This is a good example of things reaching their logical conclusion.. if you reward myopic and greedy optimizations, you will ultimately experience the results of your actions.
OT-- U.S. Government Trustee calls investment banking fees "Staggering" in General Motors bankruptcy case. (Finally someone sees reality.)
"The fees sought by Evercore (Investment Bank) are staggering: Evercore seeks $400,000 (assuming the sale closes in one month) in addition to the $46 million paid prepetition and in addition to an extraordinarily large success fee of $17.9 million (which includes the Government Funded Sale Fee, DIP Structuring Fee, and the Delphi Fee). This compensation request is all the more incredible in light of the fact that the Debtors are also retaining a Crisis Manager, which is asking for its own success bonus. Not only does the scope of services of these two professionals have some apparent overlap, but it is impossible to justify these inordinately large bonuses under the circumstances of these cases. This was not the circumstance where the financial advisor was left to search for a buyer and through its own unique and extraordinary efforts identified a white knight to save the company and the jobs of the Debtors’ employees. On the contrary, Evercore had no success at finding a purchaser or funder for the Debtors. In light of these facts, the Evercore Application clearly exceeds the bounds of reasonableness.
Because the Debtors have not, and cannot, justify the fee structure and bonuses for Evercore the application cannot be approved."
It is not unreasonable to assume that there are an infinite number of universes in the universe. Ya.. it is what it sounds like.
If every particle in the universe can assume an infinite number of positions and associations (quantum mechanics), you can have an infinite number of universes in the universe (all at once). It is our sense of time and perception that makes us believe that there is only one reality.
Maybe we should consider spending energy on how to deal with cyclical crashes
I don't think we must have cyclical crashes, at least not like this one. We can severely restrict credit expansion, and accept a slower, steadier growth rate.
I wish there were a chance of couple of decades respite, but even with better regulatory reform, the seeds of the next crisis are already sown and will ripen into scary green shoots within 5 years minimum.
I am not as pessimistic as Martin, for the simple reason that I see the financial establishment gradually, slowly imploding due to its own arrogance and impotence. He still sees it as all-powerful and self-serving. But what I see, dealing with this industry day-to-day to earn a living, is that it is Rome in the last stages of decay, with a lot of indecision and ineptitude.
I'm talking most directly here about asset managers and hedge funds, with whom I work most closely. I don't see much strength or conviction lately. When it all boils down to just trying to game the system every day to make today's buck, you really don't have much power left.
"We can severely restrict credit expansion, and accept a slower, steadier growth rate."
I don't even know if that's possible or would produce that outcome. It's certainly never happened that way in any society more complicated than tribes that haven't invented credit yet. Even basic agrarian societies have to deal with cycles.
"A business that is too big to fail cannot be run in the interests of shareholders, since it is no longer part of the market. Either it must be possible to close it down or it has to be run in a different way. It is as simple – and brutal – as that."
Martin Wolf: As a result, creditors have little interest in the quality of a bank’s assets or in its strategy. They appear to have lent to a bank. In reality, they have lent to the state.
Bank creditors lent to the state but picked additional yield compared to straight government debt
"If something is too good to be true, then the taxpayer is paying for it"
Utterly off-topic, but I feel so guilty I have to post this article from the Foreign Policy Journal. Maybe it's a Jewish thing.
"There is ample reason to believe that the U.S. likely had a hand in fomenting the chaos that has since plagued the country many commentators have compared to the 1979 revolution that overthrew the Shah."
Fascinating that Japan and Germany become the envies of the world, yet South America and the former Soviet Republics remain basketcases to this day. I want to move to Duluth.
It is not abnormal to over do it a bit. It is totally abnormal to put a blind eye to the most basic signs of theft. Our Federal regulators and politicians are the real crooks for not doing the slightest discipline or for not warning of what was taking place!
Was it you who was warning about insurance companies several months back?
What's going on with the ins. companies these days?
I think most life insurance companies are in trouble, for a variety of reasons. First, their mainstream retail products aren't high up the food chain and aren't selling very well. Recently, I had a 10-year level term policy expire. I bought $1 million of coverage, ten years ago, at age 49, for $2,400 per year. So, I had to go shopping for new coverage lately. I was stunned with how competitive and cheap the same coverage has become. I ended up getting a 10-year level term policy that will carry me to age 69 from Transamerica at exactly the same cost that I had paid 10 years ago. It just shows you how the dogs are eating the dogs.
There's a fiasco going on right now in the variable annuity world, because the life insurance companies can't hedge their stock market risk fast enough on the living benefits. The portfolios of most life insurance companies are heavy into T-bonds and mortgage-backed, which are vulnerable to price declines. There's way too many agents out there just trying to scratch out a bare subsistence living, and the headquarters operations and field distribution systems still cost too much.
So, I don't see much future for life insurance companies. Even though they are helping to maintain my standard of living very well, because they keep buying what I write!
"There is ample reason to believe that the U.S. likely had a hand in fomenting the chaos that has since plagued the country many commentators have compared to the 1979 revolution that overthrew the Shah."
Fascinating that Japan and Germany become the envies of the world
Imagine what people from the early 20th century would have said, if somebody had told them that in a hundred years Japan and Germany would be among the most peace-loving nations, whereas the Jews would be among the most militarized
Iran's real problem is a lot of young educated men and women.. and funny thing, they have poor job prospects.
//"There is ample reason to believe that the U.S. likely had a hand in fomenting the chaos that has since plagued the country many commentators have compared to the 1979 revolution that overthrew the Shah."//
My ins. company is a combo - I have life, auto & homeowners w/them. Wonder if branching out like that helps keep them stable. They are even starting to offer health ins. now. I wish them the best.
"Imagine what people from the early 20th century would have said, if somebody had told them that in a hundred years Japan and Germany would be among the most peace-loving nations, whereas the Jews would be among the most militarized"
What are we to be surprised at in the early 22nd century? Perhaps that there aren't any people in it, as we would recognize them.
There was no meaningful reform after the Asian Crisis, related to global systemic weaknesses, but there were one hell of a lot of meetings and new acronyms created. Countries had already gone national, G-L-B as a rather good example. IMF multilateral surveillance was a late run to address the impending bubble. No systemically important regulator had the remotest intention of seeing that it worked.
Martin Wolf is correct, I am afraid. We have responded to a problem by making its causes worse. Investors (including people who buy homes for well over twice their income) no longer bear the full risks of their decisions. Taxpayers and savers (through the subtle tax created by future inflation) pick up the tab for many of the losses. This was what created the bubble, and now we have expanded, formalized and institutionalized the process. This fix will last for a shorter time than the last one, and the next fix after that will last for an even shorter period, and so on, until all credibility is lost and real (lasting, sustainable) solutions must be developed.
Far from some inevitable, harmless evidence of progress, this increase in risk transfer is a mistake. It's an avoidable mistake as much as Greenspan's extended cheap money policy was an avoidable mistake.
"This fix will last for a shorter time than the last one, and the next fix after that will last for an even shorter period, and so on, until all credibility is lost and real (lasting, sustainable) solutions must be developed."
Lasting, sustainable perhaps, but maybe not desirable.
Regulations are useless (anyway the regulations that Obama wants). Do you think that it's regulations that kept 1929 from happening for 80 years? No it's psychology. The bust turned out so bad that market participants became very risk averse.
The bigger the bubble, the bigger the bust (and in this respect the bubble of the 20"s was a picnic compared to today). Odds are that the outcome will be so bad that such a crisis will not happen again before, a long, very long time.
I'm talking most directly here about asset managers and hedge funds, with whom I work most closely. I don't see much strength or conviction lately. When it all boils down to just trying to game the system every day to make today's buck, you really don't have much power left.
I certainly hope you are right. I can only imagine that things will change when money is removed from our politics (strikes me as more unlikely than financial reform), or when this particular industry no longer has enough lobbying power (money) to buy the regulation they want.
In a pure, theoretical sense, Wolf is right of course - nothing will change until we eliminate "too big to fail" - and as long as we insist on relying on private infrastructure, whether financial or roads - we will continue to put ourselves at the mercy of pirates/kidnappers. This problem has really been with us here in the US since the railroads came and we tried the ICC in response. The railroads immediately recognized and seized on regulatory capture (quite successfully) as their best long-term solution. We need a meaningful anti-trust division to be reborn - both at the FCC and at Justice.
