to go mow a lawn or something to earn enough money to buy their bling...
I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?
I feel that the gap will indeed grow wider and wider.
Middle class & poor will NOT get wealthier... wealthy might get poor. That is what happened after '29 and the gap closed a lot.
"A society where crime increasingly pays more, each year we move closer and closer to social disintegration."
First they undervalue risk, then they undervalue trust. Banks are the boy who cried wolf. Won't be long until the Bank of America will be the Federalized Bank of America. And yet, the chumps were lining up today.
Those of us who graduated HS in the late 70s pretty much had to go to college to have any decent job prospects, got to graduate college into a huge recession (and oh, yeah, our parents were broke/laid off in the 70s), enjoy huge inflation (oh, but not so much for our wages) super-high interest rates and deteriorating public services.
If you came from a working class family like I did, these were tough times. And if your family was renters, you just got the higher rents and no home equity appreciation/build up to pass on to the kiddos. And appreciation there was in the 70s.
I was fortunate enough to start my own biz in the mid-80s, based on stuff I learned getting my MA while avoiding horrid job market. Savings from that business, killed by the dot-com boom (hard to compete against folks who don't have to make a profit), have kept me in the upper-middle class, but just hanging on at this point.
My point is that there is a HUGE difference in how life has been experienced depending on what decade you were born in.
Anytime between 1958 - 1965, mostly things have been crappy economically, with short interludes that those of us from those years didn't really trust. Likely since we could see our city services, education and everything else go to pot (as compared with the 60s) and the rich getting richer.)
I thinks it going to end up being a "video game" republic actually. A lot of these people are just going to tune into the Internet and video games and drop out and drop out of society. They may have some crap job somewhere (or live with mom and dad or whoever) but most of life will be lived online.
It highly possible that people will soon learn to want less stuff. if they can't get ahead, why try? Besides instead of striving for another $5 an hour that will just be inflated/taxed away just take that ambition and level grind the Warlock to 60 or make You Tube Videos or just garden or something.
This may sound like an authoritarian dream but its not. The entire 'empire of bases' and 'jail state' requires people to produce vast amounts of wealth the government to waste --
A society with ,more scavenger jobs, off the book work less shopping, less shops (welcome to buying online) and less manufacturing is well not long for the modern first world
If the US simply makes and uses less stuff tax and more importantly wants less stuff revenue will plummet like a stone. Imagine say taking in half what we do now with no up in the future
Also as an added bonus, the most generally hard working and law abiding core of your society will cease to exists in most places. Not only will their population plummet (who can afford a baby?) but the only people reproducing in numbers will be high natality low english speaking immigrants, poor people with little opportunity and evangelicals --
say hello to super high crime and little money for policing
we have roughly 20 years till the Republic ends if this scenario is true -- this is when the largest generation in US history comes of age and it meets the definition I gave you to the letter.
Likely we will end up with a fractured decentralized union -- still the US in name but with power mostly divested to the states --or it might collapse into a Junta (we are overdo) or several smaller republics -- any which way it won't be a pleasant place to live
Morgan Stanley needs to be seized and its executives lynched.
Or jailed. I would settle for jailed.
chump change, good for another 10% tomorrow
The CEO of Morgan Stanley said he would work for free when the bigshots went to the congress hearing...
All banks are above average, nobody fails, we would not want to damage their feelings of self worth - sounds like the public school tests...
The banks are climbing even higher in after hours trading. All is well.
Capital One passed ?!?
Does that mean the credit card bill failed in Congress?
OT:
Old Fiat: Fix it again Tony
New Fiat: Finally! Inuring American taxpayers
good for another 10% tomorrow
don't fight the fed. props to AllenM and his Velvet Fist.
It is time for California to become a Bank Holding Company!
no bank left behind.
to outright fail a bank would ruin it's self esteem
I figure another bear raid on the banks wouldn't be much fun unless they get fattened up a little bit more... and then bring on some of that Fibbonacci technical trading wizardry for the downleg.
Couldn't they at least spit on it first?
I've read that the banks will have 30 days to present a plan to remove their deficiencies. They must also evaluate whether management is up to it (self evaluation?).
Credit Card Holders' Bill of Rights passed the House 357-70 on April 30th.
The Senate is being encouraged to act promptly and passage appears likely.
Capital One could be in trouble if there's a Stress Test 2.0, especially given anticipated default rates.
Capital One passed?? I don't get this stress test. Most of it looks logical but how can they pass? Is it possible because we have an impending downward-accelerating path for Capital One that the regulators can't see with the adverse scenario stress test?
another bear raid on the banks
I wonder how many short funds are still around. tice, fleck, lahde, among others, all basically sold at the top. Are they walking around, dazed and confused, like realtors, wondering where their 2/20 went?
btw. GBP/USD is at a three month high.
whew! For a minute there, I thought MS was going to fuck up my 19-team parlay!
"Capital One could be in trouble if there's a Stress Test 2.0, especially given anticipated default rates"
if by trouble you mean rolling in taxpayer loot.
Shnaps, +1
The idea is to simultaneously fry shorts while comforting the most sheep-like of investors. The only thing for certain is that goldman created the plan before the fed implemented it - and that insiders there will be making money on whatever direction the market goes with it.
This is a "test" much like the kind of academic exam administered to highly-recruited freshmen starting linemen in SEC schools.
Do you really believe that Citi needs only 5 Billion? Do swines fly? Residental and commercial real estate is toast. Where are all of the losses going? Who is booking them? Did they sell all of their crap to Fani? So many questions no real honest answers. Who do you believe? Your neighborhood and your home prices or the Feds?
On FDIC guarantees;
Cheap guarantees of your products are worth something, but the real score is collecting the full guarantee. Viva la bonus!
"I wonder how many short funds are still around" Considering the huge, nearly instant popularity of FAS and FAZ and the incredible trading volumes. Maybe the next bear raid doesn't need big short funds.
Where are all of the losses going?
There's a ringfence around $306B of their most toxic assets, guaranteed by the Treasury and the FDIC.
Is it possible because we have an impending downward-accelerating path for Capital One that the regulators can't see with the adverse scenario stress test?
According to the Journal (see CR's post the day the white paper on methodology was released) the more adverse scenario assumed 2-year cumulative 20% loss rates on credit cards. COF was at 8.4% annual as of last quarter.
".......no bank left behind..........to outright fail a bank would ruin it's self esteem"
.....perfect.
the short funds had a pretty transparent strategy: short the stock + buy the CDS and force a ratings downgrade.
The ratings downgrade forced numerous institutional investors to liquidate their holdings. This type of hysteria can not be replicated with with the ultrashorts, absent a collapse of another money center bank, which is not politically possible. The next leg down will be protracted. It's the seventies show redux.
Can someone tell me which scenario the banks were held to? Do they need to raise this capital based on the baseline or based on the adverse? Or is it based on -25% of the adverse..aka reality.
don't fight the fed
I'm not fighting them, I've simply been a spectator for the last 18 months as far as the equity markets go.
I am trying to understand how to best short the Fed, cause I'm quite certain they are setting themselves up for a doozy of a fall. I'll give Ben credit for one thing (pun intended), he sure wasn't afraid to put his theories to the test. We're all gonna find out what happens if the theories don't quite work out in the real world.
This is one reason I pay attention to Anna Schwartz, and she still thinks his response is inappropriate to this situation.
This is how the stress tests were really done.. secret footage from an earlier decision.
South Park Chicken Scene
YouTube -
It's the seventies show redux.
The 70s had nothing like today's total debt to GDP ratio. Debt carrying costs are the critical factor today, and they cannot increase.
I predict that in 90 days we will have another stress test with an Even More Adverse scenario. And another 90 days we will have another stress test with an Ridiculously Adverse scenario. And another 90 days another stress test with an Wildly Optimistic scenario.
