Rolling US Economy Into The Shitbin Thread

http://bigpicture.typepad.com/comments/2007/10/more-inflation.html

personally I'm applying for a civil servant position ASAP

Just FYI, during the 1930s depression, many civil servants were paid with vouchers rather than cash, because local governments were unable to collect property taxes and their receipts fell into the shitbin.

Economy's doing poorly enough as it stands, why do we deliberately want to roll it into the shitbin?

Because that way Hillary can rescue us all.

lol property taxes

shitbin's a great word, BTW.

you been loving my thread titles lately

i came to this country some time ago with little more than a crippling debt burden in GB Pounds and the shirt on my back. i used to have to send back $1,200 each month to pay off my UK debt, and now I'm sending back over $1,400 to cover the same amount of debt repayment. that's two and a half thousand dollars disappearing from my tiny disposable income every year, for no explicable reason. i *heart* the decline of the US economy.

anyway why start this thread now because the bit where ritholtz points out that domino's pizza can't print new menus fast enough to keep up with inflation was pretty fucking amazing

I wish rasheed wallace was still around to show us the latest and greatest exploding bubble blogs

wow Roberto that was some shitty timing, that sucks

This was in the paper today:

Mortgage defaults

Hit an annual rate of 1.5 million in September. That compares with 900,000 last year from fewer than 800,000 in 2005. At the current rate, more than one million Americans will lose their homes to foreclosure, making this the worst housing recession since the Second World War.

Housing starts

Sank to a 14-year low of 1.19 million in September. Starts are a vital economic engine, creating jobs and growth as people stuff their homes with sofas and TVs. Starts peaked at 2.3 million in early 2006, and the decline will be a drag on the rest of the economy until the slide stops.

Mortgages

A quarter of the roughly 50 million U.S. home mortgages are subprime. That's seven times the number of high-risk mortgages there were in 2001. That means that many more marginal homeowners have mortgages, making it far more likely they'll wind up in default.

House prices

Fell 3.2 per cent in the second quarter. Prices are falling faster and more broadly than they have in decades, according to the closely watched Case-Shiller index.

http://www.theglobeandmail.com/servlet/story/LAC.20071018.IBUSECONOMY18/TPStory/Business

where the hell is rasheed anyway?

economic blogs I read (they're all fairly liberal):

http://calculatedrisk.blogspot.com/
http://angrybear.blogspot.com/
http://delong.typepad.com/sdj/
http://www.marginalrevolution.com/marginalrevolution/
http://bigpicture.typepad.com/
http://www.janegalt.net/

In regard to inflation, in the USA during the past three years inflation has been soaring - but almost entirely in the housing sector. The fact that people are encouraged to see their houses as investments rather than as expenses doesn't mean that skyrocketing housing costs weren't inflationary. They were.

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008. As it has for the past 30 years, the official CPI will understate the real inflation rate. It was rigged under Reagan so that government entitlement programs indexed to the CPI would not increase at the true pace of inflation.

If Bush continues to shovel shit on the dollar right up to the end of his term in January 2009, the inflation rate could hit 15%-20% by 2010.

There are some good economics articles put up here as well:
http://www.VoxEU.org

Which shit on the dollar are you referring to?

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008.

lol

this is why i live in canada!

oh wait.

Guys, this is a good time stay in academia right?

It's a good time to learn a European language.

Prime shit examples:

When Bush was elected in 2000, the federal budget was in surplus and the national debt was being paid down. Had this state of affairs continued, as projected, it would have led both to lower interest rates and a strong dollar, together. Instead, Bush submitted a series of enormous tax cuts to the Republican-controlled Congress and lobbied them through. Immediately, the CBO's projected budget surpluses turned to projected deficits for the next decade.

Bush also initiated a war of choice, not necessity, in Iraq. This war has already cost well over $700 billion. Yet, Bush insisted on making his tax cuts permanent. Overall, the national debt has increased under Bush by about $2 trillion in seven years. This represents a difference of about $3 trillion of debt from what was projected at the start of his first term.

Because, due to Bush's tax cuts and other policies, the Federal government was in a far weaker position to stimulate the economy when the recession started after 9/11, almost the entire stimulus was delivered via lower interest rates. Because these rate cuts were artificial, and not based on a stronger dollar, this stimulus not only inflated the current housing bubble, but it also undercut the dollar even more than the ballooning national debt did.

Now the dollar is at an all-time low against the euro and the canadian dollar. However, the incomes of the top 10% of American households have increased at a good clip, while the lower 50% of households have seen a decrease in income after inflation. This is largely thanks to Bush's shitty policies. I expect more of the same mismanagement until he is gone.

I agree with everything you've just said. You're predictions still seem a tad extreme on the downside though, if I may so.

i wonder if income inequality will ever arrive as a political issue in this country. americans tend to not begrudge the rich - so it'll have to be more of a "for everyone's good" type of angle. no?

I remember the 1970s and early 80s quite well. Back then people couldn't belileve it, either. Bush has done a bangup job of recreating many of the same policy errors under Johnson and Nixon that led to raging stagflation back then, except the underlying economy is now weaker than it was in the 1970s and the oil shocks we are likely to get are not political, as when OPEC was formed, but structural.

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

Anyone want to join my modern-day James Gang? We shall ride across the lower Midwest, robbing and pillaging.

sounds fun

Sorry, I don't want to relocate. But this scheme sounds ripe for franchising.

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

-- Aimless, Saturday, 20 October 2007 19:07 (14 minutes ago) Link

The coming of $100/barrel oil is not Bush's fault. It's yours and mine and everyone else's for using too damned much energy. I agree Bush could and should have done a lot more with policy to encourage energy efficiency, but there's little he could have done to stop oil's eventual rise to that price level.

Part of the pricing of oil represents the weakness of the dollar. This hurts the USA more than it does other countries. US citizens are paid in dollars and the US government collects revenue in dollars, so they are stuck. EU countries can use euros to buy increasingly cheap dollars, so they don't see the same rise in prices as we do. The weakness of the dollar is mainly Bush's fault.

The US also uses way more oil than other countries.

he could have done to stop oil's eventual rise to that price level.
Not starting a war in Iraq would definitely have helped here.

http://bp3.blogger.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s1600-h/IMFresets.jpg

arrgh, if that won't work then
http://calculatedrisk.blogspot.com/2007/10/imf-mortgage-reset-chart.html

tombot u r freakin me out

i hope my small apartment + modest savings plan + job in "information services" is enough to weather the shitstorm, if it comes. i got myself out of credit card debt a few months ago, at least

well if you can hold down a job and don't have to worry about an ARM reset you should be okay, it's the homeowner with kids and a subprime loan and two cars who ought to be shitting themselves

apart from some student loans and binging on credit cards over a few years, i'm kind of debt phobic.

which has actually made me lose out over the past several years, i realize, since i pay for EVERYTHING with a debit/check card... i could have just paid that balance on a credit card with some rewards scheme and has some air miles or something

rolling gff personal finances into the shitbin thread, ha

This will give you a boner Tombot

http://nymag.com/guides/money/2007/39952/

the economy increased by 3.9% this quarter! bull market forever, baby. economy's better than ever. golden age.

yet me and so many people I know are getting laid off next month. granted we're all in the writing/design field, but urhhhhh. gggg.

http://nymag.com/guides/money/2007/catastrophist071105_560.jpg
http://nymag.com/guides/money/2007/catastrophist071105_2_560.jpg

^^^ lol

most of that guy's scenario is not really news to regular bigpicture/CR readers I don't think. But #5, the "we don't pay attention" thing, yeah, well, evidently the awareness campaign is underway, but hell if the big players are paying attention.

He also leaves out the approaching demographic catastrophe as millions of inexperienced thirtysomethings and even some late-twenties kids are forced to move into arguably tougher jobs that the boomers have been holding for two decades. Beyond the social security and healthcare costs associated with mass retirement, I don't really know if this generation has the work ethic and definitely not the rolodex to just start filling in and not fuck up royally. too busy updating their linkedin pages.

can someone explain what "being upside down on your mortgage" means, in plain English?

essentially, owing more than your home is worth.

also Tombot I'm not going to blame this generation as much as I blame their parents.

isn't that the way people buy homes? by paying for the privilege of a loan?

When you enter into a contract with a bank for a mortgage, both you and the bank assume that the property value will not plummet. The bank doesn't want you to default any more than you want to default. But if for whatever reason you need to sell your home, and you can't get what you owe on it, then you will owe the difference to the bank. And the bank knows that when that happens, you probably will not have enough assets to cover the difference.

Predatory-type loans (which seems like a nebulous description to me) typically compound the problem because they have higher transaction rates (points, etc.)

oh certainly! well played baby boom letting healthcare slide for the 20 years you've owned the electorate

yeah Tracer it's also called "negative equity"

Not to mention saddling us with ridiculous expectations. Why do I have to be the one to tell my PARENTS "No, I can't make a living doing whatever I want."

I know several people who live in homes that cost more than $500K that signed unbelievably stupid loans.

Today the news is telling me the economy is going great - no need to worry. about anything. I'm glad all this mess is finally, somehow, over.

I love how the financial press keeps reporting that the subprime crisis is *not turning out to be as bad as we thought* when it hasn't even come near its peak. No one could have predicted the levees wouldn't hold, etc.

No one could have predicted that Bin Laden was determined to strike inside the United States!

No one could have predicted that he would use planes as missiles!

Dear US economy,

I love you. Send money. Thanks loads. Ta!

oh certainly! well played baby boom letting healthcare slide for the 20 years you've owned the electorate

Yeah, that's something, among numerous other socio-political phenomena that baffles me. Does that mean that all that "hippies done sold out and became heartless, vacuous yuppies" stuff is true?

sure, whatever that means.

side note: the word "yuppie" did once have a specific meaning. I'm a little tired of it just signifying everyone upper-middle class and below retirement age.

how funny will it be when affluent boomers need their money to pay for their own lifestyle instead of being able to just throw it away on their kids' rent and shit?

It once meant a specific kind of douchebag, now the term encompasses too many douchebag subcategories.

xp

I agree, Hurting, Abbott...I think that "yuppie" is about as useful a word as "hipster" (or arguably, "hippie"). But, I'm thinking of all the press about baby boomers -> "yuppies" that was the subject of Time and Newsweek, etc., cover stories when I was growing up in the eighties.

Not all that funny, if it also means my already-rent-paying ass has to start supporting my parents, which is already a situation I have a small reason to worry about (xpost)

Yeah but overall pretty funny, right?

even that's pretty funny - the last 50 years of not giving a shit about our elders are something of an aberration, no?

also funny because my brother is way more successful than me and any duties are going to fall on him. haha

gotta get back to my law school applications...

This is where repeated viewings of the movie "Disorderlies" becomes inspiration for a lucrative career path, I guess...

So, are there any nurses or people going to nursing school or working towards related professions in this bitch?

Dollar is now at a 26-year low against the pound after that rate cut. $2.08!

i'll never save up enough money to move back to the uk at that rate.

Hurting, when the financial press say that sub-prime is not turning out as bad as expected, what they're really talking saying is: it's not turning out as bad as expected for the big financial institutions. No doubt, a lot more *individuals* are going to start defaulting when they come off teaser rates, but the investment banks have already marked to market the securities backed by them so, in theory, they have no exposure left to them.

The judge said the church's financial statements, sealed earlier, could be released to the plaintiffs.

Ooooooooh! I want to see these.

Who the hell lawyers for PhelpsCo.?

The weak dollar is also driving up the cost of oil since the leading petroleum nations trade oil in US currency and buy most of their durable goods in Euros.

god hates the us economy xp

Dollar is now at a 26-year low against the pound after that rate cut. $2.08!