//whether string theory is really a theory if it cannot be falsified//
Off topic, but for some reason, this reminded me of a quote from an Argentine Mathematician. I forget the name and the exact quote but it goes something like this...
"Names are free in mathematics. For example, you can call a spectral operator an elephant. But what you cannot do is pretend that they have anything to do with large grey mammals..."
June 23 (Bloomberg) -- Chrysler Group LLC, created out of the best assets from its bankrupt predecessor, can’t make new cars until it gets needed tools tied up in legal disputes, a lawyer told a judge in charge of the reorganization.
Not 50% though.. In many east european countries, more than 95 % were killed.
You must be talking about Jewish populations in various countries.
I was talking about nations with their own states like Germany or Japan.
You should also add Gypsies then.
June 24 (Bloomberg) -- Japan’s exports fell at a faster pace in May, extending the nation’s deepest trade slump since World War II.
Shipments abroad dropped 40.9 percent from a year earlier, more than April’s 39.1 percent decline, the Finance Ministry said today in Tokyo. The median estimate of economists surveyed was for a 39.3 percent decrease. From a month earlier, exports fell 0.3 percent, the first deterioration since February
"Lasting, sustainable perhaps, but maybe not desirable."
Why do you say that, Pavel?
When "all credibility is lost...", the solutions maybe be as draconian as they are unprecedented, at least for our era. If it's correct that the present crisis is at least as much a case of moral bankruptcy as it is of a financial one (as someone here wrote recently in so many words), and if it is true that society is in any case mutating rapidly into new forms, I think we will be seeing new kinds of social organization and control. There may be banking and there may be credit, but a lot else will be different.
As a field biologist might be able to confirm climate change, so an anthropologist might be able to confirm the kinds of radical social change going on now, even though we're too close to it to see it. Our economic crisis is at least partly an expression of that social change.
By: Eric Dash, The New York Times | 23 Jun 2009 | 08:56 PM ET Text Size
After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up.
The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan.
In his newest book, The 86 Biggest Lies on Wall Street, John R Talbott answers my question first by writing, "I know what you're thinking, how was I able to narrow down the number of lies to just eighty-six."
Here are some samples from the "Biggest Lies on Wall Street"
Going into the current crisis, the American economy was the strongest and most resilient in the world
This was simply a subprime mortgage problem that no one could have foreseen
Like the Great Depression, this is primarily a liquidity problem, and injecting cash into the system will solve it
CEO pay is deserved because it is determined in a highly competitive market
Excessive regulation is not needed in the financial markets because anyone who is harmed can seek redress in the courts
Government regulation is bad for economic growth and prosperity
"In his newest book, The 86 Biggest Lies on Wall Street, John R Talbott answers my question first by writing, "I know what you're thinking, how was I able to narrow down the number of lies to just eighty-six."
But when lies are compulsive and compulsory, it means that reality is sliding out of our grip. Compulsive drinking, compulsive gambling - compulsive banking?
I see, Pavel. You are afraid that circumstances that would cause the general populace to lose faith in ever-larger doses of our current financial medicines would also lead to social breakdown.
I am not so fearful. I think that people here in the US have enough remembered history of individual economic responsibility to come to their senses when the carrots stop coming even as they keep pushing the "easy food" button.
"I see, Pavel. You are afraid that circumstances that would cause the general populace to lose faith in ever-larger doses of our current financial medicines would also lead to social breakdown."
Not quite, patientrenter. I believe it's social break down that's leading the financial crisis.
"I think that people here in the US have enough remembered history of individual economic responsibility to come to their senses when the carrots stop coming even as they keep pushing the "easy food" button."
Lucifer (profile) wrote on Tue, 6/23/2009 - 8:22 pm
What does Chrysler make?
For tier 1 and some tier 2 suppliers, any tooling that touches the part is property of the OEMs. As part of the part purchase contract, the tier 1 will purchase the toolong, and the OEM will reimburse the tier 1 once the tooling is PPAPed (approved for production). Often this can become a source of considerable friction, as the OEM delays or rejects approval based on minor details.
I went through a case like this earlier this year with Chrysler. We ended up eating almost $1 million just to get paid the remaining $2 million for tooling, before Chrysler went into BK.
I would partially agree on that one.. our technology ran past our ability to change. But we will have to change.. technology once unleashed, cannot be put back in the bottle.
//I believe it's social break down that's leading the financial crisis.//
Regulations are useless (anyway the regulations that Obama wants). Do you think that it's regulations that kept 1929 from happening for 80 years? No it's psychology. The bust turned out so bad that market participants became very risk averse.
The bigger the bubble, the bigger the bust (and in this respect the bubble of the 20"s was a picnic compared to today). Odds are that the outcome will be so bad that such a crisis will not happen again before, a long, very long time.
Regulations are like traffic laws - they only work if the population wants to makes them work [i.e. the psychology]. After the depression almost all market participants wanted to make them work... the few that didn't were constrained by enforcement of those 'useless regulations'. By the 80s the majority of participants wanted those useless regulations thrown aside and didn't remember why they were there in the first place. They got thrown aside. They now why they were there.
"Experience keeps a dear school, but fools will learn in no other"
By the 80s the majority of participants wanted those useless regulations thrown aside and didn't remember why they were there in the first place. They got thrown aside. They now why they were there.
DryFly - you forget that in 1929 and during hte Great Depression, corporations and banks were allowed to fail for their mistakes. So maybe they did learn their lesson 80 years. But that's not going to happen this time if we continue to have their back on all potential losses.
I am not so fearful. I think that people here in the US have enough remembered history of individual economic responsibility to come to their senses when the carrots stop coming even as they keep pushing the "easy food" button.
Hah! I think that's a little Polyanna - kind of like, another depression will teach us our lessons and we'll all be happier for it. I'm with Hollywood Hack on this one - I was listening to Public Radio's Marketplace on the way home and some guy was yammering about what it would be like if we reverted to the late 70s/early80s: stopped using credit cards. People would be in complete culture shock.
There's still a lot of cushion here. There will be no fundamental change until someone in power says: We can't go on this way. That's what Gorbachev said in 1985.
DryFly - you forget that in 1929 and during hte Great Depression, corporations and banks were allowed to fail for their mistakes. So maybe they did learn their lesson 80 years. But that's not going to happen this time if we continue to have their back on all potential losses.
They are failing today just as then... we can't cover them all or even cover some of them all the way. We aren't halfway through this pain fest.
Many people have stopped using credit cards. They are maxed out, the cc firm reduced the amount available to what they owed, People are paying down cards now, not increasing debt.
So those that remember life before credit cards have decided it was not such a bad thing. I remember those days, I lived just fine.
"Imagine what people from the early 20th century would have said, if somebody had told them that in a hundred years Japan and Germany would be among the most peace-loving nations, whereas the Jews would be among the most militarized"
I continually marvel at how much of the history of the 20th century tumbled out of the Archduke Ferdinand's driver taking a wrong turn.
OEMs - they have the government backstop, Tier 1s............ dropping like flies!
Tier 1 automotive manufacturing is NOT a fun industry these days.
Hello CDA - in Wichita tonight. Aerospace is next on the docket. Talked to a person at the hotel tonight - it's coming full bore. The Boeing delay is just the tip of the berg.
Jeez, no wonder people think this is a Doom and Gloom blog. Why can't you all just accept that everything is for the best in this the best of all possible universes.
"Jeez, no wonder people think this is a Doom and Gloom blog. Why can't you all just accept that everything is for the best in this the best of all possible universes."
The problem started not because of infaltion. During the high inflationary times we just bought less or on sale only. Still no credit card.
When people decided they wanted it, deserved it NOW. And credit card, TV rental companies figured out how to give it to them. That was the begining of the end.
Marketing helped, allot. All the you "deserve it" commercials, the "you can have it now" ads.
Talk about pessimism. Another financial crisis is unfortunately inevitable - all we hope to do with reform is to put it off for a couple of decades or more.
Kudos to Martin Wolf and this is known knowns to the more informed people here right ?
Is everyone having a good time as America becomes a much BIGGER version of Argentina or Mexico in the near future
"They are failing today just as then... we can't cover them all or even cover some of them all the way. We aren't halfway through this pain fest."
In the 1930's, when banks failed, the people who put their money into them lost some of it. Not true today. It really is different today.