Good point Basel. I guess I am looking at it this way. .... FAS May 9 calls were OTM at .61 last week ( when I sold.. Damn ! ) Today they popped up to 3.10. A huge percentage gain.. So If someone wants to short a stock and is afraid of getting their nuts in a vice on the squeeze, it is now easy to by leverage on the opposint 3X ETF to avoid loosing money. In that case the scenario can be set for a mass bear raid by multiple parties.
No Offense, CR.....but I gotta say it...........Nobody with a brain can possibly believe this tripe. But then I never would have believed an 8500 Dow either with a $1.5-trillion upcoming federal budget, much of which is "bad checks" floating around the globe.
This is nothing but a "warm & fuzzy" press release to help make the idiots feel secure. Seems there's a lot of that going around.
Buy not by. Hooked on phonics and all
Yalt said: The 70s had nothing like today's total debt to GDP ratio. Debt carrying costs are the critical factor today, and they cannot increase.
As the debt increases and the Chinese buy less, how do the debt carrying costs not increase?
I'm surprised there hasn't been anything out about US Bancorp one way or the other....
Like the French Aristocracy, the Banksters have a limited survival rate on the planet.
Don't know if will be by the guillotine this time.
While the whole thing is done to instill market confidence, the fact that Capital One needs no capital compared to the others is baffling.
Black Star - the new federal budget is 3.6 trillion, a 1.5 trillion increase from last year...
The 3.6 trillion is just the 'ordinary' budget, nothing special.... All the Acorn people will be driving Lexus...
As the debt increases and the Chinese buy less, how do the debt carrying costs not increase?
Jubilee? Or an absolute crushing wave of debt deflation.
It's not treasury debt I'm concerned with, it's private. If individuals and most corporations are forced to pay debt at 70s rates they will default, even if wages/revenues inflate as well. Holders of long-term fixed debt would be crushed, short-term and adjustable-rate debtors would be crushed.
Duh..........I thought it sounded small when I typed it. Thnx, ShadowInv
If you knew a Jubilee was coming, wouldnt you go out and run your debts up to the max? ......... Oh! Hey, wait....... uh.....
Whew, for a second there I thought that crazy janitor in New Jersey was gonna get some street cred with his wild-ass guess... (Dirk, better think twice before quoting him in the future!)
adornosghost (profile) wrote on Wed, 5/6/2009 - 8:48 pm reply Ignore user Like the French Aristocracy, the Banksters have a limited survival rate on the planet.
Don't know if will be by the guillotine this time.
Positively no guillotine.
It will be a quick and crude beheading with no superfluous technological embellishments.
re: capitol one
for numerous reasons, you can't estimate relative impairment on balance sheets by defaults on mortgages vs credit cards simply by looking at the absolute numbers. Credit card ABS are generally structural differently, whereby the issuer had to keep more skin in the game. But more importantly, primary residential mortgages were considered "safer" and therefore were only risk weighted 20%, whereas credit cards were weighted at 100%, meaning that the banks had to keep 5X as much capital for every credit dollar lent. Also, the really toxic stuff, CDO squared (turd squared), were primarily real estate backed.
So, I count 73.6 Bil so far... and growing.
No way they can raise all this from the market or selling off assets. This means dilution for the shareholders...
"February monthly net TIC flows were negative $97.0 billion. (Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion)"
"January monthly net TIC flows were negative $148.9 billion. (Of this, net foreign private flows were negative $158.1 billion, and net foreign official flows were positive $9.2 billion.)"
March monthly TIC flows.............what do you think? Over/Under: $100-billion ???
Uh Oh. Cramer is all Boo-Yah on the bank crisis being solved.....
"The 70s had nothing like today's total debt to GDP ratio. Debt carrying costs are the critical factor today, and they cannot increase."
That is why we will have stagflation to a T this time. Must be a stronger word for stagflation? Staggerflation?
In any case, the way to short the Fed is to short the USD against "commodity-backed" dollars like Canada or the Aussie dollar. At least they have raw materials to sell to the Chinese, and are in relatively good shape fiscally (the Canadian govt actually ran a surplus for 10 years until this year).
Or just stay short and start buying tbills as Zimbabwe Ben starts raising rates in a futile attempt to fight commodity inflation by slowing an already slow US economy. Wait to see how that works.
Maybe he can sell all the MBS he has bought....uh, forget it.
If individuals and most corporations are forced to pay debt at 70s rates they will default, even if wages/revenues inflate as well.
The inflation of the late seventies was caused by the devaluation earlier that decade. Which is basically what we're going to go through. We'll pay off private debt with helicopter ben's devalued dollars, which will make borrowing more expensive down the road; simultaneously, borrowers are becoming more risk averse, which will lead to higher savings.
BB is only concerned about getting us out of the deflationary spiral, and his weapons are extremely blunt...
That is why we will have stagflation to a T this time. Must be a stronger word for stagflation? Staggerflation?
The amount of inflation that would bring us to our knees this time around hardly even deserves a 'flation.
This may be a tie in to the no newsgathering in China particularly of a financial nature...
From Yves:
Power generation in China dropped again in April, indicating that the macroeconomic rebound the market has expected is yet to appear.
China Power Generation Falls, Suggesting Talk of Recovery is Premature « naked capitalism
@Basel Too: Thanks very much for the enlightening information on the CC ABS...I wouldn't weep for Capital One so much as for our state budget.
"The explosive rise of the U.S. budget deficit and debt burden will lead to serious inflation down the road," says billionaire and Obama supporter Warren Buffett.
The Congressional Budget Office predicts that government debt will peak around 54 percent of GDP in 2011.
But Buffett said Monday morning that the ratio could surpass 80 percent"
“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett said.
Moneynews - Buffett Sees Massive Inflation to Handle Staggering Debt
What do the ???'s mean?
...........pretty simple.
We'll pay off private debt with helicopter ben's devalued dollars
I don't see how that works. Creditors are going to accept negative real rates? Either nominal rates adjust upward to keep real rates positive or creditors get crushed. And domestic creditors don't get crushed. They run the place.
And if nominal rates adjust upward along with inflation, the percentage increase in carrying costs is far, far greater than the inflation rate.
"As the debt increases and the Chinese buy less, how do the debt carrying costs not increase? "
Pay it off with printed money?
Cramer......"It's hard for me to wrap my head around why the bears continue to be negative" Cramer, the best sell signal ever.. maybe that is another signal for the next leg down.
“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett said.
I don't buy this argument either. Why inflate and spread the pain evenly among all holders of all dollar-denominated debt when you can selectively default and put the pain precisely where you want it?
"Uh Oh. Cramer is all Boo-Yah on the bank crisis being solved..... "
Isn't that a rerun?
@Basel: I also 100% concur with the future inflation expectations...eventually it will boomerang...and they are betting on another Volcker-like beheading to stop that.
They have 60 days to come up with a plan?
Here, I took 5 seconds:
Taxpayer bailout
There, capital problems solved
".........when you can selectively default and put the pain precisely where you want it?"
....how so?
Once inflation gets started, it tends to feed on itself as consumers hurry to buy before prices go up again... Fed has to raise rates and either stop buying or even start selling tbonds to raise rates and dampen demand.... It's a never ending battle... and every interference in the market distorts it, guaranteeing that there will be more unnatural volatility in the future...
Basel Tu has it right: there are differences between the 1970's and now, but the essentials needed for inflation in a sluggish economy are the same.
Creditors are going to accept negative real rates?
If I recall correctly, the Saudis weren't too happy about it during the seventies. could have one of the factors in that whole embargo hullabaloo.
And domestic creditors don't get crushed. They run the place.
Banks are not really creditors. They're financial intermediaries, even more so in a securitized world. It's the fixed income investors that are going to really feel the pain.
when you can selectively default and put the pain precisely where you want it?