-- stet, Wednesday, 31 October 2007 22:43 (Yesterday) Link

i have so many unwatched US dvds from the last few months, but they're giving them away.

when the financial press say that sub-prime is not turning out as bad as expected, what they're really talking saying is: it's not turning out as bad as expected for the big financial institutions. No doubt, a lot more *individuals* are going to start defaulting when they come off teaser rates, but the investment banks have already marked to market the securities backed by them so, in theory, they have no exposure left to them.

I've heard this explanation before, but I'm still not sure it makes sense to me -- how can the holders of those securities know exactly how bad the fallout is going to be when more of the mortgages reset? Like do they know exactly how many people are going to default? What if it's a lot more than expected because other economic conditions are worse than expected?

The markets sure weren't expecting the UBS writedown this morning. I think it is unravelling worse than expected.

I added the google DJI chart to the top so we can watch shit meet fan

today looks like it's going to be pretty exciting

I'VE BEEN WAITED SO LONG TIME.. THE BEGINNING IS JUST NOW

This is where repeated viewings of the movie "Disorderlies" becomes inspiration for a lucrative career path, I guess...

Get real fat and become a rapper?

A point that I've seen made on some of these goldbug blogs but which still seems pretty OTM is that the stock market actually HAS been falling for the last several years, basically since the summer of 2000, if you measured US stock prices in, say, pounds sterling, or Euros, or gold. The decline of the dollar as meant that even if your stock stays steady, its "actual" (?) value has decreased.

It 'as meant, gun'nor, wot wot

i.e. http://www.financialsense.com/Market/allison/2007/0430.html

So, are there any nurses or people going to nursing school or working towards related professions in this bitch?

i know several people who have switched to nursing/public health/related fields within the past two years or so.

oil = $96/barrel
dollar = £2.08

has the dollar really fallen eight cents in the past, what, three weeks??

No, not quite 3 weeks

http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/currency/img/77+X_SGBPUSD+bbc-big_thick-line+one_month.png

http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/currency/11/12/img/77+X_SGBPUSD+bbc-big_thick-line+three_month.png

Also semantic pedantry, the dolalr can't fall by cents it has to fall by pence. the pounds has gone up by 8 cents.

Unless a dollar really is worth 92 cents.

The dollar is even falling against the penny. We're doomed.

The purchasing power of little kids and grandmas has increased dramatically though.

Like do they know exactly how many people are going to default?

simply put, it's an educated guess that is mostly based on historical data and complex mathematical formulas.

why compare the USD to the pound; as opposed to, say, US's largest trading partner?

because i live in the UK and travel to the US a lot.

ah - it was more of a general question actually. i see the two compared alot and wonder why it isn't held up against it's two north american trading partners more often.

even that's pretty funny - the last 50 years of not giving a shit about our elders are something of an aberration, no?

somebody in Suck.com wrote years ago and wondered if the "Greatest Generation" thing was something that boomers came up with so that everybody could now counteract the shit they put their own parents thru for 30+ years, and for the young folks of today not to give them the same decades of shit they themselves gave.

The dollar is falling against the penny there is more than 1.2cents worth of copper in a penny.

(In the UK we make our pennies out of steel, but this is also true for pre-1992 UK copper coins)

why compare the USD to the pound; as opposed to, say, US's largest trading partner?

Because the US's largest trading partner (china) pegs its currency to the dollar and it's second largest (japan) does it's darndest to keep itself weak vs the dollar. Euro and Pound free float. Euro is probably the more important measure as the pound is strong as well as the dollar being weak. the Euro is more comperable.

when the financial press say that sub-prime is not turning out as bad as expected, what they're really talking saying is: it's not turning out as bad as expected for the big financial institutions. No doubt, a lot more *individuals* are going to start defaulting when they come off teaser rates, but the investment banks have already marked to market the securities backed by them so, in theory, they have no exposure left to them.

I've heard this explanation before, but I'm still not sure it makes sense to me -- how can the holders of those securities know exactly how bad the fallout is going to be when more of the mortgages reset? Like do they know exactly how many people are going to default? What if it's a lot more than expected because other economic conditions are worse than expected?

The holders of the securities won't know how bad the fallout is, but the holders will now all be speculative investors, hedge funds, conduits etc. Whatever subprime backed securities were on the bank's balance sheets when the shit hit the fan are being moved off the bank's balance sheets (but obviously, they're having to sell at a loss, which is what all these write downs are). That doesn't mean it can't sneak in the back door, so you might still get the odd unexpected write down, but for the most part the banks will have cut their losses.

so when should i sell all my stocks?

Ed, the US hasn't made its pennies out of copper in at least 20 years. I believe they're made of zinc, with a very very thin copper coating.

Ed - I'm aware of china pegging it's dollar. but as far as I'm aware, largest trading partner = Canada. Followed by China and then Mexico. Am I wrong?

 Canada                                 47.56           367.87

 China                                  34.34           246.29

 Mexico                                 31.55           227.46

 Japan                                  16.96           137.75

 Federal Republic of Germany            12.95            94.78

 United Kingdom                          8.57            70.94

 Korea, South                            6.78            55.28

 Taiwan                                  5.85            42.44

 France                                  5.49            45.56

 Brazil                                  4.55            32.36

 

Isn't the US dollar at something like a 20-year low against the Canadian dollar too? What difference are you trying to tease out?

Err. headers should be ||Country|| ||billions of dollars traded in August 07|| ||Billions 2007 to date||

Try 50 year! And a small distance from a historical record.

xpost

So it's like, the dollar is low by any measure.

Well, when your currency reaches parity with your largest trading partner - when it was 1=.65 a matter of years ago - it should really set off a good deal of reevaluation of the overall nature of business between the two. It's sort of causing chaos in Canada - many businesses no longer being able to compete on the merits of a weaker dollar alone, exports way down and all sorts of crazy pricing discrepancies setting off a tidal-wave of cross boarder shopping. it's the largest trade relationship in the world, if I'm not mistaken, and a sudden reversal of currency value I think should merit more evaluation.

Whatever subprime backed securities were on the bank's balance sheets when the shit hit the fan are being moved off the bank's balance sheets (but obviously, they're having to sell at a loss, which is what all these write downs are).

I don't think much has been moved off bank's balance sheets yet. The writedowns are just the banks writing down the market value of things that are still on their balance sheets. These markets have basically stopped trading since the credit crunch hit, so there's been little opportunity for banks to unload this stuff, and if they were forced to unload it, they'd certainly get even less than the marks they're putting on it now. In addition, there is the danger that banks will have to move even more of this stuff onto their balance sheets if some of the SIVs and conduits that they're backing fail to find financing.

This article from the FT says that there are good reasons to fear that worse is still to come for the banks:

Fall in ABX sparks fresh credit fears

xpost
well for me it seems that reaction in Canada = OMG OMG OMG
where as in the States = zuh?

another xpost

you know what. i don't know what my point was. i'm going back to the pot thread.

The writedowns are just the banks writing down the market value of things that are still on their balance sheets.

But with subprime, they haven't been able to do that because the market is so illiquid. Goldman explicitly stated in their earnings report that everything they couldn't value from the market, they sold.

Just to add, if some banks are holding them on their books, it's axiomatic to say that they must believe they're worth more than what they can sell them for, and that they've presumably priced in the fact that lots of people are going to start coming teaser rates into that valuation.

^^^Ach, meant to emphasise some, not banks.

testing

If there isn't a market price, the banks usually use models to come up with a price. That's what they call "Level 3" assets. Goldman may be one of the least exposed to subprime of the major banks, but they still had level 3 assets representing $72B at the end of their third quarter:

http://www.marketwatch.com/news/story/goldmanaug-level-3-asset-value/story.aspx?guid=%7BA5F0CE1D-4004-448D-967B-895CC8213FD6%7D

xpost- Banks may think they can get a better price if they wait, but that's a dangerous game when prices are falling.

(oops, please ignore that "testing" post)

you ever read that book about Long Term Capital Management o. nate ("When Genius Failed")?

Book rules.

Yes, I've read it. Good book.

Too bad more people haven't read it.

when you consider the people who were involved with LTCM, it's fucking frightening.

And my point being that illiquidity and exposure are pretty damn complicated issues at banks in a scary house of cards kind of way.

Yeah, they had a quant from GS quoted in the FT a while back saying how crazy the credit squeeze was, and how it shouldn't've happened in three universe lifetimes according to his models, and I thought dude, how can earth can you not've read that book (cause he clearly wouldn't've said that if he had)?

There was an entertaining polemic by Nassim Nicholas Taleb (author of Fooled by Randomness and The Black Swan) in the FT the other day about the models that generate these kinds of (unrealistic) predictions.

The pseudo-science hurting markets

I think he overstates his case a bit, but he does it with wit and is thought-provoking in a good way.

The dollar can fall against cents, and has been doing so very nicely in the last couple of weeks, the ECB having failed to take my suggestion that a tenth of a Euro be called a Euroling.

http://bigcharts.marketwatch.com/charts/big.chart?symb=aapl&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=609&style=320&time=8&freq=1&nosettings=1&rand=2167&mocktick=1&rand=5794

http://bigcharts.marketwatch.com/charts/big.chart?symb=rimm&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=50575&style=320&time=8&freq=1&nosettings=1&rand=2201&mocktick=1&rand=3796

http://bigcharts.marketwatch.com/charts/big.chart?symb=goog&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=1795093&style=320&time=8&freq=1&nosettings=1&rand=2361&mocktick=1&rand=7238

do you have a point

Wow! I guess there are a few bright spots (unfortunately not ones in my portfolio).

stocks be rocketing like fogdog.com

once did.

A few big tech stocks with compelling growth stories are doing well. I'm a bit pessimistic on where the broader market is heading though.

so am I, but I am usually wrong. It is sticking your neck out calling a crash when the DJIA is all of 5% off the alltime high. But it will be fun watching Jim Cramer forcing a smile and making picks on CNBC here in 5 minutes.

Wow- this just keeps getting uglier for Merrill:

Deals With Hedge Funds May Be Helping Merrill Delay Mortgage Losses

I came across an individual lawsuit plaintiff named Meryl Lynch yesterday.

i wish i knew more about this stuff and bought gold and google a few years ago

I have never had much capital to invest really but when I put $2000 into a international/developing markets mutual fund it was EXACTLY one month before a huge sell-off in that sector. So I do tend to call things a little early. OTOH, for a individual investor, I think calling a bear and hedging early is a lot wiser than believing a bull and buying late. Google, Rim and Apple all have nice narratives to their success and have been making headlines for years now, so it's no surprise amateurs are getting into it. "Hey, I use Google/an iPod/my BlackBerry every day! I should invest in these guys!"

moral for me as an investor (once I cover my recent debt injection) - if you want to invest in any sector, wait it out for a 12 month low. if it doesn't happen, you missed the boat, try again next year.

I usually make those decisions during the long holidays I take at my country house in the Algarves.

lolz. even if i ever have money i doubt i'd ever risk speculating on the market.

Yes. My advice to clients these days is to invest in property -- it's as safe as houses! I specifically recommend Florida condos. There are some crackerjack deals all over the coast.

Or, if you want something even safer, stash those dollars in a trunk and bury the trunk. And don't tell anyone where it is. Now THAT money won't be going ANYWHERE. Unless the dollar falls further of course.

Hmm.

It's been a while since I thought about finance with any real depth, but that Taleb column seems like such crap. Academic financial models hardly work better than random chance? Is that not entirely the point? If he and his buddies can predict the market so much more effectively than 150,000 business schools teaching the MPT, why the hell is he making his money writing pop-culture social science books and not trading?

haha this buddy of mine was telling me this weekend how his neighbor (whom I know) keeps $20K in cash in his basement in a safe. I'm not sure if I should mention this, but Mr. Sock Drawer is a chiropractor.

dude seriously who tells people that shit? good way to put you and your family in danger.

