Case Shiller Data....other states victims too
Wednesday, December 31, 2008
Saturday, December 27, 2008
Friday, December 26, 2008
Wednesday, December 24, 2008
CONSUMPTION and SPENDING COLLAPSING
http://briefing.com/Investor/Public/Calendars/EconomicCalendar.htm (economic calendar)
Earnings fallings, consumption plummeting, jobless claims soaring, durable goods declining (less than expected? but last month revised sharpl upward, a wash)
this CANCER is spreading, if Real Estate and LOW LOW int rates were working than the home inspector guy I met last night would not be telling me his biz is near non existant.
How do you refi low rate if home purchased has fallen well below orig value?
WHO will buy a house when unsure of job status?
Most mechants out right scared not of xmas but of sales in Jan-Feb.
WHO is running to JOS A BANK stores for 50% off sale when next week they'll have another one?
ALL cutting ad expenditures, some papers combining news resources to save money.
AT $37 oil Obama will be throwing money at alt energy?
10 yr near 2% !!! man is that a crowded trade!!!! not for me....another BUBBLE!!!!???? the worst yet???
MANY I talk to and it is so sad, have lost 50% in IRA's, cannot afford to retire.....and do they realize the blame rests on SEC and FED?
This mkt could collapse any minute, watxh 850 SPX and 8300 DOW levels...VIX holding above 40.
I was only among handful warning summer of 07 a bear was approaching, please stay with me.
D
Earnings fallings, consumption plummeting, jobless claims soaring, durable goods declining (less than expected? but last month revised sharpl upward, a wash)
this CANCER is spreading, if Real Estate and LOW LOW int rates were working than the home inspector guy I met last night would not be telling me his biz is near non existant.
How do you refi low rate if home purchased has fallen well below orig value?
WHO will buy a house when unsure of job status?
Most mechants out right scared not of xmas but of sales in Jan-Feb.
WHO is running to JOS A BANK stores for 50% off sale when next week they'll have another one?
ALL cutting ad expenditures, some papers combining news resources to save money.
AT $37 oil Obama will be throwing money at alt energy?
10 yr near 2% !!! man is that a crowded trade!!!! not for me....another BUBBLE!!!!???? the worst yet???
MANY I talk to and it is so sad, have lost 50% in IRA's, cannot afford to retire.....and do they realize the blame rests on SEC and FED?
This mkt could collapse any minute, watxh 850 SPX and 8300 DOW levels...VIX holding above 40.
I was only among handful warning summer of 07 a bear was approaching, please stay with me.
D
Monday, December 22, 2008
PERSPECTIVE
I recently read where of the $330B the Gov allocatedto FED via TARP program,maybe $110B of this has leaked into general economy.
When you add in loss of property value and decline in stock markets, there has been a near $8 Trillion loss of wealth.
Obama wants to push stimulus of $800B over 2 years? good luck, see what deflation can do....the Gov is helpless to combat such MASSIVE losses.
ALL have great holiday and New years, special shout out to jbr and my poor Tampa Buc fan friend SSK
D
When you add in loss of property value and decline in stock markets, there has been a near $8 Trillion loss of wealth.
Obama wants to push stimulus of $800B over 2 years? good luck, see what deflation can do....the Gov is helpless to combat such MASSIVE losses.
ALL have great holiday and New years, special shout out to jbr and my poor Tampa Buc fan friend SSK
D
Saturday, December 20, 2008
VIX STUDY
*Click to enlarge. Bull Vix tends to stay below 20 and in defined downtrend, Bear Vix tends to spike upwards multiple times and in defined uptrend channel.
We HAVE seen extremes, and it does appear to be subsiding, still high though historically.
D
Friday, December 19, 2008
A DRY HOLE?
OIL $33.65 if stocks had similar retrace?......$35 oil come on.....this is beyond significant in face of PLUNGING US $$$, this is depression-like ON top of 2.07% 10 yr bond yield!!! lowest by far ever....is why I think upside for stocks limited and that most likely we see lows tested.
Ask Argentina if just priniting money fixes anything
D
Ask Argentina if just priniting money fixes anything
D
Thursday, December 18, 2008
ROUBINI ON STAGFLATION OUTCOME
http://www.rgemonitor.com
Helicopter Ben goes ZIRP, QE and More…While the Global Economy Enters Stag-Deflation
Dec 17, 2008
The Fed decision yesterday to cut the Fed Funds range to 0-0.25% formalized the fact that, over the last month, the Fed had already moved to a ZIRP (zero-interest-rate-policy) - as the effective Fed Funds rate was already close to zero -and started a policy of QE (quantitative easing) as its balance sheet has surged over the last few months from $800 billion to over $2 trillion. And – as discussed below – the Fed is now undertaking even more unorthodox policy actions.These Fed policy actions are occurring while the US and the global economy is now risking a protracted bout of stag-deflation, a disease that I first discussed as early as January 2008 when I warned about the risk of a global deflation and stag-deflation. While it is now fashionable to talk about such deflationary risks – and the latest U.S. CPI figures confirm that we are entering into deflation – some of us were worrying about the coming deflation well before the mainstream – concerned with short-run and unsustainable increases in commodity prices – discovered the deflationary risks in the global economy.It was clear to those of us that saw early on the risks of a severe US and global recession that, once that recession would emerge, deflationary rather than inflationary pressures would emerge as slack in goods markets, slack in labor markets and slack in commodity markets would emerge. So now we need to worry about stag-deflation, deflation, liquidity traps and debt deflation. Welcome to the world of stag-deflation or, as Krugman would put it, to the world of “depression economics”.So what is the outlook for the US and the global economy in 2009? And what is the likely policy response to the risks of a global stag-deflation? Let us discuss next these two questions…The outlook for the U.S. and the global economy is now very bleak and getting worse as the global economy is experiencing its worst recession in decades. In the US, recession started last December, and will last at least 24 months until next December — the longest and deepest US recession since World War II, with the cumulative fall in GDP possibly exceeding 5 percent. In comparison the last two recessions in 1990-91 and 2001 lasted only 8 months each and in 2001 (1990-91) the cumulative fall in GDP was only 0.4% (1.3%). There is also a risk that this deep and protracted U-shaped recession (the mainstream consensus view of a V-shaped short and shallow recession is now out of the window) may morph into a more severe Japanese style L-shaped recession unless aggressive fiscal policy and recapitalization of the financial system is enacted.The recession in other advanced economies (the euro zone, the UK, other European economies, Canada, Japan, Australia and New Zealand) started in the second quarter of this year, before the financial turmoil in September and October further aggravated the global credit crunch. This contraction has become even more severe since then. I don’t expect growth in the advanced economies to recover before the end of 2009.There is now also the beginning of a hard landing in emerging markets as the recession in advanced economies, falling commodity prices and capital flight take their toll on growth. Indeed, the world should expect a recession (growth in the -1 to-2% range) in Russia and a near recession (growth close to zero) in Brazil next year, owing to low commodity prices. There will also be a very sharp slowdown in China and India that will be the equivalent of a hard landing (growth well below potential) for these countries. In China the latest figures for electricity use, export and imports suggest that the economy is already close to the hard landing scenario of a growth rate of 5%. The deceleration of growth in China is much more rapid than expected.Other emerging markets in Asia, Africa, Latin America and Europe will not fare better, and some may experience full-fledged financial crises. More than a dozen emerging-market economies now face severe financial pressures: Belarus, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Romania, Turkey and Ukraine in Europe; Indonesia, South Korea and Pakistan in Asia; and Argentina, Venezuela and Ecuador (a country that has just defaulted on its sovereign debt) in Latin America.How is the policy response in the US and other countries to this risk of a global stag-deflation?The Fed decision yesterday to cut the target for the Fed Funds rate to a 0% to 0.25% range is just underwriting what was already obvious and happening in reality: while the target Fed Funds was - until yesterday - still1% in the last few weeks - following the massive increase in liquidity by the Fed - the actual Fed Funds was already trading at a level literally close to 0%.So the Fed just formalized what was already happening for weeks now, i.e. that the Fed Funds rate was already zero and that the Fed had already moved to quantitative and qualitative easing (QE) in the form of massive increase in the monetary base and aggressive use of monetary policy - via a range of new facilities and tools - to reduce short term and long term market rates that are stubbornly high in a sign that the credit crunch is severe and worsening.
I predicted early in 2008 that the Fed Funds rate "would be closer to 0% than to 1%" in the midst of a severe recession. Now 12 months into this severe recession (that officially started in December 2007) - a recession that will last at least another 12 months (if not, as possible, much longer) - the Fed Funds rate is already down to 0% (the beginning of the zero-interest-rate-policy or ZIRP for the US) and the Fed has moved into uncharted unorthodox monetary policy as a severe stag-deflation is taking place.And, as predicted here over a month ago, the Fed is now committed to keep the Fed Funds rate close to zero for a long time (as a way to push lower long term Treasury yields), is purchasing agency debt and agency MBS in massive amount; and is even considering purchasing long-term Treasuries as a way to push lower long term government bond yields that are already falling sharply.More aggressive policy actions may be undertaken by the Fed as a severe credit crunch shows no signs of relenting.
In his 2002 speech on deflation the Bernanke spoke even of helicopter drops of money, monetizing fiscal deficits, and even buying equities. The latter actions have already been partially undertaken: the Fed is effectively already monetizing the US fiscal deficits as the purchase of markets assets (agency debt and MBS and other facilities) is financed with the Fed printing presses rather than the TARP program; and now with the Fed considering the purchase of long term Treasuries such monetization of deficits will be made more formal. Also, since the TARP has been turned into a program to recapitalize financial institutions (and thus boost their capital and market value) the U.S. has already effectively intervened indirectly in the equity market (by partially nationalizing a good part of the US financial system); once the Fed starts to buy the US long term Treasuries financing the TARP program this indirect Fed purchase of U.S. equities will be even more clear.While Fed actions to reduce mortgage rates – via purchases of agency debt and agency MBS – are partially successful as long term mortgage rates are falling most of Fed purchases of private assets have been so far limited to very high grade securities. Thus, the gap between the yield on high grade commercial paper purchased by the Fed and the one that the Fed is not purchasing is sharply rising; ditto for the gap between agency MBS and private label MBS; also while long term Treasury yields are sharply falling the spread of corporate bonds – both high yield and high grade – relative to Treasuries remains huge as a sign of a severe credit crunch.
Thus, as a next step the Fed may be soon forced to walk down the credit curve and start buying private short-term and long-term securities with lower credit rating. That would mean that the Fed will take on even more credit risk than is already taking on today while purchasing illiquid private assets. But desperate times lead to desperate actions by desperate policy makers.In the rest of the world monetary and fiscal easing is also occurring as global policy makers are trying to prevent a global stag-deflation; but the policy response in most countries is more limited and constrained than the aggressive one of the US monetary and fiscal authorities.In the Eurozone the policy response has been extremely slow.
First, the ECB is behind the curve and cutting rates too little and too late. Second, the ECB has been much less creative and aggressive than the Fed in creating new facilities to unclog the liquidity and credit crunch that is becoming as severe in Europe as in the US. Third, the fiscal policy stimulus in the EU is weak: those countries that need a stimulus the most (Italy, Portugal, Greece, Spain, UK) are the ones that can afford it the least given their large fiscal deficits and debts; and those who can afford it the most – Germany – are least willing to have it. Fourth, the recapitalization of financial institutions in Europe is occurring more slowly than in the US and some of the financial firms rescue plans have been partly botched. Also, cross-border financial activities and the lack of cross-border burden sharing in the EU limit the ability of the EU to rescue large financial firms with cross-border activities. Add to this the fact that many banks in Europe are too big to fail but also too big to be rescued (large relative to the fiscal resources of their country’s government). Fifth, the structural rigidities of Eurozone (labor markets in particular) may cause the Eurozone contraction to be as severe as the U.S. one even if the initial economic and financial imbalances were less severe in this region.While the US and Japan are already into a ZIRP policy other advanced economies’ central banks will in 2009 get very close to it, starting with those in Switzerland and the UK. And more unorthodox monetary policies, such as QE and the other ones adopted by the Fed, may become more popular in a number of advanced economies.In the many emerging market economies at the risk of a financial crisis aggressive monetary easing and fiscal easing are not likely. Indeed, many of these countries start with large fiscal deficits and debt, thus requiring fiscal discipline rather than easing.
Moreover, many of these countries have large stocks of foreign currency liabilities whose real value would sharply increase if easy monetary policy leads to a sharp depreciation of their currency. Thus, there is less room for monetary easing. Also, many of these countries don’t have the fiscal resources to provide liquidity and capital to their financial institutions that are now facing a sudden stop of capital inflows. The international community – IMF programs, World Bank other IFIs financial support, and the Fed/ECB with their swap lines – can help countries under distress as long as they implement appropriate policy changes but the risks of outright financial crises remain in some of the weakest economies.In China – that is now at risk of a severe hard landing - it is not clear whether the aggressive fiscal and monetary/credit easing will be able to prevent a hard landing. Can aggressive monetary/credit and fiscal policy easing prevent this hard landing?