We're doing both. Inflate via monetary and fiscal policy + selective default (GM, Chrysler, etc., and maybe mortgage cramdown)
"If individuals and most corporations are forced to pay debt at 70s rates they will default, even if wages/revenues inflate as well. Holders of long-term fixed debt would be crushed, short-term and adjustable-rate debtors would be crushed."
Yep, kick the can down the road does not change the fact that the banks are still broke, housing will continue to fall and Tim and Ben are just moving the IOU's from one pocket to another.
I'm moving in a few days and wanted to see the diesel prices so I checked out This Week in Petroleum on the EIA website. Looks like distillate demand is falling off a cliff.
The page cannot be found
griz - that's amazing - we have been hearing reports of increasing truck traffic and we are already getting into the summer travel season... I'm surprised at those charts...
Isn't that a rerun?
....From two hours ago. Hey, if the bear ETF's keep getting swatted down the rest of the week it leaves a huge upside during inevitable pullback. Cha Ching !
Banks are not really creditors. They're financial intermediaries, even more so in a securitized world. It's the fixed income investors that are going to really feel the pain
I wasn't talking about banks. It's the bondholders who really run the place, not the banks.
ot --
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is...
The Geography of Jobs - TIP Strategies
I'm getting shit from my family " You're short this market?!!" Yup its bad now. Still think the rally is "Bull"
I wonder about SunTrust. They do a bunch of CRE in the land of bank failure Fridays.
Bond Girl - new jersey janitors local 1305 sez "pass".
There is no way for this to turn out well for the administration, I think.
On the one hand, you have economists and banking analysts who have produced wildly different estimates with respect to the banks' capital position. And you have the federal government itself, which for months has been begging for bailouts, talking about how this is the worst financial crisis since the Great Depression and worthy of dramatic intervention, proposing programs to take the toxic assets off the banks' balance sheets, and then you have results like this come out.
Either the administration is saying, not that banking analysts and economists have been wrong this whole time, but that the Treasury itself been wrong this whole time in estiamting banks' needs, which completely eliminates any credibility they might have had in terms of quantifying the problem... or they are just flat-out lying and this is a Soviet-style propaganda exercise.
If they are flat-out lying, 1) it is hard to believe that they would even think to undertake that kind of thing in the US and 2) it is hard to think that the Federal Reserve would actually risk throwing the US into a wildly inflationary environment on the hope that it could help banks earn their way out of this crisis. How in the world does this turn out well?
".........when you can selectively default and put the pain precisely where you want it?"
....how so?
I'm sure the plan will be far more subtle and opaque, but I'm imagining a scenario something like this:
(1) require all holders of treasury debt to to register with the USG
(2) suspend interest remittances to non-domestic holders. Or perhaps simply to holders domiciled in, or the central banks of, certain countries designated as "hostile" or "human rights violators", etc.
Who the middle finger gets extended to, and how deep it's thrusted, depends on just how bad things get and how the debt winds up getting distributed. The point is, I think default will be a more favorable option for the people that matter than inflation, but I suspect allowances will be made for domestic Treasury investors.
And obviously this is still a long way down the road. The consequences could be frightful and things have to be pretty bad before we pull the trigger.
Calvinism
http://www.bearishnews.com/wp-content/uploads/2009/05/calvin-and-hobbes-market.jpg
ShadowInventory, I was surprised too. Makes you wonder how much to believe about the "green shoots". Another article on oil inventories:
Rising reserves of unused oil put strain on storage - Telegraph
Doesn't make you feel warm and fuzzy about the return to growth now does it?
"the Banksters have a limited survival rate on the planet.
Don't know if will be by the guillotine this time. "
It should be interesting to see how that plays out in a democracy. When J6P starts calling for the heads of bankers, will congress turn on their masters or join them in line at the gallows? As it is now, it looks like they have abdicated the dirty work to Tim and Ben, but 2010 is coming fast and one of the parties is going to re-invent themselves as hostile to bankers. (R)'s will have a tough sell to distance themseves from thier business friendly history, and (D)'s now have fresh blood on their hands. Perhaps it will give a 3rd party an opportunity.
one of the parties is going to re-invent themselves as hostile to bankers.
Seems to me the usual pattern would be for the party out of power to pretend to be hostile to bankers, then do a 180 when they get into office.
"How in the world does this turn out well?"
Everyone (except CR readers) accepts the contradictions at face value and carries on without a worry.
"The 3.6 trillion is just the 'ordinary' budget, nothing special.... All the Acorn people will be driving Lexus... "
That's incredibly obnoxious and stupid. I have a friend who's worked at Acorn for many years. Doing good work.
broward,
Yes, but that only lasts so long....
So is the next announcement that they are nixing PPIP? We do not need that anymore, obviously.
the largest holder of treasury debt is the Social Security Administration. The US will default on its senior citizens before it defaults on the rest of the world. We're already starting to see effective "defaults", e.g. no COLAs, changes in withholding, eligibility, etc.
"Do swines fly"
The plural of 'swine; is 'swine.'
You can make anything fly if you shoot it out of a cannon. Grand piano. Lawn mower.
"I wasn't talking about banks. It's the bondholders who really run the place, not the banks."
Seems the banks and Wall St. are of the opinion that that point of view is open for debate. Bondholders are likely to teach that lesson the hard way. Take a look at the 10 year over the past 20 years. That is a trend that is unlikely to continue.
JPM - No capital needed. I can understand their BSC junk won't cost them much since Zimabwe Ben signed the US Taxypayer up to take the hit but what about WM's treasure chest. Did FDIC take a chunk of losses there ?
"The US will default on its senior citizens before it defaults on the rest of the world."
That would have to be a new kind of world anyway.
"The US will default on its senior citizens before it defaults on the rest of the world."
Riiight. Who exactly is going to touch that 3rd rail?
Of course pigs can fly.
http://andrewleicester.com/case-study/photos/15.jpg
"It's the fixed income investors that are going to really feel the pain."
Well, more specifically, the long-maturity fixed income investors. Like Jas. Though we could end up with some crazy inverted yield curves for awhile. Those holding short maturities will just roll over into higher yielding short maturities. My duration in fixed income today is around 3 months.
Also crushed will be the middle to lower classes, who are net debtors, usually at short rates, and spend more of their disposable income on necessities like gas, food, and clothing.
And of course the US govt, who has a weird preponderance to borrow short.
I have no idea what is going to happen to the stock market - I don't think as a rule inflation is good for all stocks, which is why I wouldn't buy all stocks.
All I know is my gut feeling is there is going to be some serious pain thanks to Zimbabwe Ben's monetary experiment. He should know that monetary easing takes time to work, instead he got trigger happy and started this quantitative easing. We are not Japan in the 90s, we are not a net exporter, we are not a nation of savers (until now).
yalt that is the ugliest statue I have seen in a long time
Think Obama learned a thing or 2 about how to "Git 'er dun" during his brief gather-no-moss Chicago political system stint, maybe from Daly or Blago ?
"For example, the first quarter’s unemployment rate of 8.1% is higher than the regulators’ “worst case” scenario of 7.9% for this same period. At the rate of job losses in the U.S. today, we will surpass a 10.3% unemployment rate this year — the stress test’s worst possible scenario for 2010." - Matthew Richardson
I tought somebody bought MS - they should pony up the funds!
Goldman Sachs’s Tax Rate Drops to 1%, or $14 Million (Update1)
Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.
Goldman Sachs’s Tax Rate Drops to 1%, or $14 Million (Update1) - Bloomberg.com
Who exactly is going to touch that 3rd rail?
That was my point. We're not going to explicitly default; instead, it'll be effective default + monetization.
WSJ has an article up about the treasury buying more preferred stock in the banks... but it's subscription only and I dont have one...
"pretend to be hostile to bankers, then do a 180 when they get into office."
I expect they will try. J6P has swallowed it over and over again. They may get wise though when the bankers are made whole while U3 stays stays sky high along with prices. Misery loves company.
sneering nihilist (profile) wrote on Wed, 5/6/2009 - 9:28 pm
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is...