Academic financial models hardly work better than random chance? Is that not entirely the point? If he and his buddies can predict the market so much more effectively than 150,000 business schools teaching the MPT, why the hell is he making his money writing pop-culture social science books and not trading?

I think his point is not that he can predict the market better than the models, but rather that the models give those who use them a false sense of security.

http://ichart.finance.yahoo.com/3m?cadusd=x

thanks to abanana

November 9, 2007, 12:34 pm
Midday Tidbits — 99 Problems for the Dollar
Posted by Tim Annett

How much Rocawear could these euros buy?
# First Gisele, then China, now Jay-Z? Earlier this week, reports (later denied) that supermodel Gisele Bundchen was demanding to be paid in euros rather than dollars led to many jokes that surely this must be a sign of a bottom for the little-loved greenback. Nobody was laughing much when a Chinese political official badmouthed the buck later in the week, leading to the latest of many dollar selloffs. Now, either as another sign of the bottom, or just another kick to the dollar’s ribs on the way down, rapper Jay-Z has joined the dollar-bashing party. In the video for his new single, “Blue Magic,” at about 1:20 in, when Jay says, “I don’t spin on my head, I spin work in the pots so I can spend my bread,” the “bread” he is preparing to spend is a big stack of euros, not dollars. Et tu, Jay-Z? — Mark Gongloff (Hat Tip: Jesse Pesta)

http://online.wsj.com/media/jayz_c_20071109113234.jpg

from the Financial Times (http://www.ft.com/cms/s/0/7b6160be-9b80-11dc-8aad-0000779fd2ac.html?nclick_check=1)

In his letter, Mr Lahde said he expected the collapse in value of subprime mortgage-linked securities to be repeated for bonds backed by commercial property loans in a deep recession – which he also predicts.

“Our entire banking system is a complete disaster,” he wrote. “In my opinion, nearly every major bank would be insolvent if they marked their assets to market.” He also said he would be putting some of his own profits into gold and other precious metals.

I re-read the LTCM book ("When Genius Failed") over the holiday, and it's frightening given the pattern of subprime investments.

yeah platinum looks really good right about now. are there any metals looking particularly under-valued?

so if some random dude off the street (i.e. me) wanted to buy platinum or whatever, is that possible? Is that just a recipe for getting screwed? How would one go about it anyway??

call a broker dude and then shop whatever he says.

there are precious metal mutual funds and stuff, through morningstar and other fairly reputable investment groups. I think those would be easier and less costly than trying to stockpile a bunch of platinum in the commodities markets

not to mention that those funds tend to diversify sources and ideally mitigate risks better than turning your garage into a foundry and hoping you don't get robbed or burn the house down.

there's also buying gold and silver coins at your local coin shop - unfortunately the dealer knows the value of a buck so you won't be getting any super deals

When my mom worked as a bank teller she bought every silver coin that crossed her window for 20 years.

http://bigpicture.typepad.com/photos/uncategorized/2007/12/10/crisis_20071209.gif

oh, bernankepaws ...

http://ichart.finance.yahoo.com/t?s=%5EDJI

long overdue

Added wonkiness just now from Stratfor:

---

China and the Arabian Peninsula as Market Stabilizers
By George Friedman

The single most interesting thing about today's global economy is what has not occurred. In 1979, oil prices soared to slightly more than $100 a barrel in current dollars, and they are approaching that historic high again. Meanwhile, the subprime meltdown continues to play out. Many financial institutions have been hurt, many individual lives have been shattered and many Wall Street operators once considered brilliant have been declared dunderheads. Despite all the predictions that the current situation is just the tip of the iceberg, however, the crisis is progressing in a fairly orderly fashion. Distinguish here between financial institutions, financial markets and the economy. People in the financial world tend to confuse the three. Some financial institutions are being hurt badly. Those experiencing the pain mistakenly think their suffering reflects the condition of the financial markets and economy. But the financial markets are managing, as is the economy.

What we are seeing is the convergence of two massive forces. Oil prices, along with primary commodity prices in general, have soared. Also, one of the periodic financial bubbles -- the subprime mortgage market -- has burst. Either of these alone should have created global havoc. Neither has. The stock market has not plummeted. The Standard & Poor's 500 fell from a high of about 1,565 in mid-October to a low of 1,400 on Oct. 19. Since then, it has rebounded as high as 1,550. Given the media rhetoric and the heads rolling in the financial sector, we would expect to see devastating numbers. And yet, we are not.

Nor are the numbers devastating in the bond markets. By definition, a liquidity crisis occurs when the money supply is too tight and demand is too great. In other words, a liquidity crisis would be reflected in high interest rates. That hasn't happened. In fact, both short-term and, particularly, long-term interest rates have trended downward over the past weeks. It might be said that interest rates are low, but that lenders won't lend. If so, that is sectoral and short-term at most. Low interest rates and no liquidity is an oxymoron.

This is not the result of actions at the Federal Reserve. The Fed can influence short-term rates, but the longer the yield curve, the longer the payoff date on a loan or bond and the less impact the Fed has. Long-term rates reflect the current availability of money and expectations on interest rates in the future.

In the U.S. stock market -- and world markets, for that matter -- we have seen nothing like the devastation prophesied. As we have said in the past, the subprime crisis compared with the savings and loan crisis, for example, is by itself small potatoes. Sure, those financial houses that stocked up on the securitized mortgage debt are going to be hurt, but that does not translate into a geopolitical event, or even into a recession. Many people are arguing that we are only seeing the tip of the iceberg, and that defaults in other categories of the mortgage market coupled with declining housing markets will set off a devastating chain reaction.

That may well be the case, though something weird is going on here. Given the broad belief that the subprime crisis is only the beginning of a general financial crisis, and that the economy will go into recession, we would have expected major market declines by now. Markets discount in anticipation of events, not after events have happened. Historically, market declines occur about six months before recessions begin. So far, however, the perceived liquidity crisis has not been reflected in higher long-term interest rates, and the perceived recession has not been reflected in a significant decline in the global equity markets.

When we add in surging oil and commodity prices, we would have expected all hell to break loose in these markets. Certainly, the consequences of high commodity prices during the 1970s helped drive up interest rates as money was transferred to Third World countries that were selling commodities. As a result, the cost of money for modernizing aging industrial plants in the United States surged into double digits, while equity markets were unable to serve capital needs and remained flat.

So what is going on?

Part of the answer might well be this: For the past five years or so, China has been throwing around huge amounts of cash. The Chinese made big, big money selling overseas -- more than even the growing Chinese economy could metabolize. That led to massive dollar reserves in China and the need for the Chinese to invest outside their own financial markets. Given that the United States is China's primary consumer and the only economy large and stable enough to absorb its reserves, the Chinese -- state and nonstate entities alike -- regard the U.S. markets as safe-havens for their investments. That is one of the things that have kept interest rates relatively low and the equity markets moving. This process of Asian money flowing into U.S. markets goes back to the early 1980s.

Another part of the answer might lie in the self-stabilizing feature of oil prices, the rise of which should be devastating to U.S. markets at first glance. The size of the price surge and the stability of demand have created dollar reserves in oil-exporting countries far in excess of anything that can be absorbed locally. The United Arab Emirates, for example, has made so much money, particularly in 2007, that it has to invest in overseas markets.

In some sense, it doesn't matter where the money goes. Money, like oil, is fungible, which means that if all the petrodollars went into Europe then other money would flow into the United States as European interest rates fell and European stocks rose. But there are always short-term factors to consider. The Persian Gulf oil producers and the Chinese have one thing in common -- they are linked to the dollar. As the dollar declines, assets in other countries become more expensive, particularly if you regard the dollar's fall as ultimately reversible. Dollars invested in dollar-denominated vehicles make sense. Therefore, we are seeing two massive inflows of dollars to the United States -- one from China and one from the energy industry. China's dollar reserves are derived from sales to the United States, so it is stuck in the dollar zone. Plus, the Chinese have pegged the yuan to the dollar. The energy industry, also part of the dollar zone, needs to find a home for its money -- and the largest, most liquid dollar-denominated market in the world is the United States.

The United States has created an odd dollar zone drawing in China and the Persian Gulf. (Other energy producers such as Russia, Nigeria and Venezuela have no problem using their dollars internally.) Unhinging China from the dollar is impossible; it sells in dollars to the United States, a linkage that gives it a stable platform, even if it pays relatively more for oil. Additionally, the Arabian Peninsula sells oil in dollars, and trying to convert those contracts to euros would be mind-bogglingly difficult. Existing contracts and new contracts managed in multiple currencies -- both spot and forward managed -- would have to be renegotiated. Any business working in multiple currencies faces a challenge, and the bigger the business, the bigger the challenge. The Arabian Peninsula accordingly will not be able to hedge currencies and manage the contracts just by flipping a switch.

This provides an explanation for the resiliency of U.S. markets. Every time the news on the subprime situation sounds so horrendous that it seems the U.S. markets will crash, the opposite occurs. In fact, markets in the United States rose through the early days, then sold off and now have rallied again. Where is the money coming from?

We would argue that the money is coming from the dollar bloc and its huge free cash flow from China, and at the moment, the Arabian Peninsula in particular. This influx usually happens anonymously through ordinary market actions, though occasionally it becomes apparent through large, single transactions that are quite open. Last week, for example, Dubai invested $7 billion in Citigroup, helping to clean up the company's balance sheet and, not incidentally, letting it be known that dollars being accumulated in the Persian Gulf will be used to stabilize U.S. markets.

This is not an act of charity. Dubai and the rest of the Arabian Peninsula, as well as China, are holding huge dollar reserves, and the last thing they want to do is sell those dollars in sufficient quantity to drive the dollar's price even lower. Nor do they want to see a financial crisis in the U.S. markets. Both the Chinese and the Arabs have far too much to lose to want such an outcome. So, in an infinite number of open market transactions, as well as occasionally public investments, they are moving to support the U.S. markets, albeit for their own reasons.

It is the only explanation for what we are seeing. The markets should be selling off like crazy, given the financial problems. They are not. They keep bouncing back, no matter how hard they are driven down. That money is not coming from the financial institutions and hedge funds that got ripped on mortgages. But it is coming from somewhere. We think that somewhere is the land of $90-per-barrel crude and really cheap toys.

Many people will see this as a tilt in global power. When others must invest in the United States, however, they are not the ones with the power; the United States is. To us, it looks far more like the Chinese and Arabs are trapped in a financial system that leaves them few options but to recycle their dollars into the United States. They wind up holding dollars -- or currencies linked to dollars -- and then can speculate by leaving, or they can play it safe by staying. In our view, these two sources of cash are the reason global markets are stable.

Energy prices might fall (indeed, all commodities are inherently cyclic, and oil is no exception), and the amount of free cash flow in the Arabian Peninsula might drop, but there still will be surplus dollars in China as long as it is an export-based economy. Put another way, the international system is producing aggregate return on capital distributed in peculiar ways. Given the size of the U.S. economy and the dynamics of the dollar, much of that money will flow back into the United States. The United States can have its financial crisis. Global forces appear to be stabilizing it.

The Chinese and the Arabs are not in the U.S. markets because they like the United States. They don't. They are locked in. Regardless of the rumors of major shifts, it is hard to see how shifts could occur. It is the irony of the moment that China and the Arabian Peninsula, neither of them particularly fond of the United States, are trapped into stabilizing the United States. And, so far, they are doing a fine job.

wrong thread!!!

see where it says "into the shitbin?!" not "buoyed by foreigners!"