Not necessarily. First note that China has already reduced interest rates three times in the last few months and easing some credit controls. But monetary and credit policy easing may be ineffective: if capex spending by the corporate sector will start to fall sharply as the fall in next exports leads to a sharp fall in the expected return on new capital spending on exportables a reduction of interest rates and/or an easing of credit controls will make little difference to such capex spending: easing money and credit will be like pushing on a string as the overinvestment of the last few years has led to a glut of capital goods. There is indeed already evidence that but corporate loan demands have diminished sharply while commercial banks have hesitated to lend while choosing to firewall risks. The government can ease money and credit but it cannot force corporate to spend and banks to lend if loan demand is falling because of low expected returns on investment.Could fiscal policy rescue the day and prevent a Chinese hard landing?
The optimists argue yes by pointing out that fiscal deficits and public debt are low in China and that China has the resources to engineer a rapid fiscal stimulus in a short period of time. But the ability of China to implement a rapid and massive fiscal stimulus is limited for a variety of reasons. First, the combined effects of natural disasters, social strife in the West, and the Olympics have created a large hole in the central government budget this fiscal year. The Ministry of Finance may have dipped into various stabilisation funds to avoid the appearance of running a large deficit. For regional and municipal governments, the decline in turnover in local property markets has reduced the flow of fees and taxes, causing them to delay ambitious industrial development plans in some cases. Second, a hard landing in the economy and in investment would lead to a sharp increase in non-performing loans of the – still mostly public – state banks; the implicit liabilities from a serious banking problem would then add to the implicit and explicit budget deficits and public debt.
Note that the poor quality of the underwriting by Chinese banks –that financed a huge overinvestment in the economy - has been hidden for the last few years by the high growth of the economy. Once net exports go bust and real investment sharply falls we will see a massive surge in non-performing loans that financed low return and marginal investment projects. The ensuing fiscal costs of cleaning up the banking system could be really high. Third, as pointed out by Michael Pettis – a leading expert of the Chinese economy – a surge in tax revenues in last 4 years has been more than matched by surge in spending so that if revenue growth diminishes/reverses it might not be easy to slow spending growth proportionately.
Contingent liabilities from non-performing loans could also reduce resources available for a fiscal stimulus.In summary, with traditional monetary policy becoming less effective, non-traditional policy tools aimed at generating greater liquidity and credit (via quantitative easing and direct central bank purchases of private illiquid assets) will become necessary in many advanced economies. And while traditional fiscal policy (government spending and tax cuts) will be pursued aggressively, non-traditional fiscal policy (expenditures to bail out financial institutions, lenders and borrowers) will also become increasingly important in these advanced economies.
In the process, the role of states and governments in economic activity will be vastly expanded. Traditionally, central banks have been the lenders of last resort, but now they are becoming the lenders of first and only resort. As banks curtail lending to each other, to other financial institutions and to the corporate sector, central banks are becoming the only lenders around.Likewise, with household consumption and business investment collapsing, governments will soon become the spenders of first and only resort, stimulating demand and rescuing banks, firms and households.The long-term consequences of the resulting surge in fiscal deficits are serious.
If the deficits are monetized by central banks, inflation will follow the short-term deflationary pressures; if they are financed by debt, the long-term solvency of some governments may be at stake unless medium-term fiscal discipline is restored.Nevertheless, in the short run, very aggressive monetary and fiscal policy actions — both traditional and non-traditional — must be undertaken to ensure that the inevitable stag-deflation of next year does not persist into 2010 and beyond.
Helicopter Ben goes ZIRP, QE and More…While the Global Economy Enters Stag-Deflation
Dec 17, 2008
The Fed decision yesterday to cut the Fed Funds range to 0-0.25% formalized the fact that, over the last month, the Fed had already moved to a ZIRP (zero-interest-rate-policy) - as the effective Fed Funds rate was already close to zero -and started a policy of QE (quantitative easing) as its balance sheet has surged over the last few months from $800 billion to over $2 trillion. And – as discussed below – the Fed is now undertaking even more unorthodox policy actions.These Fed policy actions are occurring while the US and the global economy is now risking a protracted bout of stag-deflation, a disease that I first discussed as early as January 2008 when I warned about the risk of a global deflation and stag-deflation. While it is now fashionable to talk about such deflationary risks – and the latest U.S. CPI figures confirm that we are entering into deflation – some of us were worrying about the coming deflation well before the mainstream – concerned with short-run and unsustainable increases in commodity prices – discovered the deflationary risks in the global economy.It was clear to those of us that saw early on the risks of a severe US and global recession that, once that recession would emerge, deflationary rather than inflationary pressures would emerge as slack in goods markets, slack in labor markets and slack in commodity markets would emerge. So now we need to worry about stag-deflation, deflation, liquidity traps and debt deflation. Welcome to the world of stag-deflation or, as Krugman would put it, to the world of “depression economics”.So what is the outlook for the US and the global economy in 2009? And what is the likely policy response to the risks of a global stag-deflation? Let us discuss next these two questions…The outlook for the U.S. and the global economy is now very bleak and getting worse as the global economy is experiencing its worst recession in decades. In the US, recession started last December, and will last at least 24 months until next December — the longest and deepest US recession since World War II, with the cumulative fall in GDP possibly exceeding 5 percent. In comparison the last two recessions in 1990-91 and 2001 lasted only 8 months each and in 2001 (1990-91) the cumulative fall in GDP was only 0.4% (1.3%). There is also a risk that this deep and protracted U-shaped recession (the mainstream consensus view of a V-shaped short and shallow recession is now out of the window) may morph into a more severe Japanese style L-shaped recession unless aggressive fiscal policy and recapitalization of the financial system is enacted.The recession in other advanced economies (the euro zone, the UK, other European economies, Canada, Japan, Australia and New Zealand) started in the second quarter of this year, before the financial turmoil in September and October further aggravated the global credit crunch. This contraction has become even more severe since then. I don’t expect growth in the advanced economies to recover before the end of 2009.There is now also the beginning of a hard landing in emerging markets as the recession in advanced economies, falling commodity prices and capital flight take their toll on growth. Indeed, the world should expect a recession (growth in the -1 to-2% range) in Russia and a near recession (growth close to zero) in Brazil next year, owing to low commodity prices. There will also be a very sharp slowdown in China and India that will be the equivalent of a hard landing (growth well below potential) for these countries. In China the latest figures for electricity use, export and imports suggest that the economy is already close to the hard landing scenario of a growth rate of 5%. The deceleration of growth in China is much more rapid than expected.Other emerging markets in Asia, Africa, Latin America and Europe will not fare better, and some may experience full-fledged financial crises. More than a dozen emerging-market economies now face severe financial pressures: Belarus, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Romania, Turkey and Ukraine in Europe; Indonesia, South Korea and Pakistan in Asia; and Argentina, Venezuela and Ecuador (a country that has just defaulted on its sovereign debt) in Latin America.How is the policy response in the US and other countries to this risk of a global stag-deflation?The Fed decision yesterday to cut the target for the Fed Funds rate to a 0% to 0.25% range is just underwriting what was already obvious and happening in reality: while the target Fed Funds was - until yesterday - still1% in the last few weeks - following the massive increase in liquidity by the Fed - the actual Fed Funds was already trading at a level literally close to 0%.So the Fed just formalized what was already happening for weeks now, i.e. that the Fed Funds rate was already zero and that the Fed had already moved to quantitative and qualitative easing (QE) in the form of massive increase in the monetary base and aggressive use of monetary policy - via a range of new facilities and tools - to reduce short term and long term market rates that are stubbornly high in a sign that the credit crunch is severe and worsening.
I predicted early in 2008 that the Fed Funds rate "would be closer to 0% than to 1%" in the midst of a severe recession. Now 12 months into this severe recession (that officially started in December 2007) - a recession that will last at least another 12 months (if not, as possible, much longer) - the Fed Funds rate is already down to 0% (the beginning of the zero-interest-rate-policy or ZIRP for the US) and the Fed has moved into uncharted unorthodox monetary policy as a severe stag-deflation is taking place.And, as predicted here over a month ago, the Fed is now committed to keep the Fed Funds rate close to zero for a long time (as a way to push lower long term Treasury yields), is purchasing agency debt and agency MBS in massive amount; and is even considering purchasing long-term Treasuries as a way to push lower long term government bond yields that are already falling sharply.More aggressive policy actions may be undertaken by the Fed as a severe credit crunch shows no signs of relenting.
In his 2002 speech on deflation the Bernanke spoke even of helicopter drops of money, monetizing fiscal deficits, and even buying equities. The latter actions have already been partially undertaken: the Fed is effectively already monetizing the US fiscal deficits as the purchase of markets assets (agency debt and MBS and other facilities) is financed with the Fed printing presses rather than the TARP program; and now with the Fed considering the purchase of long term Treasuries such monetization of deficits will be made more formal. Also, since the TARP has been turned into a program to recapitalize financial institutions (and thus boost their capital and market value) the U.S. has already effectively intervened indirectly in the equity market (by partially nationalizing a good part of the US financial system); once the Fed starts to buy the US long term Treasuries financing the TARP program this indirect Fed purchase of U.S. equities will be even more clear.While Fed actions to reduce mortgage rates – via purchases of agency debt and agency MBS – are partially successful as long term mortgage rates are falling most of Fed purchases of private assets have been so far limited to very high grade securities. Thus, the gap between the yield on high grade commercial paper purchased by the Fed and the one that the Fed is not purchasing is sharply rising; ditto for the gap between agency MBS and private label MBS; also while long term Treasury yields are sharply falling the spread of corporate bonds – both high yield and high grade – relative to Treasuries remains huge as a sign of a severe credit crunch.
Thus, as a next step the Fed may be soon forced to walk down the credit curve and start buying private short-term and long-term securities with lower credit rating. That would mean that the Fed will take on even more credit risk than is already taking on today while purchasing illiquid private assets. But desperate times lead to desperate actions by desperate policy makers.In the rest of the world monetary and fiscal easing is also occurring as global policy makers are trying to prevent a global stag-deflation; but the policy response in most countries is more limited and constrained than the aggressive one of the US monetary and fiscal authorities.In the Eurozone the policy response has been extremely slow.
First, the ECB is behind the curve and cutting rates too little and too late. Second, the ECB has been much less creative and aggressive than the Fed in creating new facilities to unclog the liquidity and credit crunch that is becoming as severe in Europe as in the US. Third, the fiscal policy stimulus in the EU is weak: those countries that need a stimulus the most (Italy, Portugal, Greece, Spain, UK) are the ones that can afford it the least given their large fiscal deficits and debts; and those who can afford it the most – Germany – are least willing to have it. Fourth, the recapitalization of financial institutions in Europe is occurring more slowly than in the US and some of the financial firms rescue plans have been partly botched. Also, cross-border financial activities and the lack of cross-border burden sharing in the EU limit the ability of the EU to rescue large financial firms with cross-border activities. Add to this the fact that many banks in Europe are too big to fail but also too big to be rescued (large relative to the fiscal resources of their country’s government). Fifth, the structural rigidities of Eurozone (labor markets in particular) may cause the Eurozone contraction to be as severe as the U.S. one even if the initial economic and financial imbalances were less severe in this region.While the US and Japan are already into a ZIRP policy other advanced economies’ central banks will in 2009 get very close to it, starting with those in Switzerland and the UK. And more unorthodox monetary policies, such as QE and the other ones adopted by the Fed, may become more popular in a number of advanced economies.In the many emerging market economies at the risk of a financial crisis aggressive monetary easing and fiscal easing are not likely. Indeed, many of these countries start with large fiscal deficits and debt, thus requiring fiscal discipline rather than easing.
Moreover, many of these countries have large stocks of foreign currency liabilities whose real value would sharply increase if easy monetary policy leads to a sharp depreciation of their currency. Thus, there is less room for monetary easing. Also, many of these countries don’t have the fiscal resources to provide liquidity and capital to their financial institutions that are now facing a sudden stop of capital inflows. The international community – IMF programs, World Bank other IFIs financial support, and the Fed/ECB with their swap lines – can help countries under distress as long as they implement appropriate policy changes but the risks of outright financial crises remain in some of the weakest economies.In China – that is now at risk of a severe hard landing - it is not clear whether the aggressive fiscal and monetary/credit easing will be able to prevent a hard landing. Can aggressive monetary/credit and fiscal policy easing prevent this hard landing?
Not necessarily. First note that China has already reduced interest rates three times in the last few months and easing some credit controls. But monetary and credit policy easing may be ineffective: if capex spending by the corporate sector will start to fall sharply as the fall in next exports leads to a sharp fall in the expected return on new capital spending on exportables a reduction of interest rates and/or an easing of credit controls will make little difference to such capex spending: easing money and credit will be like pushing on a string as the overinvestment of the last few years has led to a glut of capital goods. There is indeed already evidence that but corporate loan demands have diminished sharply while commercial banks have hesitated to lend while choosing to firewall risks. The government can ease money and credit but it cannot force corporate to spend and banks to lend if loan demand is falling because of low expected returns on investment.Could fiscal policy rescue the day and prevent a Chinese hard landing?