The Geography of Jobs - TIP Strategies
Holy freakin' moley!
That's possibly the most blatantly graphic, horrific chart snuff-porn IMAGINABLE!
Excellent post, sneering nihilist! Commendable investigative reporting -- I salute you!
Yalt...I think that pig statue is in Vegas.... over by the Atlantis water and fire statue theater thing
Yogi - I have no connection to Acorn, but in my mind it is synonymous with voter registration fraud, attempts to intimidate banks into making bad loans in low income areas, and breaking and entering into private property which video was shown on national news. Whatever else they do, I dont know. But I would wager it has a lot to do with advancing the Cultural Marxism agenda.
Let's leave it there - and get back to economics... no flame war...
"How in the world does this turn out well? "
Bond Girl, this is what happens when you live in the bond market, you actually start understanding economics and the consequences of what is going on.
Note that the only person on CNBC who seems to have any sense is a bond guy, Santelli?
As for equities, they are a joke, nothing but a casino. You can get some decent indirect exposure to commodities and the like, but most of them? Get real. Why is AAPL worth 20X earnings one day and 30X earnings another day, when it doesn't return a dime to shareholders.
The S&P is still below the levels of 1997, despite kicking out a ton of loser companies in the past 12 years and replacing them with stronger companies.
If the govt is taking a cue on the strength of the economy from the stock market, God help us all.
Deflation in the UK:
"Weekly wages fell at the fastest rate in 60 years in February as City bonuses were slashed and workers agreed to reduced hours in the wake of recession, the latest official figures show.
The Office for National Statistics said average weekly earnings fell 5.8pc compared with the same month last year,"
"sneering nihilist (profile) wrote on Wed, 5/6/2009 - 9:28 pm
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is...
http://tipstrategies.com/archive/geography-of-jobs/"
That is AWESOME, thanks.
Yalt: post-modern neo-art deco on acid.
"I have no connection to Acorn, but in my mind it is synonymous with voter registration fraud, attempts to intimidate banks into making bad loans in low income areas, and breaking and entering into private property which video was shown on national news."
Wow, I would be the first to admit they have a liberal agenda and dubious methods, but you seem to have swallowed the Rights propaganda whole hog. How can you be such a critical thinker with regard to financial issues, but so apathetic to social ones?
"It's the fixed income investors that are going to really feel the pain."
Well, more specifically, the long-maturity fixed income investors.
I agree with the long bond crash, and probably 7yr+ will take a serious beating. I know the US is not Japan, but I am not so sure we won't have a fairly long period of deflation. It's hard to know when rates will spike, but when they do, the entire thing might spin out of control.
Either the administration is saying, not that banking analysts and economists have been wrong this whole time, but that the Treasury itself been wrong this whole time in estimating banks' needs, which completely eliminates any credibility they might have had in terms of quantifying the problem... or they are just flat-out lying and this is a Soviet-style propaganda exercise.
The Administration (Summers?) believes that given the super-low funding costs for the banks (ZIRP plus government guarantees) and the steep yield curve (300 bps between 1 month and 10 yrs), all banks will be able to earn enough money to absorb losses they will incur. Banks just need to be left alone. It seems that the objective of the stress tests was not to estimate capital needs but simply to give banks more time to catch their breath.
$1.5 Bil for Morgan Stanley or $5 Bil for Citi are just rounding errors put up there to create perception of propriety and sincerity.
It is not even a lie - this is bullshit in Harry Frankfurt's sense , when the bullshitter does not care whether what he says is true or false.
I thought after Bush I could not become more cynical about politicians. Yes I can!
"Deflation in the UK:"
They are really gonna be screwed by the coming stagflation.
In the interest of economic Marxism I'll share with you how to get that WSJ article for free: e-mail it to yourself.
My mother still badmouths the Red Cross for looking the other way when visiting Nazi concentration camps. But she admits they do good work.
when it doesn't return a dime to shareholders.
I think everyone should read a book on corporate finance, and the myriad of legal ways for management and select shareholders to disgorge cash from a company. Jas is definitely, right, it really is a scam market, especially when you consider that for 99% of stocks, the investor only makes money by finding a greater fool...
yalt that is the ugliest statue I have seen in a long time
I'm sorry I can't find a better picture so you can see just how ugly they are. There are four of them on the riverfront in Cincinnati--it's the symbol of the city.
But you want ugly? A few years back there was a charity gig where flying pig statues were put up on display around town and then auctioned off. Pictures here:
Big Pig Gig - Pig Profile
n the interest of economic Marxism I'll share with you how to get that WSJ article for free
What i do is go to news.google.com and search for the title (e.g. "Banks Need at Least $67 Billion in Capital"). For some reason (probably a referrer tag), when you don't come from the wsj.com homepage, it doesn't prompt for a subscription.
I would say that if I was Acorn I would be running classes on parenting and how to do job interviews, handing out alarm clocks and copies of the want ads, and teaching the poor that they are going to remain poor unless they work themselves out of it.... that they will never get rich by living on handouts... And since the public schools do a terrible job teaching basic skills, I'd probably run some reading, writing, and arithmetic classes too... When the students are capable I would teach them how to save and invest and work their way up... The left always runs this line of helping the poor but all their actions do little to actually help them other than feed them for a day.... instead of teaching them how to feed themselves for their whole lives...
Bummer for Cincinnati, at least St. Paul MN got all of those bronze Snoopys and such.
So is Cincinnati going to cull those pigs to prevent pandemic flu ?
Stop badmouthing the pig,my ex was the model.
"sneering nihilist (profile) wrote on Wed, 5/6/2009 - 9:28 pm
sorry if this link has been posted already. it's a dramatic and horrifying look at the job market for the past 5 years or so. i have no idea how accurate it really is...
http://tipstrategies.com/archive/geography-of-jobs/"
Brings to mind, financial weapons of mass destruction.
Well, hey, maybe Bernanke has stumbled on some sort of economic truth about booms and busts. Let the banks fuel the mother of all credit sprees, send a lot of money to money heaven, then let the central bank print money to fill the holes in bank balance sheets, eventually the banks will be even and they can start the next spree. Genius. We never have to produce anything real ever again!
You got it. Actually, this is a neat trick known for while:
Read The Wall Street Journal For Free
If you use firefox, you can install an extension called refspoof and cheat wsj.com anytime you want using a fake referral.
"The left always runs this line of helping the poor but all their actions do little to actually help them other than feed them for a day.... instead of teaching them how to feed themselves for their whole lives..."
I think ACORN sees themselves as the AARP or NRA for the poor. Getting political representation for the poor and minorities. Key to having that level of political clout is to have members who vote. The Right does not historically represent ACORNS constituents, so they tend to vilify them, whenever possible.
Genius. We never have to produce anything real ever again!
The Fed can produce all the "capital" the world needs at a computer terminal. I am in awe of their power
The Feds have decided that no major asset class will be allowed to deflate, and have acted accordingly. This is the result of $3+ trillion in action. Wait till the stimulus money kicks in at years end. How it ends, I don't know. Perhaps poorly.
"Jas is definitely, right, it really is a scam market, especially when you consider that for 99% of stocks, the investor only makes money by finding a greater fool..."
Absolutely. Just ask the guys who bought CSCO at 80 back in March 2000, who are now down 75% in nominal terms, much more in real terms, and have received not one dime in dividends.
Sure, management buys back stock - to soak up the shares they issue to their employees.
No thanks, not for me.
I'd have to do some research to get the exact facts, but I think the Duhb administration doubled the education budget... I'm not sure of anything else to quote, but the Republicans did not do any budget cutting during the 6 years they had control of the congress... My point is that the poor have little incentive to become an entry level employee when they can get a better deal from govt programs... And I think the biggest shame of all is that they will never experience the exhilaration of successfully completing a difficult task.... The thrill of the big win... The left uses them as a voting bloc to retain power and funnel taxpayer money into their own pockets too...