Oh, and another amen to the 30 yr fixed, 20% down on everything comment. With that one change, our housing market would be almost normal again. But the house price gain orgy would be well and truly over for 2/3 of our population. The end of the biggest free lunch scheme ever hatched. So, it ain't going to happen.
Respectibility of western thought and people is one of the biggest casualty of this crisis.
//The real joke though is how, during the Asian crisis, people like Geithner et al went around and lectured the Asians on how to run their economies.//
20% down means that all those 20yr olds would have to save up??? $20,000.00 to $50,000.00 before they could buy a house. And they will have to do it with fewer or lower paying jobs. Of course they need to pay off the student loans and save for retirement as well. And hope health insureance doesn't continue to rise.
Twenty percent down will show also the home prices are to high. Flake financing has created the need to pump people into homes they can not responsibly afford. Bang we have a warped reality!
The bare tolerance of the Asian crisis "rescuers" and their gut-churning pieties about crony capitalism, prudence, regulation and transparency lasted only until the Enron implosion. There was a very swift change in the discussions about corporate malfeasance, more like "Really? Do tell us what this best practice might be..."
dryfly (profile) wrote on Tue, 6/23/2009 - 9:01 pm
Hello CDA - in Wichita tonight. Aerospace is next on the docket. Talked to a person at the hotel tonight - it's coming full bore. The Boeing delay is just the tip of the berg.
It will be interesting to see how the aerospace situation plays out. Lots of opportunities for backdoor bailouts via the defence budget.
Citigroup Is Said to Be Raising Pay for Workers Citigroup, which to many, symbolizes the troubles of the financial industry, intends to raise workers’ base salaries by as much as 50% this year to offset smaller annual bonuses
It will be interesting to see how the aerospace situation plays out. Lots of opportunities for backdoor bailouts via the defence budget.
Here in Wichita Boeing had spun off a lot of its 'commodity' aircraft mfg capability into an entity called 'Spirit Aerospace' in much the same way GM spun off Delphi and Ford spun off Visteon. However Boeing DID KEEP Boeing Defense in Wichita. I assume a similar tactic was employed in Seattle area [anyone?]. I don't think that was an accident... I think the winners and loser were chosen way back then. If I worked for Spirit & had the option I would try to get back into Boeing Defense ASAP. Just sayin'...
The problem started not because of infaltion. During the high inflationary times we just bought less or on sale only. Still no credit card.
When people decided they wanted it, deserved it NOW. And credit card, TV rental companies figured out how to give it to them. That was the begining of the end.
Marketing helped, allot. All the you "deserve it" commercials, the "you can have it now" ads.
In 1994 I started a business in Mexico. After the peso devaluation in Dec 1994, I lost everything, including my house in the US and $40k in credit card lines of credit. It was the most liberating experience of my life because it forced me to live on a cash-only basis. You really CAN live on cash only. It forces you to evaluate very purchase, and to plan what and where you are going to spend your hard earned cash on.
I think this is something that many people in the US are going to have to come to grips with soon. "You can have it now" is going to become "You can have it when you pay off the lay-away".
Life will go on. It's just the transition that will be painful.
20% down means that all those 20yr olds would have to save up??? $20,000.00 to $50,000.00 before they could buy a house. And they will have to do it with fewer or lower paying jobs. Of course they need to pay off the student loans and save for retirement as well. And hope health insureance doesn't continue to rise.
Well, this is the point: if you return to a pay-go society from a credit society, the NAR's "affordability index" goes to hell in a handbasket, and quick. I remember paygo life too, and I resumed it in the mid-90s myself. It's not that bad. But, you either have to have wage inflation or asset deflation, and given "globalization" and labor arbitrage, we aren't going to see a repeat of the 70s. In the short term this seems just dandy: taking our medicine from Dr. Paul. However, once you start to realize that the financially prudent and virtuous depend on that giant stomach that is the American consumer eating and eating...well, not so great.
Since I'm getting a late start on kids (if I ever have any) they will likely experience a remarkably similar paygo upbringing like I did, in a tiny rancher, where a garbage disposal was a serious luxury upgrade to the 8'x10' kitchen. That's fine: it's all relative.
What was virtuous in the pre- and early- industrial era is suicidal in a post-industrial era.
//However, once you start to realize that the financially prudent and virtuous depend on that giant stomach that is the American consumer eating and eating...well, not so great.//
I've had a couple of good runs with small biz, so my income has gyrated wildly. It is harder than most people think to adjust your lifestyle down by half after several years at a higher level. I've done it twice and the second time was much easier. I could do it again if I had to, but of course, would prefer not to have the short sharp shock again.
well that punk daneric is finally admitting he's run his followers into the p2 ground and now Jas is getting excited . As schweitzer135 said time to retest the lows; this rotten floor is crackin. The rot's too deep. The center cannot hold. Might take a couple or 3 months but this suckers goin down. See you at S&P 580, FAZ 19+
Turbo Timmy, Larry Summers, and the rest of the Obama crime family will uber-regulate the heck out of those Wall Street fat cats! Any day now, waiting...
P.s. thanks to counterpointer for the heads up three weeks ahead from foreign market clues, which i telegraphed to relatives who now actually pay f'ing attention
Could not ask for a better quote in a discussion about incentives
June 23 ( Bloomberg ) The U.S. economy will begin to grow in the third quarter as fiscal stimulus measures take effect and credit conditions begin to improve, according to a survey by the Securities Industry and Financial Markets Association.
Following a 2 percent decline at an annual pace in the second quarter, the world’s largest economy will expand at a 0.8 percent pace in the next three months and at a 1.9 percent rate from October through December, the group said today in Washington. For all of 2009, the economy will shrink 2.7 percent and then grow 2.1 percent next year, the group said.
“The U.S. economy remains afloat, although battered, with the passing of the financial market meltdown and the credit market freeze,” Kyle Brandon, SIFMA’s managing director of research, said in a statement. “This cautiously optimistic outlook is a result of the aggressive and unconventional central bank actions and the fiscal stimulus.”
In the short term this seems just dandy: taking our medicine from Dr. Paul. However, once you start to realize that the financially prudent and virtuous depend on that giant stomach that is the American consumer eating and eating...well, not so great.
That detail is lost on a lot of folks... my liability is somebody else's asset. Their debit is my credit. Folks will get it soon enough.
Um, they are not exactly rare right now... Saying that incentives have to change doesn't make you a pessimist; it's just that the administration's take that this is all some sort of accidental calamity is so insanely generous.
@ MrM (profile) wrote on Tue, 6/23/2009 - 7:53 pm
“The U.S. economy remains afloat, although battered, with the passing of the financial market meltdown and the credit market freeze,” Kyle Brandon, SIFMA’s managing director of research, said in a statement. “This cautiously optimistic outlook is a result of the aggressive and unconventional central bank actions and the fiscal stimulus.”
This reminds me of the movie 'Sink the Bismarck'...stay tuned !
More on the way... Cessna, Hawker/Beechcraft, Spirit and even Boeing. Hitting deep into supply chain too. Wichita is rapidly falling from boom to bust. The buzz around the bucket of beer was lay offs & more lay offs. Very different than a year ago.
Months ago, dryfly, you said something that has stayed with me. You said many white, blue collar women and men put aside racial misgivings, and voted for Obama, hoping that this guy would be on their side.
What are they saying now? Is it on Obama, or is it more generically, Wall Street that's to blame?
Not really. Credit cycle becomes increasingly unstable as debt gets larger and larger.
Likewise, cultural impetus carries forward for quite some time, in spite of legal / "incentive" changes.
For many people, cheating is cheating even if it's legalized.
i wasn't aware that my money market short-term treasury cash sitting on a 0.1% return was dependent on much of anything... nor my glod
As you yourself note: it's just sitting there, not earning very much. And it will continue to sit there. Or are you just waiting until you can engage in massive rent capture by snatching up piles of distressed assets, waiting for eventual productivity to return? If things really get deflationary, your cash will be fine, but the gold will lose value. You'll need to spend a little building the hardened enclosed compound.
broward (homepage, profile) wrote on Tue, 6/23/2009 - 9:48 pm
You really CAN live on cash only
I lived cash only for a couple of decades.
I still use mostly cash except for a couple of monthly charges like AT&T, etc.
I agree. Finally after 10 years of cash only, I got exactly 1 credit card with a $1,500 limit for internet purchases and car rentals (this with a $100k+ per year income). Credit card is paid off each month. Large purchases I do with lay-away... it forces me to make the payment. My wife controls the household budget..... when the cash runs out - no more purchases untill next payday. 10% goes to savings off the top. It is a very simple system. And, I can sleep at night without worrying about how to juggle the payments.
