This is not funny. Last sept I went to a Wamu (woohoo!) ATM and it did not have any money. I never laughed so hard

The Fed will come by to refill it soon.

Mr. Dawg have you heard about my asset management service? I can offer you some extremely attractive rates on some offshore CD's which you could buy with the funds from your Heloc....

Teachers vs. UAW - Brilliant move on the part of the hedgies...

My wife's colleague was shocked to find her home ATM closed last fall. Right after upgrading her Cabo timeshare that she has used once. Oops.

Would have been funny as hell if we got an interior shot through the Bathroom window showing the US dollar as a roll of Toilet paper.

"The Fed will come by to refill it soon. "

No doubt.

Angry Saver,

You got piggled.

Example 1: Japan was a net creditor. Yah, sure they increased public spending and deficits, but they were an export economy. They didn't take on debt like the US going into their lost generation, they simply became a net lendor and net exporter with the US to buy their goods.

Example 2: Yes this was a prolonged deflationary event, but look past 1946 and note the pro-longed inflationary event finally subsiding in the 1980s.

All that being said, it's timeline I think we're discussing...when? I'm not sure hyper-inflation is what is around the corner, but I'm sure there will be prolonged inflation, possibly lasting a generation.

And of course, we "could" see a generation of deflation before that.

Always possible.

I'd pull for that scenario with U3 above 15% with U6 at 25%. Then yes, a pox on both houses.

--bh

ShadowInventory (profile) wrote on Wed, 6/3/2009 - 10:08 am

Mr. Dawg have you heard about my asset management service? I can offer you some extremely attractive rates on some offshore CD's which you could buy with the funds from your Heloc....

Iceland? Latavia? Ireland? UK?

Heck, if I want to go that route consider: CA State short term double tax free infrastructure bonds 6.128% using double tax deductible 3.00% HELOC money. Win-win.

@Basel

I wonder how many other retirement funds were invested with the hedge funds that already capitulated.

i have a friend that's an analyst with the SC pension fund (all $24B) of it. I'm telling him to convince his bosses to purchase California assets, especially natural monopolies, on the cheap...

I heard the 19 hijackers were armed only with financial pox cutters, as they cut losses and allowed the have mores with no social mores anymore, more.

I'm investing with Hoopajoops...

I wonder how many other retirement funds were invested with the hedge funds that already capitulated.

We'll find out the full extent at the end of the FY, when the librarians pension fund in Moline, IL asks the city to draw from the general fund because they were burnt by GM/Chrysler. the muni pension funds are an absolute mess...

then again, to wall street, fleecing the Sheboygen city council was like shooting fish in a barrel.

bh,

My guess is that once the banking system has been bailed out, the fed "printing" will end. No way will they extend that sham to the federal or state governments or the public at large.

Greedy and incompetent bankers pulled off a massive swindle. They got huge bonuses AND a bailout. The rest of us will have to actually earn our way out of debt.

Don't you just love that fed "independence".

Resurgent Russia Discharging Dollars

Resurgent Russia Discharging Dollars

RED SHOOTS!

All economic reports tracked on bloomy today missed concensus estimates.

So... in a nutshell - More less bad than expected.

Let's use the modest percentage we made off of managing Rob Dawg's nest egg as the start up capital... it'll be rough getting it chartered, but I know a few congressmen.

Lots of my trailing stops getting hit on energy, gold, the treasury short. Lots of confirmations rolling in. Could have been right, could have been wrong setting stops, thinking we'd see a dollar rally.

Bleah. We'll see if the market has a memory tomorrow.

Angry Saver (profile) wrote on Wed, 6/3/2009 - 10:31 am
My guess is that once the banking system has been bailed out, the fed "printing" will end. No way will they extend that sham to the federal or state governments or the public at large.

Normally you'd be right. These are not normal times. The Fed/Federal govt has to bail out California. No choice. The alternative is to "lose" California in that The State will print its own paper and spoil the whole game. USA(sans California) dollars or Neuva California Dollareos? USA loses much more relatively. Thus it won't happen.

@ Rob Dawg:

When you say utility increases, do you mean municipally owned? The investor-owned utilities will not have an easy time increasing rates. SCE was just denied an increase in rates with the rationale being that the economy was so bad (i.e. the CPUC admitted that the increase was justified).

Calpers selling stock to meet some obligations: Journal

(MarketWatch) -- California Public Employees Retirement System, the largest U.S. pension fund, is selling stocks to ensure it has enough cash to meet obligations to private-equity firms and real-estate partners, The Wall Street Journal reported on Saturday. Calpers had $188.8 billion under management as of Wednesday; it normally keeps less than 2% of its assets in cash but has had to raise that level, the Journal reported. The Calpers board's investment committee met last week to discuss ways to raise cash, people familiar with the matter told the paper

Whats your view in today's upward move on the dollar?