"Wait till the stimulus money kicks in at years end. "
If Nancy Pelosi were President (shudder the thought), we would have a second stimulus package of spending on non-productive things.
"The left always runs this line of helping the poor but all their actions do little to actually help them other than feed them for a day"
The obvious answer is yes, plenty of people still don't get enough food each day and millions of children have starved to death in the last 100 years despite all the leftist conspiracies. I'm involved with a non-profit "urban squash" program. The kids play squash after school 4-5 days a week (nyc public schools have few sports programs), get mentoring, tutoring, and SAT prep., and perform community service. 100% college admission so far. Founded by lefties.
BlackHalo - before we got sidetracked I was going to recommend that you run as 3rd party candidate in 2012....
Yogi I stand corrected. Admirable service.
"Well, hey, maybe Bernanke has stumbled on some sort of economic truth about booms and busts. Let the banks fuel the mother of all credit sprees, send a lot of money to money heaven, then let the central bank print money to fill the holes in bank balance sheets, eventually the banks will be even and they can start the next spree."
That actually is a great plan, if you want to become the next Argentina or Zimbabwe.
I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?
I think that would have happened in a severe deflationary recession, but with Ben printing dollars like crazy, I think the gap is going to grow wider and wider, despite BHO's attempts at closing it. In five years the middle class are going to be on the endangered species list.
I was being sarcastic...
"My point is that the poor have little incentive to become an entry level employee when they can get a better deal from govt programs..."
Yeah the 5.75/hr job will make you, not poor... Also, I am not familiar with these government programs that would put the children of the poor on the same playing field as the children of the bankers.
And the incentive for banks to get off of the government dole is?
It will, but not through conventional economics.
//I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?//
Well you have to start someplace and work your way up - develop yourself, gain skills, gain confidence, and of course always be looking for a better job... Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder...
"BlackHalo - before we got sidetracked I was going to recommend that you run as 3rd party candidate in 2012.... "
Hah! I wish. I am unelectable as I have an aversion to only telling people what they want to hear.
"Uh Oh. Cramer is all Boo-Yah on the bank crisis being solved....."
Hey may be right, but I doubt he sees the sovereign debt/USG default crisis that's coming.
"I was being sarcastic... "
Oh, I know.
I would hate to be Americans under the age of 30 - 35 because most of them will probably be living a good part of their lives in the biggest Banana Republic in the world !
ShadowInventory,
Keep believing in that stuff.. delusions can reduce the feelings of hunger when you end up on the streets.
//Well you have to start someplace and work your way up - develop yourself, gain skills, gain confidence, and of course always be looking for a better job... Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder...//
[ It's hard to know when rates will spike, but when they do, the entire thing might spin out of control]
Ben has a magic econometric-model with a whole bunch of dial and adding more all the time. He'll take care of everything
"But I doubt he sees the sovereign debt/USG default crisis that's coming."
Well, that is an interesting issue. Will the USG default on it's debt? I think the probability is remote.
Much more likely, though, is it will eventually let Fannie/Freddie default. Remember, Ben owns a lot of their debt, so a default just means money has been created that won't be able to be taken out of the system.
I would suspect most other investors that matter (i.e. foreign governments) have sold out of their positions. The only ones hurt would be some US-based funds and banks, but the govt didn't care too much about them when they wiped out the preferreds.
Totally anecdotal, but I saw a semi hauling an auto trailer crammed full of various makes and years (mostly the last few years) and on the top tier of the trailer was a Chevy half-ton pickup with the bed half full of living room furniture. NEVER EVER saw that before in my life! It's got to be full of fresh repos. They obviously snatched the pickup while the family was in the process of moving out of somewhere into who knows where.... This is not good.
Never been out of work, only HS ed, 8 years in the military, worked my butt off, retired at 58.... Never stopped studying, learning, improving my skills... Grew up on a farm - my great-grandad was a covered wagon pioneer...
"Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder... "
Worked for W.
ShadowInventory,
So you believe that "It won't happen to me because I am a hardworking motivated white guy". Well.. that is what banksters call "suckers"
Look how it turned out -
Are we back to the welfare queen in her caddy? Yep, they're still living it up even after the '96 changes, particularly when cavorting with the radical homosexuals and the NEA. They really paint the town red. Seriously, this is a duckduckgoose-like obsession.
Lucifer - if I had to I would find work again... only now I would have to suffer the arthritis pain...
I know - sanity - change the damn subject will you
ShadowInventory,
Communists used to call people like you "useful idiots". You believe in the system...
You know what.. keep on believing- only reality can wake you from this dream.
-
game multiple SYS
fibonaccii retraces
nine four test SQ1
From the aforementioned WSJ article...
Banks that are found by government stress tests to need additional capital will have two choices: raise the money from the private sector, or go back to the government trough. But instead of taking more money, the government expects many banks to exchange the Treasury Department's existing preferred stakes -- which it acquired last year at the height of the financial crisis -- for a new type of preferred share.
This new instrument, called a "mandatory convertible preferred" share, gives banks the ability to create common equity as needed. The preferred shares convert to common shares when a bank or its regulator decides they should, or within seven years. Regulators are paying more attention to the common equity each bank holds, in part because it measures what shareholders would have left if a company were liquidated.
"Much more likely, though, is it will eventually let Fannie/Freddie default. Remember, Ben owns a lot of their debt, so a default just means money has been created that won't be able to be taken out of the system."
What about AIG? Lots of money headed for parts unknown, out of there. Plus Fannie/Freddie, FHA and the Fed have been paying $$$ for assets that are worth near 0, hand over fist. That money is going to turn up eventually.
I believe that at the end of the day, the Fed will have doubled the $$$ in circulation, regardless of who ends up BK.
Ben has a magic econometric-model with a whole bunch of dial and adding more all the time.
The Wright Model Bernanke?
If only kids today go could back in time to be able to do what you did... Unfortunately the new globalized reality is that its far more difficult today to go from Lower -> Middle class and from Middle -> Upper class than at any time in the last century.
Either the administration is saying, not that banking analysts and economists have been wrong this whole time, but that the Treasury itself been wrong this whole time in estiamting banks' needs, which completely eliminates any credibility they might have had in terms of quantifying the problem... or they are just flat-out lying and this is a Soviet-style propaganda exercise.
Bond Girl, I'll argue that they're flat out lying. We know that things were bad enough that the financial system did seize up, and if it were really as easy to clean up as they're implying, there simply wouldn't have been such a dramatic result, or such a dramatic response (TARP, TALF, etc.) Hence I think the most reasonable conclusion is that this is an exercise to prevent panic and buy some time.
Let's agree that generalizations are foolish and a few instances of fraud don't mean a program should be scrapped. If that were true no one would be employed by the military for 8 years...
Looks like housing inventory is coming down in Santa Barbra right now.
Just one more hit, man. C'mon bro, I'm getting better. I just need a little tiny teensy bit more capital, just this once. C'mon man, you don't wanna make me fail do you? I'm a lot better than before, I just...you know...need a little help right now. I'm under a bit of stress, and just need one last hit. I promise...
I doubt it, Doc. I've sent out thousands of vehicles for repo in my time, and personal property was always inventoried and kept at the repo guys facility. Why haul shit to an auction if you don't have the right to sell it when it gets there? I'm not sure what you saw, but it doesn't sound like it was repossessed vehicles.
The preferred shares convert to common shares when a bank or its regulator decides they should, or within seven years.
I love that feature. I understand they'll also be selling equity options that convert at the seller's discretion rather than the buyer's, and common shares that require the holder to pay the bank a dividend whenever the bank declares one.