A lot of people are going to have to learn to live like that.
Why 20 percent down and 30yr term? Just because it is the standard doesn't make it the right number.
People need to have skin in the game but I question arbitrarily set terms. Seems like pricing by local market risk would be a better way to go... 40 down in Orange County and 15 in Dallas TX
Gee whiz, Bill:
You all leave out STOPPING fooling the people! Price is value plus mispricing. Mispricing is little-mentioned in order to fool the people into price = value.
Inflation-adjusted asset price histories show lots of mispricing, see first chart here: Real Dow & Real Homes & Personal Saving & Debt Burden
So, such histories are kept out-of-sight, to fool the people.
I am reminded of a former two-term U.S. President: 'Hey ace: It's NOT wrong UNLESS you get caught AND you can't lie your way out of it.'
Credit cycle becomes increasingly unstable as debt gets larger and larger..
Historians will note that while the credit-collapse was swift, the ensuing fall in asset prices was anomalously slowed, intentionally by those seeing the danger of liquidation and undertaking to disguise the reality of the price drops so as to discourage self-reinforced selling, and unintentionally by those who hopefully or ignorantly expected buying and lending to re-emerge at each new low. The antidote to the credit-asset-price-collapse contagion will prove to have been the liquidation of non-distressed business and personal assets, even at decreasing "below-market" levels, and the preservation of cash in whatever forms appeared more essentially durable, but the remedial solution will have remained invisible to almost all, hiding in plain sight.
"20% down means that all those 20yr olds would have to save up??? $20,000.00 to $50,000.00 before they could buy a house. And they will have to do it with fewer or lower paying jobs. Of course they need to pay off the student loans and save for retirement as well. And hope health insureance doesn't continue to rise."
The children of the wealthy do not have those concerns. That's what the US has come to.
Incentives.. the devil is always in the details!
This is a good example of things reaching their logical conclusion.. if you reward myopic and greedy optimizations, you will ultimately experience the results of your actions.
Lucifer - a man should know his entropy
Good calls back there
OT-- U.S. Government Trustee calls investment banking fees "Staggering" in General Motors bankruptcy case. (Finally someone sees reality.)
"The fees sought by Evercore (Investment Bank) are staggering: Evercore seeks $400,000 (assuming the sale closes in one month) in addition to the $46 million paid prepetition and in addition to an extraordinarily large success fee of $17.9 million (which includes the Government Funded Sale Fee, DIP Structuring Fee, and the Delphi Fee). This compensation request is all the more incredible in light of the fact that the Debtors are also retaining a Crisis Manager, which is asking for its own success bonus. Not only does the scope of services of these two professionals have some apparent overlap, but it is impossible to justify these inordinately large bonuses under the circumstances of these cases. This was not the circumstance where the financial advisor was left to search for a buyer and through its own unique and extraordinary efforts identified a white knight to save the company and the jobs of the Debtors’ employees. On the contrary, Evercore had no success at finding a purchaser or funder for the Debtors. In light of these facts, the Evercore Application clearly exceeds the bounds of reasonableness.
Because the Debtors have not, and cannot, justify the fee structure and bonuses for Evercore the application cannot be approved."
From Zero Hedge
Zero Hedge: US Trustee In GM Case Throws Up All Over Evercore Fee App; Calls Fee Demand "Staggering" and "Incredible"
Anyone reading this blog should be smart enough to know there will be no significant change in financial regulation following this crisis.
You say pessimism, I say realism.
Things run in cycles.
Maybe we should consider spending energy on how to deal with cyclical crashes, rather than trying to prevent them?
The alternative seems to be corporate life-extension well beyond brain death.
MrM,
It is not unreasonable to assume that there are an infinite number of universes in the universe. Ya.. it is what it sounds like.
If every particle in the universe can assume an infinite number of positions and associations (quantum mechanics), you can have an infinite number of universes in the universe (all at once). It is our sense of time and perception that makes us believe that there is only one reality.
Not willingly..
//Anyone reading this blog should be smart enough to know there will be no significant change in financial regulation following this crisis.//
Maybe we should consider spending energy on how to deal with cyclical crashes
I don't think we must have cyclical crashes, at least not like this one. We can severely restrict credit expansion, and accept a slower, steadier growth rate.
I wish there were a chance of couple of decades respite, but even with better regulatory reform, the seeds of the next crisis are already sown and will ripen into scary green shoots within 5 years minimum.
Bottom of the 2nd down 14-1, but the Boys of Summers are coming up to the plate
It is not unreasonable to assume that there are an infinite number of universes in the universe.
Before you know we start discussing multiverse and whether string theory is really a theory if it cannot be falsified
rich - are you still around?
Was it you who was warning about insurance companies several months back?
What's going on with the ins. companies these days?
Non falsifiable theories = religion.
//whether string theory is really a theory if it cannot be falsified//
I am not as pessimistic as Martin, for the simple reason that I see the financial establishment gradually, slowly imploding due to its own arrogance and impotence. He still sees it as all-powerful and self-serving. But what I see, dealing with this industry day-to-day to earn a living, is that it is Rome in the last stages of decay, with a lot of indecision and ineptitude.
I'm talking most directly here about asset managers and hedge funds, with whom I work most closely. I don't see much strength or conviction lately. When it all boils down to just trying to game the system every day to make today's buck, you really don't have much power left.
"We can severely restrict credit expansion, and accept a slower, steadier growth rate."
I don't even know if that's possible or would produce that outcome. It's certainly never happened that way in any society more complicated than tribes that haven't invented credit yet. Even basic agrarian societies have to deal with cycles.
Cycles are not the problem.. Running of the cliff, on the other hand, is a problem.
//Even basic agrarian societies have to deal with cycles.//
Non falsifiable theories = religion.
Or philosophy (modern fads notwithstanding)
"A business that is too big to fail cannot be run in the interests of shareholders, since it is no longer part of the market. Either it must be possible to close it down or it has to be run in a different way. It is as simple – and brutal – as that."
Amen.
Martin Wolf:
As a result, creditors have little interest in the quality of a bank’s assets or in its strategy. They appear to have lent to a bank. In reality, they have lent to the state.
Bank creditors lent to the state but picked additional yield compared to straight government debt
"If something is too good to be true, then the taxpayer is paying for it"
Utterly off-topic, but I feel so guilty I have to post this article from the Foreign Policy Journal. Maybe it's a Jewish thing.
"There is ample reason to believe that the U.S. likely had a hand in fomenting the chaos that has since plagued the country many commentators have compared to the 1979 revolution that overthrew the Shah."
Fascinating that Japan and Germany become the envies of the world, yet South America and the former Soviet Republics remain basketcases to this day. I want to move to Duluth.
It is not abnormal to over do it a bit. It is totally abnormal to put a blind eye to the most basic signs of theft. Our Federal regulators and politicians are the real crooks for not doing the slightest discipline or for not warning of what was taking place!
"Non falsifiable theories = religion."
Not at all. At death, at the latest.
What's going on with the ins. companies these days?
I think most life insurance companies are in trouble, for a variety of reasons. First, their mainstream retail products aren't high up the food chain and aren't selling very well. Recently, I had a 10-year level term policy expire. I bought $1 million of coverage, ten years ago, at age 49, for $2,400 per year. So, I had to go shopping for new coverage lately. I was stunned with how competitive and cheap the same coverage has become. I ended up getting a 10-year level term policy that will carry me to age 69 from Transamerica at exactly the same cost that I had paid 10 years ago. It just shows you how the dogs are eating the dogs.
There's a fiasco going on right now in the variable annuity world, because the life insurance companies can't hedge their stock market risk fast enough on the living benefits. The portfolios of most life insurance companies are heavy into T-bonds and mortgage-backed, which are vulnerable to price declines. There's way too many agents out there just trying to scratch out a bare subsistence living, and the headquarters operations and field distribution systems still cost too much.
So, I don't see much future for life insurance companies. Even though they are helping to maintain my standard of living very well, because they keep buying what I write!
yes, the revolution will be tweeted (or is it "twittered")?
"There is ample reason to believe that the U.S. likely had a hand in fomenting the chaos that has since plagued the country many commentators have compared to the 1979 revolution that overthrew the Shah."
2009 is not comparable to 1979.