Hahaha. BUT IT'S ABOUT ECONOMICS!

kudlow.jpg

http://www.whatnotreviews.com/images/personal_finance/jim_cramer_book.gif

Fight to the death.

for a while, i've had a flip line about how the only time to worry about illegal immigrants is when they start leaving. and there they go.

Good column from Martin Wolf in the FT today about why the credit crisis is a paradigm-shifting event:

http://www.ft.com/cms/s/0/90126fca-a810-11dc-9485-0000779fd2ac.html

Alan Greenspan's take on how we got where we are, from the WSJ:

The Roots of the Mortgage Crisis

And after reading that Statfor thing:

http://seattletimes.nwsource.com/html/travel/2004067332_webchinesetourists12.html

Yes, maybe new competing thread is a good idea. Then again, having a In Da Shittybins vs. Boyed By Fauranurz fight here makes the thread more fun (IMHO)

Hmm.. now if we can just get all those Chinese tourists to buy a couple of houses while they're here.

"LOL HONGKOUVER!"

http://www.lakelandsd.com/tutorial/sinking.jpg

http://farm2.static.flickr.com/1180/753867454_b2849f7a8b_o.jpg

Seamus Milne in today's Guardian

It might be entirely true that the channeling of foreign-held dollars back into USA investments is preventing large amounts of shit from reaching the fan, this dynamic will only hold things in place if the Chinese tolerate a drastic fall in the value of their dollar-holdings. That fall is inevitable unless the USA makes a hard turn from its present course.

What I see as most likely is the Fed will hold interest rates steady, even as the recession becomes apparent in February-March of 2008. The recession will put increasing pressure on mortgage holders from the real estate bubble and loan defaults will increase through out the year as unemployment rises. This will cause the banking system to scream in pain, crying for lower interest rates.

At that point, the Fed is screwed. Lowering rates would further crash the dollar. Not lowering rates would crash the banking system. They'll choose the dollar. Then we'll see the real crisis appear. Whether we can wiggle out of it will depend on whether the central bankers of the world can agree on a plan.

The USA has benefitted enormously from becoming the world's reserve currency at a time of ballooning international trade. It's about time for the world to reclaim the keys to the world economy. I would expect some sort of 'currency basket' to be devised to replace dollars as the reserve currency by 2011. Either that, or big dose of chaos.

As usual, I do not claim to hold any special expertise in the Economics of the Future. I just read, watch, think and make my best guess.

http://invivoanalytics.com/2007/12/17/the-real-yield-negative-interest-rates/

note use of real CPI including energy, food etc. instead of what keeps getting reported as CPI in the press

forecast: (hyper)inflation or deflation?

presume will go for former but i still dont really get how this is done when wage inflation would be severely constrained

None dare call it stagflation.

No deflation is in sight in the USA, apart from housing prices unbubbling.

How this is done when wage inflation is severely constrained is simple enough. We'll import our inflation as the dollar buys progressively less in foreign markets, including raw materials (think: oil) and manufactured goods (think: almost everything in WalMart).

The USA has the most globalized economy. The erosion of USA wages will slow the price inflation down, but the loss of purchasing power will be the pertinent gauge to watch, not just wages or prices.

not helping
http://www.economist.com/images/20071208/20071208issuecovUS400.jpg

Increasing the money supply through....more credit? But won't it need takers? And institutions to happy to lend more?

The world is awash in dollars already. All that is necessary is for a signifigant portion of foreign dollar holdings to be repatriated for the USA money supply to balloon. When a nation refuses to accept its own currency... well, let's just say it isn't done by solvent nations.

As for lending and credit, when the private sector won't borrow, the government can always step in. If the government is a poor credit risk, it will just have to offer more interest, won't it? If the USA government cannot borrow even at high rates of interest... well, let's just say that is rarely the case with solvent nations.

So like, wtf is about to happen in real terms? Are we most likely looking at a depressed economy where it's tough to find a job and we have to cut our expenses a lot or a genuine crisis?

the world is awash in dollars..agreed. don't rate cuts mean yet more dollars though? meaning (hyper)inflation (possibly).

i guess foreign dollar holdings dont want to repatriate...but doesn't this make those holdings look less pleasant with each cut?

The Economist has been getting progressively worse under the new editor-in-chief
I would love to hear how "cheap food" is going to end when McDonald's is on the verge of waging its economy of scale on an even wider variety of foods across an even larger geographical range - are they all of a sudden going to have so much competition that they lose their price control?

What's to happen, in real terms?

I think it will be a very slow-motion sort of economic deterioration that will basically look like a recession with stagflation for a while, with continued degradation of infrastructure from year to year. Just a steady impoverishment, falling down from our past levels of opulence.

Whether it turns into a really nasty 'hot' crisis will depend a lot on the quality of USA politics - both among the politicians and the general public.

In the past, the USA has shown the ability to toughen up, change direction and do what has to be done to get the nation going the right way again. Whether this can happen again depends largely on how tightly the general public clings to its delusions and its old, comfortable ways of thinking and how much they are encouraged to stay deluded by leaders who shovel out loads of platitudes instead of useful information.

I can't say the signs are very good for our chucking away our delusions and facing up to the problems we've caused ourselves any time soon. We still have several more layers of fat and comfort to strip away before we come into contact with hard, sharp reality. When we reach that point, it could go any direction - but I'd bet on the country getting its act together eventually.

If we could only get rid of those damned Armageddon-believers I'd feel a whole lot more confident about where we'll be in 20 years.

1. in real terms, wages have been going down for like four years, for most americans anyway
2. additionally with the dollar being in flux so much lately a lot of other figures need to be rejiggered to see where we really are and where the trend is headed
3. "hyperinflation" should not happen because despite the decreasing purchasing power of the median household, that median american household still remains the target customer of the majority of business worldwide
4. the ultimate (c. 2012) result is going to largely depend on how overheated China is and whether they experience their own crash sooner or later
5. deflation is totally out of the question

Whether this can happen again depends largely on how tightly the general public clings to its delusions and its old, comfortable ways of thinking and how much they are encouraged to stay deluded by leaders who shovel out loads of platitudes instead of useful information.\

Actually I think the general public and the political leadership have fuck all to do with american economic resiliency. It depends more on if my generation is smart enough and tough enough to pursue effective entrepreneurship and on the capital supply for those ventures - both of which look promising at the moment, to be honest.

basically what I think is going to really happen (is happening) with the dollar is that we are going to stick median wages almost exactly where they are and then let the purchasing power of the dollar fall until the average plant worker in Kansas makes the same real amount per month as the average plant worker anywhere else in the world - since that's the competition, and since any other method of adjusting things would be too dangerous to business

2. other currencies (sterling and euro anyway) are poised to follow the dollar downwards, this might make the falls seem less harsh..in time?

3. which is presumably why foreign holdings won't repatriate dollars, but rate cuts might test that at some point?

3a. isn't rate cutting just allowing more cheap money in the economy? hair of the dog?

4. thought china were running into similar problems right about now also?

5. not much incentive to save then?

Nah, Tom. They used to call it 'political economy' instead of just 'economics'. There was a reason why. That switch of nomenclature was connected to politics, too.

I save. But the incentives are shite right now.

I'm sure you're not saying that our elected leadership runs the economy as opposed to the other way around

The power to make law and impose taxes is not a lightweight factor in how economies operate. Who makes policy and the policies they make swings a lot of weight in what outcomes you get, especially when the government is multi-trillion dollar enterprise.

That importance is reflected in the amount of effort and money that is expended by various corporate interests into keeping our representatives captive and our electorate docile. Economic pain tends to make the electorate less ruly and more likely to glom onto a Huey Long or a Townsend Plan, or technocracy... or something much worse.

Too late in the game for gold/silver/platinum? Or still early?

Or: Is money supply going to continue to grow and fiat currencies going to continue to fall? Or will the buck stop somewhere soon?

I'll take this thread as an opportunity to raise awareness for an underappreciated cult classic

http://rh.foto.radikal.ru/0709/57/19975fea5422.jpg

BofA to buy Countrywide, allow Angelo Mozilo http://latimesblogs.latimes.com/laland/2008/01/mozilo-severanc.html10 million for his ties:

http://latimesblogs.latimes.com/laland/images/2008/01/10/31893826.jpg

Phew, that was ugly formatting. $110 million in severance, as noted here:

http://latimesblogs.latimes.com/laland/2008/01/mozilo-severanc.html

should i be buying gold?

Sell your child into slavery. It's the only answer.

this looks like more fun:

http://www.lambdapsiphi.com/daft/daft/images/dtopen5.jpg

im kindof like scroge mcduck. every mornign i juimp into a money bin filled with used condoms

wow, maybe angelo mozilo will dodge a bullet after all ... seriously, i had that dude pegged as the subprime crisis's kenneth lay or dennis kozlowski.

i still hold that the subprime crisis will = Lawyers' Full Employment Act of 2008, tho'.

also, subprime crisis = the closest thing yer typical gold bug will ever come to an orgy.

and BoA may be biting off more than it can chew if its acquisition of Countrywide goes through.

This very wtf. Other than a huge portfolio of questionable loans, what kind of assets does BofA hope to acquire? A lot of employees they can let go? I am stumped.

whatever BoA is getting out of this deal, it may be the start of a trend --> WaMu Has Discussed Merger With JP Morgan Chase.

i dunno what countrywide shareholders or BoA will get out of the acquisition, but mozilo may get over http://www.latimes.com/business/la-fi-mozilo11jan11,0,2459321.story?coll=la-home-center00M outta this. (keep in mind that countrywide is already being sued for his exercise of over $100M in countrywide stock options a year or so ago -- for his grandchildrens' "college education," mozilo said!)

oh, and because i can't resist any opportunity to bash jim cramer -- Countrywide Still Looks Like a Buy, February 6, 2007

The price of gold has risen 239% since 2001, while the price of oil has risen 267%. That means if the dollar had remained as 'good as gold' since 2001, oil today would be selling at about $30 a barrel, not $99.

should i be buying gold?

-- sunny successor, Friday, January 11, 2008 4:02 PM (

depends which of the following you think will happen

a) sound fiscal policy
b) bernanke revving his helicopter

it'll be one hilarious day when all the goldbugs retire and flood the market with their precious Au, devaluing their fortunes and fucking shit right up all over the place

ie I think it comes down to whether you think things are going to get deflationary or hyperinflationary. i think they will do anything to try prevent the former which means gold looks good as fiat currencies get devalued everywhere

there are arguments that gold>cash in a deflationary environment too, but i dont quite get why...if anyone wants to explain?

when people hoard copper, are they contributing to the dollar's fall or shoring it up?

Knew those pennies would come in handy.

ass pennies?

it'll be one hilarious day when all the goldbugs retire and flood the market with their precious Au

yes! though surely gold should just act as inflation hedge, so the better things are the less you need the gold to be doing its thing. can definitely see this being something of a speculative bubble (esp once it hits $1000 and goes front page of popular press) - but can anyone see proper financial management and order returning any time soon? (when is the bottom of all this mess? 2010? 2012? later?)

My dad has a gym sock full of silver dollars from the '70s. He won't let me touch it.

Sign of some sort -- both the LA Times and the NY Times have front-page 'um, this looks really really bad' stories today.

The bottom of the slump still looks 2-3 years away as far as i can tell..but how much longer after that before it turns around I dont know. 07-12 would normally seem about right, but the huge size of the bubbles this time, and their global nature makes me wonder if it could be a lot longer than 4-5 years (esp when peak oil and the other longer term clouds come into play). Then i guess it depends on the actions of central banks/govts (more intervention would cushion it on the way down but prolong it and makes worse in long run)

A shutdown of credit would suggest a 1929 situation (but that has only really ever happened once, unless you count japan 1990), and it looks like they'll do anything to flood more cash in, so somwhere between stagflation and hyperinflation for a few years looks maybe more likely

As bad as it will be here, it will be worse in Europe

lol

we gonna die

No we just gonna be correcting painfully.