1-800-JESUS (profile) wrote (in reply to...) on Wed, 5/6/2009 - 7:43 pm
If only kids today go could back in time to be able to do what you did... Unfortunately the new globalized reality is that its far more difficult today to go from Lower -> Middle class and from Middle -> Upper class than at any time in the last century.
First love you handle name.
Yes indeed Horatio Alger to achieve the American Dream of wealth and success through hard work, courage, determination, and concern for others is pretty much life support in todays America.
So sad but true...but if you still believe call 1-800-JESUS
नए नियम
all yer rulez R belong to uz.
旧规则
fixed it
"Unfortunately the new globalized reality is that its far more difficult today to go from Lower -> Middle class and from Middle -> Upper class than at any time in the last century."
Yep, tough to make that transition from the Min wage job, to a factory job, when they are all in, or moivng to, China. Or even worse, if you manage to work your way through night school, to lose out to a doctor/lawyers/bankers son from India with an H1B.
Shnaps, all I know is that I've NEVER seen family furniture in the back of a newer model pickup that's in a vehicle trailer! There have been stories of late about banks doing FC's and selling them in bulk at huge discounts, leaving money on the table. What if the repo people are overwhelmed and it's just load 'em up, ship 'em out! Would not surprise me in the least. Protocols and procedures can go out the window when there is too much on the plate.
Of course pigs can fly.
"They don't fly, so much as plummet." - Monty Python
worked for a startup which failed and was bought out in 2001. Their web traffic is down 40% in 2009, they laid off 400 last quarter and 1000 this week. Same as it ever was. Working your way up is more luck than work, more lie than skill.
Haloscan oldie but goodie:
Subcommander Doom says:
Wednesday, December 24, 2008, 7:22:09 PM
“Franklin D. Schwarzenegger Museum of Disposable History where I dazzle and amaze the children of tomorrow with the edutaining puppet shows of yesterday.
"And that's how Jesus wrote the Constitution," says me.
"Tell us more tales of your savage time!" says one a the disembodied floatin brains.
"Well back in the ol days we didn't have your fancy Senatrons and Congressbots," says me. "We hadda pick our presidents the ol fashioned way, with a money-eating contest. The first candidate to swallow half a billion dollars without throwin up would be King of all Florida!"
"Intriguing!" says the second brain. "Now battle Clone Lincoln... to the death!"
"Raaarrrrr!" says Clone Lincoln.
I swear with God as my witness. I thought turkeys could fly.
"But I doubt he sees the sovereign debt/USG default crisis that's coming."
Well, that is an interesting issue. Will the USG default on it's debt? I think the probability is remote.
The USG can't really default as long as the dollar is the world reserve currency. May have to effectively default through inflation if the market for US debt dries up and the Fed has to buy all of it. That seems possible to me if interest rates spin out of control. When interest on the debt becomes unserviceable except through monetization, then the USG has effectively defaulted.
Let's see, we are at 11.2 trillion today, will add 2 trillion to the debt this year and probably another 2 trillion next year. Then, 1-2 trillion each year thereafter until the boomers hit Social Security and Medicare en mass, then we can add 4-5 trillion a year until interest on the debt overwhelms us circa 2021.
The whole stress test is either a complete ruse or a stall tactic so the usg can get the real plan implemented. In the meantime a lot of $$$ flowed in cranking up bank equity. That is a sweep off the table waiting to happen on the first wobble of the knees.
broward luck is the residue of diligence and power networking. I've been consulting or working with early stage software startups for past 15 yrs. In short easy breezy in 1990's, tougher from 2000 - 2005 and from then on you've got to be really good to get gigs that pay really good $$$
"I swear with God as my witness. I thought turkeys could fly."
Best sitcom episode ever!
It occurs to me that the stress tests may be setting the banks up for failure. The fact that the adverse scenario is already invalid underscores this. It's like saying, yes, we agree, you are not in such bad shape, so go take care of yourself. But if you come back, you will leave us with no choice. Basically, I think the government recognizes that the problem has been too much lending and is putting the banks in a position where they must put up by earning their way out on existing loans (I don't believe anyone really believes more lending is the answer in the current economic environment) or shut and take their medicine (government control). Be careful what you wish for.
Futurama Planet Money lives at Morgan Sachs Mitsubishi's second home on the coast in India.
Im thinking Goa.
ive done too much already.
carry on sweet southern comfort. carrion.
nitey night.
Who in the world buys stocks in companies like this? Didn't they just do a share offering in March?
Forbes.com File Not Found
" it is hard to believe that they would even think to undertake that kind of thing in the US "
Who's being naïve, Kay?
Here is another article, confirms what I thought, second offering in two months. Unbelievable.
Simon Property Plans Second Stock Sale Since March - WSJ.com
Who in the world buys stocks in companies like this?
Lesser fools?
Mandatory preferred shares - this just keeps getting even more special.
Power networking
Yes, that's what I said. "lie"
Tell people what they want to hear, which is one of the core problems today
Did my first startup in 92, although it was funded by the Feds. Economy has gotten progressively worse since 2006.
Of course the tests are a lie.
From WSJ article:
One question mark hanging over the tests is whether they will be perceived as tough enough. From the start, some economists and bank analysts argued that the Fed's worst-case economic scenario was overly rosy. Since the Fed informed banks of the preliminary test results, the government appears to have softened somewhat as banks pushed back.
Among other things, regulators accepted banks' bullish arguments about their profit outlooks. The Fed initially planned to use banks' lackluster 2008 revenues as a jumping-off point to predict future incomes, according to people familiar with the matter. But many big banks logged robust first-quarter profits and argued that should serve as the "run rate" for the stress-test period.
Pump and dump. The whole market's a boiler room now.
"Bank Stocks and ETFs Encompass 41% Of Today's NYSE Volume"
StreetInsider.com - Bank Stocks and ETFs Encompass 41% Of Today's NYSE Volume
Unbelievable. How much of this is Cramer's fault?
Still looks like a bear rally to me.
Not that I don't hedge my positions, as who knows what the GOV is going to do on their mission to save the insolvent banks.
Just playing around, at the recent "bottom" I did a "straddle" with calls on FAZ and FAS for 500$ worth of well out of the money, OCT FAZ and Mar/Jun FAS each. So far. I have doubled my money on the FAS calls five times now, took my FAS profits and re-placed my bets. The net result is I now have OCT calls for FAZ at 90, 85, 70, 40 and 30 and still have a JUN FAS at 14 (that is about to double again).
If there is a sizable pull-back, I stand to make a tidy profit. If we ever re-test the low, well then it is time for my European vacation as FAZ went to 100 last time.
Excellent bet on the October FAZ calls... the timing should be exquisite....
Doc, have you never heard of the auto transport / shipping industry? Folks who can't or don't want to drive their car across the country, so they contract with a transporter to ship it to their destination? What would make you assume that a car hauler full of mixed-make vehicles is full of repos?
blackhalo:
I've been long since about late Feb, which sucked for about a week, when I was thinking "who the hell is buying FAZ at 110?" But at the same time, I too familiar with banking law, so i knew that the banks would never be nationalized without Congressional authorization, despite the astroturfers. Mostly been playing the earnings calendar; i would say about 4/5 have popped. Sold out of my $4 BAC too early this week; now I'm in only two positions: FAS and AIG.
Yep. it's a casino...
"Well you have to start someplace and work your way up - develop yourself, gain skills, gain confidence, and of course always be looking for a better job... Even if the bosses son starts at the top he probably wont make it without experience all the way up the ladder..."
I can assure you that that is very much NOT true.
"20. Danny Needs $3.5 billion"
Well first you would need to own you house free and clear, sell it to yourself. via a loan to yourself, sell that loan as an MBS to yourself, buy default insurance from AIG on that loan, default on that loan, maybe get paid by AIG, and then sell the MBS to Ben and Timmy.