Fascinating that Japan and Germany become the envies of the world
Imagine what people from the early 20th century would have said, if somebody had told them that in a hundred years Japan and Germany would be among the most peace-loving nations, whereas the Jews would be among the most militarized
Iran's real problem is a lot of young educated men and women.. and funny thing, they have poor job prospects.
//"There is ample reason to believe that the U.S. likely had a hand in fomenting the chaos that has since plagued the country many commentators have compared to the 1979 revolution that overthrew the Shah."//
Thank you, Rich.
My ins. company is a combo - I have life, auto & homeowners w/them. Wonder if branching out like that helps keep them stable. They are even starting to offer health ins. now. I wish them the best.
"Imagine what people from the early 20th century would have said, if somebody had told them that in a hundred years Japan and Germany would be among the most peace-loving nations, whereas the Jews would be among the most militarized"
What are we to be surprised at in the early 22nd century? Perhaps that there aren't any people in it, as we would recognize them.
There was no meaningful reform after the Asian Crisis, related to global systemic weaknesses, but there were one hell of a lot of meetings and new acronyms created. Countries had already gone national, G-L-B as a rather good example. IMF multilateral surveillance was a late run to address the impending bubble. No systemically important regulator had the remotest intention of seeing that it worked.
C
I'm starting to worry about my life insurance policy with Mutual of Tijuana...
Iran's real problem is a lot of young educated men and women.. and funny thing, they have poor job prospects.
Wow. I sure am glad that isn't true here in the US.
Having half of your kind murdered in concentration camps does that to you.
PS- Wonder where US swat teams got their ideas from? Have a look at how SS squads handled their victims.
//whereas the Jews would be among the most militarized//
"I'm starting to worry about my life insurance policy with Mutual of Tijuana..."
Mutual of Astana is beginning to look a bit shaky as well.
Martin Wolf is correct, I am afraid. We have responded to a problem by making its causes worse. Investors (including people who buy homes for well over twice their income) no longer bear the full risks of their decisions. Taxpayers and savers (through the subtle tax created by future inflation) pick up the tab for many of the losses. This was what created the bubble, and now we have expanded, formalized and institutionalized the process. This fix will last for a shorter time than the last one, and the next fix after that will last for an even shorter period, and so on, until all credibility is lost and real (lasting, sustainable) solutions must be developed.
Far from some inevitable, harmless evidence of progress, this increase in risk transfer is a mistake. It's an avoidable mistake as much as Greenspan's extended cheap money policy was an avoidable mistake.
"This fix will last for a shorter time than the last one, and the next fix after that will last for an even shorter period, and so on, until all credibility is lost and real (lasting, sustainable) solutions must be developed."
Lasting, sustainable perhaps, but maybe not desirable.
Having half of your kind murdered in concentration camps does that to you.
.. has not worked out yet for the Russians or Chinese ...
Regulations are useless (anyway the regulations that Obama wants). Do you think that it's regulations that kept 1929 from happening for 80 years? No it's psychology. The bust turned out so bad that market participants became very risk averse.
The bigger the bubble, the bigger the bust (and in this respect the bubble of the 20"s was a picnic compared to today). Odds are that the outcome will be so bad that such a crisis will not happen again before, a long, very long time.
"Lasting, sustainable perhaps, but maybe not desirable."
Why do you say that, Pavel?
The numbers were high but the % was not.
//. has not worked out yet for the Russians or Chinese ...//
Odds are that the outcome will be so bad that such a crisis will not happen again before, a long, very long time.
There are those cycle theorists, who believe this kind of crisis happens about once every 50-60 years.
I'm talking most directly here about asset managers and hedge funds, with whom I work most closely. I don't see much strength or conviction lately. When it all boils down to just trying to game the system every day to make today's buck, you really don't have much power left.
I certainly hope you are right. I can only imagine that things will change when money is removed from our politics (strikes me as more unlikely than financial reform), or when this particular industry no longer has enough lobbying power (money) to buy the regulation they want.
In a pure, theoretical sense, Wolf is right of course - nothing will change until we eliminate "too big to fail" - and as long as we insist on relying on private infrastructure, whether financial or roads - we will continue to put ourselves at the mercy of pirates/kidnappers. This problem has really been with us here in the US since the railroads came and we tried the ICC in response. The railroads immediately recognized and seized on regulatory capture (quite successfully) as their best long-term solution. We need a meaningful anti-trust division to be reborn - both at the FCC and at Justice.
The numbers were high but the % was not.
I got to believe that the USSR lost a higher percentage of its population between 1930 and 1950 than Germany or Japan
//whether string theory is really a theory if it cannot be falsified//
Off topic, but for some reason, this reminded me of a quote from an Argentine Mathematician. I forget the name and the exact quote but it goes something like this...
"Names are free in mathematics. For example, you can call a spectral operator an elephant. But what you cannot do is pretend that they have anything to do with large grey mammals..."
Not 50% though.. In many east european countries, more than 95 % were killed.
//I got to believe that the USSR lost a higher percentage of its population between 1930 and 1950 than Germany or Japan//
What does Chrysler make?
Chrysler Needs Use of Tools to Restart, Lawyer Says (Update3)
Chrysler Needs Use of Tools to Restart, Lawyer Says (Update3) - Bloomberg.com
By Tiffany Kary
June 23 (Bloomberg) -- Chrysler Group LLC, created out of the best assets from its bankrupt predecessor, can’t make new cars until it gets needed tools tied up in legal disputes, a lawyer told a judge in charge of the reorganization.
Not 50% though.. In many east european countries, more than 95 % were killed.
You must be talking about Jewish populations in various countries.
I was talking about nations with their own states like Germany or Japan.
You should also add Gypsies then.
At this rate we might have to eat green shoots.
Japan’s Trade Slump Deepens as Exports Tumble 41% (Update1)
Japan Export Slump Deepens, Casting Doubt on Recovery (Update3) - Bloomberg.com
By Jason Clenfield
June 24 (Bloomberg) -- Japan’s exports fell at a faster pace in May, extending the nation’s deepest trade slump since World War II.
Shipments abroad dropped 40.9 percent from a year earlier, more than April’s 39.1 percent decline, the Finance Ministry said today in Tokyo. The median estimate of economists surveyed was for a 39.3 percent decrease. From a month earlier, exports fell 0.3 percent, the first deterioration since February
Yes.. Countries such as Hungary, Romania, Poland.
//You must be talking about Jewish populations in various countries.//
"Lasting, sustainable perhaps, but maybe not desirable."
Why do you say that, Pavel?
When "all credibility is lost...", the solutions maybe be as draconian as they are unprecedented, at least for our era. If it's correct that the present crisis is at least as much a case of moral bankruptcy as it is of a financial one (as someone here wrote recently in so many words), and if it is true that society is in any case mutating rapidly into new forms, I think we will be seeing new kinds of social organization and control. There may be banking and there may be credit, but a lot else will be different.
As a field biologist might be able to confirm climate change, so an anthropologist might be able to confirm the kinds of radical social change going on now, even though we're too close to it to see it. Our economic crisis is at least partly an expression of that social change.
How kind of them.. banker= worker
Citigroup Is Said to Be Raising Pay for Workers
Citigroup Is Said to Be Raising Pay for Workers - CNBC
By: Eric Dash, The New York Times | 23 Jun 2009 | 08:56 PM ET Text Size
After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up.
The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan.
But we rewarded them for lying and scamming us..
The 86 Biggest Lies On Wall Street
The 86 Biggest Lies On Wall Street - CNBC
Posted By:Gloria McDonough-Taub
In his newest book, The 86 Biggest Lies on Wall Street, John R Talbott answers my question first by writing, "I know what you're thinking, how was I able to narrow down the number of lies to just eighty-six."
Here are some samples from the "Biggest Lies on Wall Street"
Going into the current crisis, the American economy was the strongest and most resilient in the world
This was simply a subprime mortgage problem that no one could have foreseen
Like the Great Depression, this is primarily a liquidity problem, and injecting cash into the system will solve it
CEO pay is deserved because it is determined in a highly competitive market
Excessive regulation is not needed in the financial markets because anyone who is harmed can seek redress in the courts
Government regulation is bad for economic growth and prosperity
REGULATE THE MORTGAGE INDUSTRY
30 yr fixed, 20% down on EVERYTHING.