The optimists argue yes by pointing out that fiscal deficits and public debt are low in China and that China has the resources to engineer a rapid fiscal stimulus in a short period of time. But the ability of China to implement a rapid and massive fiscal stimulus is limited for a variety of reasons. First, the combined effects of natural disasters, social strife in the West, and the Olympics have created a large hole in the central government budget this fiscal year. The Ministry of Finance may have dipped into various stabilisation funds to avoid the appearance of running a large deficit. For regional and municipal governments, the decline in turnover in local property markets has reduced the flow of fees and taxes, causing them to delay ambitious industrial development plans in some cases. Second, a hard landing in the economy and in investment would lead to a sharp increase in non-performing loans of the – still mostly public – state banks; the implicit liabilities from a serious banking problem would then add to the implicit and explicit budget deficits and public debt.
Note that the poor quality of the underwriting by Chinese banks –that financed a huge overinvestment in the economy - has been hidden for the last few years by the high growth of the economy. Once net exports go bust and real investment sharply falls we will see a massive surge in non-performing loans that financed low return and marginal investment projects. The ensuing fiscal costs of cleaning up the banking system could be really high. Third, as pointed out by Michael Pettis – a leading expert of the Chinese economy – a surge in tax revenues in last 4 years has been more than matched by surge in spending so that if revenue growth diminishes/reverses it might not be easy to slow spending growth proportionately.
Contingent liabilities from non-performing loans could also reduce resources available for a fiscal stimulus.In summary, with traditional monetary policy becoming less effective, non-traditional policy tools aimed at generating greater liquidity and credit (via quantitative easing and direct central bank purchases of private illiquid assets) will become necessary in many advanced economies. And while traditional fiscal policy (government spending and tax cuts) will be pursued aggressively, non-traditional fiscal policy (expenditures to bail out financial institutions, lenders and borrowers) will also become increasingly important in these advanced economies.
In the process, the role of states and governments in economic activity will be vastly expanded. Traditionally, central banks have been the lenders of last resort, but now they are becoming the lenders of first and only resort. As banks curtail lending to each other, to other financial institutions and to the corporate sector, central banks are becoming the only lenders around.Likewise, with household consumption and business investment collapsing, governments will soon become the spenders of first and only resort, stimulating demand and rescuing banks, firms and households.The long-term consequences of the resulting surge in fiscal deficits are serious.
If the deficits are monetized by central banks, inflation will follow the short-term deflationary pressures; if they are financed by debt, the long-term solvency of some governments may be at stake unless medium-term fiscal discipline is restored.Nevertheless, in the short run, very aggressive monetary and fiscal policy actions — both traditional and non-traditional — must be undertaken to ensure that the inevitable stag-deflation of next year does not persist into 2010 and beyond.
Wednesday, December 17, 2008
SUPER LOW RATES REDUCING REPOS
http://www.nakedcapitalism.com/2008/12/super-low-treasury-rates-reducing-repos.html
WHAT FED is dong is PURE MADNESS and UNCONSTITUTIONAL, they do not have power to do what they are doing.
KILLING our currency, INDEX back below 80.00 support
WHAT FED is dong is PURE MADNESS and UNCONSTITUTIONAL, they do not have power to do what they are doing.
KILLING our currency, INDEX back below 80.00 support
TOOK IT IN THE CHOPS!!
*click to enlargeMasacred, lows rates will save real estate? beat to snot the shorts here.
D
IS THIS WHAT THE MARKET LIKES? BUT NOT ALL QUALIFY
Within hours, he had locked in a rate of about 4.6 percent. He'll save about $160 on his monthly payment. "Any time you can save a dollar," he said, "why not?"
Homeowners across the country did the same Wednesday. Mortgage brokers reported a surge of calls from borrowers seeking to take advantage of the Fed's extraordinary decision. Some brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.
The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates -- the lowest since the 1960s and down from 5.3 percent Tuesday.
"This is beautiful, oh my gosh!" said Patti Mazzara, a mortgage broker in the Minneapolis suburb of Edina, who was surprised when she looked up rates and found them well below 5 percent, down at least three-quarters of a percentage point from earlier in the week. "This is a whole new game now. Hopefully it's going to give people some relief."
The Fed, aiming to free up lending and jolt the economy back to life, cut the federal funds rate Tuesday from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.
It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage.
"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party."
Even Wall Street, which pushed the Dow industrials up 360 points after the Fed announcement Tuesday, tempered its enthusiasm on Wednesday. The Dow finished down about 100 points.
An estimated 12 million Americans owe more on their home loans than their houses' current value, unemployment is still rising quickly, and foreclosures are soaring.
For people whose home values have plunged, "I could have a 1 percent interest rate, but it wouldn't help them," said Michael Maynard, a mortgage broker in Branford, Conn.
"People losing their homes aren't losing their homes because they can't get a 6 percent mortgage," Maynard said. "They're not qualifying at all."
In Charlotte, Jabon's mortgage broker, Will Mullinix, said that while rates that low are "pretty unprecedented," the best deals are available only to borrowers with pristine credit who are taking out loans for under 80 percent of their house's current value.
"All the stars have to align," Mullinix said.
And economists expect falling rates to provide only a modest boost to home sales, especially as unemployment worsens amid what could be the longest economic downturn since the Great Depression.
"People tend to be more inclined to buy a house when they're confident about their employment and income prospects," said Wachovia Corp. economist Mark Vitner.
Besides lowering the interest on fixed-rate mortgages, rates should come down on adjustable-rate home equity loans. Those are tied to the prime rate, and prime rates came down immediately after the Fed move Tuesday.
The Federal Reserve also plans to buy up mortgage debt and is considering buying long-term Treasury bonds that are closely tied to mortgage rates, so analysts expect rates to drop even further.
"We're going to see just a massive refinancing boom," said Mark Zandi, chief economist at Moody's Economy.com, who estimates that up to 10 million U.S. borrowers, or about one in five Americans with a mortgage, could wind up refinancing.
Senate Majority Leader Harry Reid said Wednesday that some of the $700 billion financial bailout should spent to aid borrowers in danger of losing their homes.
"We've given enough big checks to these banks. Let's do something to help foreclosures," he said in a conference call with reporters.
President-elect Barack Obama's advisers were weighing an economic recovery plan that could cost as much as $850 billion over two years. Though they had not settled on a final figure, it was bound to be bigger than the $600 billion that Obama's team initially envisioned.
Mortgage applications rose about 3 percent last week, but are still below highs for the year reached in early February, the last time rates were attractive enough to cause refinancings to surge.
For homeowners who haven't been able to sell their houses, the lower rates represent an opportunity to at least save some money. And if they have enough equity in their homes, they can still pull out money to make improvements -- albeit at a higher interest rate.
Lisa Wallwork, 37, and her husband, Shawn, are in the process of refinancing the mortgage on the house they've owned for five years in Tolland, Conn. They pulled it off the market in September after their house didn't sell for more than a year.
"We wanted to move up to a bigger and better house," she said.
Instead, the couple are refinancing their $185,000 mortgage, pulling out equity to remodel their kitchen and getting a new front door. And they still expect to save up to $300 a month in the process.
Associated Press Writers Joshua Freed, Christopher S. Rugaber, Stephen Singer and Erica Werner contributed to this report.
Homeowners across the country did the same Wednesday. Mortgage brokers reported a surge of calls from borrowers seeking to take advantage of the Fed's extraordinary decision. Some brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.
The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates -- the lowest since the 1960s and down from 5.3 percent Tuesday.
"This is beautiful, oh my gosh!" said Patti Mazzara, a mortgage broker in the Minneapolis suburb of Edina, who was surprised when she looked up rates and found them well below 5 percent, down at least three-quarters of a percentage point from earlier in the week. "This is a whole new game now. Hopefully it's going to give people some relief."
The Fed, aiming to free up lending and jolt the economy back to life, cut the federal funds rate Tuesday from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.
It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won't be able to take advantage.
"It's a call to action for homeowners looking to get out of adjustable-rate mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "Unfortunately, it's not an equal-opportunity party."
Even Wall Street, which pushed the Dow industrials up 360 points after the Fed announcement Tuesday, tempered its enthusiasm on Wednesday. The Dow finished down about 100 points.
An estimated 12 million Americans owe more on their home loans than their houses' current value, unemployment is still rising quickly, and foreclosures are soaring.
For people whose home values have plunged, "I could have a 1 percent interest rate, but it wouldn't help them," said Michael Maynard, a mortgage broker in Branford, Conn.
"People losing their homes aren't losing their homes because they can't get a 6 percent mortgage," Maynard said. "They're not qualifying at all."
In Charlotte, Jabon's mortgage broker, Will Mullinix, said that while rates that low are "pretty unprecedented," the best deals are available only to borrowers with pristine credit who are taking out loans for under 80 percent of their house's current value.
"All the stars have to align," Mullinix said.
And economists expect falling rates to provide only a modest boost to home sales, especially as unemployment worsens amid what could be the longest economic downturn since the Great Depression.
"People tend to be more inclined to buy a house when they're confident about their employment and income prospects," said Wachovia Corp. economist Mark Vitner.
Besides lowering the interest on fixed-rate mortgages, rates should come down on adjustable-rate home equity loans. Those are tied to the prime rate, and prime rates came down immediately after the Fed move Tuesday.
The Federal Reserve also plans to buy up mortgage debt and is considering buying long-term Treasury bonds that are closely tied to mortgage rates, so analysts expect rates to drop even further.
"We're going to see just a massive refinancing boom," said Mark Zandi, chief economist at Moody's Economy.com, who estimates that up to 10 million U.S. borrowers, or about one in five Americans with a mortgage, could wind up refinancing.
Senate Majority Leader Harry Reid said Wednesday that some of the $700 billion financial bailout should spent to aid borrowers in danger of losing their homes.
"We've given enough big checks to these banks. Let's do something to help foreclosures," he said in a conference call with reporters.
President-elect Barack Obama's advisers were weighing an economic recovery plan that could cost as much as $850 billion over two years. Though they had not settled on a final figure, it was bound to be bigger than the $600 billion that Obama's team initially envisioned.
Mortgage applications rose about 3 percent last week, but are still below highs for the year reached in early February, the last time rates were attractive enough to cause refinancings to surge.
For homeowners who haven't been able to sell their houses, the lower rates represent an opportunity to at least save some money. And if they have enough equity in their homes, they can still pull out money to make improvements -- albeit at a higher interest rate.
Lisa Wallwork, 37, and her husband, Shawn, are in the process of refinancing the mortgage on the house they've owned for five years in Tolland, Conn. They pulled it off the market in September after their house didn't sell for more than a year.
"We wanted to move up to a bigger and better house," she said.
Instead, the couple are refinancing their $185,000 mortgage, pulling out equity to remodel their kitchen and getting a new front door. And they still expect to save up to $300 a month in the process.
Associated Press Writers Joshua Freed, Christopher S. Rugaber, Stephen Singer and Erica Werner contributed to this report.
Tuesday, December 16, 2008
BROTHER HAVE YOU HEARD THE NEWS?
Fed cuts to ground zero, says "we'll buy anything", wild buying on Wall street ......VIX falls to 52 but hangs above 50 ish support. SRS plummets 20% (SHORT REAL ESTATE! ) homebuilders soar.....shorts scatter like bugs.
but why can't I find any cheer here? why? Because prices are falling like it's 1930. Interest rates on long bond are at lowest level since?maybe ever....FED funds rate at level NEVER seen before at basically ZERO....."will use all measures at our disposal"
They created current fiasco buy lowering rates to 1% during last Bear Market and now are going to fix everything and pump it back up by lowering them even further?
So those who didnt get the money to borrow will now be able to do so or wnat to?
BBY beats numbers but cuts capex by 50% ! I feel like the f'ing Grinch here.....
Bussiness for lots of us is at a standstill. My own levels of business are CUT IN HALF from just one year ago and I see NO light at end of tunnel....just the train.
What am I going to do? CUT OVERHEAD, CUT SPENDING....that's coming outta somebody's pocket.
In this environment you gonna run out and buy a car or home? f no....and prices are FALLING if you wait....even further that's DEFLATION! Yet no one who has put fuel surcharge on me has taken it off and all those price increases from last year are still there.
Today's move by the FED is pure DESPERATION, they are puking hairballs I dont care what they say.
This I dont believe is the start of a new BULL MKT, and sure sometimes you have to just forget about fundamentals and go with the flow.
When this flow stops, you dont want to be long. DAY after FED usually reverses course, have a great tomorrow and upcoming holidays....kiss your kids, tell all you love them....you are rich if you have that and your health, all else bets are off!
D
but why can't I find any cheer here? why? Because prices are falling like it's 1930. Interest rates on long bond are at lowest level since?maybe ever....FED funds rate at level NEVER seen before at basically ZERO....."will use all measures at our disposal"
They created current fiasco buy lowering rates to 1% during last Bear Market and now are going to fix everything and pump it back up by lowering them even further?