A shutdown of credit would suggest a 1929 situation (but that has only really ever happened once, unless you count japan 1990), and it looks like they'll do anything to flood more cash in, so somwhere between stagflation and hyperinflation for a few years looks maybe more likely
Yea, the post-crash mismanagement of the 1930s economy was cookbook recession-to-Depression stuff and the economy surely won't be badly managed this time around, ha.

I just re-read Galbraith's book on the crash, and there's lots of interesting parallels, especially in how little understanding people had of exactly where all the money was, and how chain-reaction it would be when it finally broke.

Yea, the post-crash mismanagement of the 1930s economy was cookbook recession-to-Depression stuff and the economy surely won't be badly managed this time around, ha

not saying they wont mismanage it (they clearly already have been doing). more that it is more likely to be mismanaged via hyperinflation than via depression (retreat of prices). ie germany 1923 seems more likely than usa 1929 (i really dont know which way it will go, but i think they would do ANYTHING to avoid the latter scenario).

also the dollar was on gold standard during the depression which contributed to price falls. as the dollar isnt now there is nothing stopped more and more dollars being pumped out there, and leading to (hyper)inflation. this is surely why gold is rising (or more accurately fiat is falling), they cant magic gold out of thin air in the way they can magic money out of thin air.

if we were on gold standard then the deflation argument makes more sense to me because then you cant magic money out of thin air and therefore prices drop and depression occurs. they'll do the opposite and we'll be swimming in every more worthless dollars and pounds and euros and krones and whatever else before the decade is out

my guess all along is that we will get stagflation for the next few years -- we've already got the inflation, and now the rises in the unemployment rate are coming. it will get ugly IMHO -- probably worse than any recession we've had since the early 1980s -- but not 1930s bad. in any event, i don't envy whoever will be in the White House in january 2009.

it's the obvious question, but THE question is: where WILL all of the "cheap credit" go? commodities are already bubbling (will the next cheap-ass cable TV show sensation be "flip those gold bars"?).

will the next cheap-ass cable TV show sensation be "flip those gold bars"?

I'm still predicting a flood of "Living Simply" shows and pop-psych books.

Commodities are an excellent guess as to what sort of sponge might absorb the cheap credit, assuming the Fed cuts interest rates.

A word to the wise: if you try to hoard toilet paper, the acids in the paper will slowly render it into fluff. Save your mail order catalogs instead. If you hoard tobacco, then hoard loose, cut tobacco in hermetically sealed tins; cartons of cigarettes will go stale and dry out. (insert old-fashioned emoticon here)

http://www.waxidermy.com/bbs/images/smiles/old.gif

"fiat currency"

i.e. currency

im scared

as barry bigpicture points out, the most bullish thing going on right now is how much of a bear everybody is being! the psychology of the mainstream press espousing the idea of a recession either ongoing right now or about to come down hard is actually GOOD NEWS for the economy overall because it means the big players are more risk aware and will most likely contribute to softening the blow

e.g. the same way big magazine cover stories on booms typically signal approximate peak points, when they're about busts, they can signal troughs

kind of a bit late to be risk-aware though?

i'd also say the trough is when it ceases to be news. still seems to be very early in the curve to me

I think busts/recessions are stickier and slower than booms, for sure, but all this talk to the negative seems encouraging, especially compared to the rose-colored spin of the past two years or more. Large firms calling a recession and saying we're already in it bodes well for the short term because it means an end to not admitting things are fucked. Bernanke should now stick to his guns and keep a tight grip on the money supply IMO.

I'm leaning towards deflation at this point

it seems inevitable for a number of commodities already (labor, shipping costs, overhead/housing)

Not sure if this is the right place to post this, but this was pretty interesting:

http://nplusonemag.com/hedge-fund-interview.html

Btw, I'm pretty sure that interview should be dated January 2008, not 2007 as they have there.

ever notice how the stock market "plunges" on Friday, then "rallies" the next Monday?

The stock market is like one of those delicate upper crust women from the melodramas of the 1890s, always fainting and reviving.

how else will you afford coke

xp

friday sell-off for brokers weekend yayo fund is #1 theory

Citibank goes 'oops'

citygroup's been around (in some form) for 195 years?!?!

i am so happy citi is putting my credit card finance charges to good use. way to go guys.

us ilxors are all in the wrong lines of work!

"i made you a pension but i losed it"

the connection between car part thefts and the commodity bubble

from the linked article:

Handfield says a tightening economy may be spurring the spike in metal thefts. He says Irvine police recently arrested a man stealing metals from construction sites. He was a mortgage banker using his luxury Lexus SUV to haul the loot, Handfield says.

!!!

Where does a thief even go to sell their ill-gotten scraps of metal?

Recycling yards. No questions asked, for the most part.

http://calculatedrisk.blogspot.com/2008/01/ny-times-education-of-ben-bernanke.html

we gonna die

we gonna die

-- Jimmy The Mod Awaits The Return Of His Beloved, Sunday, 13 January 2008 17:19 (4 days ago)

At least you are consistent in your approach.

http://img2.timeinc.net/ew/dynamic/imgs/040713/165732__robocop_l.jpg

BLAMMO

Well, tomorrow I sell my mutual fund. It made me 80% last year and is now tanking like a barrel full of tanked monkeys.

ILX follow my lead!

i'm too wet behind the ear in that dept - i have to ride this bitch out.

economy is better than ever

took a $400+ bath on the 401k this quarter... will be moving to under-the-mattress option later today.

i'm starting to think a savings account is a better investment than either a mutual fund or a house

savings in which currency?

good point

my savings account pays about half of inflation

http://img.photobucket.com/albums/v134/tracerhand/squeezethatmoneybrother.jpg

In the current climate there is no safe haven for your money.

The safest investments will be those which have immediate practical value to you personally: tools, practical clothes and shoes, acquiring a valuable skill - that sort of thing. The perfecta would be a tool that you would use for yourself, is not common, and could conceivably be turned into a small side business to earn a few bucks.

The riskiest will be those where you have no firsthand knowledge or experience, the "Argentinian Railway Bonds are a sure bet" or "the Thai auto industry is going to be the next big thing" kind of investment.

The best investment of all is yourself. Skills

Sometimes a skill is rather forlorn without the tools to make it go.

an interesting chart from our friends at calculated risk:

http://bp1.blogger.com/_pMscxxELHEg/R5TbFlX1msI/AAAAAAAABfk/WCQnqA1I_5A/s1600/SP500MonthlyCloseChange.jpg

and for the REALLY antsy ILXors, the same chart from the Great Depression through today:

http://bp0.blogger.com/_pMscxxELHEg/R5TrdVX1mtI/AAAAAAAABfs/vqPdabZ5Or4/s1600/DOWCloseMax.jpg

blogspot do not allow hotlinking bro

SQUEEZE THAT MONEY BRO

bernanke needs to start saying bro

blogspot do not allow hotlinking bro

my bad!

Bear Markets and Recessions -- check out the charts.

at any rate, tomorrow (1/22/08) may be very interesting indeed.

or, if y'all prefer, a visual representation:

http://img71.photobucket.com/albums/v216/spinnerau1/Snopes/Wet_roller_coaster.jpg

b/c this threads needs some MORE indices to watch plummet in real time:

http://chart.finance.yahoo.com/c/0b/_/_n225

http://chart.finance.yahoo.com/c/0b/_/_hsi

http://chart.finance.yahoo.com/c/0b/_/_ftse

I love the existence of "stock market futures" -- I think we should start a stock futures futures market so we can get even further ahead of the curve

mo' futures index porn:

http://ichart.finance.yahoo.com/instrument/1.0/%5EFTSE/chart;range=1d/image;size=239x110

http://ichart.finance.yahoo.com/instrument/1.0/%5EGDAXI/chart;range=1d/image;size=239x110

http://ichart.finance.yahoo.com/instrument/1.0/%5EFCHI/chart;range=1d/image;size=239x110

I think we should start a stock futures futures market so we can get even further ahead of the curve

until eventually the market foresees its own death and goes on a long drinking binge.

stock market futures futures is called "the stock market"

everyone should strike and invest in paint

emergency rate cut?

Invest in pumpkins now and cash up big in...October?

Gosh:

http://www.nytimes.com/aponline/business/AP-Fed-Interest-Rates.html?hp

ok thats INSANE. everyone to the bunkers

man the lifeboats!

here they come!

http://img62.imageshack.us/img62/853/VRWCBlackHelicopters.jpg

emergency rate cut?

-- laxalt, Tuesday, January 22, 2008 9:33 AM (4 hours ago) Bookmark Link

damn, son.

Alright! Here comes the "petroeuro," £1=$3, massive inflation.

stock market futures futures is called "the stock market"

so it's futures all the way down!

no wonder we're fucked!

the fed reminds me of bubbles from 'the wire' right now.

By June, Bush's $500 tax rebate will only buy a pack of 'ports and 40 oz of St Ides

http://i12.photobucket.com/albums/a228/mortaljive/Extra%20Images/normal_dr_strangelove.jpg

http://ichart.finance.yahoo.com/instrument/1.0/%5EDJI/chart;range=1d/image;size=239x110

you know what fucking kills me is that in every article about a major dip or crash in the stock market, you get reax from various analysts who say things like "well it looks like the fed finally gets it!" or "some feel the fed has been slow to wake up to the deterioration in the stock market" or "brananke has finally decided to stop the bleeding".. as if the panicky traders who have bet long on endless leveraged growth are the smart cookies and the fed is some dopey retarded cousin. you play with matches for a living, you shouldn't insult firefighters.

haha "brananke"

otm tracer

not that i think the fed even knows what it's fighting at this point, or whether there's a fire, or whether their extinguisher is filled with gasoline or what

but yeah the fed doesn't remind of me of bubbles so much as all the "analysts" and traders whose eyes are red and raw from lack of the gushing credit flows and leveraged whatnots to which they've become accustomed; just an extra little drop into the syringe and they're like "AAAAHHHHHH.... the fed gets it"

meanwhile the national debt grows and mean incomes continue to stagnate

http://www.philosophising.com/dogpress/images/hair.of.dog.jpg

i mean, these dudes really are the top-hatted robber barons of old, playing with trillions of dollars that no one else ever sees and putting the entire world's economies at risk - and somehow it's the fed's fault when they get a hangover - somehow the taxpayer is supposed to offer them even cheaper terms on their loans than they've been used to

we're in new territory here

http://media.npr.org/programs/atc/features/2007/aug/panic_cover200.jpg

Bonus points to whoever finds the first bad political cartoon about all this that features the Cloverfield monster stomping down Wall Street with the word "RECESSION" on its chest.

found on a goldbug blog:

Problems Bernanke Faces

* Falling real estate prices
* Subprime housing mess
* Alt-A mortgage mess
* Pay Option ARM mess
* Sharply rising unemployment
* Rising credit card defaults
* Commercial Real Estate implosion
* Global wage arbitrage
* Falling US dollar
* Overheating China
* Slowing global economy
* Tapped out consumers
* Implosion of $500 trillion in derivatives
* Solvency issues at banks
* Forced unwind of massive Yen carry trade
* Boomer retirement
* Pension plan assumptions in an economy starving for yield
* Rising corporate defaults

LOOKS LIKE A GOOD TIME TO STAY IN HIGHER ED!

I ain't moving anywhere!

I feel pretty stupid for investing in my 401k (actually a 403). I'd had a lot more fun if I had eaten the taxes and spent the money on booze, records and drugs.

I mean, like I lost a thousand dollars on paper this year I think!

I have just called the local banks to start the process of refinancing my mortgage.