Only then would the Bank of Danny qualify.
so, I thought this was a joke when I first heard about it, but earlier today Oprah apparently was going to feed the world
Oprah KFC Coupon Riot! - Kfc - Gawker
Riots over free 2 piece chicken meal erupted all over, did it have anything to do with the economy and people pinching pennies?
"Well, that is an interesting issue. Will the USG default on it's debt? I think the probability is remote."
I always have to caveat this. Let's agree to call inflation "soft default" and continue discourse
since Goldman Sachs and JP Morgan pass that makes it a done deal. The rich and powerful are OK to remain rich and powerful. Get back to eating McDonalds and watching Dancing with the Stars. There gift to us is 2000 pts on the Dow since early March. Take advantage of the crumbs! All is well! Dance and be happy. They left us coloring books to fill in the details.
@ShadowInventory: my apologies (sort of). I didn't read your bio until later. You grew up in a different time, predominated by a false sense of stability and relatively constant growth... the so-called "great moderation". Hard work and brains certainly helped one advance in that environment. "Relationships" helped more. Today, it's all (and only) about "relationships".
Alas (fortunately for you), we only really know what we've experienced.
Cheers!
"I always have to caveat this. Let's agree to call inflation "soft default" and continue discourse"
Looking at a 20 year chart of the 10 year US T-bill, I do not see how they can keep it together. That looks an awful lot like the next bubble to pop. I look at that and my mind boggles how anyone would be caught holding long term Ts. To be honest, how have they kept it together this long?
I have this image of Eddie Murphy's Kit, in Bowfinger, saying his litany of "Keep it together. Keep it together. Keep it together." as Steve Martin's Bowfinger, is busy turning his world upside down. Mindhead indeed.
RockyR - appreciate that - well I appreciate yogi and halo too - it's a different world now for sure... If I was graduating HS today I think I would be looking at plumbing, hvac, electrical or something - but if I was that young again who knows - I didnt operate on so much knowledge back then... Lot of the time I think we are into the transition to a world with no work - if the smart robot shows up that will be the end of work for sure... then everyone has to get a living allowance and it will be a totally different world... I have no idea how it will shake out...
well someone has to design and repair those robots i guess.
Also I didnt have a linear climb to success there were a lot of setbacks along the way - career changes, bad decisions - and of course no one could reliably predict the future back then either... My grandmother told me that our advantage in the US was that we got a free education through HS while most of the world didnt, and it was my obligation to take advantage of it... My dad taught me a lot of things, how to do a lot of things, but mostly that whenever I got around someone who knew how to do something that I didnt know, I should try to get them to teach me... that worked out well - for now even though I no longer want to do the work I know how it should be done - so I can tell if someone is doing things properly...
Ah well - "Walker, there is no path for you.... You make the path when you walk."
This is Fanuc in Japan...
Factories - Production - Profile - FANUC
Robots building robots... eventually there will be no work if we manage to survive the interim...
"If I was graduating HS today I think I would be looking at plumbing, hvac, electrical or something"
Good call. Rental maintenance is going to boom.
"My grandmother told me that our advantage in the US was that we got a free education through HS while most of the world didn't"
Now most of the ROW gets free ed through college, and we don't. And it looks to me like the PTA and Teacher's unions, have turned our HS into something less than it was.
You want to know how I know this stock market rally is a ghost? Sector valuations haven't changed. Every time there is a big crash, it only ends when some sector or company starts to bring in real money to in turn fuel a larger rally. Government funding of corporations has only had a time horizon of about 60-90 days max throughout this process. Only when we have gone longer than that with no funding (be it debt guarantee, equity stakes, buying 'illiquid' assets, etc), can you even know things might be solvent
If I was graduating HS today I think I would be looking at plumbing, hvac, electrical or something
Because of the racket that education can be, the HS would do everything in its power to prevent you from doing so. After all, the % of graduates going to college is a tracked metric of high school performance, and you'd be lowering their stats. but feel free to rack up $100K in student loans.
strange world we're in.
Shadow sounds like you could teach a lot to the next guy.
As with influenza H1N1, beware the second wave after mutations in the organizing-governing nucleic code. Affluenza, once the market tampering, currency printing, and pyramidal IOU layering changes governance in the free market, will have a devastating unpredictable second wave.
There will be blood, there will be casualties.
strange world we're in.
Strange, indeed. Even the ball game doesn't make sense. First and second quarters were like two different games.
"I swear with God as my witness. I thought turkeys could fly."
WKRP designed this recovery plan, too.
The Rockets with T-Mac would be ridiculous.
"Robots building robots... eventually there will be no work if we manage to survive the interim..."
Sadly, it has been my experience that the Chinese worker is putting the robots out of work.
"The Rockets with T-Mac would be ridiculous."
I weep for my Spurs.
Hackman: The stress tests tripped my "set up" radar, too. The government "tried everything," the last resort arrives to resignation instead of roars.
There has been a lot of work done on agricultural robots too - fruit pickers, weed pullers etc... but the equipment has not been widely adopted because of low cost labor, and the requirement in some case to replant the orchards... There is an existing machine now that can pull weeds from among strawberry plants, and also a strawberry harvester that picks the fruit one piece at a time... amazing stuff really....
The Senate bill that was passed today requested a new foreclosure moratorium...
Effective Demand: Senate calls for new foreclosure moratorium
Now most of the ROW gets free ed through college, and we don't. And it looks to me like the PTA and Teacher's unions, have turned our HS into something less than it was.
Most HS today are way better than most were in the past but the bar is higher now... my youngest is just now graduating from HS - mid sized rural midwest public school - plenty of middle class to poor kids [none rich - not one]... surprisingly good 'basic' education. Way better than I got from a similar school 30 years ago. But 30 years ago the global competition wasn't what it is now. So even though theyare better educated they have fallen behind similar age kids from our developed world competition.
As for those who say do construction - you have got to be kidding or don't know anyone in the trades. I talked with my plumber lately - did a job for me - he said once the house bust hit even those who focused on 'repair' got hosed... price competition. He said he is only working 3-4 days a week because laid off construction plumbers are flooding the 'repair' market. He still has income unlike a lot of laid off plumbers but it is pretty low now compared to what it was say two years ago.
Back in the 80s construction bust I a had friends who were in the trades and it wasn't uncommon for them to go a year or two between jobs.
There is no 'easy' sure fire career - at best all you can do is learn to scramble.
I'm sure that everyone in DC is trying to figure out how to get things straightened out so it will look good for the election next year... but with all the scheduled loan resets and everything else, even with unlimited spending I'm not sure they can get it done in time... So far we havent heard much from the republicans or any 3rd party but I know that some people have been having discussions - Michael Reagan said he had a group but he was not interested in being a candidate himself...
The Senate bill that was passed today . . . .
CYA by those august senatorial types who just voted no on letting homeowners in foreclosure have the matter resolved in bankruptcy court.
A 'Sense of Congress' Resolution so shortly following a key vote is an insult to anyone with more than half a brain.
"...a devastating unpredictable second wave."
Anyone claiming 'The taxpayer will make money on this bailout in the long run' risks his blood, for sure.
I always have to caveat this. Let's agree to call inflation "soft default"...
Works for me.
Like any other kind of default we'll only get to do it once - next time they either won't lend to us at all OR lend to us in THEIR currency backed by some kind of collateral.
A 'Sense of Congress' Resolution so shortly following a key vote is an insult to anyone with more than half a brain.
Problem is these type of things become reality whether its a law or not.
"As for those who say do construction - you have got to be kidding or don't know anyone in the trades."
Well we ARE on the bad side of a bubble. Remember how hard, expensive and low quality you got when you had work done. when we were on the other side?
?Question?
If the banks packaged and sent most of their mortgage bonds downstream to sovereign wealth funds and pension funds are we just seeing the tip of the losses iceberg?