So those who didnt get the money to borrow will now be able to do so or wnat to?
BBY beats numbers but cuts capex by 50% ! I feel like the f'ing Grinch here.....
Bussiness for lots of us is at a standstill. My own levels of business are CUT IN HALF from just one year ago and I see NO light at end of tunnel....just the train.
What am I going to do? CUT OVERHEAD, CUT SPENDING....that's coming outta somebody's pocket.
In this environment you gonna run out and buy a car or home? f no....and prices are FALLING if you wait....even further that's DEFLATION! Yet no one who has put fuel surcharge on me has taken it off and all those price increases from last year are still there.
Today's move by the FED is pure DESPERATION, they are puking hairballs I dont care what they say.
This I dont believe is the start of a new BULL MKT, and sure sometimes you have to just forget about fundamentals and go with the flow.
When this flow stops, you dont want to be long. DAY after FED usually reverses course, have a great tomorrow and upcoming holidays....kiss your kids, tell all you love them....you are rich if you have that and your health, all else bets are off!
D
Saturday, December 13, 2008
IT'S IN GOOD HANDS
>>Asked whether GM thinks using the TARP money for direct loans or as collateral on loans from the Fed would provide the automaker with enough help in the short-term to avoid a collapse, GM Spokesman Greg Martin on Saturday replied "Yes."
The company's financial staff worked over the weekend exploring options with Treasury officials.
GM announced Friday it would cut an additional 250,000 vehicles from its first-quarter production schedule — a third of its normal output — by temporarily closing 20 factories across North America. The move affects most plants in the U.S., Canada and Mexico.
"If the administration can convince itself that a bankruptcy could be an orderly proceeding, then they could let it happen," Reinhart said.
The Bush administration, which has just weeks left in office, wants to try to avoid a disorderly bankruptcy.
"It's possible that the administration won't do anything," Reinhart said, listing long-running problems with the industry. "If the administration can convince itself that a bankruptcy could be an orderly proceeding, then they could let it happen."<<<<<
AND MORE MADOFF DETAILS>>>WOOOOF
List of potential victims grows in NY fraud case
By TOM HAYS, LARRY NEUMEISTER and DAVID B. CARUSO, Associated Press Writers Tom Hays, Larry Neumeister And David B. Caruso, Associated Press Writers 1 hr 54 mins ago
NEW YORK – Investors who put their fortunes in the hands of arrested New York money manager Bernard Madoff are waiting to hear how much of their stake is left.
The roster of potential victims in what prosecutors said was a $50 billion Ponzi scheme has grown exponentially longer in the past few days.
Madoff, 70, said in regulatory filings that he only had around 25 clients, but it has become apparent that the list of people who lost money may number in the hundreds or even thousands.
Among those who have acknowledged potential losses so far: Former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services.
A charity in Massachusetts that supports Jewish programs, the Robert I. Lappin Charitable Foundation, said it had invested its entire $8 million endowment with Madoff. The organization's executive director said she doesn't expect it to survive.
Other institutions that believed they had lost millions included The North Shore-Long Island Jewish Health System and the Texas-based Julian J. Levitt Foundation.
Hedge funds and other investment groups looked like big losers too. The Fairfield Greenwich Group said it had some $7.5 billion in investments linked to Madoff. A private Swiss bank, Banque Benedict Hentsch Fairfield Partners SA, said it had $47.5 million worth of client assets at risk.
The losses may have extended far beyond the coffers of the wealthy and powerful.
The town of Fairfield, Conn., said it placed nearly 15 percent of its retiree pension fund with Madoff. Officials were scrambling to determine how much of the $42 million remained.
Harry Susman, an attorney in Houston, said he represents a group of clients who had unknowingly become entangled in the scandal by investing in a hedge fund managed by Merkin, which then put almost all of its $1.8 billion in capital in Madoff's hands.
"They had no idea they had exposure," Susman said. He said his clients were now dumbfounded as to how the fund came to invest all of its holdings with just one man, especially since concerns had been circulating for years about Madoff's operations.
For decades, Madoff had dual reputations among investors. Many wealthy New Yorkers and Floridians considered him a reliable investment whiz. Others, more skeptical, had questioned whether his returns were real, pointing to the firm's secrecy and lack of a big-name auditor.
But when he met privately with a family member at his firm earlier this month, something clearly was amiss.
First, federal authorities say the 70-year-old Madoff surprised the unidentified family member by saying he wanted to pass out hefty annual bonuses two months earlier than usual, court papers said. Then, when challenged on the idea, he said he "wasn't sure he would be able to hold it together" if they continued the discussion at the office, and invited him to his apartment.
It was the beginning of a stunning meltdown for the former Nasdaq stock market chairman.
Madoff himself described his investment business as an unsophisticated "Ponzi scheme," according to investigators who interviewed him.
Perhaps more startling than the loss was that it apparently caught regulators and investigators off guard, only coming to light last week when Madoff's own family turned him in.
The core of the scheme — taking investments from one client to pay returns to another — "has been around since the beginning of time," said Marc Powers, a former Securities and Exchange Commission enforcement chief and head of the securities practice at Baker Hostetler.
The firm somehow pulled off the fraud despite being subject to examination by the SEC, Powers added. "You wonder how these things escaped the normally careful review of these regulatory organizations."
The latest dose of bad news in the world of finance has left Madoff's clients "panicked," said Stephen A. Weiss, a lawyer for several dozen investors. "These people are sorrowful. These people are angry. And many are now destitute."
The wave of ill will — fuel for inevitable lawsuits — was aimed at a man who had cultivated an image as a straight-shooter with a personal touch.
The day after his arrest, his company's Web site still boasted that "in an era of faceless organizations ... Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door."
It went on to say "Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."
Madoff's resume was the stuff of Wall Street legend: He founded his company in 1960 with $5,000 he earned in part working as a lifeguard on Long Island beaches while putting himself through Hofstra University Law School. It eventually became one of five broker-dealers that spearheaded the formation of the Nasdaq Stock Market, where he served as a member of the board of governors in the 1980s and as chairman of the board of directors in the early '90s.
By 2001, Madoff's firm was one of the three top market makers in Nasdaq stocks and the third-largest firm matching buyers and sellers of securities on the New York Stock Exchange, according to Baron's.
Investigators say Madoff's crime originated in a separate and secretive investment-advising business.
Madoff apparently kept the loss a secret even from his two sons and other family members who work at the firm until he and two of them retreated to his apartment occupying the entire 12th floor of an Upper East Side building on Dec. 9, according the complaint drawn up by an arresting FBI agent.
"It's all just one big lie," he told his family. He confided he had blown the money in what was "basically, a giant Ponzi scheme," the complaint added.
Several attorneys representing investors, however, have questioned how he could have acted alone, given the size of the alleged fraud and vast holdings of his firm.
According to the court complaint, Madoff told his family he expected to end up behind bars, but wanted to execute his own version of a bailout package by doling out $200 to $300 million he had left to family, friends and employees. After the meeting, a lawyer for the family contacted regulators, who alerted the federal prosecutors and the FBI.
Madoff was in a bathrobe when two FBI agents arrived at his door unannounced at 8:30 a.m. on Dec. 11. He invited them in, then confessed after being asked "if there's an innocent explanation," the complaint said.
Responded Madoff: "There is no innocent explanation."
The company's financial staff worked over the weekend exploring options with Treasury officials.
GM announced Friday it would cut an additional 250,000 vehicles from its first-quarter production schedule — a third of its normal output — by temporarily closing 20 factories across North America. The move affects most plants in the U.S., Canada and Mexico.
"If the administration can convince itself that a bankruptcy could be an orderly proceeding, then they could let it happen," Reinhart said.
The Bush administration, which has just weeks left in office, wants to try to avoid a disorderly bankruptcy.
"It's possible that the administration won't do anything," Reinhart said, listing long-running problems with the industry. "If the administration can convince itself that a bankruptcy could be an orderly proceeding, then they could let it happen."<<<<<
AND MORE MADOFF DETAILS>>>WOOOOF
List of potential victims grows in NY fraud case
By TOM HAYS, LARRY NEUMEISTER and DAVID B. CARUSO, Associated Press Writers Tom Hays, Larry Neumeister And David B. Caruso, Associated Press Writers 1 hr 54 mins ago
NEW YORK – Investors who put their fortunes in the hands of arrested New York money manager Bernard Madoff are waiting to hear how much of their stake is left.
The roster of potential victims in what prosecutors said was a $50 billion Ponzi scheme has grown exponentially longer in the past few days.
Madoff, 70, said in regulatory filings that he only had around 25 clients, but it has become apparent that the list of people who lost money may number in the hundreds or even thousands.
Among those who have acknowledged potential losses so far: Former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services.
A charity in Massachusetts that supports Jewish programs, the Robert I. Lappin Charitable Foundation, said it had invested its entire $8 million endowment with Madoff. The organization's executive director said she doesn't expect it to survive.
Other institutions that believed they had lost millions included The North Shore-Long Island Jewish Health System and the Texas-based Julian J. Levitt Foundation.
Hedge funds and other investment groups looked like big losers too. The Fairfield Greenwich Group said it had some $7.5 billion in investments linked to Madoff. A private Swiss bank, Banque Benedict Hentsch Fairfield Partners SA, said it had $47.5 million worth of client assets at risk.
The losses may have extended far beyond the coffers of the wealthy and powerful.
The town of Fairfield, Conn., said it placed nearly 15 percent of its retiree pension fund with Madoff. Officials were scrambling to determine how much of the $42 million remained.
Harry Susman, an attorney in Houston, said he represents a group of clients who had unknowingly become entangled in the scandal by investing in a hedge fund managed by Merkin, which then put almost all of its $1.8 billion in capital in Madoff's hands.
"They had no idea they had exposure," Susman said. He said his clients were now dumbfounded as to how the fund came to invest all of its holdings with just one man, especially since concerns had been circulating for years about Madoff's operations.
For decades, Madoff had dual reputations among investors. Many wealthy New Yorkers and Floridians considered him a reliable investment whiz. Others, more skeptical, had questioned whether his returns were real, pointing to the firm's secrecy and lack of a big-name auditor.
But when he met privately with a family member at his firm earlier this month, something clearly was amiss.
First, federal authorities say the 70-year-old Madoff surprised the unidentified family member by saying he wanted to pass out hefty annual bonuses two months earlier than usual, court papers said. Then, when challenged on the idea, he said he "wasn't sure he would be able to hold it together" if they continued the discussion at the office, and invited him to his apartment.
It was the beginning of a stunning meltdown for the former Nasdaq stock market chairman.
Madoff himself described his investment business as an unsophisticated "Ponzi scheme," according to investigators who interviewed him.
Perhaps more startling than the loss was that it apparently caught regulators and investigators off guard, only coming to light last week when Madoff's own family turned him in.
The core of the scheme — taking investments from one client to pay returns to another — "has been around since the beginning of time," said Marc Powers, a former Securities and Exchange Commission enforcement chief and head of the securities practice at Baker Hostetler.
The firm somehow pulled off the fraud despite being subject to examination by the SEC, Powers added. "You wonder how these things escaped the normally careful review of these regulatory organizations."
The latest dose of bad news in the world of finance has left Madoff's clients "panicked," said Stephen A. Weiss, a lawyer for several dozen investors. "These people are sorrowful. These people are angry. And many are now destitute."
The wave of ill will — fuel for inevitable lawsuits — was aimed at a man who had cultivated an image as a straight-shooter with a personal touch.
The day after his arrest, his company's Web site still boasted that "in an era of faceless organizations ... Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door."
It went on to say "Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."
Madoff's resume was the stuff of Wall Street legend: He founded his company in 1960 with $5,000 he earned in part working as a lifeguard on Long Island beaches while putting himself through Hofstra University Law School. It eventually became one of five broker-dealers that spearheaded the formation of the Nasdaq Stock Market, where he served as a member of the board of governors in the 1980s and as chairman of the board of directors in the early '90s.
By 2001, Madoff's firm was one of the three top market makers in Nasdaq stocks and the third-largest firm matching buyers and sellers of securities on the New York Stock Exchange, according to Baron's.
Investigators say Madoff's crime originated in a separate and secretive investment-advising business.
Madoff apparently kept the loss a secret even from his two sons and other family members who work at the firm until he and two of them retreated to his apartment occupying the entire 12th floor of an Upper East Side building on Dec. 9, according the complaint drawn up by an arresting FBI agent.
"It's all just one big lie," he told his family. He confided he had blown the money in what was "basically, a giant Ponzi scheme," the complaint added.
Several attorneys representing investors, however, have questioned how he could have acted alone, given the size of the alleged fraud and vast holdings of his firm.
According to the court complaint, Madoff told his family he expected to end up behind bars, but wanted to execute his own version of a bailout package by doling out $200 to $300 million he had left to family, friends and employees. After the meeting, a lawyer for the family contacted regulators, who alerted the federal prosecutors and the FBI.
Madoff was in a bathrobe when two FBI agents arrived at his door unannounced at 8:30 a.m. on Dec. 11. He invited them in, then confessed after being asked "if there's an innocent explanation," the complaint said.