I really don't like being a recent college graduate and reading this.
Although I doubt there's anyone who does, really.

anyone think a stimulus plan is a good idea?

anyone think a stimulus plan is a good idea?

absolutely (that's what keynes was all about, yo) -- the chinese and the bond markets may not like it very much, tho'.

I feel pretty stupid for investing in my 401k (actually a 403). I'd had a lot more fun if I had eaten the taxes and spent the money on booze, records and drugs.

you'll be fine, as long as you keep your job and keep making contributions.

Don't pay attention to your 401k or 403b value for the next X years, just max out the matching contributions. A dollar for dollar match gives an immediate return of 100%, doesn't it? And that doesn't take into account tax advantages, or reinvested dividends, or compounding.

I'm convinced that the next channel for promoting consumption will be loans against the value of the 401k, which will result in old people eating rats in 20 years.

At least this tax refund (is that what GWB wants?) is happening when I'm being taxed enough to GET something.

</short-sighted self interest>

Don't pay attention to your 401k or 403b value for the next X years, just max out the matching contributions. A dollar for dollar match gives an immediate return of 100%, doesn't it? And that doesn't take into account tax advantages, or reinvested dividends, or compounding.

Lol we match double at 5% but I'm also contributing another 5% which isn't matched.

pick funds that have really low operating costs, that way the robots and douchebags losing your money aren't charging you to do so.

im no economist, but it seems to me the economy today is radically different than it was in keynes time

Yes and no, money is still borrowed into existence. everything has changed and yet not that much has changed

thats deep.

good analysis

to answer your question as to whether it is a good idea, i'm pretty much at the stage of thinking there are no good ideas, sometimes its just better to let the drunkard be. As to whether it will work, which is a different question, they are totally shot if it doesn't, where next if this doesn't work? real interest rates are already negative even before this. its also election year

also, as the uk is finding out interest rates cuts aren't necessarily passed on the customers at all

http://www.iwillteachyoutoberich.com/blog/the-worst-financial-advice-from-around-the-web-today-only

actually, i think its kind of important the point about money being borrowed into existence, because while more money can be dumped onto the economy, it still has to be borrowed by someone, the question is whether sentiment is holding up enough for people to take on yet more debt and spend, or whether they'll just try pay off what they already have, which returns money to source and is deflationary

Aw man...

President Bush and leaders of Congress joined in a rare show of cooperation in promising urgent action to pump up the economy with upwards of $150 billion in tax cuts and government spending.

http://www.cbpp.org/1-18-08tax-stmt.htm

^ comprehensive dismantling of the president's plan

So I'm a youngish dude. I was in middle school during the dot com crash and didn't have a job in high school during the subsequent recession.

You guys that have lived through this stuff before: how freaked out do I need to be by this talk of "a really bad recession?"

(lol i'm graduating in 6 months, shit.)

graduating into a teaching or a master's program, more like

Yeah I'm going straight into a teaching program this summer I think.

Unless I don't.

GF is moving to NY for grad school next January. Any teaching job I take is gonna require a two-year contract. I might chase her for grad school, who knows. I have about a month to decide lol

Plz read "I might chase her for grad school, who knows" as "damn am I gonna stay with this girl or not?"

It's been a good 4 years and I'd love to continue it, but wtf do I do with a bachelors in English without a teaching cert or any contacts in publishing etc?

work in a record store, duh

learn to pour beer

make the noize bored more fun

re: fears about 401k's etc - I contribute dutifully to my IRA (our co. doesn't match. dicks.) and will likely continue to do so. The low-fee stock index funds I bought 3 or so yrs prior to the "correction" in 2000 and have occasionally contributed to since have weathered the storms pretty well. The key is making sure you're not socking away money in these things that you will likely need in the short term (& obv w/ IRA & 401k you prob don't want to even think about it until your nearing retirement in order to avoid penalties). I guess it's important to remember that the market has averaged something like right over 9% since 1927 - which has includes the Great Depression as well as several nasty recessions.

of course it's entirely likely that I don't fully understand the intricacies of the current economic climate and that we are, in fact, all DOOMED.

learn to pour beer

-- El Tomboto, Wednesday, January 23, 2008 2:08 AM

yeah there are these obnoxious "Texas School of Bartending" commercials on the radio every day and i occasionally consider actually dialing

one-EIGHT HUNNID- bar- TEND!

i was in college during the 1991-1992 recession -- i coped by moving back with my parents, getting a full-time job and finishing up undergrad as a part-time student. it was not fun, but i survived. also, i was very lucky in that my employer at the time had a VERY generous tuition reimbursement policy so my undergrad debt was minimal (i understand that that may not be realistic, and i admit that i was very fortunate in that regard). i ended up graduating in 1997, right when the dot.com thing took off and was able to get a good job. also, my BA is in english/poli. sci. (though i started out as an economics/poli. sci. student) & my undergrad job was in accounting and benefits administration (which may have made me somewhat more marketable when i finally got the BA than the typical english BA).

i survived the dot.com crash/post-9/11 NYC-economy-in-the-shitbin by being in law school during the worst of that -- though those days were financed by student loans (for which i am paying dearly now). i survived that, too, but i would hesitate to recommend doing any kind of post-grad (including law school -- ESPECIALLY law school) if you'll end up deep in student loan debt.

and re IRA investments -- learn the term "dollar cost averaging" (it means make regular deposits into the IRA account at a set time interval [weekly, biweekly, monthly, whatevah). it won't totally prevent losses if you are investing in equities, but it will mitigate them to some extent. dollar-cost averaging is how you invest in 401(k)'s, anyway, so if you do that then you already know the drill.

i also heart low-fee/no-load funds ... paying a load is throwing your money away.

im no economist, but it seems to me the economy today is radically different than it was in keynes time

that is true -- but the basic idea remains the same: put money in the hands of those who are most likely to spend it (pref. lower-to-middle class folks), who then do just that (and thereby put money in the hands of merchants, who then spend THAT money, etc.). if anything, it may be MORE effective now since (as is repeated ad nauseum in the press) our economy is so strongly dependent on consumer spending.

the problem, though, is funding such a stimulus program -- we've got deficits now to worry about (and freaking out the bond traders and the chinese by running the debt even higher) (and thanks to dubya and his stupid tax cuts/even stupider Iraq war). and dubya (and ANY GOPer) WILL veto anything that raises taxes (the ghost of ronnie reagan still roams the land!)

"I might chase her for grad school"

NYC has been a not very good place for those who don't already have jobs or high-demand skills and aren't willing to go into (high?) debt.

And soon (now?) it will be a TERRIBLE place for same. There won't be new jobs outside the service economy, and there will be huge financial layoffs, so you better hope the Europeans learn to tip.

"how freaked out do I need to be by this talk of 'a really bad recession?'"

Incidentally I got my BA in the early 90s recession, and our commencement speaker at my Big State University was the Postmaster General. He told us "there are a lot of good jobs with the post office."

Now that the NYC economy is basically all financial and service (serving the needs of the financial workers), I'm curious to see what happens now, especially since it looks like Europe and Asia are having problems of their own.

will: why would you contribute to a 401K if your company isn't matching?

http://www.nytimes.com/2008/01/23/opinion/23stiglitz.html

short version: "if we had democratic policies in place we wouldn't be in this mess"

Yes and no, when everything is 'booming' people have a tendency not to want any measures that might stop the good times rolling, even though they are the very measures that would stop it falling off the edge of a cliff down the line

um, kinda off-topic, but who made that dolly parton/robert armani mashup?

will: why would you contribute to a 401K if your company isn't matching?

-- Jimmy The Mod Awaits The Return Of His Beloved, Wednesday, 23 January 2008 04:06 (10 hours ago) Link

yeah poor wording on my part. I meant to say that since my company doesn't match 401k I try to max out my Roth IRA instead.

there are tax benefits even if your company doesn't match. You can sell low performing funds and buy into better performing ones or switch over to bonds etc within your 401(k) and not have to pay capital gains on it. You're only taxed when you actually cash out.

Roth IRAs are taxed on the way in but not on the way out, which I think is better. But there's a contribution limit.

also, assets in 401(k)s and IRAs are off-limits to creditors in case of bankruptcy (yes, even after bankruptcy "reform"). not that anyone here is planning on going bankrupt, but it's nice to know that if you do then at least your retirement money won't be on the block.

http://www.stock-market-crash.net/images/ftse.gif
http://etftrends.typepad.com/photos/uncategorized/2007/03/13/japanski.jpg

we gonna die

xp
ah I see

yeah ideally you have the disposable income to do both. Contributing to your 401k reduce your taxable income and (have capital gains benefits as brownie points out), plus, if your company matches, hey! free money!

IRA's don't get taxed when you cash out at retirement (...at least not for now, muahahahaha)

reduces

http://www.nytimes.com/2008/01/23/us/politics/23campaign.html?hp

Mr. Romney, in a speech to Jewish leaders in Boca Raton, sought to portray an air of reassuring confidence as he went through an economic plan that included tax cuts to business to encourage investment, as well as to individuals to spur spending.

“Every time I’ve seen things really get scary and the markets really collapse, I put aside my fear and say — aha, this is a buying opportunity,” he said. “My experience is, whatever goes down goes up.”

Former Mayor Rudolph W. Giuliani of New York was more sketchy as he answered questions about how he would handle the financial upheaval. Addressing a reporter he knew from New York, he pointed to his experience as mayor in suggesting that he was prepared to handle the crisis, but offered no details on what he thought should be in a stimulus package, or what taxes should be cut.

“Congress and the president should do a stimulus package and they should do a spending reduction package,” he said. “You’re familiar with that; we used to do that in New York.”

The shift could prove particularly complicated for Mr. McCain, of Arizona, who, in his own view, began gathering strength as a candidate after conditions in Iraq appeared to improve; he was long a proponent of increasing troop strength there, and national security and the war are the two mainstays of his campaign appearance. He brought up the action by the Federal Reserve before a question was asked at a news conference in Pensacola, and in a speech there, pushed elements of his own economic plan.

Those include eliminating the alternative minimum tax, making the Bush tax cuts permanent and cutting the corporate tax rate to 25 percent from 35 percent. “And, my friends, we’ve got to cut spending,” he said. “Otherwise we will continue to borrow money from the Chinese.”

The Washington Post/ABC News poll found no appreciable differences among Republicans in their ratings of whether Mr. Romney, Mr. McCain or Mr. Giuliani would be best at dealing with the economy.

Harding, Coolidge, Hoover, Reagan, Bush, ??????

Who will be the next Republican to fuck our shit up?

Fucking dilettantes.

The weakened economy and the turmoil in financial markets have helped to cement a gradual shift in emphasis in the presidential campaign to domestic issues from national security, giving the candidates an opportunity on Tuesday to spotlight economic proposals and try to convince voters that they could handle a crisis.

Whoever would have guessed that a stock market crash and almost unprecedented action by the Fed would have put the economy in the spotlight, well done Adam Nagourney for bringing us this brilliant analysis.

I love how Romney and Giuliani place much of the blame on overregulation. Repealing Sarbanes Oxley would not have done a THING to prevent this-- in fact, without SOx some of the losses may have been hidden away, festering to do even more damage.

sarbanes-oxley did absolutely nothing whatsoever except employ a bunch of self-proclaimed sarbanes-oxley experts to consult for every poor bastard business that didn't know where to even begin trying to comply with sarbanes-oxley

it's one of the more asinine and pointless business regulations I'm unfortunately familiar with

just as an aside, the small business i own is completely fuckmared. looks like worst december ever will be followed by worst january ever.