Example A: Freddie Mac
Example B: Fannie Mae
I'm sure the building trades are lousy all over the country... my friend who has a 40 truck plumbing company says his biz is off 30% and he is getting a lot of competition from the laid off construction plumbers too - they run an ad in the little dollar saver magazine and do cut price work... and if the recovery is sluggish it could go on like this for a long time - but I agree with you there is not now and never was any sure fire easy career - the more stuff you know how to do the more likely you are to find something...
Stress Test Table:
Taxpayer Rape Table.
Greatest non-violent crime in history.
The more damage you do to Innocent people the more money you get from the taxpayer who makes 1 one hundredth of your income..
A society where crime increasingly pays more, each year we move closer and closer to social disintegration.
Did Freddie report any results since that CFO hung himself in the basement? There was a story about accounting irregularities and improper loss accounting going back to 2000 as I recall...
Shadow
I hear that FRE was able to avoid 40 billion dollar loss due to an accounting change.
Effective Demand, sorry, but those types of things really incense me (whether or not they ever become law). The Senate had a chance to do something significant for the benefit of homeowners in foreclosure, namely give them the same right that investors who own 8 or 10 houses have to have the foreclosure put on hold while the matter of the size of the lien is adjudicated.
The Senate's vote was a resounding NO; hence the quoted remark by Sen. Durbin that bankers own this place.
For the Senate now to express its sentiment in a nonbinding way that servicers really shouldn't foreclosure until they've let the poor homeowners call 1-800-HELP ME OUT strikes me as not just absurd, but an insult.
They just want to trot out the campaign slogan next year about how much they were doing to try to help homeowners when in fact they were working for the bankers all along.
"Problem is these type of things become reality whether its a law or not."
Yeah the banks were all for the TARP, until they noticed all the strings attached. Hmm, something about a camel's nose or was it a camel through the eye of a needle than a banker to enter the kingdom of heaven? Moral Hazard? Socializing losses, has it's cost.
See what happens when you abandon the free market, not so free now.
I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?
I feel that the gap will indeed grow wider and wider.
What I see slowly (in most cases) happening is that the upper-middle and middle classes are being pushed down to the level of the working poor, due to job loss, underemployment, high local fees/taxes, healthcare and other 'needs' costs (food, meds, water, power, etc.) Little to no savings in this group, especially if they have kids.
I think in the next year, you will see dramatic changes in lifestyles and spending. A lot of activities previously thought 'necessary' are going to be dispensed with - even those considered 'must haves' for the kids. I'm already seeing that here where I live -- people are really thinking about big lifestyle changes. Not making 'em yet, generally, but getting ready to make 'em.
My thinking is that the really wealthy might be less wealthy than before, and there might be a greater spread between the top 'wealthy' tiers, but they will remain much more wealthy than the downwardly mobile.
Well we ARE on the bad side of a bubble. Remember how hard, expensive and low quality you got when you had work done. when we were on the other side?
If you don't shop price too hard. I always got great work done in the bubble but (1) I was a backwater - not real bubblish (2) I paid premium to people I knew who were good & (3) I understood they were busy & didn't ride their ass.
I had learned the hard way in the 80s - an out of work contractor low bid a renovation project I wanted done & I let him do it [friend of the family]... it was post bubble then too and I got a super low price - shittiest work I have ever had done. Live and learn.
Point about the trades is if 70s & 80s style busts are common going forward - tradesman will be out of work a lot [like 30& of the time]. If we have a 1930s like depression they will be out of work for decades at a time... my father's uncle was a tradesman in the 20s-30s-40s-50s... he was very busy all through the 20s... he literally didn't work at all through the 30s... then worked steady again all through the war & cold war.
That is part of being in the trades - it always was and still is - we just forgot that during the Greenspan Years. We relearn the hard way again.
The Madoff thing wiped out a lot of really wealthy people and took a big bite out of another bunch...
I think the kids will be better off if they dont get everything they want, and if they have to go mow a lawn or something to earn enough money to buy their bling...
I actually have a question for the board - does anyone here think the gap between rich and poor is actually going to get smaller over the next few years?
I feel that the gap will indeed grow wider and wider.
Middle class & poor will NOT get wealthier... wealthy might get poor. That is what happened after '29 and the gap closed a lot.
"A society where crime increasingly pays more, each year we move closer and closer to social disintegration."
First they undervalue risk, then they undervalue trust. Banks are the boy who cried wolf. Won't be long until the Bank of America will be the Federalized Bank of America. And yet, the chumps were lining up today.
"wealthy might get poor."
Yep. And the poor are going to go after it. If you think 39% is a travesty, get a load of the pre 80's rates.
"Point about the trades is if 70s & 80s style busts are common going forward - tradesman will be out of work a lot [like 30& of the time]."
And do they show up on the U3?
"Point about the trades is if 70s & 80s style busts are common going forward - tradesman will be out of work a lot [like 30& of the time]."
And do they show up on the U3?
Ummmm - no but they are still out of work. I didn't see them in the stats back then - I saw them on their couch.
"What do the ???'s mean?"
Whatever comes after stealing the underpants.
The Underpants Business - Clips - South Park Studios
Well, nice for you.
Those of us who graduated HS in the late 70s pretty much had to go to college to have any decent job prospects, got to graduate college into a huge recession (and oh, yeah, our parents were broke/laid off in the 70s), enjoy huge inflation (oh, but not so much for our wages) super-high interest rates and deteriorating public services.
If you came from a working class family like I did, these were tough times. And if your family was renters, you just got the higher rents and no home equity appreciation/build up to pass on to the kiddos. And appreciation there was in the 70s.
I was fortunate enough to start my own biz in the mid-80s, based on stuff I learned getting my MA while avoiding horrid job market. Savings from that business, killed by the dot-com boom (hard to compete against folks who don't have to make a profit), have kept me in the upper-middle class, but just hanging on at this point.
My point is that there is a HUGE difference in how life has been experienced depending on what decade you were born in.
Anytime between 1958 - 1965, mostly things have been crappy economically, with short interludes that those of us from those years didn't really trust. Likely since we could see our city services, education and everything else go to pot (as compared with the 60s) and the rich getting richer.)
I thinks it going to end up being a "video game" republic actually. A lot of these people are just going to tune into the Internet and video games and drop out and drop out of society. They may have some crap job somewhere (or live with mom and dad or whoever) but most of life will be lived online.
It highly possible that people will soon learn to want less stuff. if they can't get ahead, why try? Besides instead of striving for another $5 an hour that will just be inflated/taxed away just take that ambition and level grind the Warlock to 60 or make You Tube Videos or just garden or something.
This may sound like an authoritarian dream but its not. The entire 'empire of bases' and 'jail state' requires people to produce vast amounts of wealth the government to waste --
A society with ,more scavenger jobs, off the book work less shopping, less shops (welcome to buying online) and less manufacturing is well not long for the modern first world
If the US simply makes and uses less stuff tax and more importantly wants less stuff revenue will plummet like a stone. Imagine say taking in half what we do now with no up in the future
Also as an added bonus, the most generally hard working and law abiding core of your society will cease to exists in most places. Not only will their population plummet (who can afford a baby?) but the only people reproducing in numbers will be high natality low english speaking immigrants, poor people with little opportunity and evangelicals --
say hello to super high crime and little money for policing
we have roughly 20 years till the Republic ends if this scenario is true -- this is when the largest generation in US history comes of age and it meets the definition I gave you to the letter.
Likely we will end up with a fractured decentralized union -- still the US in name but with power mostly divested to the states --or it might collapse into a Junta (we are overdo) or several smaller republics -- any which way it won't be a pleasant place to live
blackhalo said:
"If we ever re-test the low, well then it is time for my European vacation as FAZ went to 100 last time."
Financials would have to drop by 85% for FAZ to reach 100.
State Street, I can relate. Many were the times I "needed $$$" too.
Where was Uncle Sham with his flim flam then, I ask ye?
Nemo, I prefer the original scenario, myself.