Responded Madoff: "There is no innocent explanation."
Friday, December 12, 2008
DESTRUCTION OF WEALTH
Playing God With The Economy
By tmartin • December 2, 2008
The unholy alliance between self-important bureaucrats and failed bailout bankers continues to wreaks havoc upon the economy. Only a gold standard can prevent these charlatans from poisoning the entire world with their increasingly worthless dollars. In his latest column Ron Paul speaks truth to power and calls for the abolishment of the Federal Reserve. But can reasoned arguments alone win this epic battle for sound money? — tmartin
The Neo-Alchemy of the Federal Reserve
by Ron Paul
As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.
The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.
One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.
Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.
Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.
The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.
Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.
–
Read more about how the Federal Reserve ruins our country and destroys our future.
http://www.ronpaul.com/
By tmartin • December 2, 2008
The unholy alliance between self-important bureaucrats and failed bailout bankers continues to wreaks havoc upon the economy. Only a gold standard can prevent these charlatans from poisoning the entire world with their increasingly worthless dollars. In his latest column Ron Paul speaks truth to power and calls for the abolishment of the Federal Reserve. But can reasoned arguments alone win this epic battle for sound money? — tmartin
The Neo-Alchemy of the Federal Reserve
by Ron Paul
As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.
The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.
One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.
Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.
Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.
The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.
Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.
–
Read more about how the Federal Reserve ruins our country and destroys our future.
http://www.ronpaul.com/
Thursday, December 11, 2008
ONE HOUR DIFFERENT STORY futes down 40
By Chris Isidore, CNNMoney.com senior writer
Last Updated: December 11, 2008: 10:04 PM ET
Senate edges closer to auto bailout deal
Democrats appear ready to compromise with leading Republican critic of bailout, but fate of bill to provide $14 billion in loans to GM and Chrysler still in doubt.
Negotiations to bring measure up for vote fall short, possibly dooming GM, Chrysler to bankruptcy.
December 11, 2008: 11:31 PM ET
NEW YORK (CNNMoney.com) -- Hopes for Congressional approval of a bailout of the U.S. auto industry appeared to fall apart late Thursday night as Senate leaders said Democrats and Republicans were unable to reach a compromised deal that could get the bipartisan support needed to bring the measure for the vote.
The 52-35 vote followed the collapse of negotiations between Senate Democrats and Republicans seeking a compromise that all sides could accept.
"We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line," Senate Majority Leader Harry Reid, D.-Nev.,said on the Senate floor before the vote. "That's just the way it is. There's too much difference between the two sides."
Reid acknowledged that the bill would not survive the procedural vote.
Senate Minority Leader Mitch McConnell, R-Ky., said the sticking point was the United Auto Workers' refusal to set a "date certain" to put employees at U.S. auto manufacturers at "parity pay" with U.S. employees at foreign automakers in the United States.
Currently, analysts estimate the union workers at U.S. automakers make about $3 to $4 per hour more than the non-union U.S. employees of foreign automakers like Toyota and Honda, according to the Center for Automotive Research.
Last Updated: December 11, 2008: 10:04 PM ET
Senate edges closer to auto bailout deal
Democrats appear ready to compromise with leading Republican critic of bailout, but fate of bill to provide $14 billion in loans to GM and Chrysler still in doubt.
Negotiations to bring measure up for vote fall short, possibly dooming GM, Chrysler to bankruptcy.
December 11, 2008: 11:31 PM ET
NEW YORK (CNNMoney.com) -- Hopes for Congressional approval of a bailout of the U.S. auto industry appeared to fall apart late Thursday night as Senate leaders said Democrats and Republicans were unable to reach a compromised deal that could get the bipartisan support needed to bring the measure for the vote.
The 52-35 vote followed the collapse of negotiations between Senate Democrats and Republicans seeking a compromise that all sides could accept.
"We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line," Senate Majority Leader Harry Reid, D.-Nev.,said on the Senate floor before the vote. "That's just the way it is. There's too much difference between the two sides."
Reid acknowledged that the bill would not survive the procedural vote.
Senate Minority Leader Mitch McConnell, R-Ky., said the sticking point was the United Auto Workers' refusal to set a "date certain" to put employees at U.S. auto manufacturers at "parity pay" with U.S. employees at foreign automakers in the United States.
Currently, analysts estimate the union workers at U.S. automakers make about $3 to $4 per hour more than the non-union U.S. employees of foreign automakers like Toyota and Honda, according to the Center for Automotive Research.
CAR INDUSTRY EXPERT ED WALLACE
http://wbal.com/apps/news/templates/smith_show.aspx?articleid=15369&zoneid=14 ED wallace interview (4 segments) A MUST HEAR I AINT KIDDIN'
Listening to talk radio, Auto industry expert (talked to Congress) says if they dont get the money they need, he says $50B now $50B next year.....the fallout would be CATOSTROPHIC.....you got parts..glass, rubber etc etc.....our economy would GRIND to a halt.
WHat we might be left with is a CZAR? Detroit will make the cars AL Gore wants....not what the people will buy or want....force their GREENESS on us....this country is f'd!
This'll make you sick!
AIG 'Bonus' OutrageThursday, December 11, 2008CBS Early Show InvestigationInsurance giant AIG was given $152 billion in bailout money by the federal government since nearly collapsing. Now the company is planning to take millions of that money and hand it over to employees in a program that sounds a lot like bonuses.
A good downer today in the markets, UYG (financials) were poor performers all day, and the VIX held that support level I had talked about near 55
TRANS fell 5.5% ! this just a retrace of ongoing rally? damnifiknow
Listening to talk radio, Auto industry expert (talked to Congress) says if they dont get the money they need, he says $50B now $50B next year.....the fallout would be CATOSTROPHIC.....you got parts..glass, rubber etc etc.....our economy would GRIND to a halt.
WHat we might be left with is a CZAR? Detroit will make the cars AL Gore wants....not what the people will buy or want....force their GREENESS on us....this country is f'd!
This'll make you sick!
AIG 'Bonus' OutrageThursday, December 11, 2008CBS Early Show InvestigationInsurance giant AIG was given $152 billion in bailout money by the federal government since nearly collapsing. Now the company is planning to take millions of that money and hand it over to employees in a program that sounds a lot like bonuses.
A good downer today in the markets, UYG (financials) were poor performers all day, and the VIX held that support level I had talked about near 55
TRANS fell 5.5% ! this just a retrace of ongoing rally? damnifiknow
HOPE TRUMPS HARSH REALITY?
http://briefing.com/Investor/Index.htm go to calender
Most jobs lost in a month for 25 years. prices plunging = deflationary pressures = plunging SPX profits.
Will we ALL end up working for the government? VIX was sitting right on support,,,,,this could go either way......you cannot fight the tape.....and it will come in the form of sellers VS buyers.
D
Most jobs lost in a month for 25 years. prices plunging = deflationary pressures = plunging SPX profits.
Will we ALL end up working for the government? VIX was sitting right on support,,,,,this could go either way......you cannot fight the tape.....and it will come in the form of sellers VS buyers.
D
RAINING MONEY ON ECONOMY AND...THEMSELVES!!
WASHINGTON – If the $14 billion bailout plan for U.S. automakers passes, it will help more than just Ford, Chrysler and General Motors. Federal judges would get a pay raise, as well.
The raise — an annual cost of living adjustment, or COLA — would bring U.S. District court judges up to par with members of Congress, who will receive an almost $5,000 boost on Jan. 1. District judges and lawmakers now earn $169,300 a year but are expected to be awarded a 2.8 percent raise next year, said Dick Carelli, a spokesman for the Administrative Office of the United States Courts.
Senate Majority Leader Harry Reid, D-Nev., insisted that the judicial pay raise go into the automaker loan measure, which is the only item of business on Congress' lame-duck agenda.
Under ethics legislation enacted almost two decades ago, members of Congress get a cost of living raise automatically, but they have to vote to give judges an identical raise. Because the spending bill covering U.S. courts has not passed, the step is necessary if judges are going to get their COLA.
http://news.yahoo.com/s/nm/20081211/bs_nm/us_economy_usa_forecast economic forecast
The raise — an annual cost of living adjustment, or COLA — would bring U.S. District court judges up to par with members of Congress, who will receive an almost $5,000 boost on Jan. 1. District judges and lawmakers now earn $169,300 a year but are expected to be awarded a 2.8 percent raise next year, said Dick Carelli, a spokesman for the Administrative Office of the United States Courts.
Senate Majority Leader Harry Reid, D-Nev., insisted that the judicial pay raise go into the automaker loan measure, which is the only item of business on Congress' lame-duck agenda.
Under ethics legislation enacted almost two decades ago, members of Congress get a cost of living raise automatically, but they have to vote to give judges an identical raise. Because the spending bill covering U.S. courts has not passed, the step is necessary if judges are going to get their COLA.
http://news.yahoo.com/s/nm/20081211/bs_nm/us_economy_usa_forecast economic forecast
Wednesday, December 10, 2008
3 HEADS ARE NOT BETTER THAN ONE
http://www.safehaven.com/article-12039.htm WHY FED should NOT LOWER INTEREST RATES from 1%.
http://news.goldseek.com/LewRockwell/1228742520.php "The FED'S EXPLODING BALANCE SHEET"
In a world where we hear time and time again, "we need a free market system" the FREE MARKET is not being allowed to correct the historic abuses which came before this heroic effort to BACK STOP ther world's economies and banking sstem.
We are to believe by printing and guaranteeing $trillions of newly created FIAT, and basically saying LEND and ADD MORE DEBT to a system already burdoned by too much debt, with loads of it going bad.....is like going to a dentist for a heart attack and expecting good care.
Bailout after bailout. new lending program after lending program.......does little to bring us back to balance......rid us of the abuses, and lay the groundwork for recovery.
http://investmenttools.com/futures/bdi_baltic_dry_index.htm The BALTIC DRY INDEX has yet to stabilize, mining companies are laying off, companies are downsizing and cutting capital spending, banks aren't lending, homes continue to lose value and not sell to deplete inventories, newly renegotiated LOWER mortgages are defaulting at an alarming 50% rate.....CC SABATHIA signs with Yankees for $23 M a year!....the NFL lays off 10% of workforce to save less than 1% of salaries paid to players.
WHO'S TAKING it on the chin here? WHERE IS the PRIVATE SECTOR DEBT BEING MOVED TO?
WHat we got? I COIN " THE BENDOVER ECONOMY"
Duratek
http://news.goldseek.com/LewRockwell/1228742520.php "The FED'S EXPLODING BALANCE SHEET"
In a world where we hear time and time again, "we need a free market system" the FREE MARKET is not being allowed to correct the historic abuses which came before this heroic effort to BACK STOP ther world's economies and banking sstem.
We are to believe by printing and guaranteeing $trillions of newly created FIAT, and basically saying LEND and ADD MORE DEBT to a system already burdoned by too much debt, with loads of it going bad.....is like going to a dentist for a heart attack and expecting good care.
Bailout after bailout. new lending program after lending program.......does little to bring us back to balance......rid us of the abuses, and lay the groundwork for recovery.
http://investmenttools.com/futures/bdi_baltic_dry_index.htm The BALTIC DRY INDEX has yet to stabilize, mining companies are laying off, companies are downsizing and cutting capital spending, banks aren't lending, homes continue to lose value and not sell to deplete inventories, newly renegotiated LOWER mortgages are defaulting at an alarming 50% rate.....CC SABATHIA signs with Yankees for $23 M a year!....the NFL lays off 10% of workforce to save less than 1% of salaries paid to players.
WHO'S TAKING it on the chin here? WHERE IS the PRIVATE SECTOR DEBT BEING MOVED TO?
WHat we got? I COIN " THE BENDOVER ECONOMY"
Duratek
Tuesday, December 09, 2008
VIX WEDGIE
*click to enlargeA breakdown from support would be contructive to near term bullish mkt asperations. This is how I see it and support area.
More and more people, experts turning bullish. slope of SPX earnings though coming DOWN....estimates for qtr 2009 is STILL for 9% increase????
Infrastructure plays zoomed like AKS steel...fcx beaten down copper etc....
D
Monday, December 08, 2008
COULD WE BE FINALLY IN FOR WEEKS AND MONTHS OF RALLY?
AT some point reality will be reality , was there hope in 2002 as rates were squished to 1%.....very much so....911 scare in rear view mirror...life must go on...REAL ESTATE is HOT....MONEY FLOWED LIKE WINE....speculators bloomed like the desert rose....now my friends we have none of this....this is what we got.
NEW YORK (CNNMoney.com) -- Weak auto sales are likely to continue through the first quarter of 2009, according to a new forecast from respected industry consultant J.D. Power and Associates.
That could create further problems for the struggling U.S. automakers, even if they get the federal loans now being considered by Congress.
Tom Libby, senior director of industry analysis for J.D. Power & Associates, said his firm is now forecasting a seasonally adjusted annual sales rate of about 10.5 million vehicles for December and between 10.9 million and 11 million in the first quarter of next year.