"In his newest book, The 86 Biggest Lies on Wall Street, John R Talbott answers my question first by writing, "I know what you're thinking, how was I able to narrow down the number of lies to just eighty-six."
But when lies are compulsive and compulsory, it means that reality is sliding out of our grip. Compulsive drinking, compulsive gambling - compulsive banking?
I see, Pavel. You are afraid that circumstances that would cause the general populace to lose faith in ever-larger doses of our current financial medicines would also lead to social breakdown.
I am not so fearful. I think that people here in the US have enough remembered history of individual economic responsibility to come to their senses when the carrots stop coming even as they keep pushing the "easy food" button.
Precisely!
//But when lies are compulsive and compulsory, it means that reality is sliding out of our grip.//
"I see, Pavel. You are afraid that circumstances that would cause the general populace to lose faith in ever-larger doses of our current financial medicines would also lead to social breakdown."
Not quite, patientrenter. I believe it's social break down that's leading the financial crisis.
"I think that people here in the US have enough remembered history of individual economic responsibility to come to their senses when the carrots stop coming even as they keep pushing the "easy food" button."
I hope you're right.
Lucifer (profile) wrote on Tue, 6/23/2009 - 8:22 pm
What does Chrysler make?
For tier 1 and some tier 2 suppliers, any tooling that touches the part is property of the OEMs. As part of the part purchase contract, the tier 1 will purchase the toolong, and the OEM will reimburse the tier 1 once the tooling is PPAPed (approved for production). Often this can become a source of considerable friction, as the OEM delays or rejects approval based on minor details.
I went through a case like this earlier this year with Chrysler. We ended up eating almost $1 million just to get paid the remaining $2 million for tooling, before Chrysler went into BK.
I would partially agree on that one.. our technology ran past our ability to change. But we will have to change.. technology once unleashed, cannot be put back in the bottle.
//I believe it's social break down that's leading the financial crisis.//
"I think that people here in the US have enough remembered history of individual economic responsibility"
maybe that's true in the flyover states, but here in SoCal, people couldn't even remember the early 90s housing bear as of 2003...
Can OEMers keep on taking such hits?
// We ended up eating almost $1 million just to get paid the remaining $2 million for tooling, before Chrysler went into BK.//
Regulations are useless (anyway the regulations that Obama wants). Do you think that it's regulations that kept 1929 from happening for 80 years? No it's psychology. The bust turned out so bad that market participants became very risk averse.
The bigger the bubble, the bigger the bust (and in this respect the bubble of the 20"s was a picnic compared to today). Odds are that the outcome will be so bad that such a crisis will not happen again before, a long, very long time.
Regulations are like traffic laws - they only work if the population wants to makes them work [i.e. the psychology]. After the depression almost all market participants wanted to make them work... the few that didn't were constrained by enforcement of those 'useless regulations'. By the 80s the majority of participants wanted those useless regulations thrown aside and didn't remember why they were there in the first place. They got thrown aside. They now why they were there.
"Experience keeps a dear school, but fools will learn in no other"
By the 80s the majority of participants wanted those useless regulations thrown aside and didn't remember why they were there in the first place. They got thrown aside. They now why they were there.
DryFly - you forget that in 1929 and during hte Great Depression, corporations and banks were allowed to fail for their mistakes. So maybe they did learn their lesson 80 years. But that's not going to happen this time if we continue to have their back on all potential losses.
I am not so fearful. I think that people here in the US have enough remembered history of individual economic responsibility to come to their senses when the carrots stop coming even as they keep pushing the "easy food" button.
Hah! I think that's a little Polyanna - kind of like, another depression will teach us our lessons and we'll all be happier for it. I'm with Hollywood Hack on this one - I was listening to Public Radio's Marketplace on the way home and some guy was yammering about what it would be like if we reverted to the late 70s/early80s: stopped using credit cards. People would be in complete culture shock.
There's still a lot of cushion here. There will be no fundamental change until someone in power says: We can't go on this way. That's what Gorbachev said in 1985.
what it would be like if we reverted to the late 70s/early80s: stopped using credit cards. People would be in complete culture shock.
Are you saying handwritten checks and lay-away aren't superior?
Lucifer (profile) wrote on Tue, 6/23/2009 - 8:51 pm
Can OEMers keep on taking such hits?
OEMs - they have the government backstop, Tier 1s............ dropping like flies!
Tier 1 automotive manufacturing is NOT a fun industry these days.
There will be no fundamental change until someone in power says: We can't go on this way.
Summers for the Fed Chairmanship!
DryFly - you forget that in 1929 and during hte Great Depression, corporations and banks were allowed to fail for their mistakes. So maybe they did learn their lesson 80 years. But that's not going to happen this time if we continue to have their back on all potential losses.
They are failing today just as then... we can't cover them all or even cover some of them all the way. We aren't halfway through this pain fest.
Many people have stopped using credit cards. They are maxed out, the cc firm reduced the amount available to what they owed, People are paying down cards now, not increasing debt.
So those that remember life before credit cards have decided it was not such a bad thing. I remember those days, I lived just fine.
"Imagine what people from the early 20th century would have said, if somebody had told them that in a hundred years Japan and Germany would be among the most peace-loving nations, whereas the Jews would be among the most militarized"
I continually marvel at how much of the history of the 20th century tumbled out of the Archduke Ferdinand's driver taking a wrong turn.
People used credit cards because their income did not keep pace with inflation.
//So those that remember life before credit cards have decided it was not such a bad thing. I remember those days, I lived just fine.//
OEMs - they have the government backstop, Tier 1s............ dropping like flies!
Tier 1 automotive manufacturing is NOT a fun industry these days.
Hello CDA - in Wichita tonight. Aerospace is next on the docket. Talked to a person at the hotel tonight - it's coming full bore. The Boeing delay is just the tip of the berg.
"REGULATE THE MORTGAGE INDUSTRY
30 yr fixed, 20% down on EVERYTHING."
Amen to that, Danny. That one simple step would be a huge step in avoiding another housing bubble.
Ain't gonna happen, unfortunately.
That is Taleb's favorite black swan.
//I continually marvel at how much of the history of the 20th century tumbled out of the Archduke Ferdinand's driver taking a wrong turn.//
Jeez, no wonder people think this is a Doom and Gloom blog. Why can't you all just accept that everything is for the best in this the best of all possible universes.
"I continually marvel at how much of the history of the 20th century tumbled out of the Archduke Ferdinand's driver taking a wrong turn."
Maybe, but you've just given us an example of an unfalsifiable statement.
It will work out that way.. eventually.
//Why can't you all just accept that everything is for the best in this the best of all possible universes.//
The "big idea" out of the LTCM/Asia crash in 1998 was Basel II. What a disaster that turned out to be.
If we want to eliminate (or at least reduce) the boom and bust cycles in this country, we need to eliminate, or at least severely curtail the Fed.
Unfortunately, BHO is trying to head in the other direction. The cycles of boom and bust will increase in frequency and severity.
"Jeez, no wonder people think this is a Doom and Gloom blog. Why can't you all just accept that everything is for the best in this the best of all possible universes."
I could, but I'd have to start drinking again.
Lucifer
The problem started not because of infaltion. During the high inflationary times we just bought less or on sale only. Still no credit card.
When people decided they wanted it, deserved it NOW. And credit card, TV rental companies figured out how to give it to them. That was the begining of the end.
Marketing helped, allot. All the you "deserve it" commercials, the "you can have it now" ads.
Kudos to Martin Wolf and this is known knowns to the more informed people here right ?
Is everyone having a good time as America becomes a much BIGGER version of Argentina or Mexico in the near future
"They are failing today just as then... we can't cover them all or even cover some of them all the way. We aren't halfway through this pain fest."
In the 1930's, when banks failed, the people who put their money into them lost some of it. Not true today. It really is different today.
Oh, and another amen to the 30 yr fixed, 20% down on everything comment. With that one change, our housing market would be almost normal again. But the house price gain orgy would be well and truly over for 2/3 of our population. The end of the biggest free lunch scheme ever hatched. So, it ain't going to happen.
"The cycles of boom and bust will increase in frequency and severity."
A resonance phenomenon?
You mean, common people should be more moral than banksters or businessmen? Why?
//When people decided they wanted it, deserved it NOW.//
"Going into the current crisis, the American economy was the strongest and most resilient in the world"
Agreed, anyone who still believes the US economy is/was the strongest and most resilient in the world needs to think some more.