Wait, if I'm taking out high leverage for investing in your fund, and your fund is just investing in my fund which is just investing in your fund... how does anyone make any money?

Right about now is when Byzantine_Ruins shows up with his traveling puppet show.

srvbeach21 (profile) wrote on Wed, 6/3/2009 - 10:43 am
@ Rob Dawg: - When you say utility increases, do you mean municipally owned? The investor-owned utilities will not have an easy time increasing rates. SCE was just denied an increase in rates with the rationale being that the economy was so bad (i.e. the CPUC admitted that the increase was justified).

Large ugly can of worms my friend. SCE also still collects a surcharge compensating them for the lost profits of nuclear plants they didn't build. Your SDGE/SCE/etc bill is already so laden with taxes it is a lie to consider them independent. Don't believe me? Try to "drop of the grid." You'll still get a monthly bill for your share of the stranded costs and lost profits of projects that were never started that would have actually raised your bill if they were.

@angry saver,

Where have you been? It's called "quantitative easing". I.e., they've been printing.

/confused

This is a very pivotal time. Bernanke and Geithner have gone all in on a massive bluff + propaganda campaign to improve investor/consumer confidence. They've stretched the bond market to the breaking point in order to create green shoots, and they've managed to convince many of the retail investors to get back into equities. And we'll soon find out whether confidence and liquidity are going to be sufficient to restore the economy to health.

Despite the recent resurgence of hope, this isn't a typical cyclical downturn. It is generational. It is the anxiously awaited grudge match of titans. Keynesian & monetarist theory vs. the deflationary debt monster. And on the sidelines we have the ticking time bombs of demographic trends, entitlements, income disparity, and industrial decline.

Short term improvement is possible, but there is no avoiding the following realities.
1) Resource constraints will prevent the ROW from meeting the quality of life in the US
2) Globalization in labor markets makes eventual equilibrium in quality of life a certainty, meaning that US must decline relatively
3) Entitlements to our older generations cannot possibly be fulfilled without enslaving future generations; they will be decreased dramatically
4) Until labor resources in this country are better utilized, we'll be redistributing a smaller and smaller pie. Government is fighting the wrong problem.
5) Our political system is broken & must be fixed. It is currently captured by corporations and lobbyists; credibility is waning
6) Productivity enhancements and automation have made much of America's workforce obsolete; unclear what unskilled laborers will do in future economy

Until we address these problems, we'll only be kicking the can. I can't wait to see the outcome. I'm optimistic about the longer term conclusion, but very bearish about the transition.

"Calpers selling stock to meet some obligations: Journal"

If I had not already bought long dated puts on DIS I would be doing with both hands now.

Ciao
MS

"We may have entered a bear market down leg on the stock market today. But not on gold/silver, commodities, oil and short Treasuries. They are going to blow up off this consolidated base."

Agree 100%. I am considering adding to my positions, in fact.

I don't worry too much about day-to-day fluctuations (and obviously don't set stops), as going long commodities fits my central investing thesis: The Fed will attempt to print our way out of this recession. There is still plenty of bad debt to monetize.

The only things that would make me change my positions are:
1. Congress gets serious about getting the Fed under control (i.e. audits their activities).
2. BB is replaced by just about anyone else (unless they resurrect Milton Friedman), I don't think anyone else would be dumb enough to follow his destructive path, not even Summers.

Besides those two things happening, I expect destruction of the dollar to continue unabated.

Angry Saver (profile) wrote on Wed, 6/3/2009 - 10:54 am
Rob Dawg,
If you and some of the others here are indeed correct about printing, then U.S. dollar's future is bleak.

Delayed feedback problem. Printing has no immediate pan involved.

I don't think we will follow that path, but who knows?

Think. Government routinely pursues least effort policies. Printing is easy. Discipline is hard.

These dingbats are clearly making up the plan on the fly as they go from fire to fire.

Exactly. We used to call it firebreak engineering. Everything is so hot you only pay attention to those that catch fire.

I believe we produce plenty of wealth. It's the distribution that is the problem. Printing will only make matters worse.

Yes. 30 years of misallocation culminating.

One more thought. Has CA housing reached an affordable level yet? If CA real estate keeps falling, its hard for me to believe the banking system is sound.

California real estate is bifurcating. 10 million of us are fine. 10 million are not involved. 10 million are so screwed they don't even comprehend the extent. I've "given back" ~$600k in primary home value. S'Okay, I have as much again to give if necessary. I live in a nice house for a fair price. No, the problem is the 10m who aren't as lucky.

The stranded cost recovery from the deregulation is a huge mess. Going forward though, it will be very difficult for utilities to raise rates directly. The state could add more taxes, for sure, but that's a different issue.