"Our position is there is no reason to believe that the first quarter of 2009 will be any better than the fourth quarter of 2008," said Libby.
TRYING TO REINFLATE OR KEEP AFLOAT WHAT MUST DIE
WASHINGTON, D.C. -- More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said Monday.
Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference.
ITS HOW ITS DONE
Tribune Co. files for bankruptcy
Chicago-based media conglomerate says it will stay in business throughout its debt restructuring.
Dow Chemical to cut 5,000 jobs -
ITS HOW THEY DEAL WITH RECESSION
ITS WHATS HAPPENING TO PROFITS
UPDATE: Ill. Tool Cuts 4Q EPS As Clients Shut-In Production -
Deleveraging is going on among corporations and individuals as well, leading to less buying power for both. That leaves less money available for homes, cars, televisions and travel, further leading to the sort of buyers strike characteristic of long periods of slow or stagnant economic growth.
WHY THE GOV WILL SPEND A TRILLION $$$ ON ROAD TAR
Turning Japanese "You can stick money into every orifice of the big banks -- their mouth, their nose, their ears, wherever -- but if they can't make loans because they have to reserve against future losses, and if they won't make loans because there's a recession, it won't do any good," Ferguson says. "If they can't lend, there's no money multiplier -- they're stuck, they're zombies. It's Japan all over again."
WE WILL have some amazing rallies, maybe even now one has started off 8100 lows, but likely this bear will growl and prowl until Dow 6,000 is seen.....the mess created that big, that bad...and what has been inflated left most nothing left.
Money could certainly POUR OUT OF BONDS into other THINGS, but snt that trade a HUGE SWARM WITH NARROW OPENING? how will they all get out....some will take even more HUGE losses.
VIX has support near here 55.....if broken VIX might even back off to 40 even 30.....huge rally....VIX is still elevated saying be careful.....IMHO
The market may not agree with my opinion.......if fear begins to leave so may the train....for awhile...HOPE IS A WONDERFUL POWERFUL THING.....OH FEDEX WARNED
D
NEW YORK (CNNMoney.com) -- Weak auto sales are likely to continue through the first quarter of 2009, according to a new forecast from respected industry consultant J.D. Power and Associates.
That could create further problems for the struggling U.S. automakers, even if they get the federal loans now being considered by Congress.
Tom Libby, senior director of industry analysis for J.D. Power & Associates, said his firm is now forecasting a seasonally adjusted annual sales rate of about 10.5 million vehicles for December and between 10.9 million and 11 million in the first quarter of next year.
"Our position is there is no reason to believe that the first quarter of 2009 will be any better than the fourth quarter of 2008," said Libby.
TRYING TO REINFLATE OR KEEP AFLOAT WHAT MUST DIE
WASHINGTON, D.C. -- More than half of delinquent homeowners whose mortgages were modified earlier this year ended up redefaulting within six months, a top bank regulator said Monday.
Some 53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing conference.
ITS HOW ITS DONE
Tribune Co. files for bankruptcy
Chicago-based media conglomerate says it will stay in business throughout its debt restructuring.
Dow Chemical to cut 5,000 jobs -
ITS HOW THEY DEAL WITH RECESSION
ITS WHATS HAPPENING TO PROFITS
UPDATE: Ill. Tool Cuts 4Q EPS As Clients Shut-In Production -
Deleveraging is going on among corporations and individuals as well, leading to less buying power for both. That leaves less money available for homes, cars, televisions and travel, further leading to the sort of buyers strike characteristic of long periods of slow or stagnant economic growth.
WHY THE GOV WILL SPEND A TRILLION $$$ ON ROAD TAR
Turning Japanese "You can stick money into every orifice of the big banks -- their mouth, their nose, their ears, wherever -- but if they can't make loans because they have to reserve against future losses, and if they won't make loans because there's a recession, it won't do any good," Ferguson says. "If they can't lend, there's no money multiplier -- they're stuck, they're zombies. It's Japan all over again."
WE WILL have some amazing rallies, maybe even now one has started off 8100 lows, but likely this bear will growl and prowl until Dow 6,000 is seen.....the mess created that big, that bad...and what has been inflated left most nothing left.
Money could certainly POUR OUT OF BONDS into other THINGS, but snt that trade a HUGE SWARM WITH NARROW OPENING? how will they all get out....some will take even more HUGE losses.
VIX has support near here 55.....if broken VIX might even back off to 40 even 30.....huge rally....VIX is still elevated saying be careful.....IMHO
The market may not agree with my opinion.......if fear begins to leave so may the train....for awhile...HOPE IS A WONDERFUL POWERFUL THING.....OH FEDEX WARNED
D
2 TIDBITS
NEW YORK (AP) -- Back in April, Goldman Sachs CEO Lloyd Blankfein said that the credit crisis, if it were a football game, was "probably in the third or fourth quarter." Eight months later, Goldman analysts are saying the current credit cycle has only now reached half-time.
Investment research analysts at Goldman issued a report Monday that said banks are "only halfway through a three-year credit cycle" -- indicating how much more prolonged than predicted the industry's struggles will be.
and this
Discussion at Monday's forum, sponsored by the federal Office of Thrift Supervision, focused on how broad the government's intervention should be, rather than whether the government should play any role at all. The U.S. is on track for 2.25 million foreclosures this year, more than double traditional levels.
New data released Monday show that more than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are already in default again.
The data raise questions about whether government money may be better spent on creating jobs, rather than averting foreclosures, said John Reich, director of the federal Office of Thrift Supervision. "I do have concerns about allocating federal resources," to such an effort, he said.
But the reports aren't detailed enough to show how well the programs are working or which borrowers have been most helped, said Sheila Bair, chairman of the Federal Deposit Insurance Corp. and a proponent of broadening loan assistance efforts.
VIX still HIGHLY elevated here....not budging much today
Investment research analysts at Goldman issued a report Monday that said banks are "only halfway through a three-year credit cycle" -- indicating how much more prolonged than predicted the industry's struggles will be.
and this
Discussion at Monday's forum, sponsored by the federal Office of Thrift Supervision, focused on how broad the government's intervention should be, rather than whether the government should play any role at all. The U.S. is on track for 2.25 million foreclosures this year, more than double traditional levels.
New data released Monday show that more than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are already in default again.
The data raise questions about whether government money may be better spent on creating jobs, rather than averting foreclosures, said John Reich, director of the federal Office of Thrift Supervision. "I do have concerns about allocating federal resources," to such an effort, he said.
But the reports aren't detailed enough to show how well the programs are working or which borrowers have been most helped, said Sheila Bair, chairman of the Federal Deposit Insurance Corp. and a proponent of broadening loan assistance efforts.
VIX still HIGHLY elevated here....not budging much today
WE CAN ALL RELEASE A BIG SIGH NOW?
And now we hit a NEW LOW for the BDI, friends.....I want a recovery too! WIshing and hoping dont make it so, these rates are VERY sensitive to economic conditions. A turn UP is what we would like to see......how long does it take for stuff to be tunred into things? especially if it isnt even on the water yet?
D
Friday, December 05, 2008
DOW CRASHES
http://broadcast.ino.com/education/the_dow_crashes/ This INO broadcast takes you up to last weeks big downer, helpful especially to those not strong in Technical anlysis
Dow strong in face of bad news? Some stocks still look cheap to some....beginning of mnth cash coming in, too early to get opinion as is the bottom in.....I am leaning sill I dont believe so
D
Dow strong in face of bad news? Some stocks still look cheap to some....beginning of mnth cash coming in, too early to get opinion as is the bottom in.....I am leaning sill I dont believe so
D
Thursday, December 04, 2008
COMMENTARY ON RETAILERS
ETFguide.com
Are Retailers a Bargain?Monday December 1, 12:34 pm ET By ETFguide.com
SAN DIEGO (ETFguide.com) - Don't let the crowded stores and the long lines fool you. The 2008 holiday shopping season may turn out to be just the kind that Scrooge would love.
Deep discounts by eager retailers may be ringing in higher sales volume, but in dollar terms, sales are likely to fall. The National Retail Federation estimates that shopper's spent 7.20% more this past weekend compared to last year. However rosy that may sound, it still might not help the sinking stock prices of major consumer retailers.
In the third quarter alone, consumer spending declined by 3.70% on an annualized basis. That was the steepest decline in 25 years. According to some economists, the fourth quarter spending numbers are expected to be even worse.
The performance of stocks in the retailing sector has been a mixed bag.
Over the past year, Macy's (NYSE: M - News), Tiffany (NYSE: TIF - News), and Target (NYSE: TGT - News) have seen their stock prices cut in half whereas Wal-Mart (NYSE: WMT - News) and Family Dollar Stores (NYSE: FDO - News) have bucked the trend by gaining. This is a strong signal that consumers are still spending, but opting to do business with discount retailers.
Consumer demand for big-ticket items has been particularly weak and confounded by a deteriorating job market. The appetite for appliances, automobiles and large-screen televisions is spiraling as October's sagging 6.20% fall in orders for durable goods indicates.
The other problem facing retailers is consumers that have money, aren't spending as much of it. The Conference Board reports that consumer confidence is at 41-year lows.
Exchange-traded funds (ETFs) that follow the sector like the SPDR S&P Retail ETF (AMEX: XRT - News) are off by 44.57% and the S&P Consumer Discretionary Stocks (NYSEArca: XLY - News) are down 36.77%.
XLY contains 81 stocks involved in apparel, leisure, hotels, and restaurants. The three largest holdings in XLY are McDonald's, Comcast, and Walt Disney. The consumer discretionary is less defensive compared to consumer staples (NYSEArca: XLP - News). The latter is the best performing S&P 500 sector so far this year.
XRT is actually a blend of two retailing sub-sectors: Consumer discretionary and consumer staples. Discretionary has a high sector weighting inside XRT (nearly 80%) compared to just 20% for the more defensive staples. Wal-Mart, CVS Caremark, and Target are the top three holdings among the 55 holdings within the ETF.
The Retail HOLDRS (NYSE: RTH - News) is an unmanaged basket of retailing stocks and it follows no particular index or benchmark. This means that RTH is never rebalanced and companies contained within it are not replaced if they merge or go out of business. With only 18 stocks, RTH is far from an accurate measure or benchmark of what's really going on in the retail sector.
Other ETFs, like the PowerShares Dynamic Retail (AMEX: PMR - News) are attempting to outperform traditional benchmarks within the retailing sector. PMR has declined 26.29% this year, which is better than most funds tracking the same area.
As the failure of CircuitCity, Mervyns, and Linen & Things illustrates, surviving in the hyper-competitive retail sector is very difficult right now. More bankruptcies are likely to follow as more companies compete for fewer customers and fewer revenues. We could be entering just the second or third inning of a major shakeup in consumer retailers.
Still, not all is doom and gloom. One of the few bright spots remains a smaller but growing segment known as online retailing.
Unlike their traditional brick-and-mortar counterparts, Website operators don't have the burden of high overhead and overbearing lease obligations. Stocks like Amazon.com, eBay and Yahoo are typically included in this particular group and are included as top holdings within retail oriented ETFs.
**If Recession deepens....retailers could come under new selling pressure...but today many and a few goldies were green.
D
Are Retailers a Bargain?Monday December 1, 12:34 pm ET By ETFguide.com
SAN DIEGO (ETFguide.com) - Don't let the crowded stores and the long lines fool you. The 2008 holiday shopping season may turn out to be just the kind that Scrooge would love.
Deep discounts by eager retailers may be ringing in higher sales volume, but in dollar terms, sales are likely to fall. The National Retail Federation estimates that shopper's spent 7.20% more this past weekend compared to last year. However rosy that may sound, it still might not help the sinking stock prices of major consumer retailers.
In the third quarter alone, consumer spending declined by 3.70% on an annualized basis. That was the steepest decline in 25 years. According to some economists, the fourth quarter spending numbers are expected to be even worse.
The performance of stocks in the retailing sector has been a mixed bag.
Over the past year, Macy's (NYSE: M - News), Tiffany (NYSE: TIF - News), and Target (NYSE: TGT - News) have seen their stock prices cut in half whereas Wal-Mart (NYSE: WMT - News) and Family Dollar Stores (NYSE: FDO - News) have bucked the trend by gaining. This is a strong signal that consumers are still spending, but opting to do business with discount retailers.
Consumer demand for big-ticket items has been particularly weak and confounded by a deteriorating job market. The appetite for appliances, automobiles and large-screen televisions is spiraling as October's sagging 6.20% fall in orders for durable goods indicates.
The other problem facing retailers is consumers that have money, aren't spending as much of it. The Conference Board reports that consumer confidence is at 41-year lows.
Exchange-traded funds (ETFs) that follow the sector like the SPDR S&P Retail ETF (AMEX: XRT - News) are off by 44.57% and the S&P Consumer Discretionary Stocks (NYSEArca: XLY - News) are down 36.77%.
XLY contains 81 stocks involved in apparel, leisure, hotels, and restaurants. The three largest holdings in XLY are McDonald's, Comcast, and Walt Disney. The consumer discretionary is less defensive compared to consumer staples (NYSEArca: XLP - News). The latter is the best performing S&P 500 sector so far this year.