The real joke though is how, during the Asian crisis, people like Geithner et al went around and lectured the Asians on how to run their economies.
No wonder they are trying to bail on our currency and economy today.
"A resonance phenomenon? "
I think so, brought to you by a pure fiat currency and fractional reserve banking.
Respectibility of western thought and people is one of the biggest casualty of this crisis.
//The real joke though is how, during the Asian crisis, people like Geithner et al went around and lectured the Asians on how to run their economies.//
20% down means that all those 20yr olds would have to save up??? $20,000.00 to $50,000.00 before they could buy a house. And they will have to do it with fewer or lower paying jobs. Of course they need to pay off the student loans and save for retirement as well. And hope health insureance doesn't continue to rise.
Resonance phenomena are self-limiting, but not in a nice way.
during the Asian crisis, people like Geithner et al went around and lectured the Asians on how to run their economies.
The same policies are currently being forced upon E. Europe by Rubin & Sons.
Is "Finanical" a play on "Fanatical"???
Ever played 'Half-Life' or 'Doom3'.
//Resonance phenomena are self-limiting, but not in a nice way.//
bubbles are dead.
long live the bubble
I have a bad feeling about this.
//The same policies are currently being forced upon E. Europe by Rubin & Sons.//
Twenty percent down will show also the home prices are to high. Flake financing has created the need to pump people into homes they can not responsibly afford. Bang we have a warped reality!
"Ever played 'Half-Life' or 'Doom3'."
I hate to put it this way, but I don't play games.
The bare tolerance of the Asian crisis "rescuers" and their gut-churning pieties about crony capitalism, prudence, regulation and transparency lasted only until the Enron implosion. There was a very swift change in the discussions about corporate malfeasance, more like "Really? Do tell us what this best practice might be..."
C
you've just given us an example of an unfalsifiable statement.
Touché, Pavel!!
Vive Claims on money.
claims on money esta muetre..
In both games, resonance cascades open portals to hell or another dimension, causing demons and aliens to invade earth.
//I hate to put it this way, but I don't play games.//
dryfly (profile) wrote on Tue, 6/23/2009 - 9:01 pm
Hello CDA - in Wichita tonight. Aerospace is next on the docket. Talked to a person at the hotel tonight - it's coming full bore. The Boeing delay is just the tip of the berg.
It will be interesting to see how the aerospace situation plays out. Lots of opportunities for backdoor bailouts via the defence budget.
Ever played 'Half-Life' or 'Doom3'.
Guilty as charged.
Citigroup Is Said to Be Raising Pay for Workers
Citigroup, which to many, symbolizes the troubles of the financial industry, intends to raise workers’ base salaries by as much as 50% this year to offset smaller annual bonuses
"you've just given us an example of an unfalsifiable statement.
Touché, Pavel!!"
Merci. It's why I can't get into alternate history novels. I keep thinking: So what?
In both games, resonance cascades open portals to hell or another dimension, causing demons and aliens to invade earth.
That'll teach you to appreciate joys of re-incarnation
Basel Too,
I did post that too.. funny how bankers are now workers..
Who was tracking insurance declines? Anyhow, UBS cuts Swiss Life to "sell":
Swiss Life Cut to ‘Sell’ From ‘Neutral’ at UBS - Bloomberg.com
C
Incentives are the problem? As long as the greater fool syndrome is possible, there are no ways to apply dis-incentives enough to counter balance.
"Hello CDA - in Wichita tonight. Aerospace is next on the docket. "
Read recently about how space programs here and in Europe are being pared down. Bob Zubrin is indignant.
Is UBS not leveraged 50x and > 4X the GDP of Switzerland? Do they have any credibility? Does anyone big have any credibility left?
//UBS cuts Swiss Life to "sell"//
It will be interesting to see how the aerospace situation plays out. Lots of opportunities for backdoor bailouts via the defence budget.
Here in Wichita Boeing had spun off a lot of its 'commodity' aircraft mfg capability into an entity called 'Spirit Aerospace' in much the same way GM spun off Delphi and Ford spun off Visteon. However Boeing DID KEEP Boeing Defense in Wichita. I assume a similar tactic was employed in Seattle area [anyone?]. I don't think that was an accident... I think the winners and loser were chosen way back then. If I worked for Spirit & had the option I would try to get back into Boeing Defense ASAP. Just sayin'...
And well he should be - how much seed corn is being shoveled into the bankers' trough to make good their over leveraged bad bets?
The opportunity cost of the whole bailout is just too much to bear at times...
We should build thousands of rocket launchers to send banksters on a one way trip to the sun. It will create many jobs in non-financial sectors.
//Read recently about how space programs here and in Europe are being pared down.//
Details, Lucifer, details...
C
What .....you mean financial ( ponzi scheme ) engineering of the US economy is not sustainable going forward
The devil is always in the details.. The swiss who bought insurance might not be happy though... the irony.
//Details, Lucifer, details...//
Charles Ponzi in turning in his grave ( assuming he was not cremated ) !
"A business that is too big to fail cannot be run in the interests of shareholders, since it is no longer part of the market."
Truer words never spoken. Time to end these things. If Obama hasn't got the guts for it, then we neeed to get somebody else.
Brits in Spain:
BBC NEWS | UK | Hard times in Spain send expats home
Declare the last election a "mulligan", grab some new candidates and announce a "do over"?
It seems that Jas is posting on his blog again..
Who was it some time ago who opined that in future banking should be no more exciting and remunerative than a public utility?
Many have opined that.. including Taleb.
//Who was it some time ago who opined that in future banking should be no more exciting and remunerative than a public utility?//
josap (profile) wrote on Tue, 6/23/2009 - 9:04 pm
Lucifer
The problem started not because of infaltion. During the high inflationary times we just bought less or on sale only. Still no credit card.
When people decided they wanted it, deserved it NOW. And credit card, TV rental companies figured out how to give it to them. That was the begining of the end.
Marketing helped, allot. All the you "deserve it" commercials, the "you can have it now" ads.
In 1994 I started a business in Mexico. After the peso devaluation in Dec 1994, I lost everything, including my house in the US and $40k in credit card lines of credit. It was the most liberating experience of my life because it forced me to live on a cash-only basis. You really CAN live on cash only. It forces you to evaluate very purchase, and to plan what and where you are going to spend your hard earned cash on.
I think this is something that many people in the US are going to have to come to grips with soon. "You can have it now" is going to become "You can have it when you pay off the lay-away".
Life will go on. It's just the transition that will be painful.
Was he talking about la cage follies where the Wall St boys go to play their alter egos
Who was it some time ago who opined that in future banking should be no more exciting and remunerative than a public utility?
Krugman
It creates a deflationary spiral.. in a post-industrial fiat currency based world, deflationary spirals are unnecessary and lethal.
//. It forces you to evaluate very purchase, and to plan what and where you are going to spend your hard earned cash on.//
20% down means that all those 20yr olds would have to save up??? $20,000.00 to $50,000.00 before they could buy a house. And they will have to do it with fewer or lower paying jobs. Of course they need to pay off the student loans and save for retirement as well. And hope health insureance doesn't continue to rise.
Well, this is the point: if you return to a pay-go society from a credit society, the NAR's "affordability index" goes to hell in a handbasket, and quick. I remember paygo life too, and I resumed it in the mid-90s myself. It's not that bad. But, you either have to have wage inflation or asset deflation, and given "globalization" and labor arbitrage, we aren't going to see a repeat of the 70s. In the short term this seems just dandy: taking our medicine from Dr. Paul. However, once you start to realize that the financially prudent and virtuous depend on that giant stomach that is the American consumer eating and eating...well, not so great.
Since I'm getting a late start on kids (if I ever have any) they will likely experience a remarkably similar paygo upbringing like I did, in a tiny rancher, where a garbage disposal was a serious luxury upgrade to the 8'x10' kitchen. That's fine: it's all relative.
What was virtuous in the pre- and early- industrial era is suicidal in a post-industrial era.
//However, once you start to realize that the financially prudent and virtuous depend on that giant stomach that is the American consumer eating and eating...well, not so great.//
@comrade dazed and amused,
I've had a couple of good runs with small biz, so my income has gyrated wildly. It is harder than most people think to adjust your lifestyle down by half after several years at a higher level. I've done it twice and the second time was much easier. I could do it again if I had to, but of course, would prefer not to have the short sharp shock again.
You really CAN live on cash only
I lived cash only for a couple of decades.