"Perhaps the Chinese sent a message through Geithner saying:

"If you try to inflate your way out of this by debasing the Dollar, we'll reduce our Treasury purchases just enough to tip you back into recession and deflation to maintain the worth of our foreign reserves.""

The Chinese are rarely that overt.

Juvenal: I take it you arbitraged your handle?

@angry saver

10-4. I'm sorry for the miss on my part.

hiker90 (profile) wrote on Wed, 6/3/2009 - 11:00 am
RD,
Wow, 9.7% beats the 8.125% paid in Texas cities. Obviously, I mistakenly thought that a state income tax allowed for lower sales taxe rates. I'm curious to know whether CA has higher property tax rates too. What is the general range?

There are 10.25% Sales Tax locations in California.
The 9.3% Income tax applies to everything over $43,000/yr.
Property taxes are 1%/yr subject to modifications. Very, very few pay less than 1.2%. Many pay 1.6%-19%. Some pay mid 2%s. This on the inflated California values. Compared to Texas, for equivalent houses I'd say property taxes are between half and three-quarters the Texas assessments.

There should be a cartoon of the Fed Reserve Building with that "out of order" sign.....

To date, I do not believe that there is a valid macroeconomic model which has been vetted with history and found to be insightful. Perhaps what we need is more common sense and less financial wizardry.

Bernanke at BC Law School Graduation:

As an economist and policymaker, I have plenty of experience in trying to foretell the future, because policy decisions inevitably involve projections of how alternative policy choices will influence the future course of the economy. The Federal Reserve, therefore, devotes substantial resources to economic forecasting. Likewise, individual investors and businesses have strong financial incentives to try to anticipate how the economy will evolve. With so much at stake, you will not be surprised to know that, over the years, many very smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future. But the results, unfortunately, have more often than not been underwhelming. Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make. To be sure, historical relationships and regularities can help economists, as well as weather forecasters, gain some insight into the future, but these must be used with considerable caution and healthy skepticism.

"I do not believe that there is a valid macroeconomic model which has been vetted with history and found to be insightful." - Gavshire

I stand by my analysis of asking cash based retail operators how their business is doing. My dry cleaner and friend who owns a convenience store both knew the economy was tanking in mid-2007.
I'll admit it's a pretty stupid analysis, but it's better than anything the Treasury or Fed uses.

Macroeconomic numbers like GDP, S&P 500, NAR or Case-Schiller broad indices, don't really tell you much about the standard of living for most people.

This is the closest thing I found of Geithner being humiliated by Chinese students. The picture of him at the event is Photo 19 of 19.
Timothy Geithner Pictures - US Treasury Secretary Geithner Visits China - Zimbio

You make 40-50% on SLV in a few months and down 7% gets you nervous?

Rich, I just wanted to concur with your thought here and thank you for suggesting SLW back in the day. There's would have to be quite a drop from here for me to even qualify as nervous.

I'm beginning to think cries for Moral Hazard are misplaced at best, and hypocritical at worst.

Lets say we're in 2003-2007; massive splurging of capital on RE, RE related and supporting industries. Even things "far" from RE like utilities and healthcare benefits from increased economic activity. Key point is: all these capital came from savings (I'm using the term liberally, not just savings accounts in the banks, includes foreign CB money, 401Ks, pension money, corporate "parking" money, etc.) as well as recycled leverage-profits (skim off the top, plow back into the game). So at any point in time in 2003-2007, if the game stops and we count the amount of money in the system, there's actually little savings squirreled into anything not attached to the RE game -- most of the money has already been spent in the form of loans/mortgage lending and/or credit card, etc; All kinds of loans/credits. This is observation A -- no savings are actually saved and not tied to bubble.

So wham, RE bubble broke, credit bubble broke. If the market is 100% efficient and instantaneous, everyone's savings account would instantly be reduced to whatever's left from the carcass. (See observation A if you're not clear about this point)

But the market is not 100% efficient and fast. Savers/pensioners/investors still think they have the money in the bank/in the account / etc. (Instead of laughing at banks with their refusal to "mark to market" their assets; we should laugh at ourselves to think that our money in the bank is still worth the same; that our pension, 401K, social security, medicare is still what we think it is.) So the slow process to discover how deep the rabbit hole starts.

During this process of "discovery" (Notice I don't call it destruction. Destruction already occurred in Paragraph #1. We're just doing "accounting" and "post-mortum" work now.). People will shriek, anger, cry. The biggest anguish will be those tho insist on moral hazard; to insist that the destruction only happen on the backs of those who caused it / signed up for it / played the game /etc. I will submit that the moral Hazard group do not realize the size of the hole; for it cannot be filled only by people who are financially dead already. It must eventually be shared by everyone is the real truth; innocent or not.