XRT is actually a blend of two retailing sub-sectors: Consumer discretionary and consumer staples. Discretionary has a high sector weighting inside XRT (nearly 80%) compared to just 20% for the more defensive staples. Wal-Mart, CVS Caremark, and Target are the top three holdings among the 55 holdings within the ETF.
The Retail HOLDRS (NYSE: RTH - News) is an unmanaged basket of retailing stocks and it follows no particular index or benchmark. This means that RTH is never rebalanced and companies contained within it are not replaced if they merge or go out of business. With only 18 stocks, RTH is far from an accurate measure or benchmark of what's really going on in the retail sector.
Other ETFs, like the PowerShares Dynamic Retail (AMEX: PMR - News) are attempting to outperform traditional benchmarks within the retailing sector. PMR has declined 26.29% this year, which is better than most funds tracking the same area.
As the failure of CircuitCity, Mervyns, and Linen & Things illustrates, surviving in the hyper-competitive retail sector is very difficult right now. More bankruptcies are likely to follow as more companies compete for fewer customers and fewer revenues. We could be entering just the second or third inning of a major shakeup in consumer retailers.
Still, not all is doom and gloom. One of the few bright spots remains a smaller but growing segment known as online retailing.
Unlike their traditional brick-and-mortar counterparts, Website operators don't have the burden of high overhead and overbearing lease obligations. Stocks like Amazon.com, eBay and Yahoo are typically included in this particular group and are included as top holdings within retail oriented ETFs.
**If Recession deepens....retailers could come under new selling pressure...but today many and a few goldies were green.
D
BULL OR BEAR TRAP?
http://community.investopedia.com/news/cadvisor/cotd/archive/OIH20081201.aspx?partner=YahooSA OIL and GAS charts from Investopedia
Wednesday, December 03, 2008
HAIR OF THE DOG
Can you force a recovery based on more borrowing when their is no home equity for those in trouble and that is what got us here in the first place? Where asking for help from most of the same idiots who got us here!
Fed: Economy darkens heading into holidaysWednesday December 3, 2:05 pm ET By Jeannine Aversa, AP Economics Writer
Fed: Economic picture darkens heading into holidays; hurting jobs, retailers, factories
WASHINGTON (AP) -- The country's economic picture has darkened further as Americans hunkered down heading into the holidays, forcing retailers to ring up fewer sales and factories to cut back on production.
The Federal Reserve's new snapshot of business conditions nationwide, released Wednesday, suggested the economy was sinking deeper into recession.
"Economic activity weakened across all Federal Reserve districts," the report concluded.
The Fed didn't use the word "recession," but just two days earlier the National Bureau of Economic Research declared what many Americans already knew in their bones: that the country had been suffering through one since last December.
To cushion the fallout, Federal Reserve Chairman Ben Bernanke said Monday that the central bank is prepared to lower its key interest rate and to explore other ways to revive economic activity. Many economists predict the Fed will cut its rate -- now near a historic low of 1 percent -- at its last scheduled meeting this year on Dec. 16.
With jobs vanishing, shoppers cut back, causing retail sales to be "weak" or "down" in most of the Fed's 12 regions.
"Retailers were preparing for a relatively slow holiday sales season," the Fed report said. New York retailers said the holiday sales season is likely to feature more discounted prices on merchandise than last year. Some retailers in the Fed regions of Boston, Philadelphia, Cleveland and Dallas planned to cut capital spending projects for 2009.
Consumer spending -- which includes retail sales -- is a major shaper of national economic activity. Job cuts, tanking investment portfolios and sinking home values have made American consumers, however, wary of spending.
ShopperTrak RCT Corp., a research company that tracks total retail sales for more than 50,000 outlets, released more data Wednesday showing that the better-than-expected sales boost on Friday, the traditional opening for the holiday shopping season at stores, fizzled quickly during the rest of the weekend -- resulting in a mixed start to the season.
The economy jolted into reverse in the summer as consumers slashed their spending by the most in 28 years.
Many believe the economy will continue to shrink through the rest of this year and into the first quarter of next year. At 12 months and counting, the current recession is longer than the 10-month average length of recessions since World War II. The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns.
Besides retail sales, auto sales were down sharply in most Fed regions. Car buyers in many areas had difficulty obtaining financing, a direct result of the credit crisis, the report said.
The chiefs of Chrysler LLC, General Motors Corp. and Ford Motor Co. are preparing to return to Capitol Hill on Thursday and Friday to again make their case for as much as $34 billion in emergency aid.
At factories, "manufacturing activity declined noticeably" since the Fed's last report in mid-October. Similarly, activity in the services sector contracted in most Fed regions.
In a separate report Wednesday, the U.S. service sector, which includes hotels, retailers and other industries, saw activity shrink more than expected in November. The Institute for Supply Management, a trade group of purchasing executives, said readings for new orders, employment and prices all hit the lowest levels on records dating back to 1997.
The Fed's survey suggested that businesses have little appetite to hire.
Employers in the Fed regions of Boston, Richmond, Chicago and Dallas reported that demand for temporary workers dropped. Employers in the regions of Boston and Cleveland also reported that seasonal hiring had been scaled back at retail stores. Employers in Atlanta noted that layoffs have accelerated and workers' hours declined. Employers in the San Francisco Fed region reported job cuts and hiring freezing across a wide range of industries.
The nation's unemployment rate jumped in October to 6.5 percent, a 14-year high. So far 1.2 million jobs have vanished this year and the losses will get worse. Many economists are predicting the jobless rate will climb to 6.8 percent for November and employers will chop another 320,000 jobs. The government releases the new employment report on Friday.
The housing picture continued to look bleak, the Fed report showed.
Sales were down and inventories of unsold homes remained high in most Fed regions. Commercial real-estate markets, meanwhile, "weakened broadly" and pushed up vacancy rates in about half of the Fed's regions, the survey said.
Against this backdrop, both consumer and business lending continued to slow, the Fed said. Despite a $700 billion financial bailout and a flurry of radical new programs, the government hasn't been able to bust through a credit clog that's contributed to the worst financial crisis to hit the country since the 1930s.
The Fed report is based on information supplied by the Fed's 12 regional banks. The information was collected before Nov. 24.
Fed: Economy darkens heading into holidaysWednesday December 3, 2:05 pm ET By Jeannine Aversa, AP Economics Writer
Fed: Economic picture darkens heading into holidays; hurting jobs, retailers, factories
WASHINGTON (AP) -- The country's economic picture has darkened further as Americans hunkered down heading into the holidays, forcing retailers to ring up fewer sales and factories to cut back on production.
The Federal Reserve's new snapshot of business conditions nationwide, released Wednesday, suggested the economy was sinking deeper into recession.
"Economic activity weakened across all Federal Reserve districts," the report concluded.
The Fed didn't use the word "recession," but just two days earlier the National Bureau of Economic Research declared what many Americans already knew in their bones: that the country had been suffering through one since last December.
To cushion the fallout, Federal Reserve Chairman Ben Bernanke said Monday that the central bank is prepared to lower its key interest rate and to explore other ways to revive economic activity. Many economists predict the Fed will cut its rate -- now near a historic low of 1 percent -- at its last scheduled meeting this year on Dec. 16.
With jobs vanishing, shoppers cut back, causing retail sales to be "weak" or "down" in most of the Fed's 12 regions.
"Retailers were preparing for a relatively slow holiday sales season," the Fed report said. New York retailers said the holiday sales season is likely to feature more discounted prices on merchandise than last year. Some retailers in the Fed regions of Boston, Philadelphia, Cleveland and Dallas planned to cut capital spending projects for 2009.
Consumer spending -- which includes retail sales -- is a major shaper of national economic activity. Job cuts, tanking investment portfolios and sinking home values have made American consumers, however, wary of spending.
ShopperTrak RCT Corp., a research company that tracks total retail sales for more than 50,000 outlets, released more data Wednesday showing that the better-than-expected sales boost on Friday, the traditional opening for the holiday shopping season at stores, fizzled quickly during the rest of the weekend -- resulting in a mixed start to the season.
The economy jolted into reverse in the summer as consumers slashed their spending by the most in 28 years.
Many believe the economy will continue to shrink through the rest of this year and into the first quarter of next year. At 12 months and counting, the current recession is longer than the 10-month average length of recessions since World War II. The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns.
Besides retail sales, auto sales were down sharply in most Fed regions. Car buyers in many areas had difficulty obtaining financing, a direct result of the credit crisis, the report said.
The chiefs of Chrysler LLC, General Motors Corp. and Ford Motor Co. are preparing to return to Capitol Hill on Thursday and Friday to again make their case for as much as $34 billion in emergency aid.
At factories, "manufacturing activity declined noticeably" since the Fed's last report in mid-October. Similarly, activity in the services sector contracted in most Fed regions.
In a separate report Wednesday, the U.S. service sector, which includes hotels, retailers and other industries, saw activity shrink more than expected in November. The Institute for Supply Management, a trade group of purchasing executives, said readings for new orders, employment and prices all hit the lowest levels on records dating back to 1997.
The Fed's survey suggested that businesses have little appetite to hire.
Employers in the Fed regions of Boston, Richmond, Chicago and Dallas reported that demand for temporary workers dropped. Employers in the regions of Boston and Cleveland also reported that seasonal hiring had been scaled back at retail stores. Employers in Atlanta noted that layoffs have accelerated and workers' hours declined. Employers in the San Francisco Fed region reported job cuts and hiring freezing across a wide range of industries.
The nation's unemployment rate jumped in October to 6.5 percent, a 14-year high. So far 1.2 million jobs have vanished this year and the losses will get worse. Many economists are predicting the jobless rate will climb to 6.8 percent for November and employers will chop another 320,000 jobs. The government releases the new employment report on Friday.
The housing picture continued to look bleak, the Fed report showed.
Sales were down and inventories of unsold homes remained high in most Fed regions. Commercial real-estate markets, meanwhile, "weakened broadly" and pushed up vacancy rates in about half of the Fed's regions, the survey said.
Against this backdrop, both consumer and business lending continued to slow, the Fed said. Despite a $700 billion financial bailout and a flurry of radical new programs, the government hasn't been able to bust through a credit clog that's contributed to the worst financial crisis to hit the country since the 1930s.
The Fed report is based on information supplied by the Fed's 12 regional banks. The information was collected before Nov. 24.
STRAIGHT TALK RON PAUL
Texas Straight Talk
The Neo-Alchemy of the Federal Reserve
As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.
The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.
One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.
Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.
Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.
The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.
Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.
Posted by Ron Paul (12-01-2008, 01:07 PM) filed under Monetary Policy
The Neo-Alchemy of the Federal Reserve
As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.
The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.
One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.
Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.
Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.
The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.
Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.
Posted by Ron Paul (12-01-2008, 01:07 PM) filed under Monetary Policy
Tuesday, December 02, 2008
YIELDS PLUNGE
Current yield now BELOW 2.7% approaching bottom of 23 yr BOND BULL CHANNELhttp://www.nowandfutures.com/key_stats.html M3 reconstructed
Monday, December 01, 2008
FELLOW BLOGGER
http://www.newsneconomics.com/2008/11/all-of-buzzwords-in-one-post.html has some inside slant to what FED is doing.
D
D
HUGE DOWN VOLUME MOVE
Todays down market produced another 90% Down Day as Down Volume was around 98.6% of total NYSE Big Board Up/Down Volume.
Traders back in force today and the result was not pretty, this brings us right back to challenge the lows in place especially if 8,000 breaks again.
Transports lost 9% of value in ONE DAY! VIX rocketed up 22%. I think SPX 800 is a KEY support area as drawn. Descending volume on the rise may have been warning as I pointed out.
Hard to dismiss away this kind of drop by saying "profit taking". It is obvious if 2 back to back 90% UP volume days did not ignite the bulls and show sellers were done.....remember after UPTICK rule was abandoned (IDIOTS) a 90% day has lost SOME of its swagger to predict.
Remember those who crowed about the 20% UP rally...... is not = to the 20% fall from the top.
EX 1000- 20% = 800 800 x120% = 960.
TO STIM OR NOT TO STIM
"The House passed a $61 billion stimulus in September but opposition from Senate Republicans backed by a Bush administration veto threat killed the bill in the Senate.
Pelosi's meeting with the governors came as the National Bureau of Economic Research said the U.S. economy entered a recession in December, 2007.
U.S. unemployment has been rising, the financial industry is reeling even with the recent enactment of a $700 billion government bailout, and Congress must decide whether to rescue domestic automakers, who face a Tuesday deadline to provide Washington with restructuring plans.
Governors and state legislatures are asking Congress to act quickly on an aid and job-creation bill, noting they face severe budget shortfalls in 2009 and 2010.
At $500 billion, the measure would dwarf the $168 billion economic stimulus that was enacted last February, which consisted mostly of tax rebates for families and small business tax benefits.
The new emergency spending would add to spiraling government spending which sent the budget deficit to a record $455 billion in the fiscal year that ended September 30.