I am very glad I do not own a small bricks and mortar retail operation, that is a fact.

or any retail operation, to be honest.

http://www.newsworld.cbc.ca/arts/images/pics/wonderful2.jpg

well at least the proposed plan to allow rapid depreciation of investments will oh no wait that really only works for the manufacturing sector fucking assholes

steel and auto industry lobbies profoundly more effective than guitar store lobby

if guitar stores and sex workers got together they could probably get some juice tho

plus the meetings would be awesome, esp if we incorporated liquor stores.

that would be great, especially the scene where the liquor store proprietors and the madams got in your face about what the hell guitar stores have in common with two industries whose entire existence is dependent on the whimsy of the state's blue laws and you come up with some goofy wayne's world answer off the cuff and everybody cheers

Now *that's* a stimulus package!

http://www.ft.com/cms/s/0/24f73610-c91e-11dc-9807-000077b07658.html

Soros says it's the worst market crisis in 60 years.

what is renminbi?

is that a srsly question?

As expected: http://krugman.blogs.nytimes.com/2008/01/24/stimulus-disappointment/

If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.

This sounds analogous to what happened in Japan in the 90's. Is that the kind of recession we're headed into?

If it hits that point, yes. When rates are at, or close to 0%, there's nothing left to cut. Under deflation, it gets to a point where businesses can make more money by saving their cash than by growing the business, and then you get a really nasty deflationary cycle going on. That's what happened in Japan.

deflation vs hyperinflation again;)

japan is still a strange situation because yes they had/have deflation, but didnt they kind of play a trick, sacrificing the domestic economy, and basically exporting inflation (yen carry trade and all that?).

this is a learning curve for us all, but i still think it looks more like hyperinflation than deflation. (almost all economic meltdowns have been hyperinflationary, other than great depression and japan?). the decreasing worth of the currency doesn't suggest deflation either, i dont know how it will pan out though!

this is a learning curve for us all, but i still think it looks more like hyperinflation than deflation. (almost all economic meltdowns have been hyperinflationary, other than great depression and japan?). the decreasing worth of the currency doesn't suggest deflation either, i dont know how it will pan out though!

well, bernanke has the nickname "helicopter ben" for a reason!

seriously now, i don't see how flooding the market with cheap money CANNOT be inflationary at some point.

This dude is even more pessimistic than Gareth. In ten years' time we'll be forced to eat our weakest neighbour just to survive.

Legendary Funds Manager Predicts Utter Global Collapse Stemming From Bursting of Property Bubble

Blames Bush-Cheney "regime"

In a recent interview on CNBC with Ron Insana, one of the "old-timer" funds manager, Julian Robertson, predicted "utter global collapse" as a consequence of the bursting of the world-wide property bubble.

Often called "Never Been Wrong Robertson", the former head of Tiger Management (once the largest hedge fund in the world), is extremely worried about the speculative bubble in real estate.

Specifically, he is very worried about a world that is sustained by American consumer spending which is in turn 1/4 sustained by a property bubble. He predicts that 20 million people could lose their homes once the property bubble bursts.

Even more worrisome, he thinks central banks around the globe out of desperation will try to re-inflate the world economy with more liquidity that will create an inflationary spiral unseen in the economic history of mankind.

"Where does it end?", Insana asked Robertson. "Utter global collapse," he answered. But not just economic collapse ... collapse of epic proportions.
Collapse and disintegration of all infrastructure, including government.
Inflation will run into the double and triple digits. "Food production will fall. People will be carrying around U.S. dollars in wheelbarrows like Germany," he said.


There will be "total collapse of public infrastructure. Total collapse of medical care systems. All public pension plans, Social Security will collapse. All corporate pension plans will collapse."

"The American consumer is effectively now supporting the rest of the planet," he continued. "Consumption rates in all other nations are falling, have fallen to the point that the tax revenues to governments, that the business and industries those nation states are providing is now a net negative number relative to total debt service and public cost, that this exists in virtually every nation state on the planet now."

And for much of this "doom", interestingly, he blames the Bush-Cheney "regime".

"They have now consolidated power and money on the planet to the maximum extent possible. The planet's net liquidity, that is its, net free cash flow. Is now a negative number. The planet is not simply sinking into a sea of red ink; it is already sunk. The people just don't realize it yet," he said.

According to Robertson, "the Bush-Cheney regime is preparing the nation for transition from democracy into dictatorship because a dictatorship will be necessary to control, in 5 years time, food and water riots." He said "the federal government, that part of Patriot II Act, the internal exile, that the government is going to have to build now huge detention compounds on federal lands, probably in the West where the land is available, to potentially house 50 million or more citizens that will be in financial ruin."

In 10 years time, whoever is left will be effectively starting again, he said.

"More importantly, and I'm trying to think how we imply this or how we express this to the people, what extraordinary times we are living in and how the destruction of the planet has been engineered by the Bushonian Cabal from 1980 to 1992, and then from 2001 to present, which has effectively destroyed the economic liquidity of the planet," he said.

Robertson ended the interview by saying that he hopes he is not alive to see this.

"The lucky ones are the ones who are my age now," he said.

someone's been reading 'the road'.

if you believe in deflation put your money in savings, im there

if you believe in hyperinflation put your money in gold, im there too

Bushonian Cabal

Er?

Actually Robertson must have been catastrophically wrong in the past considering he managed to grow his fund from $8m to $22bn and then promptly wipe most of the value out.

I intend to weather such a crisis by pretending to be the second coming and developing a cadre of loyal followers.

A little googling suggests that story is dubious. Any source?

Clearly that was the work of the Bushonian Cabal.

Yes, apparently most of the comments in that story were invented by one Al Martin:

http://www.movermike.com/posts/1118125009.shtml

This is crazy.

Most taxpayers are going to get a refund of $600-$1,200?

In Las Vegas, they hand out free chips to the high rollers, don't they? And the low rollers get some free nickels for the slots. Same idea.

Jesus Christ a bunch of young people thinking they're the first people in history to experience a recession.

So the stock market is basically experiencing brief memory lapses about the long-term problem and moving on short-term good news, right?

have you seen my blue-eyed sally?
she lives way down on shin-bone alley
the number on the gate is the number on the door
and the next house over is a grocery store

stay all night, stay a little longer
dance all night, dance a little longer
pull off your coat, throw it in the corner
i don't see why you don't stay a little longer

Jesus Christ a bunch of young people thinking they're the first people in history to experience a recession.

-- aaaaaaaaaaaaaaaaaaaaaaaaaa, Friday, January 25, 2008 2:01 AM (12 hours ago) Bookmark Link

soros ain't that young.

Dems' perfidy knows no end, and Krugman says why:

the Democrats appear to have buckled in the face of the Bush administration’s ideological rigidity, dropping demands for provisions that would have helped those most in need. And those happen to be the same provisions that might actually have made the stimulus plan effective.

...the plan gives each worker making less than $75,000 a $300 check, plus additional amounts to people who make enough to pay substantial sums in income tax. This ensures that the bulk of the money would go to people who are doing O.K. financially — which misses the whole point.
...If the money the government lays out doesn’t get spent — if it just gets added to people’s bank accounts or used to pay off debts — the plan will have failed.

...The words of Franklin Delano Roosevelt come to mind: “We have always known that heedless self-interest was bad morals; we know now that it is bad economics.”

And the worst of it is that the Democrats, who should have been in a strong position — does this administration have any credibility left on economic policy? — appear to have caved in almost completely.

Yes, they extracted some concessions, increasing rebates for people with low income while reducing giveaways to the affluent. But basically they allowed themselves to be bullied into doing things the Bush administration’s way.

i'm 100% in agreement with you on this one, morbius. that the dems signed off on this "stimulus" bill is disgraceful on a number of levels.

http://media.townhall.com/Townhall/Car/b/ca0123cd.jpg

i imagine the republicans said "fine, if you won't budge we won't pass the bill - how will your constituents like that?" to which the democrats said "yeah well what about YOUR constituents??" to which the republicans said "we've convinced them they can't count on the govt for anything so why should we even care"

re that cartoon i cannot wait until these bizarre antigovernment zealots are exposed for the toadying, complacent elites that they are

Chuck Asay makes me want to throw up my hands and say fuck it.

"Hail, holy Ass!" the quiring angels sing;

"Priest of Unreason, and of Discords King!" Great co-Creator, let Thy glory shine: God made all else, the Mule, the Mule is thine!"

--Ambrose Bierce

http://bigpicture.typepad.com/comments/images/2008/01/23/wheres_the_bottom.png

they should issue the rebates as visa gift cards, in which case people would have to spend them.

not actually kidding.

Where's the bottom? As in my aunt Fanny?

Haha, I can clearly hear the six different variations on meaningless bullshit coming out of that CNBC screen

today bernanke injected more crack into the system ...

http://mechapixel.com/slags/329/2285EyAN.jpg

is that would just happened up there at the 2pm mark? I was getting actual work done

ritholtz called it at 10 am

don't see why you don't stay a little longer

so we get our stimulus checks by what, August? I NEED NOW

Instead of taking a stand and recognizing the serious errors made in this little economic situation, once again it's ... easy solutions that'll lead to the same problems again.

Who are these people running our country? Man alive.

And down it goes....

So money is basically free now.

This intraday and day-to-day volatility in stocks is just INSANE. Makes 1999 look stable.

My totally inexpert guess is that you're seeing push/pull between fear of recession and people thinking "gee, this is a great buy-in point" (who are presumably also ignoring/downplaying the fear). I'd also bet you'd see a similar pattern right before past recessions.

Hello everyone when is the next cut?

http://www.ft.com/cms/s/0/28b464a2-cf50-11dc-854a-0000779fd2ac.html

The US should face its need for adjustment with courage and reason, not fear. It should stop behaving as the whiner of first resort, ready to waste all its dry powder on a short-sighted attempt to prevent a 2008 recession. Many poorer countries with weaker markets and institutions have survived and benefited from an adjustment that involves a year of negative growth. Faster bank recapitalisation, fiscal investment stimulus and international co-ordination should be first on the ­policy agenda.

OTM--the U.S. seems to've got itself locked into a boom-bust cycle again through short sighted monetary policy.

My totally inexpert guess is that you're seeing push/pull between fear of recession and people thinking "gee, this is a great buy-in point" (who are presumably also ignoring/downplaying the fear). I'd also bet you'd see a similar pattern right before past recessions in the history of capitalism, cause that's what capitalism is.

boom-bust cycles as we know them today are around 300 years old

the graph at the top of this thread was a brilliant move

I'd also bet you'd see a similar pattern right before past recessions in the history of capitalism, cause that's what capitalism is.

I mean the unusual volatility of the market right now. I mean I'd guess that before recessions you tend to see big ups and downs with an overall downward trend, the greater downward force being fear of recession and the lesser upward force being denial

http://www.federalreserve.gov/releases/h3/Current/

can anyone explain why the 'reserves of non-borrowed reserves' rapidly went into negative territory in January? Am i misreading this? How can reserves be negative??

So I couldn't find any other thread to put this in but surely this is the kind of thing to make Tombot point and laugh. Favorite part:

After a month of heartbreak and frustration, I finally decided to suck it up and ask my contacts for assistance. They tried, but to no avail. I then asked my White House intern friends for help, but since I had changed political sides after my internship, they were not willing to help me.

From a Dartmouth grad, ladies and gentlemen.

"Euros Accepted" signs in NYC

http://www.reuters.com/article/newsOne/idUSN0655798320080206

Talking about retail on CNN: "...worst January in forty years."

http://www.reuters.com/article/newsOne/idUSN0655798320080206

I scored a temporary job long enough to pay my phone bill.

articles like that always leave a lot to the imagination.

It's a little hard for me to believe that int'l relations-related entry level jobs would suffer that significantly from the current economic downturn, at least so soon. More likely it's just a highly competitive field - low demand, lots of highly educated people wanting to do it.