I still use mostly cash except for a couple of monthly charges like AT&T, etc.
My only problem has been car rentals but even that just requires a large deposit that's tied up for a day or two.
well that punk daneric is finally admitting he's run his followers into the p2 ground and now Jas is getting excited . As schweitzer135 said time to retest the lows; this rotten floor is crackin. The rot's too deep. The center cannot hold. Might take a couple or 3 months but this suckers goin down. See you at S&P 580, FAZ 19+
@the great reflation: my EEV and SDS hope you are right...
@great deflation - what the?
C
The American consumer is pretty wall tapped out. Consu\mption will fall, is falling.
Some people got hit over the head, some people woke up. Some will spiral to the bottom first. Some people just tried to fallow the rules.
Stores are restarting layways. People in the stores are using coupons again.
We are watching back to the future. JMO
Turbo Timmy, Larry Summers, and the rest of the Obama crime family will uber-regulate the heck out of those Wall Street fat cats! Any day now, waiting...
P.s. thanks to counterpointer for the heads up three weeks ahead from foreign market clues, which i telegraphed to relatives who now actually pay f'ing attention
Dryfly;
"Here in Wichita..."
Didn't Cessna just have a big round of layoffs?
Could not ask for a better quote in a discussion about incentives
June 23 ( Bloomberg )
The U.S. economy will begin to grow in the third quarter as fiscal stimulus measures take effect and credit conditions begin to improve, according to a survey by the Securities Industry and Financial Markets Association.
Following a 2 percent decline at an annual pace in the second quarter, the world’s largest economy will expand at a 0.8 percent pace in the next three months and at a 1.9 percent rate from October through December, the group said today in Washington. For all of 2009, the economy will shrink 2.7 percent and then grow 2.1 percent next year, the group said.
“The U.S. economy remains afloat, although battered, with the passing of the financial market meltdown and the credit market freeze,” Kyle Brandon, SIFMA’s managing director of research, said in a statement. “This cautiously optimistic outlook is a result of the aggressive and unconventional central bank actions and the fiscal stimulus.”
In the short term this seems just dandy: taking our medicine from Dr. Paul. However, once you start to realize that the financially prudent and virtuous depend on that giant stomach that is the American consumer eating and eating...well, not so great.
That detail is lost on a lot of folks... my liability is somebody else's asset. Their debit is my credit. Folks will get it soon enough.
Titanic?
//“The U.S. economy remains afloat, although battered, with the passing of the financial market meltdown and the credit market freeze,” //
red roof went under? damn who thought pet stained carpets would be a turn off.
"The mystery is that crises erupt so rarely."
Um, they are not exactly rare right now... Saying that incentives have to change doesn't make you a pessimist; it's just that the administration's take that this is all some sort of accidental calamity is so insanely generous.
@ MrM (profile) wrote on Tue, 6/23/2009 - 7:53 pm
“The U.S. economy remains afloat, although battered, with the passing of the financial market meltdown and the credit market freeze,” Kyle Brandon, SIFMA’s managing director of research, said in a statement. “This cautiously optimistic outlook is a result of the aggressive and unconventional central bank actions and the fiscal stimulus.”
This reminds me of the movie 'Sink the Bismarck'...stay tuned !
Their debit is my credit. Folks will get it soon enough.
"Survival of the fittest" don't work so good when your lifeline is tied to the guy you put out of work.
Didn't Cessna just have a big round of layoffs?
Yes - a couple waves.
More on the way... Cessna, Hawker/Beechcraft, Spirit and even Boeing. Hitting deep into supply chain too. Wichita is rapidly falling from boom to bust. The buzz around the bucket of beer was lay offs & more lay offs. Very different than a year ago.
Some people just tried to fallow the rules.
And others just let the rules lie fallow.
broward == socialist
//"Survival of the fittest" don't work so good when your lifeline is tied to the guy you put out of work.//
"deflationary spirals are unnecessary"
really now... i think kondratieff might disagree.
"the financially prudent and virtuous depend on that giant stomach "
i wasn't aware that my money market short-term treasury cash sitting on a 0.1% return was dependent on much of anything... nor my glod
Who cares about his theories? It is about survival, not philosophical theories!
//really now... i think kondratieff might disagree.//
"lay offs & more lay offs"
Months ago, dryfly, you said something that has stayed with me. You said many white, blue collar women and men put aside racial misgivings, and voted for Obama, hoping that this guy would be on their side.
What are they saying now? Is it on Obama, or is it more generically, Wall Street that's to blame?
"The mystery is that crises erupt so rarely."
Not really. Credit cycle becomes increasingly unstable as debt gets larger and larger.
Likewise, cultural impetus carries forward for quite some time, in spite of legal / "incentive" changes.
For many people, cheating is cheating even if it's legalized.
Tech bubble -> housing bubble -> government debt bubble.
I knew an old lady, she swallowed a fly...
All that is needed is for the basic wheels of commerce to keep turning.
Gluttonous consumption is not required.
Cycles happen.
red roof went under? damn who thought pet stained carpets would be a turn off.
I'm actually expecting more places to start accepting pets; beggars can't be choosers, and pet owners have money too.
Morality... how do you define gluttony (especially when you are talking about average people).
//Gluttonous consumption is not required.//
i wasn't aware that my money market short-term treasury cash sitting on a 0.1% return was dependent on much of anything... nor my glod
As you yourself note: it's just sitting there, not earning very much. And it will continue to sit there. Or are you just waiting until you can engage in massive rent capture by snatching up piles of distressed assets, waiting for eventual productivity to return? If things really get deflationary, your cash will be fine, but the gold will lose value. You'll need to spend a little building the hardened enclosed compound.
Whee, an new thread!
broward (homepage, profile) wrote on Tue, 6/23/2009 - 9:48 pm
You really CAN live on cash only
I lived cash only for a couple of decades.
I still use mostly cash except for a couple of monthly charges like AT&T, etc.
I agree. Finally after 10 years of cash only, I got exactly 1 credit card with a $1,500 limit for internet purchases and car rentals (this with a $100k+ per year income). Credit card is paid off each month. Large purchases I do with lay-away... it forces me to make the payment. My wife controls the household budget..... when the cash runs out - no more purchases untill next payday. 10% goes to savings off the top. It is a very simple system. And, I can sleep at night without worrying about how to juggle the payments.
A lot of people are going to have to learn to live like that.
What are they saying now? Is it on Obama, or is it more generically, Wall Street that's to blame?
I don't know. To early to tell. The 'little people' I talk to have gone quiet. Not sure that's a good thing.
Pavel,
Why 20 percent down and 30yr term? Just because it is the standard doesn't make it the right number.
People need to have skin in the game but I question arbitrarily set terms. Seems like pricing by local market risk would be a better way to go... 40 down in Orange County and 15 in Dallas TX
Gee whiz, Bill:
You all leave out STOPPING fooling the people! Price is value plus mispricing. Mispricing is little-mentioned in order to fool the people into price = value.
Inflation-adjusted asset price histories show lots of mispricing, see first chart here:
Real Dow & Real Homes & Personal Saving & Debt Burden
So, such histories are kept out-of-sight, to fool the people.
I am reminded of a former two-term U.S. President: 'Hey ace: It's NOT wrong UNLESS you get caught AND you can't lie your way out of it.'
Credit cycle becomes increasingly unstable as debt gets larger and larger..
Historians will note that while the credit-collapse was swift, the ensuing fall in asset prices was anomalously slowed, intentionally by those seeing the danger of liquidation and undertaking to disguise the reality of the price drops so as to discourage self-reinforced selling, and unintentionally by those who hopefully or ignorantly expected buying and lending to re-emerge at each new low. The antidote to the credit-asset-price-collapse contagion will prove to have been the liquidation of non-distressed business and personal assets, even at decreasing "below-market" levels, and the preservation of cash in whatever forms appeared more essentially durable, but the remedial solution will have remained invisible to almost all, hiding in plain sight.
"20% down means that all those 20yr olds would have to save up??? $20,000.00 to $50,000.00 before they could buy a house. And they will have to do it with fewer or lower paying jobs. Of course they need to pay off the student loans and save for retirement as well. And hope health insureance doesn't continue to rise."
The children of the wealthy do not have those concerns. That's what the US has come to.
Regulatory Reforms are like locks on doors. It only keeps the honest people out.
Michael LittleBig
6-24-09