Hoping to blunt Republican criticism that Democrats are cobbling together a massive bill full of wasteful spending, Pelosi said the measure would be aimed at "creating jobs for the 21st century," with a focus on energy projects.
Obama has said that his first priority when taking office would be signing an economic stimulus bill into law."
we better hop right on that alt energy bandwagon...Oil drops 9 percent to $49 as OPEC defers cuts
THANK GOODNESS THEY FIGURED IT OUT.......
WASHINGTON (Reuters) - The U.S. economy slipped into recession in December 2007, the nation's business cycle arbiter declared on Monday, and the downturn could be the worst since World War Two.
ANOTHER DUBIOUS TITLE?
"The most important things we can do for the economy right now are to return the financial and credit markets to normal, and to continue to make progress in housing, and that's where we'll continue to focus," White House spokesman Tony Fratto said.
President George W. Bush is the first president since Richard Nixon to preside over two recessions.
President George W. Bush is the first president since Richard Nixon to preside over two recessions.
WE GOT OPTIONS??
Bernanke says Fed has options as rates near zeroMonday December 1, 5:52 pm ET
By Ros Krasny
AUSTIN, Texas (Reuters) - Federal Reserve Chairman Ben Bernanke on Monday urged decisive action to protect the economy and said the central bank had alternative tools it could employ to help as interest rates approach zero.
By Ros Krasny
AUSTIN, Texas (Reuters) - Federal Reserve Chairman Ben Bernanke on Monday urged decisive action to protect the economy and said the central bank had alternative tools it could employ to help as interest rates approach zero.
ALERT ALERT BEN SAYS NEED LOWER RATES TO STIM GROWTH
He said the Fed could directly purchase "substantial quantities" of longer-term securities issued by the U.S. Treasury or government-sponsored agencies to lower yields and stimulate demand.
THIS ASS just doesn't get it? Tie the 2 Paulson and BEN together and you get what? a pair of old mens testicals....
HELOOOOO 10 yr Bond rate just hit LOWEST RATE EVER???!!!! yes....even below that of the great depression...
AND IF THAT DOn'T WORK.....
Bernanke also said the Fed could side-step institutions that are reluctant to lend and pump money directly into specific markets. The Fed has already done this in the market for commercial paper, short-term debt companies use to finance day-to-day operations, and last week it announced a program to push funds into markets for consumer-related debt as well.
Great, I feel MUCH better now!
Note, since I added google analytics to my site we have had hits from 30 countries......I will continue to make this a place worth coming to.
Duratek
D
VOLATILITY INDEX
2 support areas I was watching, no breakdown....a day like today could happen...looks like a 90% downer too.
D
KArl Denninger
Tired of The Crash?
The market and economy will not stop falling apart until:
Paulson is fired and his policies cease.
We have transparency in balance sheets - for every firm on the exchange. No exceptions. All Level 3 asset mark models and assets identified - period.
Bernanke withdraws all his alphabet soup programs or is removed from office and his successor does, and the "crowding out" in the credit markets ceases.
Its that simple, and all three must happen before we will see any sort of sustainable bottom put in.
This doesn't mean we can't have "rip your face off" rallies - we both can and will.
But the market and economy will not bottom until the three things above are done, and the only way that is going to happen is when you make it happen.
That's right. Your 401k is a 201k (and will soon be a 41k) because you (collectively) sat on your butts last October when I started running petitions and because we have managed to garner only 50-odd people at protests.
There should be hundreds of thousands.
There should be general strikes - people who simply refuse to go to work, en-masse, across the nation.
There should have not been one Congressman or woman who voted for the bailout returned to office.
Bottom line: You have and are consenting to this economic depression - and make no mistake, that is exactly what the credit markets are saying we are entering right now.
Remember that more than a year ago Subprime Mortgage Bonds forecast a total meltdown in that industry, and that nearly all of the companies in that space would go bankrupt. We were told that this sort of "Armageddon" scenario would not and could not occur, and that the credit market was playing "histrionics". A number of so-called "smart money" investors (Wilbur Ross anyone?) stepped in and bought these supposedly-undervalued instruments - and promptly got slaughtered when the actual performance was worse than the credit markets were forecasting.
The credit market was right and those who said it couldn't happen were wrong.
Now the credit market is saying that we are going to have more defaults than happened during The Great Depression. That is, it is forecasting a Greater Depression that worse than the 1930s. The TNX (10 year yield) is threatening to break three percent, down another 6% (!) this morning to 3.16%. The bottom going back as far as my charts extend is 3.07%. Almost there.
The 13 Week T-Bill (IRX) stands at 0.1%, which is for all intents and purposes zero. The Effective Fed Funds trading rate has been between 0.2 and 0.3% since the last putative rate cut to 1% - that is, effectively zero.
Corporate AAA commercial mortgage spreads are at extreme wides, standing at over 700 bips; added to reference this means that super senior AAA commercial mortgages now yield more than 10%. Given the level of credit enhancement in these deals this forecasts default rates of more than thirty percent in this space. Similar extreme spreads are found among both the "high grade" and "high yield" corporate bond markets.
The credit market is telling you that we are headed for an S&P 500 trading at three hundred and a DOW at under three thousand. That we are headed for unemployment north of 20% on the U6 (broad) measure, and GDP contraction of twenty percent cumulatively from top to bottom.
That's one person in five in the US without a job, deflation of 20% cumulatively or more in prices, over 2 million businesses going bankrupt in the next three years, and literal starvation and privation - all across America. No part of this nation will be spared.
The market callers are all saying all this is impossible.
Even though every thing the credit market has forecast thus far since this problem began has been not only proved correct but conservative; that is, if you bought believing that it would not be as bad as the credit market is forecasting, you have had your head handed to you.
So who are you going to listen to?
Ben Bernanke ("we won't have a recession") and Hank Paulson ("the economy is fundamentally strong"), along with all the market "callers" on CNBC, who have been wrong every single time for more than 18 months?
Or the credit market which has been right 100% of the time thus far since this crisis began?
Welcome to The Greater Depression, and make sure you remember that the blame for this event belongs to Congress, Henry Paulson, Ben Bernanke, and of course..... you, since you have failed to insist and force your government (and yes, its your government, just as its my government) to stop these clowns.
We will get out of this when - and only when - you stop believing that you can "have a pony", "a chicken in every pot", "economic stimulus", and "free credit for everyone."
Only when we the people (collectively) are either all bankrupted or we come to our senses and demand that the fraudsters be locked up and the bad debt purged by default will the system clear and both the economy and market find a sustainable bottom.
Those are the only two choices folks, and right now, you're choosing bankruptcy and Depression for all.
http://www.denninger.net/ I suggest going to Karl's site and there is a wealth of intelligent writings.
D
The market and economy will not stop falling apart until:
Paulson is fired and his policies cease.
We have transparency in balance sheets - for every firm on the exchange. No exceptions. All Level 3 asset mark models and assets identified - period.
Bernanke withdraws all his alphabet soup programs or is removed from office and his successor does, and the "crowding out" in the credit markets ceases.
Its that simple, and all three must happen before we will see any sort of sustainable bottom put in.
This doesn't mean we can't have "rip your face off" rallies - we both can and will.
But the market and economy will not bottom until the three things above are done, and the only way that is going to happen is when you make it happen.
That's right. Your 401k is a 201k (and will soon be a 41k) because you (collectively) sat on your butts last October when I started running petitions and because we have managed to garner only 50-odd people at protests.
There should be hundreds of thousands.
There should be general strikes - people who simply refuse to go to work, en-masse, across the nation.
There should have not been one Congressman or woman who voted for the bailout returned to office.
Bottom line: You have and are consenting to this economic depression - and make no mistake, that is exactly what the credit markets are saying we are entering right now.
Remember that more than a year ago Subprime Mortgage Bonds forecast a total meltdown in that industry, and that nearly all of the companies in that space would go bankrupt. We were told that this sort of "Armageddon" scenario would not and could not occur, and that the credit market was playing "histrionics". A number of so-called "smart money" investors (Wilbur Ross anyone?) stepped in and bought these supposedly-undervalued instruments - and promptly got slaughtered when the actual performance was worse than the credit markets were forecasting.
The credit market was right and those who said it couldn't happen were wrong.
Now the credit market is saying that we are going to have more defaults than happened during The Great Depression. That is, it is forecasting a Greater Depression that worse than the 1930s. The TNX (10 year yield) is threatening to break three percent, down another 6% (!) this morning to 3.16%. The bottom going back as far as my charts extend is 3.07%. Almost there.
The 13 Week T-Bill (IRX) stands at 0.1%, which is for all intents and purposes zero. The Effective Fed Funds trading rate has been between 0.2 and 0.3% since the last putative rate cut to 1% - that is, effectively zero.
Corporate AAA commercial mortgage spreads are at extreme wides, standing at over 700 bips; added to reference this means that super senior AAA commercial mortgages now yield more than 10%. Given the level of credit enhancement in these deals this forecasts default rates of more than thirty percent in this space. Similar extreme spreads are found among both the "high grade" and "high yield" corporate bond markets.
The credit market is telling you that we are headed for an S&P 500 trading at three hundred and a DOW at under three thousand. That we are headed for unemployment north of 20% on the U6 (broad) measure, and GDP contraction of twenty percent cumulatively from top to bottom.
That's one person in five in the US without a job, deflation of 20% cumulatively or more in prices, over 2 million businesses going bankrupt in the next three years, and literal starvation and privation - all across America. No part of this nation will be spared.
The market callers are all saying all this is impossible.
Even though every thing the credit market has forecast thus far since this problem began has been not only proved correct but conservative; that is, if you bought believing that it would not be as bad as the credit market is forecasting, you have had your head handed to you.
So who are you going to listen to?
Ben Bernanke ("we won't have a recession") and Hank Paulson ("the economy is fundamentally strong"), along with all the market "callers" on CNBC, who have been wrong every single time for more than 18 months?
Or the credit market which has been right 100% of the time thus far since this crisis began?
Welcome to The Greater Depression, and make sure you remember that the blame for this event belongs to Congress, Henry Paulson, Ben Bernanke, and of course..... you, since you have failed to insist and force your government (and yes, its your government, just as its my government) to stop these clowns.
We will get out of this when - and only when - you stop believing that you can "have a pony", "a chicken in every pot", "economic stimulus", and "free credit for everyone."
Only when we the people (collectively) are either all bankrupted or we come to our senses and demand that the fraudsters be locked up and the bad debt purged by default will the system clear and both the economy and market find a sustainable bottom.
Those are the only two choices folks, and right now, you're choosing bankruptcy and Depression for all.
http://www.denninger.net/ I suggest going to Karl's site and there is a wealth of intelligent writings.
D
BACK TO REAL WORLD?
Anyone looking for UPSIDE employment surprise has seen the tooth fairy.....THIS reality we are witnessing is so ugly, so severe.....the bear rallies have been sold and harder and harder to escape deflationary gravity....all should be concerned....when the last goof has called the the bottom and told us HOW COMPELLING values are must have crystal ball for forward earnings I don’t have.
Near 90% down volume IF holds into close would be a real hit to sellers are exhausted theory.
Now maybe gold feels it MUST show deflating values (before it is coveted as safe haven) what really is safe? In liquidation phase. Hedgies trying to STOP $600B flee....
I think of all things the 10 yr yield is SCREAMING "we are Screwed!"
The way gold and oil have sold off, especially OIL and the low 10 yr yields are a dramatic example of deflation IMHO......low gas prices are appreciated but when commodities sell off when FED is easing, when yields fall these are part of a down stock market...signs of WEAKNESS...people get confused.
I am glad I include where VIS support is, this was one piece of bullish puzzle I hadn't seen occur yet...a break of support area.
D
Near 90% down volume IF holds into close would be a real hit to sellers are exhausted theory.
Now maybe gold feels it MUST show deflating values (before it is coveted as safe haven) what really is safe? In liquidation phase. Hedgies trying to STOP $600B flee....
I think of all things the 10 yr yield is SCREAMING "we are Screwed!"
The way gold and oil have sold off, especially OIL and the low 10 yr yields are a dramatic example of deflation IMHO......low gas prices are appreciated but when commodities sell off when FED is easing, when yields fall these are part of a down stock market...signs of WEAKNESS...people get confused.
I am glad I include where VIS support is, this was one piece of bullish puzzle I hadn't seen occur yet...a break of support area.
D
SOME CORRELATION HERE??!!
*Another new LOW for the BDI.
We should see a PULLBACK today in SPX, and when we get the raw data we will have better picture of whether sellers are exhausted.
One retail tracker said US Black Fri sales were UP 3% yr/yr (prior yr/yr was up 8% as comparison) and some are frolicking about as if that is better than expected and sign consumers have some ZING left?
HEAVY HEAVY discounting took place, and long way to go, and a few LESS shopping days this year to last, won't HEAVY promotions cut into profits?
I am not sure we are OUT OF THE WOODS just yet, as credit markets seem still frozen......looking 6 months out......not great sign IMHO
D
Subscribe to:
Posts (Atom)