"If I can't even find a job the economy must be really bad"

actually I would say underemployment around here is hitting pretty much every stripe and maybe even my crowd (the cleared people) - I'm on a program that's going nowhere but up, but I keep hearing from everybody else that they're worried/looking around

When you wet, it's slippery (yeah)
When it damp, it crampin
If you slidin', you're tumblin' down
Don't want you on the ground!

I am kind of amazed I still have a job, especially since I work for a real estate company. At least once a day I take a minute to count my blessings. Then I count again to make sure that my blessings will still cover my rent.

I do my best not to take my job for granted, that's for sure.

xxpost - even if that's true, I don't think that article is representative. Although she was a fulbright scholar and all that, underneath it just sounds like the same "I just got out of college and life isn't as easy as I thought," article I've been reading every year for as long as I can remember.

that said, of course, I'm REALLY lucky to have my job (I'm no Fulbright scholar), and really glad to be going back to school next year.

laxalt, somebody pointed me toward this link today, about "non-borrowed reserves".. i can't say i understand it though -

http://globaleconomicanalysis.blogspot.com/2008/02/borrowed-reserves-and-tin-foil-hats.html

Well, I guess we are going to find out sooner or later whether negative non-borrowed reserves are as bad a thing as they would appear to be!

It would be interesting to see what the equivalent figures in the UK and Euro would be (and is that Iceland sailing into the same murky waters?)

that chick must be doing something wrong--my school has a big I.R. program and isnt anywhere near as good as dartmouth and large portions of its graduates get jobs pretty easily w/ the govt and NGOs

After a month of heartbreak and frustration, I finally decided to suck it up and ask my contacts for assistance.

ok someone who doesnt use any connections theyre lucky enough to have as an opening strategy is prob just a retard or rich enough that they have the luxury to prove it to themselves and the world that they can make it on their own

i mean do they not teach you this shit in college?

my friend went to Dartmouth--she just has to breath and she has jobs thrown at her in NYC. I went to a shitty state college ... took about 7 months to find anything, with 90% of the interviews starting with, "so, where did you go to school?... really?" and ending with, "you really don't like Perec?"

aka, people who don't use their school connections are dinguses.

weren't you not going to post here anymore or something?

I don't think you "get it"

(tips a wink at burt, who covertly signals thumbs up)

Aw, you're in love.

In love with life, Ned. With life!

Fun fun:

The banking industry, struggling to contain the fallout from the mortgage debacle, is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.

One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers.

Credit Suisse officials have met with senior officials from the Department of Housing and Urban Development, which runs the FHA, and other policy makers to discuss the proposal.

lol Ned I missed that! especially funny considering how CS had to revise down again this week. shitbirds.

So is Obama being set up as Carter II or what?

We've got plenty of time to get all the hate out pre-November. And won't Bush's farewell address be inspiring.

Another article from Portfolio on the rising pressure for a government bailout of the big financial firms:

The Bankers' Bailout

The rescue operation brings to mind John Kenneth Galbraith's dictum that in the United States, the only respectable form of socialism is socialism for the rich.

http://bigpicture.typepad.com/comments/2008/02/quote-of-the--5.html

JKG getting big kudos from the bears post facto!

http://www.fpif.org/fpiftxt/4996

"Skyrocketing oil prices, a falling dollar, and collapsing financial markets are the key ingredients in an economic brew that could end up in more than just an ordinary recession."

very OTM inetrnetter comment on today's action. (prognosticate all you will about the economy in general, but there is just NO predicting to stock markets.)

by FreddieMac 6 hours ago

So the DJIA spends the greater part of the day (plus last few days) solidly in negative territory, and at 3:35PM Eastern Time the market suddenly explodes into POSITIVE territory (230 points, from peak-to-trough), as incredibly large volumes of funds SUDDENLY flow into the market? That was about as subtle as the Navy's missile hitting the disabled satellite the other day!

This AMBAC story is absolute poppycock: is THIS the best they could come up with, the unlikely explanation to provide cover for the CO-ORDINATED buy? Once again, the infamous Plunge Protection Team was leading the way, providing government liquidity to the big banks to flood the market to rally stocks.

If you ever doubted it, this clearly shows how the market is rigged, and is no more allowed to operate on free-market principles than the Soviet Republic communist system EVER was. Get used to it, as it is what it is.

Oh, well, the government giving money to banks to prop up the stock market (which is reaching some technical levels that are very worriesome) is no doubt better than the idea of giving recession rebate checks to the sheeple..... But this market is about as sustainable on it's own strength as Terry Schiavo was when hooked up to life-support.

Rising Risk of a Systematic Economic Meltdown

http://pub32.bravenet.com/photocenter/remote/2724789253/1B96860485.jpg

"Is It Thunderdome Yet?" A Rolling Looming Apocalypse Thread

More on bailout talk in Washington:

A 'Moral Hazard' for a Housing Bailout: Sorting the Victims From Those Who Volunteered

fuck republicans

you all realize this makes the hillary vs obama race completely moot, right? and the GOP already figured this out and is just letting McCain be their fall guy for this round?

That's why this year is going to be such a goddamn trudge to November!

One thing that really gravels me is that the Federal Reserve Bank has regulatory powers that extend well beyond the ability to set the Fed Funds rate, and include such things as raising the margin requirements for stock purchases, but because the Fed's governors have completely bought into the Reaganite ideology that regulating free markets can only hurt matters, it has systematically eschewed using these powers, which not only could have softened the dot-com bubble and bust but could also place some boundaries on the over-leveraging used by hedge funds.

By now every single lesson from the Great Depression has been forgotten and every safeguard put in place by those who saw it and lived through it has been dismantled (Glass-Spiegle), co-opted (SEC) or heavily abused (FDIC).

Regulation is for the way down;)

By now every single lesson from the Great Depression has been forgotten

i dunno, is this true? isn't bernanke a great depression expert and thats maybe partly why he was brought in?

more to the point, i think there's one lesson they learned very well. Avoid Deflation At All Costs (which is why Japan 1990 is the only subsequent downturn that followed that path?)

Which is what all this helicopter ben business and $600 presents is all about? what we'll get instead may be just as bad, but any govt will choose rampant inflation over deflation every time now

Eh.

Deflation destroys by slow attrition. It tends to slow everything to a crawl and to strangle commerce. Hyperinflation destroys like a prairie fire, or more accurately, like a neutron bomb that leaves infrastructure intact.

Deflation tends to favor the old and the established, but chokes off investment and fossilizes an economy. Hyperinlfation tends to favor the young, who had less invested, fewer savings and who tend to start from scratch anyway and have their working lives ahead of them.

Don't go wishing for either one, but I suspect that the hyper-right wing establishment is finally going to get its inner heart's desire: wipe out all the work of the New Deal and Great Society, wreak revenge on those damn-hippie baby boomers, and reduce the next generation to properly obedient field workers. It will be Reagan's final legacy.

They'll save their own fucking hides through the wonders of our all-benevolent Chapter 11, which has at last become the sword they needed to work all this magic without ruining themselves.

Bah! I feel immensely old and sour when I think about this stuff.

Deflation favours the liquid, hyperinflation favours the illiquid

their actions thus far look like they will do anything to avoid the former. the former means a full stop for the economy, vastly reduced economy. the latter means activity continues, allbeit with people poorer (some of them wont realise)

vastly reduced ACTIVITY, i meant to say

though you could argue that economy and activity are the same thing, i dunno

Deflation favours the liquid solvent, hyperinflation favours the illiquid insolvent. Slightly different emphasis provided. Both are true.

not if you are solvent but rely on a wage for income.

Wages may lag in a hyperinflation, but they beat the living tar out of a fixed income.

even so, the feds actions thus far suggest they learned one lesson from the great depression? doesn't mean they're doing the right thing, but they've reacted very quickly, and seem happy to get more dollars out there? (at what ever cost that ultimately brings)

Yes, they do seem very happy to spew maoney across the landscape like t-shirts at a rock concert, although it is a nail-biting, jittery sort of happiness.

http://www.harpers.org/archive/2008/02/0081908

When is the next cut? march 18?

That Harper's article is excellent.

Cunning Realist has a little project going.

We haven't even got a good name for that pass play in the last Super Bowl yet. Dude needs to chill.

Hahah

http://bigpicture.typepad.com/comments/2008/03/foreclosure-pro.html

"the owners, have ceased paying their mortgages in some cases for nearly 2 years and have continued to occupy these homes. Now, these are homes in excess of $2,000,000 in the very best neighborhoods in South Florida"

this true? those jinglemail dudes must be regretting handing the keys back so easy now

http://themot.org/gallery/d/45773-2/gas_prices.jpg

yeah i was gonna start a rolling shitty gas prices thread yesterday.

$3.25 down the street, though i'm sure i've got it easy compared to some of you guys.

gas prices are further evidence that I am way too pessimistic to make money with puts and shorts or whatever, because I was calling for $4/gallon (DC area) back in 2006

I think I was just too young and unaware of how much oil companies will manipulate their own pricing at american pumps in order to maximize profit

like, maximize maximize warehouse full of actuarial scientists and microeconomics phd's all evaluating demand curves and models of agents with bounded rationality 80 hours a week maximize

will fed cut again in response to todays payroll data?

I'd say yes. One quarter percent cut looks about right to me.

They are in a tough spot. Politically speaking, they need to look busy. However, in real terms a cut now will do at least as much harm as it does good. It's only for show, to keep the panic on a lower simmer instead of coming to a boil.

it's good to know that we're using our fiscal policy primarily to sooth a bunch of panicky cocaine-addicts.

haha I know

http://bigpicture.typepad.com/comments/2008/03/whose-the-socia.html

Further, the ECB doesn't seem to care where their equity markets are.

http://bigpicture.typepad.com/photos/uncategorized/2008/03/06/2008europeangraphic.jpg

whoa the market was around 11500 in Jan '00. It's now at 11900.

where's my coke

NEW YORK (AP) -- Stocks tumbled for a second consecutive session Friday after the government's much-anticipated February jobs report revealed employers slashed payrolls last month, touching off concern that a cornerstone of the economy's growth in recent years is showing signs of strain. The Dow Jones industrials fell more than 200 points, bringing their two-day slide to more than 400.

The decline came despite the Federal Reserve's announcement that it would take steps to aid the credit markets.

The Labor Department's report that employers cut jobs by 63,000 last month -- the most since March 2003 -- unnerved investors worried about the health of the economy and who had been expecting a 25,000 gain in jobs. While the unemployment rate fell to 4.8 percent, the decline reflects people leaving the labor force.

The payroll numbers arrived minutes after the Federal Reserve announced it would take fresh steps to ease credit troubles, including boosting the amount of money it will auction to banks.

IT LIVES:

http://www.latimes.com/media/alternatethumbnails/photo/2008-03/36502038-07122031.jpg

Whoa Nellie.

So can someone help me understand what the fed did? They basically offered to trade government securities to financial institutions for risky mortgage-backed securities? Does anyone have any opinion on that?

Well, not exactly a trade- a 28-day loan of a Treasury with a AAA-rated mortgage-backed security as collateral.

ah ok. So does that basically add liquidity by temporarily letting banks hold more safer securities? I really don't understand this stuff that well.

Yes, it's supposed to be a liquidity injection - since the banks can easily convert the Treasuries to cash. There are some things that are not yet clear, such as will the Feds automatically roll these loans over every 28 days as long as the MBS hasn't been downgraded? What haircut will be applied to the MBS collateral?

So is there any big risk here? Like what if the MBS turn out to be even worse than we thought?

I guess there is some risk of the bank defaulting on the loan, but if that happens, I think we can assume the bank is hosed anyway since I don't think the government is going to let them just walk away from the loan unless they are in fact bankrupt.