(Another way to think about this, if the "moral hazard" group is so angry about it; they should've DONE SOMETHING serious, back when capital is being destroyed. People and savers should have been most angry and most active during the bubble. The fact is, silence is acceptance, whether you directly contributed to it or not. Back in 2003-2007 was when actions would've been most useful. I don't see any protests, rallys, teaparties or social defiance when the bubble is being blown, so STFU when it's over and we have to clean up.)

In some ways, even saver's "good economy and stable life" of the last decade was borrowed, so in a sense, silence during the boom (and raking in income from salary, busienss or stock) is also agreement with the policy. Crying now is almost hypocritical unless you want to give back all the money of the last decade as well.

Dark pools owned by brokers and large market makers accounted for 70 percent of all dark U.S. equity volume in April,

Not sure I follow what you saying... one too many "darks" by any chance? Are you saying these pools accounted of 70% of all equity volume or 70% of all dark equity volume. If the latter, what % of total equity volume is made up of dark equity volume?

Forget it... read the article. so they estimate that these dark pools only account for 9% of the the total equity transactions... though I guess that's enough to prop up a market.

Gavshire wrote:

To date, I do not believe that there is a valid macroeconomic model which has been vetted with history and found to be insightful.

I think the Austrian theory of the business cycle, money and credit, makes a lot of sense and fits history quite well.

Perhaps what we need is more common sense and less financial wizardry.

No question about that.

If you try to inflate your way out of this by debasing the Dollar, we'll reduce our Treasury purchases just enough to tip you back into recession and deflation to maintain the worth of our foreign reserves.

The problem with this argument is if the Chinese reduced treasury purchases it would lead to more dollar devaluation and an increased risk of inflation. it would also help our economy out by making our exports cheaper. It would basically result in the exact opposite of what you're stating.

Another way to look at it:

You share a wooden boat with a group of people. Someone starts using the boat's planks for fuel. It does speed up the engine / boat. You think they're being stupid / a nuisance and merely complain and not do anything CONCRETE. Eventually enough wood is consumed and the boat starts to sink. Moral Hazarders say "Throw those people who used the wood overboard! Don't make ME pay for their mistakes". In the meantime, the boat continues to sink, unbeknown to them.

Half on topic-- what are required down-payments that everyone is seeing? 3% still with FHA, I believe, but what about the others? I've promised that I won't buy until there's a 10-20% down payment required (with bank statements to show that it wasn't a gift).

We're looking at the destruction of currency, period.

Sing it, Rich!!!

I bet Larry Flint would pay good money for the Chinese video of them laughing at Geithner.

If you anticipate civilization continuing in some form over your lifetime then it is very important to play the blame game and punish those at fault. Your boat analogy is another apology for moral hazard.

note to kcoop: don't know how or why the box appears around my posts, but can you get rid of it?
Thanks

I'm sure it got posted here, but Across the Curve is reporting the Fed bought 5 yards of that 7 year issue from last week today.

hc,

It''s more complicated than your examples presume. The government and the fed were in on the con. They allowed banks and lobbyists to rip off the public, but the sham was not easy to spot. And the MSM has clearly become a propaganda arm of big business and government. Is it any wonder the masses were duped?

I don't think you can blame the masses. The people in charge are to blame.

We've given you a Republic, if you can keep it. (Ben Franklin, paraphrased).

A little early on the BUY button, guys!

Fed's Hoenig Calls for Rate Hikes

1 currency now - yogi:
Just because you didn't see it doesn't mean it didn't happen. There were WTO protests, riots at bank branches in Argentina, protests against the Iraq War (where a few trillion of capital was destroyed, along with plenty of labor). And don't pretend that just because everyone will pay something for the losses, it doesn't make a huge difference what the details are.

Which of these specifically is about the housing bubble, or the increasing credit bubble IN THE USA?

Law of the world, losses are always paid by someone who have the capability to pay, not by deadbeats or disabled people. I'm not talking about individual loans, where a person can borrow elsewhere to repay this loan. I'm talking about the whole system as a whole, if you are unable to pay, you will not be able to pay it back, by definition. The losses is borned by the person who has the money (i.e. the lender).

This is also the curse of money. Own it, and you have to worry about the millions of ways to losing it.

Get used to it if you have money to lose.

"I'm sure it got posted here, but Across the Curve is reporting the Fed bought 5 yards of that 7 year issue from last week today. "

Just in case:

Across the Curve » Blog Archive » Midday Miscellany 

Of course, BB testified that he is not monetizing the debt, so we should believe what he says, not what he does, right?

The Fed Ex guy just came into my office with a package. He asked me "So, are you interested in alternative revenue streams?" I asked what exactly was an "alternative revenue stream." It was something to do with Internet marketing... I cut him off - told him no thanks. I guess I will look for him at Starbucks now.

Back in the day, the UPS guy at the place where I worked was into "alternative revenue streams" too. He sold cable boxes that let you get all the pay channels for free. He drove a damn nice car, too.